Welcome to the Neighborhood A Practitioner’s Guide to Inclusionary Housing September 2017 Housing Virginia 203 N Robinson St | Richmond, VA | 23220 | www.housingvirginia.org Workbook Composition: Thomas Silverstein, Lawyers’ Committee for Civil Rights Under Law; Bob Adams and Jonathan Knopf, Housing Virginia; Catherine Bray, HDAdvisors Report Design: Alise Newman, Housing Virginia TABLE OF CONTENTS EXECUTIVE SUMMARY 4 1. INTRODUCTION 5 2. LEGAL FRAMEWORK FOR INCLUSIONARY HOUSING IN VIRGINIA 12 3. EXAMPLES AND BEST PRACTICES 17 4. RECOMMENDATIONS AND GUIDELINES 24 5. STRATEGIES FOR INCLUSIONARY DEVELOPMENT 31 6. RESOURCE DIRECTORY 35 7. REFERENCES AND FOOTNOTES 37 4 | Housing Virginia EXECUTIVE SUMMARY Thousands of Virginia’s families struggle to find a tional inclusionary zoning programs that are only secure and affordable home each day. Thankfully, applicable when a developer seeks a variance or there are proven solutions for expanding housing special exemption. Three successful case studies of opportunities for these households. One innovative inclusionary housing programs are also examined, strategy is inclusionary zoning, which directs or including an in-depth review of Fairfax County’s encourages below-market rate units in new housing Affordable Dwelling Unit policy. developments, usually in exchange for meaning- ful developer incentives. Inclusionary zoning is Using a review of national best practices, the most effective as a part of a grander inclusionary guidebook offers a series of guidelines and rec- housing plan that promotes an array of tools to ommendations for crafting effective inclusionary offer a wide range of housing choices for families housing programs in Virginia. Building support early whose incomes are a barrier to finding a secure and often is key, especially from a diverse range of market rate home in their community. stakeholders. Local officials and advocates should also carefully consider their messaging to avoid Welcome to the Neighborhood is written as a guide common backfires. And, while there are certain for local planners, practitioners, and advocates to statuatory guardrails for inclusionary housing understand the opportunities and limits of inclu- policies, local governments have an impressive sionary housing in Virginia. This guidebook first range of options to consider when designing these overviews the need for expanded housing options ordinances. Officials should weigh demographic and for the one million households across the Common- socioeconomic needs with their current housing wealth facing unsustainable housing costs. It then market to develop a custom-tailored program. provides a detailed legal review of the bifurcated state enabling act for inclusionary zoning, which In some low-growth communities, traditional inclu- only permits mandatory inclusionary zoning in a sionary zoning requirements may be a hindrance to small number of cities and counties. The remainder expanded housing options. The fifth section of this of Virginia’s localities may opt to create condi- guidebook outlays other alternatives and incen- tives for inclusionary community development, including housing trust funds and community land trusts — which may work in conjunction with, or independently of, inclusionary zoning. Practitioners should not be afraid to think outside the box when attempting to create housing in their community that is secure and affordable. Although Virginia law provides some constraints, there is still ample room for localities to push the envelope using inclusionary zoning and other complimentary strategies. This guidebook acts as the first point of reference to help transform these opportunities into meaningful action. Inclusionary Housing Guidebook | 5 1. INTRODUCTION WHAT IS INCLUSIONARY HOUSING? WHAT DOES THIS GUIDEBOOK DO? Policies that mandate or encourage new residen- This guidebook is meant to provide local tial developments to dedicate a share of homes to decisionmakers with the information and resources low and moderate income families are inclusionary necessary to craft inclusionary housing programs housing strategies. The most common method is that produce affordable units without hindering inclusionary zoning, which creates specific afford- supply. The guide includes: ability targets in local land use codes, but this guidebook uses the term “inclusionary housing” • A statement of need for additional housing to also include additional incentives and programs that is affordable to low- and moderate-income that complement zoning requirements. families • The legal framework in Virginia for drafting HOW COMMON IS INCLUSIONARY HOUSING? local inclusionary housing policies Inclusionary housing is generally a local-level • Examples of inclusionary best practices in approach that requires state-level enabling legis- Virginia and across the country lation. Nearly 500 cities and counties across the nation have active inclusionary housing policies. • Recommendations for planning, designing, and That number will continue to rise as communi- implementing inclusionary housing programs ties strive to ensure that all persons, regardless of income level, benefit from increasing growth and • A glossary of complementary programs and investment in their neighborhoods. policies that promote housing affordability • A list of datasets and resources that help DOES INCLUSIONARY HOUSING WORK communities determine housing needs EVERYWHERE? While it may be tempting to view inclusionary housing as a panacea for affordability issues, local governments should carefully weigh the costs and benefits. Inclusionary policies are best suited for high-growth and high-cost areas — if there is more new housing, more affordable units are also needed. In medium-growth communities, inclu- sionary requirements could deter construction and keep housing costs high unless planners offer mean- ingful incentives. In slow markets, where demand is low, affordable housing needs are likely to be more effectively met by other means. 6 | Housing Virginia WHAT IS AFFORDABLE HOUSING? Housing is said to be affordable when families spend expenditure, followed by transportation. These 30% or less of their income on rent or mortgage two costs are inextricably linked. In general, a payments. Households are cost burdened when household’s transportation costs will rise the further they exceed that 30% threshold and are extremely the worker lives from their job. Often, families will cost burdened when housing costs are 50% or more need to live far from their place of work to find of their income. Sometimes, only inadequate or a home that they can afford. Therefore, the cost unsafe housing is available for families with lower of transportation is sometimes added to the cost incomes. Therefore, affordable housing must also of housing when measuring housing affordability. be high quality, safe, and secure. For the average renter, this total is nearly 55% of income; for homeowners, it is over 48%. Figure 1 illustrates the typical American family’s budget by spending category. Housing is the largest Figure 1: Household spending by housing tenure1 Renters 38% 16.2% 13.5% 5.9% 26.3% Homeowners 31% 17.3% 12.2% 8.4% 31.2% Housing Transportation Food Healthcare Other* *Spending categorized as “other” includes: personal insurance and retirement savings, alcoholic beverages, apparel, entertainment, personal care, reading, education, tobacco products, miscellaneous expenses, and cash contributions Inclusionary Housing Guidebook | 7 WHAT IS THE NEED FOR AFFORDABLE HOUSING IN VIRGINIA? About 1 in 3 households in Virginia are housing cost The Commonwealth’s housing affordability problem burdened. This share has decreased from over 35% is not confined to large cities. In fact, just over one during the height of the Great Recession in 2010 quarter of all rural households in Virginia are cost and 2011, but has failed to dip below 31% (Figure burdened.2 Map 1 shows how pervasive this issue is 2). Today, nearly one million of Virginia’s families across the state.3 face housing prices that exceed their budget. Figure 2: Cost burdened households in Virginia (2008-2015)4 1,050,000 37% 1,025,000 36% 35% 1,000,000 34% 975,000 33% 950,000 32% 925,000 31% 900,000 30% 2008 2009 2010 2011 2012 2013 2014 2015 Number Percent Map 1: Housing cost burden by county (2015)5 % Households with housing cost burden Less than 20% 20% — 25% 25% — 30% More than 30% 8 | Housing Virginia The affordability challenges for owners and renters If housing consumes half of the budget for a family are different. Renters are significantly more likely earning $30,000 per year, there is very little to be housing cost burdened — largely because they remaining for other needs, such as food, education, have lower incomes than homeowners on average. child care, transportation, and medical expenses. In fact, housing cost burden is directly tied to For higher income households, there is much more income: households with low and very low incomes leeway, even when housing costs exceed 30%. face the greatest challenges in meeting the needs of their family budget (Figure 3). Figure 3: Housing cost burden in Virginia by housing tenure and income (2015)6 100% 90% 89.2% Percentages reflect share of 80% households in each category 80.9% that have a housing cost burden. 70% 72.0% 60% 50% 55.5% 40% 48.4% 30% 37.8% 30.5% 20% 25.8% 10% 8.1% 8.3% 0% Under $20k $20k - $35k $35k - $50k $50k - $75k Over $75k Owner Renter Cost burden affects more than four out of five Virginia renters with incomes below $35,000 per