Another way to provide affordable housing?

This is ludicrous. (courtesy of WVIR)

Caravati visited Richmond on Wednesday for the third time in two weeks. He’s pushing an amendment to the City’s Charter that would make developers set aside parts of their projects as low- and moderate-income housing. Caravati says the city has had some success partnering with developers but now, “they’re just not answering the call there and hopefully this will be another inducement to get them to build more affordable units for those families that can’t quite afford it in a very expensive city.”

If the developers “aren’t answering the call” why doesn’t the City go after the employers for not “answering the call” to pay their employees more? (I know about the Living Wage, but even that is not sufficient) The median sales price for a house in Charlottesville is almost $250k; “affordable housing” would make developers set the prices at around $200k. What do you think will happen to the prices of the other houses?

Neil Williamson of the Free Enterprise Forum responds:

“I consider the other ten buyers the ones that won the lottery and won the opportunity to have the below-market cost house and the other 90 are the ones that subsidized it,” Williamson said.

From the City’s website:

Affordable Housing is defined, for the purpose of this policy, as those houses affordable to the sixty – seventy percent of the City population that have household incomes at or below 80% of the 2004 metropolitan area median household income of $63,700 for a family of four. For 2004, the maximum affordable home for purchase (by those making 0-80% of the median area household income of $63,700) would be approximately $218,300, using the latest VHDA limit, and maximum housing costs (rent and utilities) for tenants would be $796 …

The intent may be good, the method is not. Penalizing developers may make some “feel good,” but it’s not right. Nor is it right to penalize those who can legitimately afford homes in the are. The solution to the affordable housing crisis is out there somewhere. This is just not it.

How does one regulate the free market?

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5 Comments

  1. JMcNamera January 26, 2006 at 12:16

    If they allow a very large number of homes to be built in the city and in the local surrounding area (not Nelson, Madison etc), then supply-demand will cause some homes to be cheaper and thus affordable.

    They want to restrict housing, keep prices high, and have affordable housing? Something will have to give.

  2. Ray Hyde January 26, 2006 at 17:02

    This idea, inclusionary zoning, is becoming very popular.

    It is an idea that is as dumb as toast. McNamera is 100% correct. If you want affordable housing, get off the builders back.

  3. JMcNamera January 27, 2006 at 11:35

    Actually, I didn’t say “get off the builder’s back”. Just that the cost of homes is partly a factor of supply, let the supply be increased in and close to Charlottesville. There is lots of room east, west, and south, and even some north of town yet within a 10 mile distance of the center.

    The current policies are encouraging sprawl and higher costs. However, I do not advocate dropping reviews of builder’s plans. Its just that the county and city are using them to deny/delay projects.

    The development proposed just south of I-64 is a great example of homes being built close to town. With the reviews etc, it will be years before it starts. Letting it happen now will do more to reduce prices than trying to do so via a “lottery” as Neil Williamson put it.

  4. Ray Hyde January 27, 2006 at 18:08

    I overspoke for myself and it came out like i was speaking for you something you didn’t say. My apologies.

    You are right. We need review and inspections, but it has become an industry to itself. Some economists say that in certain highlyrestrictive areas it can represent 30% of the cost of a home.

    More supply means lower prices, up to a point.

  5. Tom Coleman January 27, 2006 at 22:59

    If ‘inclusionary zoning’ diminishes a developer’s proforma sale proceeds and material costs are constant, then the entire project won’t provide a reasonable return on investment and the developer won’t have reason to bear the risk of development. Ultimately, land owners will have to lower their asking prices when selling to developers. In the meantime, the lack of new dwelling units will drive up prices of the existing housing stock.

    Cities in TX have non-restrictive zoning, the most housing supply and some of the most affordable housing in the country. Of course, one trade-off is traffic congestion. Perhaps a better solution, with less traffic implications, is to promote more intense residential development ‘downtown’, which would mean lifting building height restrictions (if any).