Whither workforce housing?

• Author: Parlow, Matthew J.
• Position: As part of affordable housing development - 40th Anniversary Symposium

ABSTRACT

The last forty years have marked a dynamic era in affordable housing. During this time, affordable housing shifted from being largely government-owned to privately-owned, though certainly supported by government efforts. This evolution thus marked a distinct switch from a supply-side approach to a demand-side approach to affordable housing. As states and localities adapted to this paradigm shift, some high-priced metropolitan regions discovered that their housing markets were squeezing out middle-income service workers, such as police officers and teachers. In response, many localities--and some states--adopted various laws and policies to spur the creation of workforce housing: that is, moderately-priced housing that is affordable and desirable for these middle-income workers. These types of efforts seemed--and, indeed, were-necessary for these metropolitan areas when the housing market was at its peak in the mid-2000s. However, with the Great Recession came a bursting of the housing bubble, and home prices dropped dramatically all around the country. With the correction in the housing market, the continued need for workforce housing programs is less clear. In the context of the changes in affordable housing, this article seeks to analyze workforce housing's place in the affordable housing landscape and explore the need for workforce housing in the future.

TABLE OF CONTENTS Introduction I. Affordable Housing: A Forty-Year Retrospective A. Public Housing: The Supply Side Approach B. Privatization: The Demand Side Approach 1. Section 8 2. Community Development Block Grants (CDBG) C. Expansion of Demand Side Affordable Housing Efforts D. State and Local Government Efforts II. Workforce Housing A. Inclusionary Zoning B. Land Trusts and Housing Trust Funds C. Incentives: Grants, Loans, and Tax Credits D. Employer-Assisted Housing Conclusion INTRODUCTION

The last forty years have seen a dramatic evolution in affordable housing efforts on the local, state, and federal levels. Many early affordable housing efforts began as public efforts--that is, government entities built, owned, and managed public housing buildings for low-income individuals. (1) As these forms of public housing became too expensive for governments, affordable housing initiatives turned to the private sector. (2) These efforts consisted largely of governments releasing their control over affordable housing by lessening restrictions that prohibited or hindered private sector involvement. In this regard, governments attempted to incentivize private sector construction and maintenance of affordable housing. (3) This evolution marked a philosophical shift from a supply-side approach to affordable housing to a demand-side approach as governments went from directly providing affordable housing to giving low-income families and individuals vouchers, certificates, or other subsidies to increase their buying (or renting) power, thus allowing them to participate in the affordable housing market. (4)

As the various types of affordable housing programs took root, some expensive metropolitan areas found themselves struggling with housing for middle-income workers: police officers, firefighters, teachers, health care workers, retail clerks, and the like. These workers could not afford to purchase or rent homes close to their jobs and thus had to travel long distances to work, which took an economic and emotional toll on their families and their lives. These major metropolitan areas saw the problems caused by such circumstances and attempted to create workforce housing for these middle-income workers. (5) In response, some states and many local governments (6) adopted workforce housing initiatives through inclusionary zoning laws, a reduction in regulatory barriers, the creation of housing trust funds, the provision of "gap funding" measures, and incentives for employer-assisted housing initiatives. (7)

Due to the Great Recession (8), the real estate market has adjusted from its staggering prices in the mid-2000s. Accordingly, the question arises as to whether workforce housing programs are still needed and, in any event, whether they should be prioritized in an era of reduced government budgets. This Article seeks to analyze the evolution of affordable housing over the past forty years and situate workforce housing within this framework. In the process, this Article seeks to determine the continued relevance and importance of workforce housing initiatives to a region's overall housing approach.

Part II of this Article provides an overview of the significant changes in affordable housing over the past forty years. Part III situates workforce housing within the affordable housing landscape and details the various approaches to spurring more development of homes for middle-income workers. Finally, Part IV offers some concluding thoughts related to the question of whether workforce housing continues to be needed after the recent correction in the housing market.

1. AFFORDABLE HOUSING: A FORTY-YEAR RETROSPECTIVE

   1. Public Housing: The Supply Side Approach

      Beginning in the 1930s when the federal government became more heavily involved in affordable housing matters, and into the 1970s, affordable housing measures were largely public endeavors. (9) The federal government enacted legislation enabling local governments to build and own public housing for low-income individuals. (10) Those local governments interested in participating would create public housing authorities to build, own, and maintain public housing for low-income families and individuals. (11) Government efforts in affordable housing thus constituted a supply side approach: that is, governments sought to build, maintain, and rehabilitate affordable housing units in an attempt to affect the available supply of housing, particularly for low-income individuals and families. (12) However, this model was marked by two significant, interrelated problems. First, because such programs were funded through taxpayer dollars--whether at the federal, state, or local level--the public housing authorities were unable to create enough public housing to meet the needs of the low-income populations in their jurisdiction. (13) Second, the expense of continuing to build and maintain public housing became a drain on public resources, making the model financially unsustainable. (14) Due to these and other problems, governments have moved away from the public, supply side approach to affordable housing and more to privatization and a demand side approach. (15)

   2. Privatization: The Demand Side Approach

      This privatization movement was driven, in part, by several assumptions: that the public sector was the reason for the dearth of affordable housing; that the private sector could better produce affordable housing, particularly if government regulation was minimized or eliminated; and that it would be more advantageous for the poor if they could purchase their dwelling units rather than merely rent them, as was the case with public housing. (16) Accordingly, privatization saw a de-emphasis of public housing authorities and a lessening of regulations that had, up until the 1970s, prohibited or hindered private sector involvement in affordable housing efforts. (17) As described further below, all levels of government sought to break down these barriers and spur the private construction and maintenance of affordable housing. (18) This change led to more private sector construction and ownership of affordable housing, as well as more home ownership by low-income families and individuals. (19) Such a shift evinced a movement away from the supply-side approach to affordable housing and toward a demand-side philosophy. (20) As noted further below, these changes manifested themselves in programs designed to increase the buying and renting power of low-income individuals and families through vouchers, certificates, and other forms of subsidies. (21)

      There may be no one true event or policy decision that marked the shift from the supply side approach to the demand side approach to affordable housing. However, President Nixon's implementation of a moratorium on housing and community development assistance in 1973 may have been as significant as any event in signaling such a change. (22) The moratorium was not met with much resistance because various stakeholders in the affordable housing sector believed that governmental efforts up until that point had been largely ineffective. (23) During this temporary moratorium, President Nixon convened a task force to analyze affordable housing efforts and propose a new program aimed at bolstering the affordable housing sector. (24) This deliberative process led to the federal government's adoption of the Housing and Community Development Act of 1974 (HCDA). (25) The HCDA launched two significant initiatives--the Section 8 program and the Community Development Block Grant program--that led to the effective end to governments building public housing and a rise in private sector affordable housing efforts. (26)

      1. Section 8

         The Section 8 program had two facets: (1) project-based assistance to help fund new construction and substantial rehabilitation efforts, as well as Loan Management Set-Asides (LMSA) and (2) tenant-based assistance through certificates. (27) Approximately 850,000 affordable housing projects were funded through the project-based assistance of the Section 8 program from the 1970s through the early 1980s. (28) However, Congress revoked the statutory authority for such project-based assistance in 1983, and the program officially ended in 1985. (29) Similarly, the LMSA--which "provide[d] financial assistance in the form of rental subsidies to multifamily properties subject to FHA insured mortgage loans which are in immediate or potential financial difficulty"--has been effectively discontinued, as Congress has not appropriated funds to the program in recent years. (30)

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