Charlotte Mecklenburg Strategies for Affordable Housing Development

Introduction:

This report presents several strategies that can be used to finance and facilitate the development of quality affordable housing, with a focus on long-term affordability.

The 2016 Housing Instability & Homelessness Report Series is a collection of local reports designed to better equip our community to make data-informed decisions around housing instability and homelessness. Utilizing local data and research, these reports are designed to provide informative and actionable research to providers, funders, public officials and the media as well as the general population. In 2014, the Housing Advisory Board of Charlotte Mecklenburg outlined four key reporting areas that, together, comprised an annual series of reports for community stakeholders.

Defining Affordable Housing:

Definitions of housing affordability may vary depending on the program, however, in general terms, housing is considered affordable if a household does not have to pay 30% or more of their pre-tax gross income on household expenses.

Affordable Housing Investment Fund:

Arlington, VA’s revolving loan fund, known as the Affordable Housing Investment Fund (AHIF), was established in 1988. To date, the fund has been able to leverage an average of $3 of private funds for every $1 of public funds, and from 1988 to 2014 was able to develop approximately 7,000 affordable units. The purpose of the loan fund is to provide gap financing for the development or preservation of Committed Affordable Housing units.

Land Use Incentive Policies:

A development incentive that involves providing grants and reduction in fees to incentivize affordable housing development.

Housing Trust Funds:

Housing trust funds (HTF) “are distinct funds established by the city, county or state governments that receive ongoing dedicated sources of public funding to support the preservation and production of affordable housing and increase opportunities for families and individuals to access decent affordable homes.

Strategic Use of Public, Private and Non-Profit Owned Lands:

High prices of land and development costs make affordable housing development a challenge, especially in markets that have already experienced an increase in land costs. There are restrictions in many communities on giving away or selling public land for less than market value, but there are provisions that can allow for the donation or below-market sale of land if it has a public benefit. This strategy applies not only to vacant land, but to sites with existing public facilities that are underutilized or as part of new developments planned for public purposes (ex. affordable housing could be built in the space above a new library).

Tax Increment Financing (TIF) and Synthetic TIFS:

Tax increment financing (TIF) is a tool used across the United States to encourage private development in blighted or under-developed areas, most often in cities. TIFs work by incentivizing and paying for the construction of new buildings and public resources that will improve property values and tax revenues in the specified area, then using those increased revenues to pay for the project.45 When structured correctly and used in tandem with other local public policy initiatives, the use of TIFs can contribute to the growth of affordable housing in a community

Increased use of 4% Low-Income Housing Tax Credit (LIHTC):

The Low-Income Housing Tax Credit (LIHTC) is one of the most widely used sources of affordable housing development financing. The tax credits provide an investor with a one-to-one reduction in taxes for ten years. Tax credits are allocated to each state on a per-capita basis and then administered by a local authority. Eligible use includes new construction, rehabilitation or acquisition. In North Carolina, LIHTC allocations are administered by the North Carolina Housing Finance Agency (NCHFA) in accordance with their Qualified Action Plan (QAP.)

Affordable Housing Overlay Zone (AHOZ):

Overlay zoning is a type of flexible zoning technique in which a new zoning district with modified standards is drawn on top of a base zoning district.78 Overlay zones do not replace the base zone, but provide an alternative set of zoning standards that are applied only when certain conditions are met. This technique is commonly used to ensure the protection of a specific design and land use that the community desires, such as the preservation of a historic district.79 Although overlay zones may be utilized to place additional restrictions on land use and development, an affordable housing overlay zone (AHOZ) typically relaxes certain standards and provides bonus incentives for developers who choose to reserve a certain portion of their development for affordable housing units.

Conclusion:

The affordable housing development strategies presented in this report are intended to serve as a conversation tool.

Due to the complexity of the strategies and the steps that would be needed to implement them, it is not possible to say which approach should be prioritized in Charlotte-Mecklenburg without further discussion. As such, there are some recommendations that can help facilitate these discussions and to take into consideration:

 Start now. As land costs increase, so will the cost to develop affordable housing. Given the population growth occurring in Charlotte’s region and the resulting pressures on the housing market, it is important to be proactive in addressing affordable housing development challenges to ensure that the growth that occurs is inclusive of all Charlotte-Mecklenburg residents.

 Engage a variety of stakeholders. Convene a group of stakeholders to discuss strategies within the context of Charlotte-Mecklenburg, including neighborhood residents. Tailor strategies to individual neighborhood needs but also explore citywide policies.

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