Despite rule, few affordable units created in new developments

Despite rule, few affordable units created in new developments.

The pace of apartment construction in Baltimore has reached new heights in recent years, with thousands of units approved for luxury high-rises with the latest in pools, gyms, dog parks and other amenities.

But few of those projects include units for low- or moderate-income families, despite a 2007 city law that advocates hoped would make developers reserve a portion of new housing projects for the needy.

Only 32 homes at four developments have been created under the city's inclusionary housing law since it went into effect, according to a new report by the city's Inclusionary Housing Board. More than 9,000 new units have been completed or approved since 2010, many in neighborhoods around the harbor and downtown, according to the Planning Department.

Marvin "Doc" Cheatham, president of the Matthew Henson Neighborhood Association in West Baltimore, who campaigned for the ordinance, said the numbers show the city is failing to take advantage of the new development to improve housing opportunities for longtime residents who need it.

"It's kind of discouraging. ... You're just bringing in a lot of outside folks that are very well-to-do and forgetting about the folks that actually live here," he said. "If these numbers are correct, it shows that we have a very, very long way to go."

About 90,000 families in the Baltimore region earn less than 30 percent of the area's median income, or about $26,000 for a family of four, according to a housing report released last month by the Opportunity Collaborative, a regional consortium of government and private groups charged with developing a plan to connect all the region's residents to a sustainable future. Those households have few options on the private market, the group found in its analysis, conducted as part of a federal grant requirement.

The 2007 ordinance, which went into effect in 2009, requires developers to keep 10 percent to 20 percent of a project's units affordable, based on a scale correlated to median income. Affordable housing is defined as costing about one-third of a family's income.

The city agreed to compensate builders for the affordable units in response to concerns that the provision would chill development.

Thousands of new homes are exempt from the ordinance, which is only triggered when the city provides a subsidy or rezoning for market-rate projects with more than 30 units. Those exempted include at least 2,200 new units in already subsidized developments, such as senior housing.

But even in those four developments the law applied to — Millers Court in Remington, 520 Park Avenue in Mount Vernon and Union Mill and Mill No. 1 along the Jones Falls — the set-asides fall short of the targets established under the rule. Just 32 of those projects' 351 units are designated as affordable.

"Several" other projects received waivers from the city, according to the Inclusionary Housing Board's report. And all of the units developed so far have gone to households with moderate incomes — not the very needy.

Members of the Inclusionary Housing Board are "very concerned" that the law is not working, according to the report. The city convened the board, a requirement of the ordinance, for the first time late last year after pressure from advocates.

"The ordinance doesn't seem to have the capacity to provide significant affordable housing units in the market-rate housing that's being built," said Board Chair Ruth Louie, adding that the board plans to spend next year developing alternative recommendations. "If this ordinance doesn't do that, what are the other vehicles we can come up with to provide that opportunity?"

Developer David Tufaro's Terra Nova Ventures received $450,000 for five apartments in the 84-unit Mill No. 1 under the inclusionary program. Tufaro said strengthening the rule need not hurt new projects as long as the city is flexible — allowing for less deluxe fixtures in affordable units, for example.

"It's sad. Thirty-two apartments is such a small, small dent in the need," he said. "Is there a better way to structure it that works for developers and allows the city to make its contribution go farther? That's a dialogue. … There's a real cost, but there can be a balancing process potentially, if the burden on the developer is not too huge."

Inclusionary housing laws are designed to increase the supply of affordable housing, while integrating those homes into more upmarket neighborhoods and giving poorer households a shot at sharing the benefits of better neighborhoods.

The policies, in place in more than 480 jurisdictions in 27 states, have gained traction since being developed in the 1970s, partly in response to research showing the importance of childhood neighborhoods to later success.

As areas improve, inclusionary housing also is supposed to prevent longtime residents from being forced out by rising property taxes.

"Inclusionary housing was always conceived of as a long-term statement of how the city would want to grow, as it grows," said Michael Sarbanes, who led the fight for the rule as the former head of the Citizens Planning & Housing Association. "The growth should be happening in a way that is not zero sum, that is not excluding some people from the benefits."

Families in some Baltimore neighborhoods already face that pressure.

Leona Cero, 59, lives on a fixed income in the South Duncan Street house in Upper Fells Point where she spent her childhood. She said she's found herself priced out as investors renovate rowhouses and add new development in the neighborhood.

"I'm going to be in the process of moving," Cero said. "I can't afford the upkeep."

Baltimore's inclusionary law went into effect at the start of the recession, when building of all kinds slowed, one reason it produced so few units, analysts said.

Even at its strongest, Baltimore's housing market is relatively weak in comparison to many of the places held up as models for inclusionary housing.

Montgomery County's inclusionary program, for example, produced an average of 261 affordable rental and homeownership units each year since 1990, according to a 2012 review for the U.S. Department of Housing and Urban Development. But the jurisdiction also issued an average of 3,584 building permits annually during that time, far more than in Baltimore.

"It's not like it's a hotly contested market, where there are a lot of developers trying to develop market-rate housing. That's a big problem," said George W. McCarthy, president of the Lincoln Institute of Land Policy, which has studied inclusionary zoning around the world.

The design of Baltimore's law — shaped by 100 amendments to the legislation first introduced in 2007 — also made it ineffective, advocates said. One of the most significant roadblocks is a provision in which the city agreed to offset the costs of the affordable units for developers, using vehicles such as density bonuses and cash payments from a new inclusionary housing trust fund.

"It was, I thought, clear at least to most of the advocates from when the law first went into effect that it wasn't going to function the way the advocates had originally hoped it would," said City Councilman Bill Henry, chairman of the housing and community development committee. "It really boils down to, if the city doesn't put up money to subsidize units, then units don't get built."

The city has spent $2.2 million to compensate builders for the 32 units so far — an average of nearly $69,000 per unit. The trust fund established to compensate developers has $70,000 left, according to the report.

Builders can apply to build affordable units off-site. In two cases, developers agreed to contribute to the inclusionary housing trust fund to bypass the requirement.

The Jefferson Apartment Group, which developed the 304-apartment Jefferson Square at Washington Hill complex, for example, paid $470,000 to the fund, according to the city. Beatty Development Group agreed to contribute $30,000 per residence for 10 percent of units it builds at Harbor Point into the fund, estimated to be $3 million over 15 years.

A partner at Jefferson Apartment Group declined to comment. Beatty Development and other developers did not respond to requests for comment about the program.

Baltimore Housing Commissioner Paul T. Graziano said the city wants to expand choices for families and he expects the city to look for ways to strengthen the ordinance.

"I don't want people to confuse the market and legislative challenges with some lack of desire on our part to expand choice," he said. "Clearly, it hasn't yielded a large number of units at this point."

But the city's poverty problem is larger than its affordable housing problem, he said. Other strategies — such as blight elimination and neighborhood revitalization — are more important and help a larger number of families, he said.

"There are many other tools that I think are more direct and more effective at addressing those problems," he said. "I firmly believe that one choice ought to be, 'I want to stay in my neighborhood because it's getting better.'"

Eric Rose, 28, said he understands that Baltimore leaders want to bring wealth back to the city.

"I get what they're doing. I also don't think it's fair," Rose said Tuesday as he waited for a bus transfer on Fayette Street opposite the Jefferson Square complex, where a large leasing poster advertised a glimmering blue pool.

"I would love to live somewhere like that, but I couldn't afford it," said Rose, on his way to work at an East Baltimore hotel from his grandmother's home in Greenmount. "It wouldn't even be a place I would stop to look at. ... This new stuff is for the upper class."

As the pace of new construction picks up, some say they want to see the ordinance strengthened, placing more responsibility on developers.

"We have to take [responsibility] for the fact that what's in place is not working," said City Councilman Nick Mosby, whose district includes Hampden and West Baltimore. "We're talking about the benefits of what we'll see in 2025, at 10, 20, 30 years out."

One way to strengthen the law would be to make the tax benefits provided to construction in enterprise zones trigger the rule, Henry said. They don't trigger it now because the state establishes the zone.

City Council President Bernard C. "Jack" Young, who sponsored the original bill, said any changes would be the result of long-term discussions, but the ordinance provides a place to start.

"I think we can build on what we have learned with the bill, put a little more teeth in it so we can have more than 32 units," he said. "Thirty-two units since '07 — I'm not happy with that. You know that off the bat."

Dominic Wiker of the Time Group, whose 520 Park Avenue project received $60,000 in exchange for seven units, said the biggest problem for his 171-unit project was discovering the rule at the last minute.

"It's what was required, and I get it, and we know now we have to account for it in the next project," he said. "In our case it didn't require any extraordinary measures to get that type of income demographic in our building."

But adding affordable units can be costly for developers, especially those of high-end projects, like much of Baltimore's recent development.

"The market in Montgomery County is completely different from the market in Baltimore City and what's being developed in Baltimore City," said Joseph T. "Jody" Landers III, who opposed the 2007 ordinance when he was executive vice president of the Greater Baltimore Board of Realtors. "There are ways of reducing cost, but in the end there's still going to be a cost differential and how do you make up that difference?"

Mel Freeman, executive director of Citizens Planning & Housing Association, said he believes the city's real estate market can handle a stronger rule.

"We keep treating this as if it's this new, shiny automobile that Baltimore is not ready for," said Freeman, also on the board that issued the report. "There are places in this country where developers come to the table knowing that their deal is not going to go through until they do this. Once that atmosphere is created here, we won't be having these conversations."

nsherman@baltsun.com

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