We have been building Affordable Housing and Inclusionary Housing since 1992. We believe that it is simply the right thing to do, although the burden of subsidizing it should be borne by a wider cross-section of society if the number of affordable units is to keep growing.
Definition: Affordable Housing
Affordable Housing is any housing either permanently, or for a given time period—often 30 years—set aside for households making less than a defined amount per year. That sum is often 60%, 80%, or 110% of the median income for the particular metropolitan area in question. Affordable housing can be subsidized in a variety of manners. Rents can be underwritten by city or state or federal entitlement programs; recently more and more of the burden of providing the amenity of inexpensive housing has been shifted, by zoning ordinances, to private, market rate developers. The producers of affordable housing have been city housing authorities, state housing authorities, community development corporations, nonprofit housing and social service corporations and agencies, large institutions as mitigations of other intensive building programs, and, usually only when required to by zoning ordinances and private developers. Affordable housing comes in all varieties of income level, types of ownership or rental agreements. When it is at its most successful, it is usually mixed in with other income levels.
Definition: Affordable Housing
Definition: Inclusionary Housing
Inclusionary Housing is a term coined for the requirement by zoning ordinances that private developers provide a specified amount and type of affordable housing when building substantial developments, whether residential or commercial. Residential developments are required to provide a percentage of their units as affordable, usually in the 10% to 15% range. These units are expected to be exactly the same as the market rate units in size and amenities and style; they are also expected to be evenly distributed throughout the project. The intent is to avoid ghetto-ization. Most of Metropolitan Boston has some form of Inclusionary Housing; we have worked with ordinances in, Cambridge, Somerville, and now, in Watertown. Where the market rate units are to be sold as condominiums, so too, will the inclusionary units be. When the project is intended as rentals, the inclusionary units will be apartments. The rental or sale of these units is usually conducted by the town’s or city’s community development department, housing department, or housing authority. It is sometimes conducted by contracted nonprofit groups. It is rarely handled by the development entity itself. Potential residents are first qualified by income level, family size, credit worthiness, and often length of residency in the particular town or city. If there are more applicants than units, a lottery is conducted. Availability of units is usually advertised in local papers or by reaching out to the clientele of various nonprofit groups or municipal agencies. The resale or future leasing of units is almost always regulated to ensure that they remain affordable, available only to households that qualify.
Definition: Inclusionary Housing
Using the zoning code to enforce the production of housing supported by any type of subsidies is a great way to leverage the power towns or cities have in their zoning ordinances, but will not produce as many units as other models. Eventually, we might do well to switch from a binary model—where units are either affordable or market rate, to a spectrum where newly constructed units have to match the full range of incomes existing in the town.
Inclusionary Zoning and Affordable Housing often become a political lightning rod, with many otherwise progressive neighborhoods or towns insisting that they already have enough inexpensive housing, or outright, unabashedly stating fears of introducing a different demographic into their midst under the misapprehension that they are inviting a host of social, cultural, and economic ills into their communities. We have experienced this in a wealthy neighborhood in Cambridge near Porter Square, and the Somerville Community Corporation was recently assailed by some Union Square residents for proposing a rental development in that location.
Many housing activists attack inclusionary zoning as being simply a sop, too little too late. They may be right, but something of something is infinitely better than nothing of something. We believe more affordable housing could be built if the zoning ordinances were more aggressive in greater density bonuses to developers, and more rewards of some type to developers who voluntarily chose to build some inclusionary units. Lambasting inclusionary provisions in local ordinances seems as wrong-headed and as decrying palliative relief to seriously ill patients because it is not a cure.
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Except for Market Street, all of our affordable units have been for sale condominiums in condominium associations where the other units are market rate for sale condominiums. We have never had a problem with mixing different income levels, and do not believe it has had any negative effect on real estate prices or neighborhood cohesiveness or quality of life. Inclusionary units are not, however, a panacea for the problems stemming from the high cost of housing.
Not enough can be produced using present formulas, and given the high cost of land in urban core areas, there are not enough projects that are feasible and subject to inclusionary ordinances. Nor is it necessarily the best step toward more control over one’s living situation after years of being a tenant. Inclusionary units do not escalate in value as market rate units; they have many of the responsibilities of full-fledged home ownership but not most of the financial rewards.
For families who have the bulk of their estate tied up in home ownership, this can pose significant consternation for succeeding generations. And many inclusionary zoning ordinances do not allow children to inherit their parents’ inclusionary unit. The unrevealed truth (aka dirty-little-secret) is the unfunded liability—the ordinances usually require that the units be resold to other families making 60% to 110% of median income; their total housing cost cannot exceed 30% of their gross salaries.
Interest rates fluctuate greatly and when they increase dramatically (e.g., from 2000 to 2010 interest rates varied by 100%), there will be a significant drop in the price at which these units can be sold. Present day buyers are told that they will never have to sell for a loss, but that is a promise from local housing and community development departments that is not backed up—there are no funds set aside to cover the potential losses.
Inclusionary units and other affordable housing are a great first step toward financial independence and control over one’s own housing situation, but not the only one or the last one. Far better than renting and offering the security of home ownership, it creates a second class home ownership, and does not provide the same financial security as normal home ownership.
What does all this mean for you, if you are buying a condominium in one of our developments which includes inclusionary units? Not much. The owners of those units are less likely to own very expensive cars, and are marginally more likely to have children. They may be more likely to live on the first floor or near the parking; their units might have a slightly lower degree of finish in bathrooms and kitchens. Other than that, you will not notice, except that there might be a more congenial blend of people.