Agenda - Planning Commission - 10/12/2017

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Zoning Credit By Woo Kim, AICP °leaas Housing affordability is a key component of social equity. In 2014, 20.8 million renter households in the U.S. spent more than 3o percent of their income on housing (HICHS 2(316). More American renters were hous- ing burdened in 2014 than ever before, and housing insecurity puts into jeopardy other basic human needs such as education, health, and nutrition. Compounding this issue, many socioeconomic cohorts cluster within communities, resulting in low-income families living among other low-income fami- lies in resource -starved, majority -minority neighborhoods. Over the past 20 years, the planning literature has covered inclusionary zoning extensively. While inclusionary zoning is an important tool for increasing the supply of new affordable housing, requiring develop- ers to set aside a small percentage of new units as affordable is unlikely to fully address the demand for affordable housing in most communities. Cities with strong housing markets, such as San Francisco, New York, and Boston, are producing affordable units through inclusionary zoning, but the num- bers are insufficient to keep up with rising rents or to address pervasive social inequity. Furthermore, many communities simply do not command high enough rents per square foot to absorb the subsidy required by afford- able units. In fact, within the rapidly growing downtowns of cities such as Philadelphia, Pittsburgh, and Atlanta, inclusionary zoning can stymie much needed growth. The federal Low -Income Housing Tax Credit (LIHTC) program is the most important resource for creating affordable housing in the U.S. today. These are typically fixed -rent units in mixed -income developments, where a majority of the units are deemed affordable to families earning less than 6o percent of the area median income (AMI). In contrast, inclusionary zoning projects seldom provide more than one affordable unit for every four market -rate units, and many inclusionary zoning ordinances target families earning 8o percent of AMI. For these reasons, the LIHTC rt L n program is as, if not more, important than inclusionary zoning to address the demand for affordable housing. Nevertheless, the planning literature has, so far, been largely silent about the relationship between zoning and the development of LIHTC projects. As a partial corrective, the following sections will discuss how LIHTC drives the production of affordable rental housing, summarize common zoning barriers to LIHTC projects, explore potential zoning reforms to address these barriers, and highlight brief case studies of communities that have been successful in making space for LIHTC proj- ects by reforming their zoning codes. THE LIHTC PROGRAM The LIHTC program, created by the Tax Reform Act of 1986, gives investors a dollar -for - dollar reduction in their federal tax liability in exchange for providing financing to develop affordable rental housing (26 USC §42). using Before this, federal assistance for private affordable housing took the form of subsidies and vouchers from the U.S. Department of Housing and Urban Development (HUD). The Need for LIHTC In the 198os, many private affordable hous- ing owners decided to "opt out" of the project -based Section 8 program, resulting in a sharp decline of good quality rental housing for low-income families (Anderson et al. 2017). Housing advocates —including public housing authorities, nonprofit afford- able housing developers, local government officials, nonprofit advocacy organizations, and low-income renters —organized to pre- serve this disappearing stock of affordable housing using whatever funding and financ- ing was available to them. This housing crisis, together with a very visible nationwide homelessness epidemic, led to the creation of the LIHTC program. C ditralec projects addresses so es ue as)ersey ZONINGPRACTICE 9.17 AMERICAN PLANNING ASSOCIATION I page 2