27 Feb Key Takeaways from ULI Housing Opportunity Conference
Written by: Trevor Butler
Edited by: Alex Seidenberg
The conversation surrounding housing affordability has transcended its historical confines within coastal markets, now echoing loudly in almost every major city across the United States. The recent ULI Housing Opportunity Conference held in Austin, Texas, served as a microcosm of this nationwide dialogue, where stakeholders grappled with the urgent need to address the complexities of housing affordability in burgeoning Sunbelt cities. As attendees shared experiences and insights, it became evident that the challenges extend far beyond merely constructing buildings; they delve into intricate financial structures, land negotiations, and the symbiotic relationship between housing and transportation. Against the backdrop of a rapidly evolving urban landscape, the conference shed light on the multifaceted barriers and potential solutions that define the contemporary discourse on housing affordability.
The growth of Sunbelt cities, which have historically been recognized as affordable housing markets, has forced these communities to think about the issues surrounding housing affordability and to find tools in short order to help address these issues. Housing affordability is no longer an issue isolated to coastal superstar cities, but a phenomenon that nearly all major metropolitan regions in the country are grappling with. The concentration of growth into metros and the agglomeration of growth in the Sunbelt show no indications of slowing down – meaning this is not a storm that can be passively weathered.
Capital & Financing
One of the biggest barriers that was repeatedly identified by affordable housing developers to delivering affordable units is the complexity of the capital stacks required to make affordable housing a reality. Affordable housing developers are ultimately competing against one another for a relatively shallow pool of funds available from federal and state sources, and an ever more competitive field of philanthropic funds. Many of the panelists who spoke on this topic detailed the capital stack of recent successful developments. In today’s economic, fiscal, and capital environments it is not atypical to have up to seven layers of financing. Public-private partnerships have been critical in helping deliver affordable housing across Austin, with the public sector contributing land, abating taxes, expediting permitting, and waiving development fees. While these success stories stand as a testament that affordable housing can still be built, the complexity of these capital stacks necessitates more time, more experience, and more players to get involved in the game.
Risk is at the heart of the affordable housing conversation in every way. Developers want to mitigate risk in their pro formas, investors want to cushion their equity with higher rates of returns, local decision-makers want to avoid suspicion and criticism, and neighbors and homeowners want to reduce risks to their real estate assets – all of these actors and decisions take years to materialize, make a small (but crucial) difference in the crisis of affordable housing supply, and often fail to deliver the deep affordability that is needed
Government institutions are uniquely situated to hedge risk. The complicated nature of capital raising for affordable housing deals points to a possible fiscal solution at the state and federal level whereby these institutions take a greater role in financing affordable housing. The federal government is the only entity able to absorb the risk required to commit in earnest to the issues surrounding affordable housing production and preservation at the scale required to meet the needs of the current crisis. While many may be dubious of the expanded role of government being proposed, to them we would ask “Then who?” because capital markets won’t save us.
Transportation
Themes surrounding the intimate connection between housing and transportation were common throughout many conference sessions. One attendee from Fayetteville, Arkansas explained how in that market, affordability could still be attained by developing on the urban fringe and beyond, causing sprawl and subsequent complaints from those living in the Fayetteville area that traffic was getting worse. These complaints have reportedly been considered by many municipalities in the Fayetteville area, resulting in the adoption of perhaps unexpectedly progressive land use policies to help curb sprawl, traffic congestion, and rising transportation costs through context-sensitive densification.
Additionally, parking continues to be a barrier to the delivery of affordable units across all major markets. As Adam Driver says in his performance as Enzo Ferrari, “two objects cannot occupy the same point in space at the same moment in time”, – if a space must be dedicated to parking, it cannot also be dedicated to a housing unit. Most in the affordable housing space and most proponents of New Urbanism routinely espouse the doctrine of “under-park it if you can!” This continues to be more difficult in practice than in concept. Even when cities drop parking minimums and developers feel that the market is capable of absorbing units that do not come with resident parking, the financial institutions that provide financing and underwriting for these projects continue to require parking. Mitigating risk is again at the core of this wicked problem. Federal, state, and local governments have frankly been inadequately committed to the development of non-automotive transportation infrastructure since the 1950s. The lack of infrastructure commitment for everyday citizens, and lack of certainty for financial institutions has created a development environment dependent on preserving the permanence of the auto-oriented built environment.
The lack of commitment to alternative transportation infrastructure in most American cities has in this way effectively reassigned the responsibility for building transportation infrastructure onto individuals and, relevant to the topic of affordable housing: the developers tasked with supplying housing to these individuals. Consumer and financial markets are much more adaptable than policymakers might want to imagine, and as a result, there is a lack of meaningful policy interventions out of the fear that shifting away from the current modes of auto-centric transportation infrastructure and residential development patterns will result in reduced economic productivity and property values.
NIMBYism: Community Engagement & Education
Another common theme during the conference’s concurrent sessions was the difficulty of obtaining community buy-in to new housing, and more acutely new affordable housing. This is an issue that one panelist from Boise, Idaho, has taken action to attempt to remedy. For Boise, this involved the creative deployment of an anthropology graduate from a local university who studied the ways that Boise’s public engagement communications reached different groups. Ultimately, this led to the conclusion that north of 80% of all communications were responded to by homeowners, which precipitated the endeavor by the city to engage residents by intentionally reaching out at laundromats, bars, and other local establishments. This resulted in community input that gave voice to a different set of opinions on key issues and gave focus to different matters than those at the forefront of discussions that resulted from more traditional community outreach techniques.
NIMBYism was cited by many as an enduring barrier to the creation of affordable housing. NIMBYs see affordable housing as an existential threat to their primary wealth-building assets and mobilize against any efforts that would impact them. Homeowners don’t know if affordable housing or transportation projects will cause their property values to decline or increase crime in their neighborhood, however, they do know the current state of the world assures that their property values will steadily increase, and that neighborhood safety is adequate.
NIMBYism isn’t an insurmountable obstacle; rather, it often stems from a lack of understanding about crucial issues. Addressing the concerns of NIMBYs may necessitate a more personalized approach, tailored to their individual perspectives. What matters most is fostering comprehension of the rationale and significance underlying affordable housing policies and their resultant outcomes. A panelist engaged in policy advocacy emphasized the significance of humanizing affordable housing initiatives. For instance, a community predominantly composed of mortgage-free baby boomers residing in spacious, high-priced homes may fail to grasp the necessity of incorporating affordable apartments or denser housing options until their own adult children find themselves priced out of returning to the neighborhoods that they once called home.
The experience from Boise highlights the importance of committing the necessary time and resources to obtain truly representative community feedback – something that public-facing professionals should prioritize. As professionals, we have an imperative to use the data that is required to make the decisions that we are tasked with making, not just the data that is available or easiest to obtain. It is not enough to have an institutional framework that merely allows public participation, stronger efforts ought to be made at the local level to engage residents in deeper, more meaningful ways to ensure that local decision-making is representative and democratic.
Homelessness
Another key takeaway from the conference was the shift in dialogue regarding homelessness. Housing professionals, capital fund managers, non-profit leaders, developers, and municipal staff staunchly acknowledge that the crisis of homelessness is a housing problem. This is a major shift from how homelessness has generally been discussed as an individual fault rather than a systemic issue derived from unregulated housing markets. It is not surprising for housing to be at the heart of many issues at a national housing conference, the way that experts message these tricky topics is essential to how the public at large understands them. And the transition from framing this issue as one of moral failure or mental health crisis into one that focuses on housing might just help us fix the root of the problem – home.
Wages & Economic Development
A part of the conversation that is notably missing is the role of wages in relation to housing. Wages answer the question of “affordable for whom?” Wages are undoubtedly working against the efforts of affordable housing developers and where possible housing professionals should be more active in involving employers in conversations about housing. As a panelist stated succinctly a few weeks ago at ULI Atlanta Real Estate Development conference at Georgia Tech, “houses are where jobs go to sleep at night.” It ought to be a priority for economic development leaders at every level to also be involved in discussions around housing. The prevailing doctrine of economic development revolves around growth and attracting employers. Those responsible for granting tax breaks and other financial incentives for those employers must consider the downstream housing and infrastructure costs to their communities.
Final Takeaways
Talking to fellow attendees of the ULI Housing Opportunity Conference and hearing from the panelists revealed that the room was full of creatives. All of us who are engaged in housing work and in the greater scope of shaping the built environment are creatives because we have to be, because there isn’t a straight path to a solution on any of these issues. The developer that wrestles with a pro forma to make an affordable deal work is engaging in creative work. Policy advocates are immensely creative in the solutions that they advance at the local and state levels for by right development, shrinking minimum lot sizes, the allowance of accessory dwelling units. And planners and public servants engage in creative work when they think of new ways to reach their communities. This creative spirit and the increasing prominence of housing as a national conversation are both reasons to be optimistic about the future of housing even at this current moment of crisis.
The current moment, which is defined by high-interest rates and higher construction costs, presents itself as the ideal moment to convene policymakers, non-profits, and developers to strategize for the future. In January a writer for the Atlantic, David Brooks, published an article entitled “Despite Everything You Think You Know, America Is on the Right Track”, a title that seems flippantly optimistic, but which identifies the general pessimism that Americans have about the current and future trajectory of the world. He goes on to suggest that meaningful change can only come from a place of optimism. If we set out expecting to sink, if we limit our beliefs in what the future can be, we are destined for a shipwreck. For Atlanta, and for every city across the United States, an invaluable asset is whatever sources of optimism we can find, whatever visions we can conceive of for the greatness of our cities, and for the dream of a better, healthier, and more diverse community.