There is no question that the need for affordable housing in our urban centers is rising, while many of our older downtowns require revitalization because of unbounded population growth, housing price inflation, and increasing poverty. As our population continues to rapidly increase and affordability levels decrease, the gap between housing needs and supply, particularly for urban low-income families, is reaching alarming proportions.
Housing in our urban centers is in painfully short supply because of the simple disconnect between supply and demand. While our towns and cities gain large numbers of new households every year, only a very small number of housing units are being built. A host of factors is driving up housing prices and holding down construction of more affordable housing units, such as high land and construction costs; slow-moving bureaucratic processes for the review and approval of construction permits; complex and often inflexible codes and regulations; and limited government funds to subsidize low-income housing.
Yet, in the midst of this housing crisis, residential construction and urban development continue. The problem, however, is that such construction is often either a) for upper-income groups, in high-rise condos in urban centers or gated residential subdivisions in the suburbs; or b) too far away from centers of employment and livelihood. In both cases, housing affordability is viewed only in terms of the price of a housing unit, without the cost of commuting to centers of employment and livelihood.
The solution to the growing need for affordable housing close to where jobs and livelihoods are concentrated is urban redevelopment that addresses both housing price and location, as well as the revitalization of old downtowns and commercial districts.
Urban redevelopment involves policy and development frameworks that encourage or require residential developers to incorporate affordable units in market-rate projects as a condition for project approval. It is similar in objective to the 20-percent socialized housing requirement of the Urban Development and Housing Act (UDHA). However, the implementation of the UDHA has allowed developers to provide the required socialized housing far away from urban centers.
If affordable housing is to be built in urban centers, an urban redevelopment policy must be adopted by the government. This involves enacting laws that encourage or require residential developers to build affordable housing units in market-rate projects for their project to be approved. Many advanced cities administer urban redevelopment and affordable housing programs. Some are negotiating affordable housing project agreements with developers on a case-by-case basis.
The experience shows that these programs are not without problems. The most frequently asked questions are: Why is it legally sound to require developers rather than the government to shoulder the burden of providing low-income housing units to needy households? How do such programs avoid raising prices of market-rate housing and undermining the economic feasibility of residential projects? Predictably, the answers are mixed, supporting both sides of the issue.
To reduce the objections to urban revitalization and affordable housing ordinances, several approaches can be adopted. Property developers should make a reasonable return on a project and receive some form of regulatory relief, such as density bonuses, that partially or wholly compensate for the affordable housing units required.
The government, meanwhile, should prepare a compelling case for adopting mandatory programs. It should demonstrate that construction of private, market-rate housing units has impacts on specific community interests that are addressed by the affordable housing requirement. This should not be difficult to establish given the increasing housing backlog and the number of people living in informal settlements in many of our towns and cities.
From an economic standpoint, each urban redevelopment project must be considered as a whole, combining cost and income trade-offs relating to all factors that generate a bottom-line financial picture. This requires developers and the government to work out feasible incentives in an integrated approach that considers both urban redevelopment and affordable housing objectives.