Winter 2004

Practicing Planner

Copyright by American Planning Association

Responding to HUD's Affordable Communities Initiative: Will It Make a Difference?

By Candace H. Stowell, AICP, and Mark Shelburne, Esq.

During the summer of 2003, the U.S. Department of Housing and Urban Development (HUD) launched its new Affordable Communities Initiative. The purpose of the initiative is to pressure local and state governments to remove financial and regulatory barriers to affordable housing. Although commendable, the Affordable Communities Initiative offers no new strategies to deal with community opposition to affordable housing and places unfair burdens on nonprofit organizations.

For more than 10 years, local communities have been required to identify barriers to affordable housing in their annual action plans. These plans are submitted as one of the requirements for receiving federal housing and community development funds, especially CDBG and HOME funds. This requirement came into effect as part of the Cranston-Gonzales National Affordable Housing Act of 1990. The level of effort put into the barriers analysis varies greatly and often becomes a paper exercise, however. There are no consequences if a local government fails to remove identified barriers to affordable housing, assuming that barriers are even identified in the first place.

In June 2003, HUD launched America's Affordable Communities Initiative, which was an effort to encourage local and state governments to develop strategies to overcome barriers to affordable housing. The initiative also will address whether HUD's own regulations are creating barriers. Several state agencies in North Carolina, including the North Carolina Housing Finance Agency, responded to one component of the new HUD initiative: the notice of funding availability (NOFA) incentive questionnaire on affordable housing barriers. In preparing a coordinated response to HUD's questionnaire, we learned that North Carolina could be more proactive in removing barriers, but that barrier removal by itself still will not reduce neighborhood opposition to affordable housing.

What Is an Affordable Housing Barrier?

Affordable housing barriers are described typically as regulatory or financial systems that make it harder for developers to create affordable housing. Much of the momentum for addressing barriers is still derived from the well-known 1991 report, Not in My Backyard: Removing Barriers to Affordable Housing. In that report, the Advisory Commission on Regulatory Barriers estimated that barriers increased construction and regulatory costs by 35 percent. According to HUD, a regulatory barrier is "a public regulatory requirement, payment, or process that significantly impedes the development or availability of affordable housing without providing a commensurate health and/or safety benefit." The list of affordable housing barriers typically includes the following items:

• Large lot single-family zoning
• Prohibitions on accessory apartments
• Exorbitant development and impact fees
• Excessive or discriminatory public review requirements
• Shortage of land zoned for multifamily housing
• Spacing requirements for group homes
• Requiring special-use permits for group homes
• Discriminatory treatment of manufactured housing
• Unreasonable and expensive building code requirements for rehabilitation projects

HUD's New Approach to Address Barriers

As part of its Affordable Communities Initiative, HUD issued a request for comment last fall on its proposed incentive questionnaire that would attempt to ascertain whether local or state governments were making progress in removing affordable housing barriers. In its request for comments, HUD said that it wanted to make affordable housing barriers a policy priority for the 2004 NOFAs, which cover many widely used competitive housing grants, such as the Continuum of Care programs for homeless populations. Applicants for these housing grants can be awarded additional points by demonstrating that they are meeting HUD policy priorities, which include ending chronic homelessness, and visitability, to name a few. If applicants were able to provide the correct answers to the affordable housing barriers questions posed, they could earn up to two additional points on the scoring of their housing grant application. The American Planning Association (APA), including the APA Housing and Community Development Division, reviewed the proposed questions and provided several comments to HUD.

The questionnaire was divided into two sections: Part A, which relates to projects submitted by local governments or applicants with projects in incorporated areas; and Part B, which relates to projects submitted by state agencies or applicants with projects in unincorporated areas. What type of questions was HUD asking? As shown in Table 1 below, the questions covered planning and zoning issues, building codes, and infrastructure standards.

Table 1. Summary of Issues Addressed by Affordable Barrier Incentive Questions Included in 2004 HUD NOFA

Problems with HUD's Approach

When HUD initially proposed these questions in the fall of 2003, many professionals in the housing field saw some immediate problems. First, HUD was not asking local governments to answer the questions, but instead was asking nonprofit organizations to answer on behalf of government entities. Because the questions covered only competitive housing grants, the applicant was almost always a nonprofit organization or a local housing authority Most of the time, the nonprofit organization did not have any idea how to answer the questions, which involved detailed knowledge of planning, zoning, building, and legal issues.

Second, the questions did not cover entitlement or formula grants such as CDBG, HOME, HOPWA, or ESG, which are always disbursed to local and state governments. Instead of dealing with the entities responsible for creating affordable housing barriers (or those most directly capable of creating affordable housing incentives), HUD went after the problem through the back door. A better option would have been a requirement in the annual action plans. As such, nonprofits would be penalized for the poor performance of elected officials and agencies. When HUD sent out the proposal in November 2003, it stated that: "The questions are also designed to motivate nongovernmental applicants to take notice of the regulatory reform efforts of their government (or lack of such efforts), promote regulatory barrier reform where there are no such efforts, and support and encourage continued efforts where efforts at barrier removal have been undertaken." To ask nonprofit organizations to promote regulatory barrier reform is hard to justify when the same nonprofits are usually very dependent on local funding. In addition, by linking the questionnaire to competitive housing grants such as HUD 202 (housing for the elderly) and 811 (housing for persons with disabilities), HUD is potentially impacting the housing that is most needed in communities. This raises the question of why HUD is not putting any direct pressure on local and state governments that receive millions of dollars from HUD funding every year.

A third problem with HUD's approach is that it does not address many other barriers, some of which include fair housing scrutiny such as group home spacing requirements, and zoning definitions that place restrictions on what constitutes a single family. Last, but not least, the HUD incentives questionnaire is silent on NIMBYism. Even the most progressive "barrier-free" jurisdictions in North Carolina can find themselves in the middle of a divisive NIMBY debate. Local governments in North Carolina have on more than one occasion revoked building permits for affordable housing developments serving persons with disabilities as a result of public opposition. If the nonprofit organization has significant financial resources, they will instigate a legal challenge. Most times, the nonprofit cannot or will not initiate a legal challenge.

North Carolina's Response

After receiving comments from 37 different organizations, HUD finalized the incentive questions in March 2004. After the SuperNOFA was released, several state agencies in North Carolina worked together to prepare a coordinated state response to the Part B questions. Despite our best efforts, we were able to provide only four "yes" answers pertaining to questions 10 (state building code), 12 (streamlining), 13 (state studies), and 15 (state law). This provided one extra point for applicants. If we had documented a minimum of 8 "yes" answers, applicants would have received an extra two points on their grant applications. Nevertheless, the state response was distributed to grantees across the state through the HUD field office in Greensboro.

Creating Solutions

The development of the North Carolina response to the HUD questionnaire was helpful in underscoring the need for several changes in state law. These include the elimination of a half-mile spacing requirement for group homes and the addition of enabling law for inclusionary zoning. In addition, it is clear that North Carolina's planning law needs to be revamped with new language requiring jurisdictions to complete comprehensive plans and housing elements. Fortunately, the 2001 recommendations of the North Carolina Commission on Smart Growth called for local communities to prepare "comprehensive local growth plans" and stated that the plans "should analyze the need for affordable housing ... and how needs will be addressed." It's too soon to know if any of the recommendations will go forward. There is now a Growth Strategies Oversight Committee in the North Carolina Legislature that is charged with studying the recommendations of the Commission on Smart Growth and submitting recommendations to the North Carolina General Assembly by January 2005.

By continuing to focus on cost and regulatory issues, HUD is not getting at the heart of the matter. Communities are continuing to deny affordable housing proposals on the basis of NIMBYism, often using property values as the reason of choice. Community opposition has been particularly ugly in relation to supportive housing proposals, at a time when states are trying to create more community-based housing for persons with disabilities. Study after study has shown that affordable housing does not impact property values, but the evidence is ignored. The decision to approve or disapprove an affordable housing development must be made on the basis of adequate infrastructure, transportation, compatibility with the comprehensive plan, and other objective criteria. There's still a long way to go in convincing communities that affordable housing is not a problem but a solution.

Candace H. Stowell, AICP, is a supportive housing development officer at the North Carolina Housing Finance Agency in Raleigh. She recently took over as chairwoman of the APA Housing and Community Development Division.

Mark Shelburne, Esq., is counsel and policy coordinator for the Rental Investment Group at the North Carolina Housing Finance Agency in Raleigh. He is a graduate of the Law and City & Regional Planning Program at the University of North Carolina at Chapel Hill.