Voluntary Inclusionary Zoning & Subsidies in Atlanta: The Legal Environment

By Chris Thayer

 

bonus_example
Example of a Density Bonus from an inclusionary ordinance.

Last April, this blog covered the legal environment of mandatory inclusionary zoning in Atlanta. This companion piece considers the situation faced by voluntary affordable housing measures, in particular, voluntary inclusionary zoning policies and subsidy programs.

While voluntary inclusionary zoning can take many different forms, these policies essentially form the “carrot” to mandatory inclusionary zoning’s “stick,” offering developers optional but enticing benefits in exchange for producing affordable units within their developments. These benefits can range from minor administrative boons like fee waivers, to zoning variances of a reduced parking requirement, to increasing the permissible density of units, or even monetary incentives like tax abatements — a form of voluntary inclusionary zoning that begins to overlap with supply-side subsidies.

Subsidies, rather than mandating or coercing developer action, represent a monetary outlay from the government to encourage the desired behaviors, and come in three major forms: demand-side subsidies, public housing, and supply-side subsidies. Demand-side subsidies operate by extending a benefit directly to individual lower-income families in need of housing, generally in the form of a voucher intended to cover the gap between the market-rate and an affordable one (at 30% of the recipients’ income). These subsidies make up HUD’s Housing Choice Voucher program, funded at the federal level and administered by subordinate localities. While still the largest affordable housing program nationwide, it has come under fire for its notoriously long waiting lists, concentration of poverty (due to a flaws in rent calculation and higher-end landlords often refusing vouchers), and upwards pressure on market rents.

Vouchers were initially designed to take over for the second subsidy approach, public housing. Public housing projects were an attempt on the government’s part to directly provide the lower-income housing needed. Like vouchers currently, in their heyday public housing project were notorious for concentrating poverty, as well as for unhealthy building conditions, high crime, and stigma. Because of these failures, HUD discontinued these programs in the late 1980s (though some public housing developments continue to operate), and instead turned to the third and final category of affordable housing support: supply-side subsidies.

Supply-side subsidies are a monetary incentive given to developers to produce affordable units within their otherwise market-rate developments. Unlike inclusionary zoning as such, these programs explicitly serve as part of the funding stream for the project and are often subjected to a ‘but-for’ analysis (the project could not otherwise be built without the subsidy). There are a variety of such programs at the federal, state, and local levels, the largest of which is the Low-Income Housing Tax Credit (LIHTC), but all of which share the essential character of funding unit construction through developers.

Compared to the difficulties mandatory inclusionary zoning faces, the way is far clearer for voluntary policies. Indeed, Atlanta already has several policies that fall under this umbrella, one of which is the Affordable Housing Impact Statement (Atlanta, GA Municipal Code § 54.2). While not affecting developers directly, it requires a statement indicating the number of affordable units added or lost be made publicly available for any legislation that might impact the housing stock, increasing transparency and lobbying power. Within the region, Fulton County adopted a voluntary inclusionary zoning program that lasted two years and offered a wide range of benefits for developers, who participated either by building units or paying fees-in-lieu during the 2007-9 ordinance activation window (Fulton County, GA Municipal Code § 4.26). Invest Atlanta offers an attractive tax abatement schedule and fee waivers for developers who include workforce housing in projects constructed in Urban Enterprise Zones, and also waves impact fees for affordable units (GA Municipal Code § 19.1001-24). The Atlanta City Council passed a voluntary zoning ordinance in 2013 that provides incentive “points,” scheduled by the number of affordable units, the extent of the affordability, and the presence of other amenities. These points can be exchanged for benefits including a density bonus (up to 120% of the existing maximum), removal of parking requirements, and reduced yard requirements (Atlanta, GA Municipal Code § 16.37). This option seems to have been largely unused by most developers, especially the density bonus, which goes unneeded as many Atlanta developers do not currently max out their ordinarily allowed densities — a similar problem to the history of failure seen in Atlanta’s attempts at Transferable Development Rights programs.

Subsidy efforts also have a good legal outlook. Vouchers are fully supported by law, and the recipients thereof are protected from administrative discrimination. However, like most of the nation, Atlanta does not have any source-of-income protections and it is therefore perfectly legal for landlords to refuse voucher-holders — leaving recipients trapped in the few low-income, high-crime neighborhoods that will accept vouchers, despite the program’s best intentions.

As previously mentioned, public housing construction has been discontinued for roughly thirty years. However, many developments are still in active operation nationwide, and the federal government’s HOPE VI and RAD programs offer grants to renovate and rehabilitate aging public housing facilities, meaning that these remaining complexes could continue to provide affordable housing for years to come. The Atlanta Housing Authority (AHA) is the largest Housing Authority in Georgia and one of the largest nationally, overseeing 8,200 units (and more than 18,000 voucher recipients). This status persists despite AHA having torn down all existing public housing projects over the last decade, redeveloping into mixed-income residences with about two-fifths the number of affordable units as the prior public housing structure offered and “vouchering out” the remaining residents with all the problems that housing vouchers entail, thereby earning the dubious distinction of being “the first U.S. city to demolish all of its low-income family public housing.” This pattern of redevelopment — which not only reduces the total of affordable units, but has shown itself to increase gentrification in the surrounding area, to the point that “in and around areas redeveloped through the AHA, the assessed value of property has increased by some $1.1 billion since 1998” — is entirely legal and up to the discretion of the current director of the AHA. This redevelopment trend is hardly new to Atlanta — indeed, Charles Palmer, who built the first public housing project in the nation in the form of Atlanta’s Techwood Homes, stated that he first became interested in ‘slum clearance’ out of concern for the effects of nearby slums on the value of his Downtown commercial properties. However, typical of Atlanta or not, it is a matter of great concern for affordable housing advocates due to the current impossibility of constructing any new publicly-owned housing ventures.

Finally, supply-side subsidies are the most popular and politically palatable form of affordable housing instrument available in Atlanta. While each source of funding has its own programmatic rules, there is relatively little other legislation in effect on subsidies. The only major legal change of note for federal subsidy provision is the recent (2015) case of Texas Department of Housing and Community Affairs v. The Inclusive Communities Project, Inc, in which the Supreme Court ruled that disparate impact claims are cognizable under the Fair Housing Act (576 No. 13-1371 2015). This means that plaintiffs may sue a housing department or other jurisdiction for distributing those funds to proposed developments in a way that would have a disparate impact, such as by clustering low-income housing in only a few neighborhoods. This increased scrutiny could have substantial implications for the subsidy allocation process, as jurisdictions must now re-evaluate their project approval criteria for discriminatory outcomes, especially in the area of income mixing. This in particular is contrary to established practice, which encouraged 100% affordable (if privately owned) projects to be built, a unit-mixing structure that is now considered unsuitable and concentrating of poverty. It remains to be seen if housing advocates will actively pursue this newly open legality to increase the level of mixed-income communities being funded through supply-side methods.

What, then, are some practical routes for pursuing affordable housing in Atlanta? There are a number of measures local politicians could put into place. First, the city council might approve zoning measures to downzone maximum acceptable densities in hot neighborhoods, forcing developers there to use the voluntary inclusionary measures to make a better profit. Next, a source-of-income protection ordinance could be passed, protecting voucher-holders from rejection due to voucher use. Thus far, there have been no successful challenges to such ordinances in any of the 44 locales and 11 states that have this protection, suggesting that Atlanta would likely see success with such an ordinance. Third, Atlanta might consider a measure parallel to House Bill H.R. 2231 (the Public Housing Tenant Protection and Reinvestment Act of 2015), which would mandate an equal number of new units of public housing be constructed for every unit torn down. While this measure seems a bit too-little, too-late for Atlanta, it would protect the 8,200 units that still exist, which are a unique, non-renewable resource. By employing any, or ideally all, of these legally defensible changes, Atlanta could take concrete steps to ensure an affordable future for all residents.

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