The rents in Raleigh are too damn high | Wake County | Indy Week

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The rents in Raleigh are too damn high



Flash back to 2009, when Raleigh's City Council debated—and ultimately shelved—a task force's proposal for what's known in planning parlance as inclusionary zoning, which in essence requires residential developers to include affordable units as a condition of building.

The city's position then, as now, is that state law doesn't allow it. They wanted to tackle this increasingly pressing issue, but their hands were tied.

Now, flash forward to 2015. Council's changed a little, as have the political and economic landscapes. But the conversation about how to encourage more affordable housing? Déjà vu.

On a Tuesday evening two weeks ago, City Council debated whether to rezone property it owns at 301 Hillsborough St., a valuable vacant lot across the street from the Dawson condominiums and Campbell Law School, to allow for a 20-story project. During the discussion, Council divided into two groups: Kay Crowder and Russ Stephenson, who wanted to ensure that the city maintained its bargaining position with the eventual developer, leverage it could use to compel affordable housing; and the rest, who weren't as concerned.

Councilor Wayne Maiorano—in his day job, a lawyer who represents developers—explained his vote thusly: "We don't have a vision or a policy plan or a direction for diverse housing options, so we don't know how to use these resources and assets yet. I would caution us not to start doing this in a less than thoughtful, strategic way."

On a 6-2 vote, the can was once again kicked down the road.

The Hillsborough Street property will now go to the Budget and Economic Development Committee to be negotiated for sale, just like the Stone's Warehouse building downtown, another substantial city-owned property that the Council agreed to sell earlier this year. Then, as with 301 Hillsborough, there was a lot of talk about using that building to create affordable housing downtown. In the end, however, it went to the highest bidder, though the city has pledged $2 million from the sale toward affordable housing elsewhere.

If you're a skeptic, you could be forgiven for not buying all the official talk about the city's affordable housing crisis. When rubber meets road, when the City Council has the chance to do something conspicuous, it always seems to pass.

Given the history, 301 Hillsborough caused considerable consternation among affordable housing advocates. Here the city had a golden opportunity that it failed to seize. When, they wonder, will the Council finally stop talking and start doing something?

The answer, if you're an optimist, is now.

If they can figure out how, that is.

That isn't to say the city has entirely ignored the problem. There have been four successful bond campaigns since 1990 that have helped pay for new, and rehabilitate old, affordable housing units, including the most recent $16 million bond approved in 2011. Data from the city's Community Development Department indicate there are more than 11,000 subsidized housing units available all over the city, funded through a combination of local, state and federal dollars.

But that's not nearly enough; in fact, the supply is only scratching the surface of the demand.

There are more than 31,000 households whose renters are considered cost-burdened, meaning more than 30 percent of their monthly income goes toward housing, according to Larry Jarvis, the city's director of housing and neighborhoods. This goes beyond housing for the very poor, and includes what's called workforce housing, a particularly urgent need in the urban core, where middle-class professionals and service workers find themselves priced out of the market and forced to the suburban hinterlands.

Everyone agrees that the city has lacked an overarching vision to date. But that could soon be changing.

In July, Jarvis will present an affordable plan to the City Council, outlining ways to meet the city's goals over the next five years. (He was mum on the details.) That same month, the Council will also vote on remapping downtown's building heights based on the city's Unified Development Ordinance, another chance to take tangible action.

In that latter vote, Stephenson sees a window.

He argues that the city should adopt a policy in which developers will have to negotiate to build to the maximum allowable height, rather than simply giving those rights away. That carrot, he says, could be used to get developers to include not just affordable units, but also things like public art and streetscaping.

If the city gives away those rights without asking for anything in return, he says, it will forever lose its ability to bring developers to heel.

"There will be no public involvement in anything built in downtown Raleigh ever again unless a developer wanted to go above the proposed heights," Stephenson says. "We have the opportunity to look at other cities using that height and land value to achieve a broader range of community goals. My question is, why are we not having that conversation first?"

One of those cities is Austin, Texas, population 886,000, where Stephenson and other civic leaders visited recently as part of a Chamber of Commerce excursion. There, nearly 18,000 housing units are rented at subsidized rates.

Recently honored by the Urban Land Institute for its innovative strategies, Austin's housing coalition has campaigned successfully for millions of dollars in bonds for affordable and workforce housing, including a $65 million bond approved in 2013. Moreover, the city charges developers for height and density bonuses downtown and along transit lines; that money goes into a fund that is then used to provide affordable housing throughout the city.

According to Rebecca Giello, Austin's assistant director of neighborhood housing and community development, Austin is also looking at flexible zoning—a concept based on the idea that land uses, neighborhoods and communities are dynamic and constantly evolving—to require developers to provide more onsite affordable housing in lieu of paying into the fund.

“We are standing on the precipice of giving away entitlements.”

—Russ Stephenson

Stephenson says these are conversations Raleigh should have had before city staffers rewrote the UDO, a process that began in 2010, and certainly before the City Council signed off in 2013.

Two days after the 301 Hillsborough vote, Stephenson called an emergency meeting of a dozen or so affordable housing advocates on the sun-drenched patio of the Café Carolina in Cameron Village.

"We are standing on the precipice of giving away entitlements," he told them.

If the city isn't careful, he later told the INDY, it will end up with a mess of its own making, similar to Capital Boulevard, where in the 1950s and '60s, the city allowed developers to more or less do whatever they wanted.

"The result should serve as a sobering lesson about expecting the free market to give us what we want," Stephenson says. "What we got on Capital Boulevard was mile after mile of car congestion, treeless, clear-cut sites, parking lots, polluted air, pedestrian hostility, polluted stormwater runoff and the list goes on."

Stephenson's plan sounds feasible: create a mechanism to entice developers to accede to the city's wishes, both for affordable housing and other public goods, simple as that. But—the Austin example aside—city planners aren't convinced, which may auger poorly for Stephenson getting the five votes he needs come July.

"There are not many examples of this being an effective policy," Ken Bowers, director of planning and development, told the City Council at a work session last week. "For a developer to choose the bonus option, the return has to be as good as the non-bonus option. That's the key economic challenge of designing a bonus-based inclusionary program, and it doesn't have a good track record around the nation. We haven't seen an example that works."

A study on the feasibility of a voluntary inclusionary housing program in Raleigh conducted by the Triangle District Council of the Urban Land Institute in 2012 yielded the same results.

"We didn't think incentives were juicy enough to deliver on affordable housing on a voluntary basis," says Gregg Warren, president of the affordable housing nonprofit DHIC, who headed the ULI panel. "Even in mandatory ordinances across the country, a developer will choose to pay a fee in lieu of affordable housing."

The ULI report did make some recommendations, including using density bonuses to encourage affordable housing in suburban areas, where property is cheaper. The report also suggested providing a per-unit rebate to developers to get them to build affordable housing is another option, but that will require cash.

To help raise that money, the report recommended using tax-increment financing, in which projected increased tax values in a specific area are used to finance current affordable housing projects. Charlotte successfully used TIF to fund its $125 million Brightwalk affordable housing initiative, turning an area once plagued by drugs and crime into a desirable mixed-income community.

Council member Bonner Gaylord says he's leaning toward using Charlotte's model rather than Stephenson's, based on what city staffers have told him. More important, he says, will be Jarvis' report, which he hopes will provide a roadmap to the city's next steps. "We are waiting for that report with bated breath," Gaylord says.

Finally, the ULI report suggests that Raleigh "proactively purchase land in downtown locations and transit corridors if it wants to insure [sic] a mix of housing types in these locations in the future." This makes sense (though it too will require capital): Downtowns benefit from having eclectic mixes of people. For many city employees and young professionals—not to mention the bartenders who pour their beers—a $1,200-a-month studio is simply out of the question. They end up living in the 'burbs and commuting, while downtown devolves into white-collar boredom.

But the City Council's recent actions, both on 301 Hillsborough and Stone's Warehouse, seem to run counter to that premise. The city already owned these properties and could enforce its will. Why not mandate affordable housing as part of their redevelopment?

Indeed, Warren tried to get the city to do just that at Stone's Warehouse. "The city did not have a priority for affordable housing, and we dropped out when we realized that was the case," he says. "The city's explicit view on Stone's was to get maximum dollars out of that deal that could be reinvested in affordable housing elsewhere."

There's no way to tell for sure, however, where the money from the Stone's sale will end up. Raleigh doesn't have a specific fund for affordable housing, and some of the $2 million is already spoken for. The city acquired Stone's in 2001 using a combination of federal grants, bond money and local funds. When the property is sold (the sale is still pending), some of the revenue has to be used for federal-grant-related activities; some more has to be reinvested in the local bond program. As for the rest, it's up to City Council to keep its word.

That's not the case in Austin, where 40 percent of city property taxes go toward a program that includes affordable housing. Raleigh has no such model, though it could. Property taxes will skyrocket in the near future as land values rise; the city could, if it wanted to, set aside a portion of these revenues for housing programs.

Options abound, though all require a political will the city has heretofore not demonstrated.

There are signs that after all the years of complacency, after all the talk, the tide could finally be turning. At last week's Council work session, over city staffers' objections, Mayor Nancy McFarlane indulged Stephenson and Crowder and asked Bowers, the planning director, to look into ways the city could use density bonuses. Whether or not city officials ultimately choose that route, they're at least taking the problem seriously.

"We need to have a true conversation about the perception of downtown, about what really affordable housing looks like, a cross-section of the city, not just a place for rich people," Crowder says. "We have an opportunity to change that perception. We need to work quickly and have a diligent process to achieve this or we won't have a vibrant, equal downtown."

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