Is the council's 'affordable housing' bill promoting anything affordable?

Sunday, November 7, 2010 at 8:00pm
Photo by Jude Ferrara

The following is from a recent apartment listing on a local real estate company’s website: “Welcome to the gated community of [development’s name] on [a street]. This rental is a lovely renovation. The kitchen has a gas stove/oven which is hard to come by in [development’s neighborhood] condos. Custom cabinetry and granite also grace the kitchen. There is a breakfast area right off of the kitchen that is framed with columns. Hardwood throughout and there is a fireplace in the living area. You won’t believe your eyes when you see your view! Sublime Northern views of [the neighborhood]. Step out onto your bricked balcony to soak up the sights and sounds.”

The rent is $1,495 a month. The listing stipulates that a prospective renter’s income must be three times the rental amount, or $53,820, after his or her debt obligations. Add a $300 monthly car payment and that’s $57,420. Adding insurance and credit debt, a renter will likely need to make more than $60,000 annually to afford this place.

But were it not yet built, this apartment’s developer would be eligible for a cost savings as part of a new bill that was scheduled for a first Metro Council vote last Thursday.

If passed, the ordinance would give a 25 percent discount on certain Metro sewer, water, electric and engineering fees as an incentive for the development of new, inexpensive housing. Inexpensive perhaps, but not technically affordable. Despite numerous press reports to the contrary, this is not an “affordable housing” incentive bill.

According to the U.S. Department of Housing and Urban Development, the family median income for the Nashville area in 2010 is $65,200. Affordable housing is defined by Nashville municipal code and by the federal department of Housing and Urban Development as housing that costs 30 percent or less of gross annual income after rent or mortgage and utility payments to people making less than 80 percent of the median, or $52,150 for a family of four. That’s a $1,303.75 per month maximum, although HUD’s current fair market rent figure for Nashville is a bit under $1,100 per month four a four-bedroom home.

But this bill, sponsored by at-large councilman Jerry Maynard, creates a new legal category for Nashville: “workforce housing.”

“The concept and the discussion on workforce housing has been around for some years,” said Paul Johnson, director of regional services for the Housing Fund, a Nashville nonprofit that provides assistance to low-income owners and renters. “Generally it refers to the population of residents we have that are maybe at or close to the maximum of what’s typically considered covered under affordable housing, and might extend to 100 or 120 percent of median family income. There’s no clear definition.”

But there is one in the bill. Houses for sale must cost no more than 2.5 times 95 percent of the MFI, or $154,850 for this year. Rentals must cost no more than 30 percent of 95 percent of the MFI, $1,548.50 per month for this year. Maynard, who did not respond to repeated requests for comment, is paraphrased in an Oct. 19 City Paper story as claiming that Nashville’s median home price is more than $200,000.

“We’re providing an incentive to say to those developers, ‘Let’s make sure we keep Nashville working families in Nashville to live, work and play,’ ” Maynard is quoted as saying.

But developer Bill Hostettler of HND Realty disputed that figure.

“I don’t think it affects anything,” he said. “Let’s look at just the Antioch market. The median sales price the last three months is $155,000 with a 13.6-month supply on the market. That’s the median price, OK.”

Indeed, according to the real estate database, the current median price for all of Nashville is even less at $139,000. It has not been above $160,000 for the past five years.

A report from the Tennessee Housing Development Authority, which gave an estimate of $165,000 for the 2010 Nashville metro area median price, showed that even at those modest levels, many low-wage earners — specifically restaurant workers, cashiers and retail employees — can’t afford to either rent or buy. Educators, it said, can only afford to rent. A Housing Fund report from earlier this year similarly highlighted the scant availability of affordable homes in the area.

That sort of information raises the question of whether this is the right solution to Nashville’s actual problems.

In contrast, Memphis has a full fee reimbursement — rather than discount — program, which is specifically designed to benefit projects intended for 80 percent MFI or lower income earners. In New York and Massachusetts, developer incentives programs require that the homes (or a percentage of apartments in a building) are sold or rented to people who make less than 80 percent of median family income. Yet the Nashville bill doesn’t address income levels at all. In theory, a developer can sell or rent these homes to anyone no matter how much they make.

Metro Nashville currently has no laws that provide financial incentives to developers building homes in the “affordable” category, though it does, in certain cases, grant density bonuses. In any case, why not specifically address the worst problems?

“I don’t see that this doesn’t target that. I think it does target that,” said the Housing Fund’s Johnson, who pointed out that 95 percent is the maximum level and that the bill is intended to include people with lower incomes.

“It’s actually a good thing that it also targets workforce housing,” he said. “If you go back to before we had the housing crisis, one of the reasons why there was beginning to be a lot of discussion around workforce housing is because people even in that 80 to 100 percent level, or 120 percent of median family income, were also beginning to experience high housing costs. I think it’s a good bill. I think you’re going to see that it motivates developers of housing in the affordability rate.”

But Hostettler said that, under the plan, savings to a developer would amount to about $700-$800 per home, not nearly enough to provide a real incentive.

“If you take into account the mortgage I’m going to pay on a house that I’m going to rent — that’s primarily why you rent a house, to pay off that mortgage — that’s about $3 per month in savings,” he said. “Now, I’m going to take that, but do you really think that’s going to get passed along?”

In addition, he said, while the bill penalizes developers if they sell or rent a house above workforce levels within five years, the penalty — the full amount of the discount — is also so little that a seller or landlord could easily make it up in the sale or lease.

“This costs Metro money, and I just don’t see how anyone benefits,” Hostettler said.

Johnson said that, if not perfect, it is at least a positive step.

“This is going to benefit every person that I work with because it’s going to cut costs,” he said. “Developers are going to see a 25 percent reduction on some of these fees. That’s a good thing. That’s going to make the project more affordable.

“Is it the be all and end all of what we need in Nashville to address our affordable and workforce housing needs? No, of course not. No single ordinance is going to do that. There’s no silver bullet out there that’s going to do that. I do think that things like this that target the costs of building affordable and workforce housing are, again, a good thing.”  


3 Comments on this post:

By: govskeptic on 11/8/10 at 7:30

Discounts on water, sewer and many of the other incentices only
means more cost to the remaining users of these services within
Metro. Services, I might add, that are always requiring more and
more funding due to state and federal mandates along with
expansion. Councilman Maynard doesn't have the least idea how
these numbers are manipulated nor the additional cost it throws
onto the least able to pay within the city. Wise up folks, afforable
housing should be what is says, not a 15th floor highrise downtown!

By: Kosh III on 11/8/10 at 8:22

They are delusional to think that rent of over 1500 mo is affordable. For whom?

This is corporate welfare for the developer.

By: on 11/8/10 at 2:29

This bill, not unlike most bills presented to the people, has absolutely nothing to do with what they end up naming it. This bill has nothing to do with housing and benevolent acts to help the poor. It has everything to do with politicians and other gov't bureaucrats raping the rest of us.