Developers hold solution to city's housing problem

October 30, 2006|By Rebecca Murphy Jones

How can Baltimore solve its affordable-housing crisis?

Before we even attempt to answer the question, we have to begin with a definition.

"Affordable housing" means different things to different people. What Constellation Energy chief executive Mayo A. Shattuck III might call affordable housing is likely what Joyce Smith would call a dream. Ms. Smith is a Franklin Square woman quoted in a recent Sun story whose daughter suffered sticker shock while searching for a home in the city. We should be considering a more precise definition of affordable housing, which may be why the term "workforce housing" has recently become more popular.

But no matter what it's called, if we are serious about addressing this crisis, there must be an honest discussion about the real costs of producing large numbers of affordable-housing units in Baltimore, and an acknowledgment that it is work requiring a particular expertise. Specifically, we have to change the notion that it is somehow unethical for developers to make a profit by building affordable housing.

Flipping is unethical. Building substandard housing is unethical.

But paying responsible developers a fair price for the work they do to build quality affordable homes is not.

Right now, it is nearly impossible for a developer to make a fair profit for building quality affordable housing in the city because the costs are no lower - and could be higher - than the costs of producing comparable market-rate units. Because the profit that developers can generate on affordable housing is substantially less than that generated from market-rate housing, developers often use public funding that provides better financing terms. However, this funding often comes with strings attached - additional regulations (Americans With Disabilities Act compliance, for example) and delays associated with the bureaucratic processing and approvals that in the end eat up any savings a developer would recoup with the better financing.

When you ask developers why they don't produce affordable housing, you get the same answers over and over: "It's not profitable." "It takes too long." "It's difficult to work with communities and the city's bureaucracy."

Watchdog groups and newspapers often complain that development subsidies take money away from other, more important community needs. But other than health and education, what is more important than housing? Regardless, there are lots of creative ways for the city to subsidize development indirectly. The recently convened Baltimore City Task Force on Inclusionary Zoning and Affordable Housing brought together a wide cross-section of the housing community, including large and small developers, advocates and housing mavens. It discussed numerous ideas for cost offsets, such as waiving fees and taxes, using creative project financing, reducing land acquisition costs and having the city absorb infrastructure expenses.

Now the debate needs to shift from discussion to problem-solving. Advocates and nonprofit community development corporations have an important role to play in communicating the desires of their communities, but they typically lack the experience to do development work. While it makes everyone feel good to empower these organizations to "develop" their communities, 15-plus years of doing that in neighborhoods throughout the city has not resulted in an appreciable increase in affordable-housing opportunities. The same communities that struggled with housing issues 15 years ago (Park Heights, Franklin Square and East Baltimore, to name just a few) continue to struggle. The fact that we're still talking about the issue proves the point.

In order for Baltimore to provide for its existing population and attract a reasonable share of the thousands of workers who will be moving to the area as part of the military's base realignment and closure process, the city needs an efficient, dependable system to create a volume of desirable and stable mixed-income communities with a range of housing types.

It may make everyone feel better to give public money to well-intentioned neighborhood organizations rather than "evil" developers. But the flaw in that approach is that development is typically only a small part of what these groups do, and they are not equipped to do the work on any substantial scale. History has taught that the private sector is generally more effective at meeting business objectives than governmental or community organizations. Community groups certainly have an important role in the process, but it's not development. In the arena of affordable housing, we simply need to stop viewing quality, dedicated, profit-motivated developers as adversaries.

A smart solution to the affordable-housing crisis will go a long way to ensuring that the city is successful.

Rebecca Murphy Jones is a native of Baltimore and a development associate for a Baltimore-based development company. Her e-mail is rebeccamjones@savannahdevcorp.com.

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