Current practices for procuring affordable housing: The Canadian context

Abstract

This article describes the current housing system in Canada, focusing particularly on the various mechanisms still available for providing affordable housing. Beginning with an overview of the Canadian housing system, it provides a brief history of Canadian housing policy and program initiatives instrumental in developing the inventory of affordable housing available today.

Current practices and procedures in private lending for affordable housing are highlighted. A discussion of current initiatives available to provide affordable housing follows, with a focus on the role of government, the third sector, and new partnership arrangements implemented to encourage more affordable housing. The conclusion highlights recent changes, the current state of the affordable housing sector, and the impact these changes may have on low‐ and moderate‐income households in Canada.     

Homeownership and Wealth among Low- and Moderate-Income Households

Abstract

Although currently neither politically nor fiscally feasible, the notion that access to inexpensive, presumably high‐quality housing should be a government‐guaranteed universal right would be a terrible idea even if it were popular and affordable. The proposition fails on three counts. It isn't necessary. It doesn't make economic sense. And, most compelling, were such a policy to be implemented, its putative beneficiaries would not thank us.

Even if we should not promulgate “a right to decent, affordable housing,” we want to assure that all Americans have access to decent, affordable housing. Happily, we can count on the private housing market (coupled with rising prosperity) to serve 95 percent of the country's households. Serving the remaining 5 percent requires concerted measures to scale back onerous housing regulations that prevent the private housing sector from meeting the needs of lower‐income and untypical households.     

A practical analysis of shared‐appreciation mortgages

Abstract

When the development of large‐scale public housing projects was discontinued in the 1970s in both Canada and the United States, the policy response was very different. This article reviews the nature of the dissimilar low‐income housing policy paths, documenting the role of federal housing policy in the evolution of a significant nonprofit “third sector” in Canada's housing system; the decision of the U.S. federal government to rely on the private sector for subsidized rental supply; and, with very little help from the federal government, the ‘bottom‐up” attempt to develop a nonprofit housing sector in communities throughout the United States. In Canada, a permanent stock of good‐quality, nonprofit social housing was created along with a growing and increasingly competent community‐based housing development sector.

The Canadian experience demonstrates that it takes time to build the capacity of the nonprofit sector. The U.S. experience demonstrates that there is a great deal of community‐based talent ready and willing to provide nonprofit housing if reliable and adequate funding is available. Canada has made outstanding progress relative to the United States in the area of affordable housing supply, creating yet another small but significant difference in the quality of life for lower income households. The general Canadian approach to consistent national support of nonprofit and cooperative housing can be applied in the United States. Canada's relative success is not based on unique structural or systemic differences—that is, it is a matter of political choice and political will. The United States should look to Canada's 20‐year experience to determine whether some of the mechanisms used to support Canada's nonprofit sector might be transferable to the United States.     

Affordable Rental Housing Development in the U.S. For-Profit Sector: Implications of a Case Study of McCormack Baron Salazar

The question of how to build decent housing that is affordable to lower income households has challenged policymakers in the United States for decades. In response, the federal government has developed a variety of partnership approaches that involve private for-profit developers. Although these entities are currently the major producers of affordable housing in the United States, they have received relatively little attention from the academic and policy communities. This inquiry is aimed at filing a small portion of this gap by presenting a qualitative case study of one of the country’s leading for-profit developers that has a longstanding commitment to affordable housing, McCormack Baron Salazar. Using a modified version of the quadruple bottom line framework as the starting point, this exploration discusses the complexity and challenges facing the affordable housing sector and offers programmatic and policy recommendations that are applicable to both for-profit and nonprofit developers. In view of the results of the 2016 presidential election, and the likely continued retreat by the federal government from supporting affordable housing, the need to better understand, and form productive working alliances and collaborations with, private for-profit affordable housing developers is more compelling than ever.     

Why Are Houses More Affordable in France?

It is not surprising that houses are more affordable in France than in Britain. Even the Barker Report proposes taxing builders, and the UK's record should be a source of shame. France has constructed roughly 150-200 per cent more housing than the United Kingdom for the last 40 years, incentivising construction by fiscal measures and by the institutional environment, including favouring social housing. Spain has substantial recent construction which on its own may not produce affordability, with little social housing. Construction aids can be of relatively low cost and produce affordable homes, but this can reduce the funds available to assist the very poor.     

Expanding housing choices for the sector popular: Strategies for Mexico

Abstract

By the year 2000, some 40 million people in Mexico will live in settlements commonly called the informal sector. Most will live in houses that they have constructed themselves and that have some infrastructure deficit. To meet their needs, the authors propose a set of demand and supply strategies. Emphasis is placed on the increased use of small group savings programs, the provision of progressive infrastructure, and the creation of housing‐related employment. The supply of low‐cost land must be increased, which will necessitate reforms in the ejido land tenure system. Examples of locally derived, non‐government‐supported betterment programs are presented.

The article concludes by calling on the federal government to create stronger links with the informal sector and to reestablish its role as the supporter of social housing in Mexico.     

Combining historic preservation and income class integration: A case study of the butchers hill neighborhood of Baltimore

Abstract

For the past several decades in the United States, a tension has existed between the goals of historic preservation, the provision of affordable housing, and the creation of mixed‐income neighborhoods. Historic restoration for residential uses has often been associated with gentrification and the displacement of low‐income residents. This article examines the public and private sector support system for combining historic preservation with the creation of affordable and mixed‐income housing and neighborhoods and analyzes the strategies and experiences of the Baltimore neighborhood of Butchers Hill in taking this approach to community re‐vitalization.

Using historic preservation as a catalyst for community revitalization requires a comprehensive approach to prevent displacement of low‐income residents. In Butchers Hill, the mixed‐income community that was created was an outgrowth of conflict between two community‐based organizations. The case eludes simple typologies of gentrification and indicates the need for additional study of the dynamics and benefits of mixed‐income neighborhoods.     

Hybrid annuity model: Hamming risk allocations in Indian highway public–private partnerships

A new public–private partnership (PPP) model, that is, hybrid annuity model (HAM) was introduced in 2016, to revive investments in the Indian highway infrastructure and to remedy the troubled relationship between the public and private sectors. This model marked a significant policy departure in the management of long‐ and short‐term public interest, which is inherent to public utilities and service delivery. Through a dispassionate lens, this paper critically examines the extent to which HAM has fulfilled its stated objectives. The analysis of project award data provides mixed empirical evidence of HAM's early success. As a positive policy imperative, HAM has been able to attract private participation in highway infrastructure by readjustment of risk allocations, and hence, it is a welcome step forward in improving public affairs. Worryingly though, HAM also brought about extensive de‐risking of the private sector, with evidence of rendering risk retention, that is, “skin‐in‐the‐game” by the less significant private infrastructure investors, and thereby adversely impacting development priorities. We find that HAM has taken the reengagement of private sector two steps back in management of PPP affairs. Recognizing that a true performance assessment is unlikely at this early stage of HAM introduction, the paper adopts a more analytical stance in identifying possible pitfalls based upon the telltale signs presented by project bidding and award data. This study offers fresh insight and course correction on the role of government and other stakeholders in this newly introduced PPP template.     

A ‘Property‐Owning Democracy’ or ‘Generation Rent’?

‘A property owning democracy’ has been at the centre of Conservative Party social policy since Noel Skelton coined the phrase in 1924. The idea has been underpinned by contrasting the independent, hygienic, suburban homeowner with the urban, managed, flat‐dwelling, high‐density council tenant. No Conservative‐led government has left office with a homeownership rate lower than when it came to power and the right to buy has enabled this growth to be maintained. However, in 2005, homeownership started to decline and this drop has continued into the Coalition government's term of office with more households now exiting owner‐occupation into the private landlord sector than entering owner‐occupation from private renting. The ‘reinvigorating’ the right to buy is an attempt put a ‘property owning democracy’ back on track but, should it fail, the Conservative Party may turn to more radical policies such as sale on vacant possession of ‘high value’ local authority and housing association houses.     

Public housing authorities: Determining an appropriate role in a national preservation strategy

Abstract

This paper examines the obstacles and issues involved in developing a comprehensive preservation agenda for public housing and explores the capacity of public housing authorities (PHAs) to meet the current and future demand for affordable housing. The paper discusses the current challenges facing the public housing program and PHAs and examines the roles and functions PHAs can assume in the current preservation and affordable housing crisis. Six specific roles for PHAs are included: resolving the equity/community dilemma, improving management, articulating modernization needs and carrying out modernization programs, preventing the loss of public housing units through sales and demolition, assuming management of privately owned subsidized housing, and developing new public housing. Although there is also much potential in nonprofits as providers of low‐income housing, they must be joined by PHAs in a comprehensive low‐income housing production and preservation strategy.     

Comment on Jennifer Steffel Johnson and Emily Talen's “affordable housing in New Urbanist Communities: A survey of developers”

Abstract

A long‐time criticism of New Urbanism has been that the housing it provides is affordable only to middle‐ and upper‐income families. Johnson and Talen's survey of New Urbanist developers and developments is intended to see whether this criticism is justified. Although the methodology is limited, the results of this survey would seem to indicate that it is.

Because Johnson and Talen's survey is restricted to New Urbanist developments, it is not possible to compare the results with those for other, more conventional developments to see whether New Urbanist developments may actually contain more affordable units than comparable conventional projects. Also, limiting the definition of affordability to the cost of housing alone prevents the authors from seeing whether the housing New Urbanist communities provide would be considered less expensive if housing and transportation costs were combined.     

Whose shortage of affordable housing?

Abstract

Shortfalls of low‐rent units are repeatedly cited as the rationale for programs to expand the supply of affordable housing. But the poverty‐level rents studied fall well below those of major supply programs. To reassess whether HOME and the low‐income housing tax credit (LIHTC) address actual shortfalls, this article compares numbers of units with renters by measuring both affordability and incomes with the median‐income‐based metric used for all federal rental programs.

During the 1980s, there were growing surpluses of units affordable to renters with incomes between 50 and 80 percent of their area's median income, a “low‐income” range that includes most HOME and LIHTC rents. By contrast, shortages were severe and growing only at rents affordable to households with incomes below 30 percent of area median. Examination of these shortfalls and the problems they create implies that programs to expand supply are not widely needed.     

The role of limited‐equity cooperatives in providing affordable housing

Abstract

This article develops an economic analysis of the role of limited‐equity cooperatives (LECs) in providing affordable housing. Using a model of the user costs of housing that focuses on housing externalities, it examines methods for overcoming externalities in multiunit rental dwellings.

Investment in management can reduce these externalities and thereby improve the quality of the housing environment, but the added cost excludes low‐income households from housing with a high level of management. LECs can reduce housing externalities without imposing the dollar costs of management on residents. They do this principally by attempting to attract a favorable resident population and by substituting self‐management for traditional hierarchical management. Given these findings, the article makes recommendations regarding the structure of a federally sponsored LEC program and draws implications for affordable housing policies in general. Finally, it calls for further empirical research into the desirable (and undesirable) features of self‐managed affordable housing.     

Selling Eastern Europe's social housing stock: Proceed with caution

Abstract

As the countries of Eastern Europe begin to reorient their housing sectors toward the private market, many quarters are advocating selling the units in the social sector—typically about one‐fourth of the housing stock—to the tenants. Whether purchasing their units is attractive to tenants depends on the sales price, current and expected rent levels, availability and terms of financing, and the strength of tenant rights of occupancy. Drawing lessons from the experiences of three countries—China, Hungary, and the United Kingdom—in selling social sector rental units, this paper concludes that too much emphasis has been placed on lowering the sales price compared with changing other conditions. This practice results in a substantial loss of revenue to government and a questionable distribution of the nation's wealth.     

Ordering Disorder – On the Perplexities of the Partnership Literature

The literature on public‐private partnerships (PPP) has proliferated in recent years. However, confusion about the actual meaning of PPP still abounds. As a consequence, contradicting findings and statements about PPP flourish in the literature. This article reviews the literature, and argues that there are different streams of PPP research which operate with qualitatively different notions of the PPP concept. Accordingly the literature is divided into four different PPP ‘approaches’. By doing so the article offers some clarification concerning an increasingly complex concept. The article concludes that an authoritative definition of PPP – one that can encompass all the different variations of the concept currently in use – is not logically possible.     

The challenges facing public housing authorities in a brave new world

Abstract

Public housing authorities (PHAs) are entering a brave new world. Major proposed changes to the public housing program will force PHAs to compete with private sector providers for tenants. To succeed, they will have to act more like entrepreneurial market participants: to change their management practices, the types of tenants they house, and the kinds of developments they operate, and to attract private capital for the development and operation of public‐private public housing ventures.

PHAs must confront the challenges of transformation while pursuing four mutually conflicting goals: housing the neediest, achieving diversity of tenantry, cross‐subsidizing by attracting unsubsidized tenants, and attracting private capital. Success, or even survival, may require sacrificing one or more of these goals. Whether PHAs can increase housing production to such an extent that they can provide sufficient housing for the neediest while fulfilling the other goals as well remains unclear.     

Low‐Income Housing Development,Poverty Concentration,and Neighborhood Inequality

Considerable debate exists about the merits of place‐based programs that steer new development, and particularly affordable housing development, into low‐income neighborhoods. Exploiting quasi‐experimental variation in incentives to construct and rehabilitate rental housing across neighborhoods generated by Low‐Income Housing Tax Credit (LIHTC) program rules, we explore the impacts of subsidized development on local housing construction, poverty concentration, and neighborhood inequality. While a large fraction of rental housing development spurred by the program is offset by a reduction in the number of new unsubsidized units, housing investment under the LIHTC has measurable effects on the distribution of income within and across communities. However, there is little evidence the program contributes meaningfully to poverty concentration or residential segregation.     

Comment on Kerry D. Vandell's “FHA restructuring proposals: Alternatives and implications”

Abstract

New Orleans, a highly segregated city with low homeownership, experienced a tremendous number of housing foreclosures between 1985 and 1990. This study highlights the process and impact of foreclosure in the urban housing market, which contributes to an understanding of their impact on the spatial structure of the city. Two aspects of foreclosure are examined: the differential impacts of foreclosure on low‐income and African‐American householders and changes in socioeconomic conditions (neighborhood change and the spatial structure of the city) resulting from foreclosure.

Conventional wisdom holds that urban neighborhood transformation is driven largely by white flight. The data presented in this article suggest a counterhypoth‐esis. Middle‐income professional whites employed in businesses impacted by recession who had recently bought housing with high loan‐to‐value ratios were forced to sell or have their houses foreclosed upon. The depressed market, in turn, made such housing affordable to middle‐class blacks interested in homeownership. Thus, black economic opportunity, rather than white flight, dramatically transformed the racial composition of many New Orleans East neighborhoods.     

Property values in inner‐city neighborhoods: The effects of homeownership,housing investment,and economic development

Abstract

This article examines the determinants of property values in Cleveland with a focus on three approaches to improving or maintaining neighborhood quality: investing in new housing, attracting and retaining homeowners, and encouraging economic development. Data comprise home sales in 1996 and 1997, investments in new housing from 1991 to 1995, homeowner migration between 1991 and 1995, and changes in the number of business establishments from 1991 to 1995.

The results suggest that (1) investments in new houses have a positive impact on housing values, especially for houses close to the new investment; (2) homeowner out‐migration has a negative effect; and (3) growth in the number of business establishments, except for social service establishments, also has a negative effect. These results further suggest that while programs to encourage housing investment and homeowner‐ship can increase neighborhood property values, care should be taken to avoid an inappropriate mixing of land uses.     

Nonprofit housing development: Status,trends, and prospects

Abstract

This article relies on a national survey of community‐based housing development organizations to profile production levels, spatial coverage, funding sources, and nondevelopmental roles of the nonprofit housing development sector. It also uses Urban Institute case study results and secondary data sources to examine continuing barriers to increased production in the sector and the evolution of institutional responses to those barriers.

Nationwide, about 13 percent of all recent federally supported housing units (excluding public housing) have been sponsored by nonprofit developers. This production is distributed very unevenly; relatively few developers produce the bulk of units, and regional disparities are marked. Long‐standing barriers to efficient production at higher volumes continue: Undercapitalization, high‐risk developments, patchwork systems of finance, and the difficulty of demonstrating the social payoff of community development investments constrain even the most sophisticated portions of the sector. However, the creation of national intermediary institutions over the past decade and the proliferation of similar organizations locally have established the preconditions for sector expansion. And in view of recent local initiatives in participatory, comprehensive neighborhood revitalization, and hints of federal support for like efforts, increased capacity in the sector has taken on new national importance.