Five Practices for Expanding Housing Production for Households with Very Low Incomes
ANACOSTIA, WASHINGTON, D.C. Colorful row houses along U Street at the intersection of 13th are in the historic Anacostia neighborhood in southeast Washington, D.C., shown on Thursday, November 3, 2005. (Photo by Nikki Kahn/The The Washington Post via Getty Images)
Nearly half of all renter households in the greater DC region struggle with unaffordable rents, but current zoning laws, material costs, and funding sources can make increasing the supply of affordable housing challenging for jurisdictions. Ensuring homes are affordable for those with very low incomes is even more difficult.
The greater DC region needs more affordable housing at all income levels, and households with incomes between 30 and 50 percent of the area median income (AMI) are particularly underserved by most federal or local housing-assistance programs. These households are often unable to afford rents in market-rate housing or in buildings supported by the Low-Income Housing Tax Credit (LIHTC) program, but they also earn too much to qualify for programs such as Housing Choice Vouchers. We call this gap the federal affordable housing doughnut hole.
Although there’s no silver bullet for creating more affordable housing fast, local leaders have some levers to ensure households with very low incomes can access affordable housing. Our team scanned current policies and interviewed local leaders to identify five promising practices that, in tandem, could increase housing production affordable to those with very low incomes in the greater DC region.
- Make more explicit public commitments to deepening affordability
Public commitments—which can range from policy statements by elected leaders to explicit legislative requirements for units affordable at 50 percent of the AMI or below—signal to developers the types of projects a jurisdiction will likely support. By establishing government-wide policy priorities, public commitments can also increase coordination between different agencies, such as planning, housing, and economic development.
Of course, all public commitments aren’t created equal. We found that more explicit public commitments, such as awarding points for units at 30–50 percent of the AMI in competitive applications and legalized requirements, tend to be more effective at incentivizing affordable housing. In any case, public commitments alone cannot produce more affordability and must be combined with other practices.
- Increase overall affordable housing investment
Perhaps unsurprisingly, local leaders and developers we spoke with identified a lack of financing as the main barrier to producing affordable housing for households with very low incomes. In many metropolitan areas around the country, including the greater DC region, rents affordable to households with lower incomes often don’t generate enough future revenue to cover the development and operating costs, which creates a financing gap. The LIHTC, the largest affordable housing tool available, doesn’t usually provide enough subsidy by itself to fill that financing gap. Some jurisdictions have begun to increase public investment and catalyze private investment to make up the shortfall.
In Prince George’s County, 2021 legislation created a dedicated funding source for the county’s Housing Investment Trust Fund. And in Washington, DC, District leaders have significantly increased funding for the Housing Production Trust Fund over the past several years. In both cases, staff emphasized the importance of predictable funding, which developers we interviewed said was also key. Because of the long life cycle of housing development, predictable investments are critical for building capacity and maintaining a consistent pipeline of affordable housing projects.
- Leverage public assets
In higher-cost areas like the greater DC region, land can make up a significant share of development costs. To meet the challenge, jurisdictions have increasingly sought to leverage public land and other public assets to support affordable housing developments. Jurisdictions can sell or lease publicly owned land to affordable housing developers, offering it at discounted rates in exchange for affordability commitments. Loudoun County used this approach in 2022, agreeing to sell a portion of a former school site to developers, which will result in a multifamily development with homes affordable to those earning 30, 50, and 60 percent of the AMI. The District of Columbia Code requires that housing developments created through the sale or lease of District-owned land include affordable housing.
Jurisdictions can also incorporate affordable housing into planned capital improvement projects, such as a new library or office center. In Alexandria, Virginia, the city partnered with a local mission-oriented developer to incorporate affordable housing into a planned fire station in Potomac Yard. That development ultimately included the station and 64 affordable units. In Montgomery County, staff are required to conduct an affordable housing development assessment (PDF) for every applicable project in the Capital Improvements Program.
- Update zoning to reflect current needs
A large body of research has demonstrated the relationship between land use regulations and housing affordability. Updating zoning regulations to change requirements that increase housing costs—like parking minimums—can support affordable housing development. Fairfax County has begun to update these regulations and is working to adjust zoning through their Parking Reimagined initiative.
Jurisdictions can also offer zoning exemptions, which typically allow for greater density or building height, in exchange for affordability commitments. The City of Alexandria used this approach when it launched its award-winning residential multifamily zone, which has incentivized more than 600 units of housing affordable at 40 percent of the AMI.
Inclusionary zoning is another common mechanism that requires developers to make a certain percentage of housing units affordable. Most greater DC jurisdictions already have such a program, but Loudoun County is seeking to expand theirs and Prince William County plans to create one.
- Increase state collaboration and external partnerships
State policies, practices, and funding can also shape the affordable housing local jurisdictions produce. State Qualified Allocation Plans and scoring guidelines, for example, can incentivize deeper affordability in projects for LIHTC awards and increased investments in housing trust funds. Currently, local jurisdictions in Virginia are unable to use Payments in Lieu of Taxes as a mechanism to reduce project costs, but the commonwealth legislature could make changes to allow jurisdictions greater flexibility to establish these programs for affordable housing.
External partners can also help local jurisdictions shape and increase affordable housing. Partnerships with large employers and corporations, anchor institutions such as hospitals and universities, and large landowners have produced affordable housing through investments of capital or land.
Although the DC region has already recognized the need to produce more affordable housing for households with very low incomes, the production of these units has been limited and will require greater investment and policy change to meet the need. Filling the federal affordable housing doughnut hole will require every jurisdiction to think about reducing project costs, increasing project revenue, and adjusting land use. Our research suggests that applying the five practices above can help jurisdiction achieve these goals and produce more affordable housing.
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