Comments on DCmud - The Urban Real Estate Digest of Washington DC: Industry Insight: Neil Albert on DC Development

So how can I tell if the condo that I recently mov...

2008-06-24T08:34:00.000-04:00

So how can I tell if the condo that I recently moved into will have 20-30% affordable housing? Would it have been in my condo docs somewhere?

My building seems to be about 40% full right now. Do they tend to move people into the affordable units ASAP or all at the end?

I understand what the city is trying to accomplish. But I would hope that if a building was going to be 30% HUD housing that the prospective buyers of the market rate units would have atleast been told. We're making the biggest financial investment of our lives and don't deserve the city and the builder colluding to suppress facts from us.

Its as simple as you state, the government require...

2008-06-23T22:53:00.000-04:00

Its as simple as you state, the government requires the seller to sell it to them at a remarkable discount. Take the case of Chase Point, in Friendship Heights, where DC mandated affordable housing 1 block from the most high-end retail in the city. So qualifying residents, including some students, were able to buy for the mid $100's in a building that started otherwise in the $600's.

The residents have to sell it for a price based on their purchase price, but they get a condo subsidized by the developer. The District gets to say it provided subsidized housing, but it doesn't cost anything from DC coffers, since the developer is footing the bill.

Very comprehensive and informative post from "Anon...

2008-06-23T22:20:00.000-04:00

Very comprehensive and informative post from "Anon @ Jun 23, 2008 5:39:00 PM".

Can someone please explain how affordable housing works for condos? I can sort of connect the dots for apartments. The government could subsidize the rent. If the person no longer qualifies at some point their rent could be raised or their lease not renewed.

But with condos how can someone making 30% of AMI afford to buy? You can't just sell them the unit at a reduced price point because they would just flip it. The goal is to house the working poor - not hand them a real estate arbitrage opportunity. Also, what happens if the individual just stops paying condo fees?

It is true that in the District RFP’s the City exp...

2008-06-23T18:39:00.000-04:00

It is true that in the District RFP’s the City expects to pay for this housing by releasing the ground they own below market. However, at 30% affordable and at 30 and 60 percent of AMI, they can give the land away for free and it will still not cover the cost to the developer to provide the units. On top of that, the City has their hand in the developer’s pants on a number of levels:

• Preparing an RFP: a significant expense and what percent have actually been awarded in a timely manner? Or at all? Confidence in the process is costing the City.
• CBE’s: Developers are forced to use up to 35 percent local contractors. These folks generally don’t exist to do projects of this scale.
• First Source Agreements: The developer is required to use the Department of Employment Service as its first source to hire. Given DC’s stellar school system, that’s a pretty shallow pool of qualified applicants.
• Equity: A material portion of the equity needs to be provided by a CBE equity partner. There isn’t a lot of this cash lying around. Just look at the SW waterfront project.

Why would anyone take a run at these RFP’s under these conditions?

Now try leasing a building at what will need to be top dollar with 30 percent of the units (and probably a higher proportion of total residents) occupied by DC’s working poor. Remember, these aren’t the school teachers, policemen, government workers. Would you want to live there? Really? And as the significant inventory under construction has been pointed out, who would finance this building given its competitive handicap.

Finally, how many units, really, will punitive affordable housing policies generate? Even if it were 10 percent of 5000 units (near term planned estimate), that’s far short of the mayor’s 10,000 unit goal. In the meantime, safe, clean Arlington, Alexandria, and Bethesda beckon with lower rents, lower taxes, reliable garbage collection, and decent schools.

In order for DC to be economically vital, it needs to attract young, affluent professionals who will then hopefully choose to stay here as their careers progress. People have choices, and living in DC can be a tough decision for some. Discouraging people from moving here, which is what these affordability policies do, will keep average household incomes in DC at about half of the regional average.

Developers have stopped building? In the District ...

2008-06-20T18:55:00.000-04:00

Developers have stopped building? In the District and Arlington - Really? Why is there a new DCMud article everyday with news about another development then?

I think you are mixing your message as well. First you say all the costs are unfairly put on the developer. Then in your final paragraph you say the costs are passed on to the consumer.

I fully agree that mixed-income is better than a l...

2008-06-20T18:08:00.000-04:00

I fully agree that mixed-income is better than a low-income housing project. My gripe is not the mix, but in foisting a disputable social responsibility upon one small group. If you believe in the concept, pony up some cash and make it happen. You, and I, don't want to do that.

The government could, if that was its priority, pay the developer for this kind of housing, or build it themselves. Instead, they just say "build it". According to you, the developer is still "making his profits". That is contrary to everything known about the industry; many are losing money. You may have noticed how many developers have stopped building.

Do we ask car sellers to subsidize car sales to poor people? Or contractors shoe salesmen to subsidize their product for people that can't afford it? The cost is only invisible because you and I don't see it, but landowners and developers make their economic decisions on these factors, which means they will be less likely to build. A reaction that perversely lowers the supply and raises the price to the rest of us.

@ Anon 3:26A developer is still making his profits...

2008-06-20T16:51:00.000-04:00

@ Anon 3:26

A developer is still making his profits. The dev corp just pays the city less to acquire the land due to the extra costs the city has imposed.

The private sector isn't too interested in building affordable housing on prime real estate. On the flip side the government building affordable housing has historically failed because it creates housing projects with concentrations of poor. It's been determined that mixed income is the best way to house the poor because it disperses the affordable housing with market rate housing.

To achieve mixed income housing the public and private sector need to work together. More specifically, the government needs to provide the incentive to developers to include affordable housing in their projects. That's what Neil Albert is doing with these RFPs.

All that said, I am curious how affordable housing works with condos. I think I get it with apartments. But in a condo, if a low income 'owner' decides to stop paying their $380/mo condo fees - then what?

I don't know how inclusionary zoning can be "non-p...

2008-06-20T16:26:00.000-04:00

I don't know how inclusionary zoning can be "non-punitive", at least from the developers' perspective. I appreciate that some other cities force housing providers to undertake the social function of providing houses for people that can't afford them, but that's should never be a function of the private sector. How about if they raise personal income taxes in order to pay for cheap housing? Because there would be an outcry, and rightly so, but developers constitute a small minority of the population, so the rest of us think its fine, provided we don't have to pay.