Goals To Tools

There is usually a choice of tools available to accomplish any specific goal. Likewise, many of the tools can achieve multiple goals. The chart below gives some guidance in matching tools to goals. However, each situation is unique. Getting familiar with each of the following six sets of tools will best help advocates craft a comprehensive strategy that fits their goals and their community.

Affordable Housing Tool Sets:

Regulate the private housing market 
Create nonprofit-owned affordable housing
Increase affordable homeownership opportunities 
Encourage resident-controlled limited-equity ownership 
Leverage market-rate development 
Preserve publicly-assisted affordable housing

Tool Set #1: Regulate the Private Housing Market

Most communities experiencing rising housing costs have a supply of older rental housing that has historically been affordable, but is becoming unaffordable (slowly or quickly). One way to stabilize renters in that situation is to regulate the housing market. Unlike strategies that focus on real estate development, these regulation strategies focus on the "rules of the game." Regulation establishes new rules that try to limit the price that can be charged for housing and to limit evictions.

Rent control limits the amount that a landlord can raise the rent.  Some ordinances allow only a set annual percentage increase.  Less stringent laws simply restrict the number of times per year that a landlord can raise the rent.  More restrictive rent controls also limit the amount the rent can be raised once the unit is vacant. Most rent control laws are not limited by the income of the resident.

Conversion Controls come in many forms. Typically they attempt to restrict the amount of rental housing that can be converted to condominiums or other forms of ownership housing. Conversion controls are also considered an important companion to rent controls because otherwise property owners can avoid rent control by simply converting their rental buildings to for-sale condominiums.

Transfer taxes, known as "anti-flipping" policies, are charged on the capital gains (profit) made on properties that are bought and re-sold rapidly. In some communities, speculators buy and re-sell property at huge profits without making any improvements (known as "flipping.")  Transfer taxes are designed to discourage this kind of speculation, as well as raise financial resources for affordable housing.

Things to consider:

• Market controls affect a lot of housing at once, at relatively low cost to government. In places where very little land is available for development or where existing housing is too expensive to acquire, regulating the existing housing market may be the most practical way to take housing affordability to scale.
• Although effective, market controls are also controversial.  Business interests have singled rent control out as a symbol of oppressive government regulation and waged a relentless, and often successful, battle against it. Rent controls only remain in New York City, New Jersey, Washington DC and California, and they have been much weakened. Other market controls, since they don't control prices directly, have met with less opposition.
• Property owners often complain about bearing the cost of rent control.  Advocates often point out that despite the limits, most property owners still earn substantial returns on their investment under rent control.
• Critics of market control argue that rent and conversion controls lead owners to abandon or not maintain properties and create disincentives for new development or renovation of abandoned buildings. These problems can generally be addressed within the structure of the control itself. For example, smart rent control policies provide some way for landlords to pass through reasonable major repair costs to residents in order to avoid lack of maintenance. Policies that exempt new housing from rent control (all of them to date) are less likely to discourage development. Another possible strategy for avoiding or reducing conflict is to enable landlords to get a fair rate of return on their investment through formulas agreed upon by negotiating parties. While this may not give landlords their highest possible return, it can discourage disinvestment.
• Developing market control laws or policies can require legal expertise or assistance. Supportive elected officials can help gather those resources. There are also nonprofits and individual attorneys who can provide this help, but such expertise is sometimes hard to find.

Another difficult issue is political power. Policies that regulate existing housing usually require the presiding jurisdiction to pass laws and affect areas larger than a single neighborhood. This means these policies have wide-reaching impacts.  But it also means these efforts often require extensive coalition work or electoral action, as there will always be property owners that oppose these policies because it limits their profit-making potential.

While regulation strategies can address some problems, they may not address all goals. Overcrowding is difficult to address through regulation. In addition, it is nearly impossible to safeguard all of the low-cost housing in a community.  Hence, community groups should also look to create new housing opportunities as well. 

Resources:

• TenantsUnion.org web site has links to tenant groups and information in every state. Tenant.net is New York City focused, but has links and resources of national interest.
• Rent Control in the New Millennium from Shelterforce magazine.
• For technical assistance, contact the local Legal Aid group, the Center for Community Change, the National Economic and Development Law Center, the National Housing Law Project, or local chapters of the ABA or the National Lawyer's Guild.

Tool Set #2: Create Nonprofit-Owned Affordable Housing

Over the past few decades, nonprofit development has emerged as a highly successful way to create new affordable housing.  In this model, a nonprofit organization develops housing and then either rents or sells it at prices affordable to very-low-, low-, and/or moderate-income people, depending on the organization's mission and the community's needs. Nonprofit development can involve new construction or renovation of existing buildings. It can focus on a specific neighborhood or a larger area, on housing only or a broader range of community goals.

Nonprofit developers typically make their projects affordable by combining public and private funds. Typical sources of funding include: 1) loans from private banks, philanthropy, or other nonprofit institutions; 2) grants or loans from government agencies; and 3) equity from the sponsor, investors (if any), and purchasers (if ownership units).  More information on funding is available in the Funding Affordable Housing section.

In nonprofit-developed rental housing, the nonprofit typically owns the housing and rents the units to tenants in certain income ranges, or with particular needs. In nonprofit-developed ownership housing, the housing is sold to homebuyers within certain income ranges (see Increase Homeownership Opportunities).  While many nonprofits develop both for-sale and rental housing, it is frequently more cost effective to serve very-low- and low-income people with permanently affordable rental housing than with homeownership programs.  Funding for affordable rental housing is also much more readily available. Two of the major federal sources for affordable housing development (the Low-Income Housing Tax Credit and the HUD 202/811 program for seniors and disabled) are rental housing production programs.  These programs create tens of thousands of units of affordable housing every year, making them by far the largest sources of housing production for low-income households.

Things to consider:

• Nonprofit developers come in virtually all shapes and sizes-from community developers to regional, statewide, and even national organizations. In some parts of the country, particularly urban areas, nonprofits are the dominant sector for creating affordable housing. However, in other places, very few nonprofits exist or their experience is very limited.
• Because the nonprofit model is well established, there are many state and federal funding programs to draw upon.  There is also, however, high competition for it. More local funding for affordable housing, through vehicles like Housing Trust Funds, could strengthen the potential of nonprofit development.
• Development requires much technical expertise. For organizations new to housing, it is important to partner with existing nonprofits to gain experience.  HUD will fund technical assistance to start and strengthen community-based nonprofit housing organizations (CHDOs) throughout the country.
• Involving community members in nonprofit development can be tricky. Real estate development requires technical expertise and day-to-day attention, making it hard for newcomers and volunteers to participate easily. Community members can, however, be involved in setting goals and making larger strategy choices. They often affect these as part of the nonprofit's board of directors or as members of a building's tenant association.
• Whether or not nonprofit development is right for a community organization may depend on the kind of role local nonprofits are willing to play. Moving from tenant advocate to landlord, or taking government money for the first time presents challenges. Sometimes, local groups choose to partner with nonprofit developers that have a wider geographic focus.

Resources:

• " So You Want to Be a Developer? " Shelterforce Jan/Feb 2002

Organizations:

National:

• Local Initiative Support Corporation
• The Enterprise Foundation
• Corporation for Supportive Housing
• National Congress for Community Economic Development (NCCED)
• Neighborhood Reinvestment Corporation

State:

• Housing California
• Colorado Affordable Housing Partnership
• Florida Housing Coalition
• Illinois Statewide Housing Action Coalition
• Indiana Coalition on Housing and Homeless Issues
• Massachusetts - Citizens Housing and Planning Association
• Minnesota Housing Partnership
• New Hampshire Housing Forum
• New Jersey Housing and Community Development Network
• New York State Neighborhood Preservation Coalition
• North Carolina Low Income Housing Coalition
• Pennsylvania Low Income Housing Coalition
• Texas Low Income Housing Coalition
• Virginia Housing Coalition

Tool Set #3: Increase Affordable Homeownership Opportunities

Homeownership is a high priority for many individuals and communities.  Opportunities for affordable homeownership can be increased through both housing development and financial assistance.

Ownership has many benefits: wealth creation, mortgage interest deductions on federal taxes, and personal stability and independence. In addition, many communities and individuals see homeownership as a key to good citizenship; the idea is that homeowners are more involved or committed to their community because they have a long-term investment in it. There isn't particularly good evidence to support this attitude, but the belief is held popular. This means homeownership is often held up as a more viable affordable housing goal/tool than rental strategies. This might be important, because community opposition is sometimes a major barrier to new affordable housing development.

Nonprofit Development of For-Sale Housing. As they do with rental housing, nonprofits develop ownership housing with the intent of taking the profit motive out of the development and sale.  The affordability of for-sale housing is usually created through public funding or subsidies, both to the developer and the buyer. These subsidies usually take the form of low-interest loans or grants. More information on funding is available in the Funding Affordable Housingsection. Some variations on nonprofit development of for-sale housing include self-help housing and limited-equity homeownership.

Self-Help or Sweat-Equity Housing. In self-help, or sweat-equity housing, would-be homeowners help to construct or renovate a building as a way of reducing the cost of the home or gaining credit for a down payment on a home.  Often these efforts include the neighborhood or a broader group of volunteers, such as houses built by Habitat for Humanity. Self-help programs are usually administered or coordinated through a nonprofit agency.  Many state agencies help finance self-help housing by providing below-market financing for mortgages.  Self-help also develops valuable skills for the participants through the on-site construction experience.

Limited-Equity Ownership. Limited-equity ownership is more common in multifamily buildings, and is a way of mixing the benefits of ownership and resident control with permanent affordability. For more information, see Tool Set #4.

As with nonprofit rental development, homeownership projects require more than good intentions to make them affordable.  One major distinction from rental housing is that equity from the homebuyer may be a major source of permanent funding.  Other "gaps" in the funding are often made up through private grants, or grants and loans from government agencies.

In order for ownership housing to be permanently affordable, some form of restriction should be included in the legal documents for the property.  This can either be a "right of first refusal" by which a public agency or nonprofit has the first option to purchase the unit at a restricted price, or a deed restriction which limits the resale price. 

Things to consider:  

• Like other tools that involve real estate development, creating affordable homeownership requires money and capacity for construction, design, and financing. Organizations can achieve this capacity through a partnership with an existing developer or by creating a new development entity.  Fortunately, various organizations now provide technical assistancein this area.

• If a group does not already have real estate skills or a partner it can trust, it can take some time to develop a working knowledge of development.  In addition, because housing development is often a full time job, there may be limits on the extent to which volunteer or part-time work will be effective.  This is especially important considering that development is often a long process-in many cases taking three to four years to complete.  Development efforts can be delayed, cut back, or even stopped by opponents, so organizational stability and capacity are extremely important issues.
• Some cities and states place such a high priority on ownership housing that much more funding is available for that than for rental housing or resident-controlled housing.
• On the other hand, it often requires more local public subsidy per household to create affordable homeownership opportunities than rental housing because there are fewer sources of federal funds to leverage for ownership housing.
• Because of the lack of federal funds, and the various credit and asset requirements necessary to become a homeowner, focusing on ownership housing can exclude very-low income people.  Communities can face a difficult choice: 1) serve relatively higher income people, or 2) serve fewer people.
  While it is easier to keep rents affordable, it is also possible to ensure that ownership housing is resold at a price affordable to lower-income people.
• Another major drawback of homeownership programs is the lack of permanent affordability. It is possible, but much harder, to ensure that ownership housing is resold at a price affordable to lower-income people.  Many programs have not been designed to assure long-term affordability.  If restrictions are not in place, the massive subsidy that is often required is lost once the first homebuyer moves out. When this happens, the community loses assets.

Resources:

• Habitat for Humanity provides national leadership on sweat equity strategies.
• ACORN Housing Corporation (AHC) offices in Arizona, Arkansas, Illinois, Louisiana, New York, Pennsylvania, and Washington, D.C. acquire and rehabilitate abandoned buildings. Low- and moderate-income families who contribute sweat equity buy the houses at below market prices.  AHC also provides pre-purchase loan counseling to low and moderate-income people in many cities in the US.
• The NeighborWorks Network of the Neighborhood Reinvestment Corporation has a Campaign for Home Ownership.

Tool Set #4: Encourage Resident-Controlled Limited-Equity Ownership

In limited-equity affordable housing, residents own their units, providing security, wealth creation, and a degree of control and investment.  The ownership is limited in certain ways, however, in order to make the unit more affordable to the initial buyer and future owners. There are usually limits on the price at which the housing can be resold or leased, and sometimes to whom. These restrictions may appear in the deed, lease, or some other legal document.

Limited-equity housing can take several forms:

• In a limited-equity condominium, each household owns its own unit, but the ownership is limited to the unit itself.  A condo association owns the rest of the building and the land beneath it, and charges common area fees for their upkeep. Because each household has its own mortgage, this model creates many of the tax benefits of associated with homeownership. The limited equity aspect of this model limits the cost of becoming an owner as well as the profit from selling the condominium in future years.
  Limited-equity resale restrictions can be based on the income characteristics of incoming purchasers, on sale prices themselves, or on both. The term "limited-equity" refers to the low-equity investments a new member of the cooperative makes.
  National Cooperative Bank
• In a limited-equity cooperative the individual household owns a share of the cooperative housing corporation, not an individual unit. The individual household has a lease with the co-op and is a voting member of the co-op. Affordability is determined by resale restrictions that limit the price for which the shares can be sold or the incomes of later buyers.
• Community Land Trusts are similar to condominiums in that a household owns an individual unit. The primary difference is that instead of the land being owned by a condo association, it's owned by a nonprofit community-based corporation. The nonprofit corporation typically is controlled by residents of the housing and by non-resident members of the community. Non-resident members help eliminate the risk that members of a resident association (in either a co-op or condominium) would vote to eliminate re-sale restrictions on their own homes. 

All these models can apply to both multifamily and single family homes, though CLTs are more commonly single family and the others more commonly multifamily. Some limited-equity models rely on sweat-equity or self-help to reduce housing costs.

Things to consider:  

• With resident-controlled limited-equity ownership, the rewards are great, but the path may be more difficult than some other models. In most regions and states, these models are less established and less well funded than more traditional rental or for-sale housing development. For that reason, they can be harder to get started or get funded. Some strategies work best when certain types of enabling legislation exists to aid the financing. Often, that legislation does not exist.
• The end result-resident ownership-has huge benefits in terms of wealth creation, skill building, and community stability.  Some models involve a great deal of resident involvement in the development and/or acquisition of the housing.  Other models focus more on resident involvement in the management or governance of the housing.
• Like other tools that involve real estate development, creating resident-controlled housing requires money and development capacity. If residents don't already have these skills or don't have a partner they can trust, it can take some time to develop a working knowledge of development.  In addition, because housing development is often a full-time job, there may be limits on the extent to which volunteer or part-time work will be effective.  This is especially important when considering that development is lengthy-in many cases taking three to four years-and is often delayed or even halted.
  
  Development capacity can be achieved through a partnership with an existing developer or by creating a new development entity.  Fortunately, various organizations now provide technical assistance and capacity building assistance.  In addition, in some locations there are groups that will actually help develop the housing itself.

• There are also resident-controlled models that do not include any form of ownership, as with mutual housing associations. In a MHA, residents control the board of a nonprofit organization that owns their homes, but they have no ownership in a financial sense.

Resources:

• The Institute for Community Economics, home of the Community Land Trust Network, provides technical assistance, training videos, and sample purchase and lease agreements for Community Land Trusts.
• National Association of Housing Cooperatives provides information on starting co-cops as well as a list of technical assistance providers, financing options and other resources.
• Urban Homesteading Assistance Board helped develop the largest community of limited-equity resident-controlled co-ops in the country in New York City. It offers training to other groups interested in its methods.

Tool Set #5: Leverage Market-Rate Development

Gentrification involves a dramatic influx of private resources into a neighborhood.  Market-rate housing often displaces existing affordable housing and brings its own demand with it, so that an increase in housing supply does not lower prices.  Sometimes there are one or two main real estate investors at work, but more often, gentrification is the net result of hundreds and hundreds of public sector and individual decisions.  As a result, it is very difficult to completely stop gentrification. Don't overlook, however, the possibility of diverting some of those resources to support the community.

Community groups can take advantage of development pressures either to create housing directly or to gain financial resources for subsidizing affordability in other developments. Most typically, this involves requiring or providing incentives for market-rate development to include a percentage of below-market rate units in new developments.  Alternatively, local land use policies can require fees from new development or even land donations to enable others to develop subsidized affordable housing.

Inclusionary Zoning policies require, or provide incentives for, developers to include a minimum percentage of low- and/or moderate-income housing in new market-rate developments. In order to avoid complicated legal battles, localities need to offer some trade-off to the developer, such as density bonuses or other zoning incentives.  In some cases, localities make it possible for the developer to donate land (or money, though this is sometimes less desirable than the construction or land gifts)instead of providing the actual units.

Tracking the units created and maintaining their affordability over the long term are two of the most difficult aspects of affordable housing created through inclusionary zoning.  In the case of ownership housing, deed restrictions and right of first refusal can be used to ensure these goals.  In the case of rental housing, it requires more active regulation and enforcement by an outside group, such as government, lenders, or community groups.

Jobs/Housing Linkages.   Finding a funding source to pay for affordable housing or other community development is crucial to anti-gentrification work. If the community is seeing lots of job-creating development but not enough affordable housing, an impact or "linkage" fee can be assessed on new industrial, commercial, and office development. Linkage fees are charged to compensate the community for the increased burden on the housing market that new job development creates.  Linkage fees are used for affordable housing, and are often directed into a housing trust fund or something similar.

Things to consider :  

• Capturing benefit from market-rate development generally works only in communities that are already attracting market-rate development or have a lot of developable land as a resource. Under these conditions, using the market can create new affordable housing or local funding without the need for lots of community development capacity. On the other hand, the amount it creates is typically small relative to local needs. At the same time, market-rate development usually drives up the price of both land and existing housing.  That's why most housing activists see market-based strategies as a way to mitigate or take advantage of existing market-rate development, rather than as a substitute for other affordable housing strategies.

• Because market-based strategies typically require the passage of citywide laws or even regional agreements, they involve extensive coalition work or electoral action, which provides great opportunities for organizing and community involvement.
• Creating laws or policies often requires legal expertise or assistance. Supportive elected officials can help gather those resources. There are also nonprofits and individual attorneys who can provide this help, but such expertise is sometimes hard to find. 
• In some cases, communities may not have the resources or power to create new laws. In those cases, developers can be forced to provide inclusionary units or impact fees on a case-by-case basis, but this can be very time consuming and difficult to achieve.  In the case of large developments, such as military base conversions, this can be worthwhile.  But in a more typical situation, taking on projects one-by-one requires a level of organizing that is difficult to sustain.

Resources:

• Inclusionary Zoning: Innovative Housing Institute
• Linkage Programs: Survey of Linkage Programs in Other U.S. Cities , May 2001. Boston Redevelopment Authority (BRA), 617-722-4300, www.cityofboston.com/bra/

Tool Set #6: Preserve Publicly Assisted Affordable Housing

Housing that is either owned or subsidized in an on-going way by the government can make up a large portion of the affordable housing in a given neighborhood.  Because the affordability restrictions and enforcement tend to be fairly firm, these units tend to stay affordable while early gentrification sets in. They are not immune, however. In booming markets, owners of subsidized housing will often "opt-out" of their contracts at the first opportunity, and even public housing can be at risk if it sits on prime real estate.

Preserving existing affordable housing requires fewer resources than new construction and allows current residents to stay in their homes.  Luckily, the conversion of assisted housing to market-rate has a moderately long lead time and many notice requirements, providing ample opportunities for organizing to preserve it.

Privately-Owned Subsidized Housing. Literally hundreds of thousands of privately owned, publicly assisted units are at risk of converting to market-rate housing.  Depending on the program, owners of these properties can pre-pay their loans or choose not to renew their Section 8 contracts and then raise the rents to whatever level they see fit. When the owners of subsidized properties want to leave their subsidy program, however, they are required to notify residents and local governments. 

At this point, housing advocates, often with the help of local government, can try to persuade owners to renew, often using various government incentives.  Another approach is for resident groups or local nonprofits to organize to try to purchase the buildings.  Preserving subsidized housing works best if it includes pro-active organizing to identify buildings that are in danger of going market rate.

Public Housing. The federal government has created a series of programs that aim to integrate public housing back into the surrounding community physically, economically, and socially. The HOPE VI program provides federal dollars to renovate or rebuild public housing, most often with the goal of lowering the number of units on a particular site and lowering the percentage of those units that are affordable to very low-income households. While the program does provide much needed resources to fix up public housing, it can also cause displacement and loss of community ties.

There are three common misconceptions about HOPE VI funding that advocates can focus on in fighting displacement.  First, HOPE VI does not require new construction.  It has funded successful renovation projects that temporarily relocate residents in phases and then enable them to return to their renovated units.  Second, HOPE VI does not require a reduction in the number of overall housing units.  Advocates can insist that HOPE VI projects not reduce the total number of units.  If not all units can be rebuilt on site, then some should be accommodated nearby.  Third, although HOPE VI requires income-mixing, it does not require reducing the number of affordable units.  Advocates can insist on one-to-one replacement of units affordable to low-income households.  Income mixing can be achieved through the creation of additional housing.

Things to consider:

• These tools have a very specific purpose-preserving existing affordable housing.  In that respect, they are extremely important and usually immediate goals for a community to pursue, but they rarely address the full range of goals for a community, particularly the need for new housing.
• Preserving publicly-assisted housing may require some of the same real estate expertise that other models involve, but not always to the same degree.  Using advocacy and organizing, community activists can have a huge effect on preserving assisted housing.  Important partners for preserving this type of housing include local government and trustworthy development partners, including nonprofits. 

Resources:

• For technical assistance on affordable housing preservation, contact the National Housing Law Project, the National Housing Trust, and the National Alliance of HUD Tenants.
• In California, The California Housing Partnership provides expertise in this arena.