affordable housing – Gary Bennett Publishing

Gap Financing: A Barrier to Affordable Housing

By Gary Bennett and Hugh Gordon, Members, Frederick County Affordable Housing Council

This article appears in the January 2025 issues of the Woodsboro-Walkersville News Journal and the Emmitsburg News Journal.

It is true that most developers are not hurting for money. No news there. But it is equally undeniable they provide great community value, particularly when working to provide affordable housing.

Unfortunately, there’s a huge barrier affordable housing developers must overcome: the ability to fully fund development and pre-development costs without the promise of market-rate revenues. As one developer put it: “Providing housing at rents low- and moderate-income folks can afford and still cover our costs is like trying to solve a Rubik’s cube.”

Think of it this way: To build any development, a developer must pay for land, materials and labor, not to mention taxes and myriad permitting and other government fees. During the last two decades these costs have skyrocketed while renter and homeowner salaries have stagnated. Therefore, rents that low- and moderate-income households can afford are often too low to cover the full costs of building, owning and managing an affordable property. Add to this the seemingly never-ending delays in the governmental approval process, and you have a recipe for possibly abandoning a project.

When development and pre-development costs can’t be met by traditional methods such as taxable and tax-exempt bonds, local bank loan funds, General Partner (GP) capital, or Federal Home Loan Banks (FHLBs), developers must turn to other methods to fill the gap.

Hence the need for what is known in the affordable housing world as “gap financing.”

Gap financing, also known as bridge or interim financing, is a short-term loan that can help affordable housing developers fill the gap between the cost of a project and the funds available. To fill the gap, developers usually need help in the form of subsidies. Those subsidies most often come from local, state or federal governments, but can also come from other sources.

The sources include tax credits in various forms, mortgages with below-market interest rates, tax-exempt bonds, federal grants or loans from programs like the HOME Investment Partnerships Program, local grants, land donations, contributions from charitable foundations and deferred developer fees.

Almost all affordable housing projects begin with tax credits awarded by the state. The most common of these is the Low-Income Housing Tax Credit (or LIHTC, pronounced LIE-TECH.) It finances about 90% of all affordable housing developments nationwide. This U.S. Department of Housing and Urban Development (HUD) program was enabled by Congress in the 1990s, was an undisputed bipartisan success and is operated by each state’s housing agency including Maryland’s Department of Housing and Community Development (DHCH).

Tax credits are greatly needed to make the books work, but the problem is that LIHTC is ultra-competitive and extremely limited. In Maryland, DHCD establishes its affordable housing priorities and then developers compete for the tax credits based on how well their project satisfies those priorities. Developers receiving an award use the tax credits to raise capital from investors. Only a handful of Frederick projects have won these tax credits in recent years.

Because a project is not feasible unless it covers 100% of its funding gap, every source of funding matters. A relatively modest local contribution can be the critical investment that makes a project work and allows the community to benefit from a large amount of federal subsidy that would otherwise flow to a different community.

That is why Frederick County and the State of Maryland try to be aggressive when helping affordable housing developers. The county and state often step in with funding options such as:

Waivers or deferrals of impact of fees charged to buyers that meet income requirements for affordable housing purchases from a developer.
Loans from Frederick County’s Housing Initiative Fund’s (HIF) Deferred Loan Program. The purpose of this fund is to provide flexible loans to support affordable housing in Frederick County.
Maryland’s Department of Housing and Community Development’s (DHCD) nearly $24 million in federal funding to provide gap financing to affordable housing projects statewide in the form of HUD’s HOME Investment Partnerships American Rescue Plan Program (HOME-ARP).
County guidance in using “rental housing works,” a fund through DHCD providing $3.5 million in gap funding.
The use of some county owned-land for affordable housing projects combined with a federal loan for pre-development costs thereby reducing two key costs.

Other funding possibilities in various stages of discussion and could come online in the future include:

Implementing a Frederick County Rental Registration and Inspection Program to mimic the one Frederick city has in place and using the proceeds for rental assistance and affordable housing projects.
Waiving development fees for housing projects meeting certain income requirements.
Increasing the portion of the County Recordation Tax revenue going into the Housing Initiative Fund, which is then used to support affordable housing projects.
Standardizing the eligibility criteria and process for approval for Frederick County’s tax abatement policy known as Payment in Lieu of Taxes (PILOT) for all LIHTC projects.

Even more creative help may be on the way soon.

The Affordable Housing Council recently learned about a push for enabling legislation to allow Frederick County to expand the use of funds under the State of Maryland’s Industrial Development Authorities (IDA) to include affordable housing.

IDA was created long ago to establish an entity that captures future tax growth for an area slated for development and reinvests it. It has been used mostly for industrial parks. It was never intended for affordable housing but could be used for that purpose in the future. Prince George’s County has this authority now.

If enacted, the County Council would create the capturing entity, adopt a project area plan and how the funds can be used in that area. The board of the new entity would then approve specific projects like affordable housing.

Financing for affordable housing projects is intricate and arcane, but the more you know, the better you can help us advocate for creative financing that gets these critical projects off the ground.

NIMBYism is Self-Defeating

By Gary Bennett and Hugh Gordon
Members, Affordable Housing Council of Frederick County

This article appears in the December 2024 issues of the Woodsboro-Walkersville (MD) News Journal, page 5.

NIMBY means “Not In My Back Yard.” It can apply to almost any human endeavor one does not want near them. But, for the purposes of our discussion today, it applies to housing. You are a NIMBY if you push back against any kind of housing initiative in your local area no matter how much sense it might make.

There is no shortage of NIMBYism in Frederick County. For example:

No-growth candidates recently carried the day in Walkersville town elections. Here are some of their comments: “I don’t want to see any more townhouses built.” I don’t want to see any more houses built.” “We don’t need more houses.” And the most pithy: “I’d like to see people come in, spend their money, and leave.” Inexplicably, all this was in addition to comments that the city needs more funding to tackle existing projects, the very thing additional tax revenue from more homes would bring. The irony is hard to ignore.

There’s more: Mount Airy stopped a mixed-use development plan in its tracks due to traffic concerns. Brunswick’s city council sent back to its city staff a proposed zoning ordinance change that would have allowed old buildings to be used for housing. Thurmont residents voted in referendum to disallow annexation of 17 acres of county land to stop a high-density development. We could go on and on.

But reasonable people must ask themselves this: Is it worth it to prevent so many people from having a home of their own so I can have things just the way I want them?

Tired old expressions are used repeatedly: “This new development will change the character of my neighborhood.” “Our town will lose its identity.” “Our way of life is being threatened.”

We are not fooled. What this really means is “I like the way things are now and I’m not going to let anyone else come in and change that.” This is not only selfish but short-sighted.

Why should just the generation that benefitted from the wealth of this country – those like me who built their incomes with access to high-opportunity jobs and reasonable, in-balance housing costs – be able to live in the best neighborhoods, in the best municipalities and prevent others from doing the same?

We’re shooting ourselves in the foot when we push back on all growth. Research has shown that increasing access to affordable housing is the most cost-effective way to reduce childhood poverty and increase economic mobility in America. Children living in stable, affordable homes are much more likely to thrive in school and have greater opportunities to learn inside and outside the classroom and increase their earning potential.

The hard truth is we don’t have enough housing in the county to satisfy demand. That is irrefutable. Experts and politicians from both sides say the same thing.

Ask the 20- and 30-somethings around Frederick County about their housing prospects. You’ll get an earful. Many are starting families and would like to find a starter home, but can’t. We have let them down. Sure, it has always been tough on young families trying to buy that first home, but the housing situation is worse now than it has ever been.

Young people have few options. Millennials are now the largest generation in American history, outpacing the baby-boomers. They are aging into their prime home-buying years with no homes to buy. In a recent survey, fully 55% of adults under age 30 say the lack of affordable housing is a major problem.

Add to the housing shortage the fact that we’re all living longer and hoping to age in place. This causes the turnover of existing homes to slow as well. Many seniors would like to downsize to a smaller home, thereby opening up larger homes to young families, but there is nowhere to downsize to.

The new housing director for Frederick County, Vincent Rogers, sees the problem clearly. “What happens when your adult children want to stay in the area and be close to their families? What happens when you have an elderly parent who can’t afford to stay in the home they are in now? I think it is critical for us to help people understand why increased housing is so important for our entire community.”

There’s nothing to be afraid of. In Frederick County and City (and even in the municipalities), new developments must pass a gauntlet of requirements before they are approved. Either the county or town can support a new development according to its capacity levels or the development must pay its own way. This includes water and sewer, schools, roads, parkland, forest conservation, and parking.

In the Ballenger Creek area of Frederick County (where Gary lives), we have lived it. The Orchard Park at Ballenger Run development in 2019 placed 210 affordable units into the market. He delivers medicine and meals to many of these good folks. Sure, traffic has increased and that took some getting used to, but additional lanes were added to Ballenger Creek Pike and that helped alleviate the problem.

School capacity increased temporarily, too. But the new development also paid for a new elementary school, a beautiful new 4-mile bike and walking path, and additional traffic lanes on Ballenger Creek Pike.

Was all this ideal? Of course not, but you must balance some inconveniences with the clear need for more people to have a home in Frederick County.

So, our plea to you is this: If we want to have a strong, vibrant community that does not stagnate because of the lack of affordable housing, and if we want children, young adults, and seniors to have a chance to live where they love, we must think twice before pushing back every single time a new development appears at our doorstep.

The role of tax credits in affordable housing

By Gary Bennett and Hugh Gordon

This articxe appears in the Opinion section of The Frederick News-Post on Saturday, August 3, 2024.

How do moderately priced dwelling units actually get built in Frederick? The short answer: It’s not easy.

It takes a lot of players coming together to make these units happen. The prices of land, material, labor costs and building fees force developers to concentrate on market rate developments to turn a profit.

All you have to do is drive around Frederick County and see all the “From the $500,000s” signs and $2,500 monthly rent ads to see this is so. Even though city and county ordinances encourage developers to build moderately priced units, many are not built because of fiscal realities.

For the last three decades, when these affordable units do get built, the federally funded low-income housing tax credit (LIHTC, pronounced “Li-tech”) has been the driving force. It is a rare congressional bipartisan success story. It finances about 90% of all affordable developments nationwide.

But these tax credits are limited, and getting one is an uncertain and highly competitive process for developers.

And, the kicker is that counties and municipalities like Frederick have little say in them. Our local governments can sweeten the pot with things like impact fee exemptions, negotiated taxes and deferred loans, but they only hear about these affordable projects when the developer approaches them for a letter of support during the competitive process.

Here’s how LIHTC works:

Federal tax credits are allocated to state housing agencies by a formula based on population. Each state agency, including Maryland’s Department of Housing and Community Development, establishes its affordable housing priorities.

Developers then compete for an award of tax credits based on how well their project satisfies the state’s housing needs.

Developers receiving an award use the tax credits to raise capital from investors. The tax credits are claimed over a 10-year period, but the property must be maintained as affordable housing for a minimum of 15 years.

Units funded by LIHTC must be affordable for people earning no more than 60% of the Area Median Income (AMI). Rent may not exceed 30% of their income.

What about those making less than 60% of AMI?

That’s a big problem if you believe safe, decent, affordable housing is a basic necessity for everyone like the Affordable Housing Council does. The sad truth is most LIHTC buildings are unaffordable to families with incomes below 60% AMI.

Here’s why:

There are two types of low-income housing tax credits: 4% and 9%. The 9% rate provides more tax credit to the developer, of course, but is ultra-competitive.

Therefore, most affordable units are developed using the 4% credit, which is a “matter of right,” meaning these credits are usually automatically available.

Unfortunately, not as much tax credit for the developers means most low-income developments are not affordable to those with the lowest incomes.

There is a clear need to reconsider how affordable housing is financed in America. Relying on LIHTC is not producing nearly enough units to address the huge deficit of affordable housing.

HUD should adjust rates to ensure that all low-income families can qualify to live in LIHTC buildings.

One way to expand access for very low-income households would be to better coordinate housing vouchers and tax credit projects to help families make up the difference in rent payments.

Frederick’s low-income developments

In recent years, due to efforts by the county’s Division of Housing and the city’s Department of Housing and Human Services, Frederick County and the city of Frederick have attracted a sizable number of affordable rental developments that utilize these tax credits. See the attached chart.

Among a few of the successful older developments not on the chart include Sinclair Way at 350 W. Patrick St., Orchard Park at Ballenger Run at 5234 Black Locust Drive and The Fred on Waverley Drive.

The new Prospect Center campus at the Old State Farm building on Himes Avenue is slated to be mostly affordable units. The plan is for 200 in four years.

The Junction at 511 W. South St. will add roughly 175 units. The Madison at 1724 N. Market St. will add another 60 affordable units.

Frederick County is quite active, but still has a long way to go in providing affordable homes for its residents.

The chart shows a total of about 1,350 affordable units in service now or soon to be. A 2016 housing needs assessment study (scheduled to be updated in 2025) shows a gap of 5,700 units.

To find an affordable home of your own, your best bet is to go to the development’s website and apply or get on a waiting list.

Editor’s note: Gary Bennett is a retired marketing executive. Hugh Gordon is the association executive for the Frederick County Association of Realtors and has decades of experience in the real estate world, including 24 years as a mortgage banker. They are longtime Frederick County residents and members of the Frederick County Affordable Housing Council.

Primer on the basics of affordable housing

By Gary Bennett and Hugh Gordon

Affordable housing project in Frederick, MD

This article appears in the Opinion section of the Saturday, June 22, 2024 edition of the Frederick News-Post.

A lot of written and spoken words have been devoted to the lack of affordable housing in Frederick County. This periodic column has discussed at length how we got into this mess and the possible long-term fixes for getting out of it.

But what exactly is meant by the terms “affordable housing,” “moderately priced dwelling units” and “payment-in-lieu fees,” among others? We will explain these terms and how the affordable housing market works in Frederick County.

What is affordable housing?

A house that costs $400,000, $500,000 or even up to $1 million can be considered affordable to those with adequate resources. But for local governments and the housing industry, the term “affordable housing” generally means housing (not just owned homes, but also rental homes) that is affordable to those with low to moderate incomes.

How do we judge low to moderate income?

The housing industry and their regulators use “area median income” (AMI) as the statistic for which the concept of affordability is based. The 2022 area median income for Frederick County is around $116,000 per household or about $51,000 for an individual. AMI is based on the most recent U.S. Census Bureau information available.

Many in the affordable housing industry consider those in lower-income households to make 40% to 60% of the AMI. In other words, Frederick County households with incomes of $46,000 (low end) to $70,000 (moderate end) can usually qualify for a government-subsidized home, also known as a moderately priced dwelling unit.

How much of your monthly income should you spend on a home?

It is generally accepted that an individual or family shouldn’t spend more than a third of their disposable income on housing. If you do, you are considered cost-burdened or, in more colloquial terms, “house poor.”

Therefore, if you make around $46,000 per year (low end), you shouldn’t spend more than $14,000 on your home. That works out to a monthly mortgage or rental payment of $1,150. When is the last time you saw a monthly rent payment such as that, much less a monthly mortgage payment, advertised in Frederick County?

Hence, the problem: For folks in this income category and below, there is simply not enough affordable housing to go around in Frederick County. According to United Way’s ALICE report, more than one-third of Frederick County residents cannot afford market-rate housing.

Where do the government’s “moderately priced dwelling unit” (MPDU) programs come in?

For many reasons, it is very difficult for market rate developers to build new homes or rental communities that are affordable to those with moderate to low incomes.

It is often left to nonprofit builders such as Habitat for Humanity or Interfaith Housing Alliance to build moderately priced homes, but their capacity is not adequate to meet the need.

Both the city and county have MPDU ordinances that try to get market-rate builders to do their share. They require market rate builders to build 12.5% of new homes in a development as moderately priced.

If they can’t or won’t, they must pay a fee to the jurisdiction in lieu of building the moderately priced units. In most instances, builders pay this fee instead of building the units.

These substantial MPDU fees go into a housing initiative fund, which helps fund such laudable programs as housing rehabilitation, homebuyer assistance, rental assistance and deferred loans for future affordable housing projects that will come to market several years down the road.

In effect, while the MPDUs are not built when the builder pays the fees, those funds are repurposed into other effective affordable housing programs.

But one thing remains clear: There is no replacement for actually building the affordable units. We’ve heard that loudly and clearly from the Board of Aldermen and County Council.

Payment-in-lieu fee

Both the city and county charge $2 per square foot as a “payment-in-lieu” fee to the developer for the entire size of the development, rather than a flat fee, in the hope that more affordable units will be built rather than the builder simply paying the fee.

Because of the length of the development process, it’s still too early to know if the change to the fee is working as a strategy.

The dwelling units that are constructed, sold or rented under the MPDU ordinance are rent-controlled in order to be affordable to those with low to moderate incomes.

Income eligibility for an MPDU is set at 70% of the area’s median household income and adjusted for family size.

Sales and rental prices are set by the appropriate governmental housing director or their designee. In general, the sales or rental prices are set as to not exceed 30% of the applicant’s monthly household income.

County’s new housing director wants to gauge shortage

By Gary Bennett and Hugh Gordon

This article appears in the Saturday, June 8, 2024 issue of the Frederick News-Post.

The first director of Frederick County’s new Division of Housing, Vin Rogers, knows he has his work cut out for him. In this era of nationwide affordable housing shortages, he believes there are many ways, however, to help solve this problem in Frederick County.

This year, Housing was elevated from department to division, with a director for the first time. This change was based on a recommendation from County Executive Jessica Fitzwater’s transition team.

“It elevates us to a comparable position as other large divisions within the county,” Rogers said. “And most importantly, it’s a recognition that the county executive sees this as a key issue going forward.”

Rogers’ top priority is to update the 2016 Frederick County Affordable Housing Study, to know exactly how big the problem is.

The updated study is a key piece of the county’s affordable housing puzzle and will include the needs of Frederick County and the incorporated municipalities. In 2016, the study showed a deficit of over 11,000 units for those making less than $50,000 per year.

After measuring the scope of the housing gap, Rogers plans to devise a strategic plan to address it.

He feels it’s imperative to consider real-life circumstances in the affordable housing debate. “What happens when your adult children want to stay in the area and be close to their families? What happens when you have an elderly parent who can’t afford to stay in the home they have now? I think it is critical for us to help people understand why it is so important for our entire community.”

Rogers alsov expects to further refine and expand upon proven programs and policies that will be addressed in the study.

Rogers said the county’s moderately priced dwelling unit (MPDU) ordinance, which recently changed its fee structure, will need time to kick in. The ordinance requires developers to pay the county $2 per square foot of total development if they opt to not build affordable units.

Developers used to pay a relatively modest, static fee, but now must pay a larger, more dynamic one, which could cause them to build smaller, more affordable units.

Since the cost of land is the highest in construction, Rogers is eager to consider how much county-owned land can be devoted to affordable housing. The county recently applied for $7.5 million in federal funds to be earmarked for pre-development costs on county-owned land.

“If we are able to use county-owned land for affordable housing and have funds available for pre-development costs, we believe developer savings would be substantial enough to require deeper subsidized units or more overall units,” Rogers said.

Rogers said developers are hamstrung by red tape and suggested that a speedier, streamlined process, or “green taping,” is needed.

“We’d like to make it less burdensome for developers to bring projects to the table because it can take so long. I’d like to raise affordable housing projects to the top.”

Other jurisdictions of Frederick County’s size sell bonds to finance housing projects, replacing private equity firms as the main source of investment. This typically saves developers millions and allows more below-market units to be built.

“What I’m used to is a housing authority that can issue bonds. Unlike the city, Frederick County doesn’t have a housing authority. If we had something like that, we could be a bond issuer,” Rogers said.

Since there’s a clear need for more senior housing, which typically doesn’t add to school overcrowding and not much to crowded roads, Rogers sees substantial community value on focusing on seniors, but strategically.

“What I’ve found is that you must be able to demonstrate success before people will get on board with affordable housing development, including senior housing. You need to produce a property so impressive that people are open to more of it.”

Rogers sees accessory dwelling units (ADUs) as part of the solution. ADUs, sometimes called “granny flats,” are independent, self-contained units that can be within a single-family dwelling, as an addition, or on the same lot as the dwelling.

“I don’t know why we wouldn’t look at expanding opportunities for homeowners to provide ADUs on their own properties. I don’t think the impact of ADUs pushes us to the point where we shouldn’t go forward with them.”

More manufactured housing could help, he said. “The speed of building housing is a problem that manufactured housing could help address. The stigma of what some people call ‘trailer homes’ is slowly disappearing. The way they’re built now, it’s almost hard to distinguish them from other types.”

Rogers wants to continues the policy exempting developers from paying impact fees when they develop affordable housing units. He sees that as a key tool that requires careful consideration based on the site and the populations served.

“There’s no easy answer on how to balance the need for more housing with the clear strain on county infrastructure. But I don’t think the two are mutually exclusive. We need to build, but we also need to preserve and make homeownership more affordable for the existing housing stock we have.”

On a practical level, Rogers hopes to build on a good working relationship with the city of Fredrick.

“The city is so important to affordable housing objectives. That is where the need is the greatest. We have a good relationship now, especially through the Affordable Housing Council, which has representatives from both the city and county. But the incorporated municipalities are very important, too. We hope to get them more involved in affordable housing issues.”

Affordable housing bills well represented in new session

By Gary Bennett and Hugh Gordon

This article appears in the February 10, 2024, issue of the Fredrick News-Post’s Opinion section.

The Affordable Housing Council of Frederick County is pleased to see there is clear recognition by the Maryland General Assembly, as evidenced by the actions it is taking, of the massive shortage of affordable housing across all of Maryland.

When the 90-day 2024 session kicked off on Jan. 10, it had prefilings over more than 800 proposed bills, many of which overlap. Of these, more than 200 deal with housing, affordable housing or related subject areas. All will be heard in committees in which Frederick County is well represented.

Despite the Affordable Housing Council’s urging, no housing-related priorities made it into the Frederick County Council’s 2024 legislative package. However, the County Council did provide several position statements supporting affordable housing initiatives and particularly the landlord/tenant “just cause” eviction notice.

The Affordable Housing Council has identified the following seven bills as important to advocate for and actively track during their monthly deliberations.

• HB3: Expedited Development Review Processes for Affordable Housing — sponsored by Del. Vaughn Stewart of Montgomery County. It requires local jurisdictions to implement an expedited development review process for affordable housing.

This bill is especially attractive since it mirrors the governor’s wish to reduce the public hearing process used to delay projects or have them narrowed and a 2024 policy priority for the local Affordable Housing Council to streamline Frederick County’s and the city of Frederick’s permitting process to accelerate affordable housing projects.

• HB7: Housing Innovation Pilot Program and Housing Innovation Fund — also sponsored by Stewart. It proposes establishing a housing innovation pilot program at Maryland’s Department of Housing and Community Development (DHCD) for providing loans for local housing authorities to develop mixed-income, cross-subsidized housing.

DHCD, the primary housing authority for the state, funds or insures loans for the purchase and construction of housing for low-income families; helps low- and moderate-income families buy or rehabilitate houses; and aids nonprofit organizations with grants or loans to house the elderly, developmentally disabled and homeless.

This bill dovetails nicely with Frederick County’s stated goal for its Division of Housing to expand further into the world of housing finance by prioritizing outside funding opportunities to create and preserve affordable housing.

• HB63: Property Tax Credit for Dwelling House of Disabled Veterans — sponsored by Del. Andrew Pruski of Anne Arundel County. It provides for a tax credit for dwelling houses of disabled veterans as declared by the U.S. Department of Veteran Affairs.

• SB25: Disabled or Fallen Law Enforcement Officer or Rescue Worker Property Tax Credits — sponsored by Sen. Katherine Klausmeier of Baltimore County. It proposes a tax credit for disabled or fallen law enforcement officers or rescue workers.

• HB69: Live Where You Teach Program — sponsored by Del. Marlon Amprey of Baltimore City. It authorizes the Community Development Administration in the state’s Department of Housing and Community Development to administer a homebuyer assistance program and a rental assistance program for housing near schools where school employees want to live.

• SB90, sponsored by Sen. Antonio Hayes of Baltimore City, is proposing that $200,000 be appropriated for CDA to apply to the Live Where You Teach Program.

This bill, if passed, would only apply at this time to the school staff in Baltimore City, but the positive ramifications for teachers statewide could be huge in the future.

• HB154: Revaluation of Property on Transfer After Appeal — sponsored by the chair of the Ways and Means Committee on behalf of the Maryland Department of Assessments and Taxation. It provides for a homeowner’s property tax credit for applications submitted within three years after April 15 of the taxable year for which the credit is sought. This means that if the assessment of the property is reduced upon appeal, the taxpayer pays the lower amount.

• HB138: Financial Literacy for All Act — also sponsored by Amprey. It proposes financial literacy requirements as part of required curriculum for students. Financial literacy is an important component for understanding prerequisites for buying, renting or financing a home.

All of these proposed bills are important building blocks for the creation, preservation or financing of affordable homes in the state of Maryland.

We are heartened that help is on the way for millions of Marylanders who can’t afford the home they need.

Working to ensure everyone has a decent place to live

By Gary Bennett and Hugh Gordon

This article appears in the January 2024 issues of the Emmitsburg News-Journal, p 25, and Woodsboro-Walkersville News-Journal, page 21.

Among the many boards, commissions and councils serving Frederick city and county, there is one that advises on the charged issue of affordable housing.

Charged? Well, yes. It is hard to find another issue that elicits such visceral comments both for and against. Most folks support the availability of housing for those economically shut out of the market until it affects them directly. Everyone is for more affordable housing until they think it might affect their own property value or when construction is planned nearby. It is understandable.

That is the tightrope on which the Affordable Housing Council (AHC) is perched.

The AHC serves as Frederick County’s main forum to discuss affordable housing issues, is the main advocate for affordable, safe, and decent housing, supports affordable housing providers and their programs, and advises county and city governments on promising new and existing affordable housing laws and regulations. The council is comprised of appointed volunteers who care about affordable housing issues and have no personal stake in encouraging more affordable housing.

Position Statement of AHC

The Affordable Housing Council believes that:

All Frederick County residents deserve to live in safe, decent, and affordable housing that does not require more than one-third of their total monthly income to own or rent.
County, state, and municipal governments should look for every opportunity to incentivize affordable housing options in land use, zoning, and development laws and regulations.
All stakeholders – government entities, developers, builders, real estate firms, civic and business groups, and consumers of affordable housing – need to recognize that a lack of affordable housing is a real problem for all of us and should work together to find real solutions.
The lack of enough infrastructure to support increased housing is a real problem and should not be downplayed. Instead of punishing middle- and lower-class Americans, however, we must hold government accountable to proactively fund appropriate infrastructure, especially schools.

What is affordable housing?

The definition of affordable housing is not always accurately understood, especially in terms of today’s charged political discussion. To those with moderate to low incomes, affordable housing is usually defined as housing that requires one-third or less of their disposable income to afford. This includes rentals and owned homes. For these folks, there is not enough affordable housing to go around in Frederick County and in most parts of the U.S. In the affordable housing world, we are typically focused on the ALICE households, those who are Asset Limited, Income Constrained, and Employed. Basically, they are working citizens living paycheck to paycheck.

Policy Priorities of AHC

The Affordable Housing Council has been quite successful in developing housing priorities and encouraging elected officials to give them fair consideration. Indeed, both the city’s Board of Aldermen and the Frederick County Council, depend on the AHC to be non-staff housing experts. We are constantly looking for creative ideas to help increase our affordable housing stock.

Earlier this year, we recommended and were pleased when the Board of Aldermen approved the updated Moderately Priced Development Units (MPDU) ordinance. The ordinance encourages increased development of affordable housing in the city by requiring developers to pay $2 per square foot for every unit in the development if they opt out of building the required number of MPDUs. The fee had been flat but is now pegged to the size of the units in the development. The city is then charged with using the proceeds from the ordinance to fund affordable housing programs. The change in the city’s ordinance brings it into synch with the county’s MPDU ordinance.

Other AHC policy priorities we will advocate for in 2024 include:

Updating the 2016 Frederick County Affordable Housing Needs Assessment report to better reflect current housing and economic realities and to develop a strategic plan to address the findings. Such an assessment and plan would guide county and city programs and resources to better serve residents in need of affordable housing.

Increasing the portion of the county’s recordation tax revenue that is earmarked for the housing initiative fund (HIF) in one-time increments and consider permanent changes to the formula that funds the initiative. The HIF is used to provide resources that make home ownership accessible to county residents.

Supporting the implementation of the City of Frederick’s rental registration and inspection program. The program provides for protection of renters’ rights and landlord and tenant education on renters’ rights and best practices.

Advocating for the inclusion of several key policies in the City of Frederick’s form-based code initiative: implementing an affordable housing overlay, waiving development fees for projects that meet certain income requirements, allowing for more density and building height in designated areas and right-sizing parking requirements for new projects.

Streamlining Frederick County’s and the City of Frederick’s permitting processes to accelerate affordable housing projects. A particular need is to increase staff capacity and use a customer service-based approach to incentivize and encourage affordable housing projects.

Encouraging the implementation of area plans as part of the Livable Frederick Master Plan to include priorities such as implementing an affordable housing overlay, allowing more density in designated areas, aligning available public transportation with affordable housing developments, and encouraging municipalities in the county to allow construction of accessory dwelling units (ADUs).

Waiving or deferring impact fees in Frederick County and the City of Frederick charged to buyers that meet income requirements for affordable housing purchases from a developer. Further, City of Frederick should formalize the waiving of property taxes and impact fees for developers while they are building or renovating homes for sale or rent to residents meeting income requirements for affordable housing.

Hugh Gordon serves as the current chair of the Affordable Housing Council. He commented, “The need for affecting implementation and the potential for assisting seniors, school teachers, policemen, firefighters, restaurant workers, and the most vulnerable residents of Frederick County is critically important.”

According to Malcolm Furgol, vice-chair of the AHC and policy committee chair, “These policy priorities build on past recommendations by the Affordable Housing Council and progress made by Frederick County and the City of Frederick towards realizing a positive environment for safe, stable and affordable housing for all residents.”

Invitation to Participate

The issues are difficult but the stakes are high for all of us. The Frederick County Affordable Housing Council invites you to participate.

AHC meets the second Tuesday of each month at 2:30 pm at a location designated by the Council. Confirm meeting dates and location by checking https://www.frederickcountymd.gov/6371/Affordable-Housing-Council or by calling the Frederick County Department of Housing and Community Development at 301-600-6091.

Meetings are open to the public and public participation is highly encouraged. Agendas can be obtained at the website noted above. Public comment is welcome at all meetings.

If you are a Frederick County resident, a registered voter and wish to become a member of the AHC, send a letter of interest and resume to fcgboards@FrederickCountyMD.gov. Call 301-600-1102 for more information. The County Executive makes all appointments subject to confirmation by the County Council.

The AHC may be comprised of as many as 13 voting members. We currently have seven members and two very good prospects. We are working hard to ensure affordable housing consumers such as teachers, police officers, and seniors are represented on the Council as well as members of industry, nonprofit organizations, and the public in general.

Gary Bennett is a retired association executive with no stake in the housing market except for being a concerned citizen. Hugh Gordon is the association executive for the Frederick Association of Realtors and has decades of experience as a mortgage banker. They are long-time Frederick residents and members of Frederick’s Affordable Housing Council.

How housing (or lack thereof) affects our economy

By Gary Bennett and Hugh Gordon

Sharpe Square affordable housing units in Frederick

This article appears in the January 12, 2024 issue of the Frederick News-Post.

As the largest monthly expense for just about all of us, it is no surprise that housing plays an outsized role in our regional and national economy.

First, there is the robust construction industry and all it employs.

We see the workers every day as we make our way around Frederick. It is no surprise that housing construction and allied trades are a large economic engine for most localities, including Frederick County.

Nearly 10% of employees in Frederick County work in the construction and allied trades industry. It is one of the largest industries in our diverse local economy. Any disruption in the construction industry, or any of our top industries, would be harmful to Frederick’s overall economy.

Second, there is the menace of inflation.

The wide gap we see now in the supply of and demand for housing that has driven up housing prices to historic levels had its origins in the recession of 2007.

Later, supply chain woes caused by the COVID-19 epidemic in 2020 drove up the cost of housing even more. The lack of balance in the housing market and the higher prices that come with it have been a major driver of inflation.

Even as food and fuel prices begin to moderate, housing prices remain stubbornly high. Mortgage interest rates that rose exponentially over the past year have only cooled demand slightly.

Rents remain artificially high, too, as folks get priced out of the home-buying market and increase competition for rentals. It seems clear, and most experts agree, that the best way to make a meaningful and long-lasting dent in inflation in the U.S. is to create more moderately priced housing.

Thirdly, our current lack of affordable housing may have a profound economic impact on the future if it’s not proactively addressed.

Research has shown that increasing access to affordable housing is the most cost-effective way to reduce childhood poverty and increase economic mobility in America. If we can somehow condition ourselves to take the long view on increased affordable housing instead of focusing on the short-term problems that can be solved with government action and political will, society will be better off.

In a large multi-year study, Stanford economist Raj Chetty found that children living in stable, affordable homes are more likely to thrive in school and have greater opportunities to learn inside and outside the classroom. Children who moved to lower-poverty neighborhoods saw their earnings as adults increase by approximately 31% and had an increased likelihood of living in better neighborhoods as adults.

Indeed, the lack of safe, affordable housing is costing U.S. cities in many ways we don’t always see. It forces families to live far from work, increasing their carbon footprint. It lowers tax bases that fund the amenities we take for granted. And, perhaps most painfully, we lose potential workers and customers that keep our local businesses thriving.

You don’t have to look any farther than our Maryland neighbor to the west, Cumberland in Allegany County, for a discouraging example.

Cumberland has long embraced a very slow-growth housing policy. With little excess housing stock, Cumberland cannot grow.

Young people who may want to stay cannot find entry-level housing. Older folks who wish to sell their large family homes in hopes of downsizing to a smaller, more manageable home cannot find buyers or more modest homes to move to.

Businesses that come to town cannot find appropriate housing for their employees. It is a self-fulfilling cycle that Cumberland has found itself in for years.

Prosperity for the Frederick region depends on decisive action now to make sure our housing stock meets the needs of the future.

We are pleased to see both Frederick City and Frederick County taking steps to make building moderately priced dwelling units more appealing to developers, and if they don’t build them, a revenue base so government can fund affordable housing programs.

For Fredrick businesses to grow and stay vibrant, they need more customers and reliable workers who have housing. To succeed, Frederick County must remain a diverse place where all people have decent, safe, affordable places to live in thriving communities.

How did we get in this affordable housing mess (Part 2)

By Gary Bennett and Hugh Gordon

This article appears as an opinion column in the Saturday, December 9 issue of the Frederick News-Post

In our column of Oct. 21, we discussed the overarching supply-and-demand cause for the nationwide affordable housing shortage and the role that single-family-only zoning plays in exacerbating this shortage.

In this column, we look at other limiting factors for building affordable housing and some possible solutions.

***

Single-family-only zoning is one way local zoning boards limit how much housing can be built.

Many places also employ height restrictions. Some areas are zoned for multifamily buildings, but don’t allow any building over two stories high. This drives down supply.

Parking requirements are often written into zoning laws, too.

Many laws require two parking spaces for each unit of multifamily housing. A 100-unit apartment complex would need 200 parking spots. This usually means buildings of that size don’t get built.

Builders must lower the number of units to save space for parking, even in areas with effective transit systems. Those units become more expensive because the land is still the same cost to the developer. What could have been reasonably affordable units become units for those with higher incomes.

Another feature of many zoning laws is minimum lot sizes. Builders are legally required to allot land for each home, often a large amount.

These “exclusionary” zoning laws push builders to focus on bigger luxury homes instead of smaller starter homes or multifamily homes.

Zoning boards are essentially only allowing people who already benefitted from the wealth of this country — who built their incomes with access to high-opportunity jobs and education and generational wealth — to live in neighborhoods.

Historically, some of the first zoning laws in our country were engineered to block people of color, particularly Black Americans, from living in predominantly white neighborhoods. This was known as redlining.

Today, laws don’t explicitly mention race, but they continue to worsen segregation. In most municipalities, the more single-family zoning for a neighborhood, the whiter it is.

Shrinking the pot of new housing getting built, while demand keeps rising, drives up the cost of housing for everyone.

The old code phrase “changing the neighborhood character” gets thrown around.

People are confused when they hear that affordable housing is coming to their neighborhood. They say they don’t want giant apartment buildings.

And they’re right — not every neighborhood should have giant apartment buildings. But affordable housing is much more than that.

Even small gradual changes to zoning laws can have an impact.

For example, allowing smaller homes on smaller lots, or simply allowing duplexes, would double available housing in some areas. In recent years, cities like Minneapolis took the huge step of ending single-family zoning.

Increased automation of the construction process can help, too.

There’s some innovation now with modular construction and 3D printing, but productivity growth is slow. States can help by mandating that manufactured housing is permitted housing in any zoning code.

The federal government isn’t blameless, either. Many incentives have been written into the tax code to encourage home ownership over other asset classes as our country’s primary wealth-building mechanism.

Most American homeowners expect the sale of their home to finance a large part of their retirement. This means property values must be maintained at all cost.

The Biden administration is attempting to help at the federal level by tackling exclusionary zoning through a $5 billion program to give money to localities that remove exclusionary zoning policies. This is more than any presidential administration has done on this topic.

Help may be on the way from Congress, too. A bipartisan bill called the Build More Housing Near Transit Act has been reintroduced to encourage construction of new homes, including low- and middle-income homes, in transit-served, walkable communities.

The act would incentivize local governments to promote building new homes in and around transit corridors. The bill adds pro-housing policies to existing law, so local governments will be incentivized to make the following changes near transit corridors:

• Eliminate parking minimums

• Establish by-right permitting for projects that meet objective standards

• Reduce minimum lot sizes

• Create and preserve homes affordable to low-income households

• Raise or eliminate height limits

Ending America’s housing shortage will require real political willpower. And it will take people across the country taking a hard look at their own neighborhoods and understanding what gets built and who gets excluded, and how to make home ownership achievable for millions who are shut out.

Editor’s note: Gary Bennett is a retired marketing executive. Hugh Gordon is the association executive for the Frederick County Association of Realtors and has decades of experience in the real estate world, including 24 years as a mortgage banker. They are longtime Frederick County residents and members of Frederick’s Affordable Housing Council.

How did we get in this affordable housing mess?

By Gary Bennett and Hugh Gordon

This article appears in the October 21, 2023, issue of the Frederick News-Post.

As members of the Affordable Housing Council in Frederick County, we spend lots of time looking at houses on Zillow, Redfin, Realtor.com and The Frederick News-Post.

This is no news to anyone, but we can assure you that houses are more expensive than ever. Here in the Baltimore/Washington, D.C., region, it’s shocking.

In Maryland, according to Zillow, more than half of all buyers in June 2023 paid above list price for their home. Buyers are paying, on average, 1 to 2 percent above asking price now.

That may not sound like a lot, but on a $500,000 home, that may be another $10,000. One Realtor friend told us that for one of her listings, there were 32 offers, all above asking price. That means 31 unhappy, unsuccessful home seekers.

Renters have it no better.

In Maryland, the National Low Income Housing Coalition has found that a renter working 40 hours per week and earning Maryland’s minimum wage of $13.25 per hour must work 79 hours each week to afford a modest one-bedroom apartment and not be cost burdened (not spending more than 33% of income on housing costs).

But it’s not just Maryland and the D.C. area. The lack of affordable housing is a nationwide problem. Over the last couple of years, we’ve seen housing prices reach a level they’ve never reached before.

According to the National Association of Realtors, the median price for a house in America is now $414,000. That is the second highest median price recorded, after June 2022.

In Maryland, it’s worse. Maryland Realtors, a nonprofit membership organization, reports the average sales price in Maryland is up more than 3 percent from last year to over $486,000. Our proximity to Washington, D.C., has a lot to do with this.

That price may not sound like a lot for this region, but keep in mind it includes all areas of Maryland, rural and urban. Those prices make rents more expensive and home ownership unobtainable for millions of Americans.

How did this happen, and how can we fix it?

We can think of today’s exorbitant housing prices as a result of a supply and demand problem. The housing supply isn’t matching demand.

On the demand side, there has been a generational shift in who is buying homes. Millennials are now the largest generation in American history, and they are aging into their prime home-buying years.

On top of that, until recently, 30-year fixed-rate mortgages were at an all-time low, which meant it was relatively cheap to borrow the money to buy a house. That enticed people to buy if they could, making demand for houses even greater.

Over the last two years, interest rates rose past 7 percent, but because of low inventory, that has yet to substantially cool demand in the housing market.

From 2010 to 2019, there were fewer homes built in the U.S. than in any decade since the 1940s. In particular, the construction of smaller, entry-level homes, for first-time home buyers, has dropped more dramatically.

In the 1980s, those “starter” homes made up about 40 percent of homes built. Today, it is closer to 8 percent.

Currently, the National Association of Realtors says the U.S. is down anywhere from 5.5 million to 6.8 million starter homes needed to satisfy demand.

Moreover, according to Pew Research in 2021, 55 percent of adults under age 30 said the lack of affordable housing is a major problem, up from 39 percent in 2018.

This housing shortage drives a big part of the problem for renters and prospective homeowners. It is worse where demand is highest, such as near good jobs, transit and schools like Frederick.

One straightforward solution is to simply build more affordable homes in desirable places. For years, however, there has been one big obstacle — builders aren’t allowed to.

Zoning or local regulations that decide where things can be built overwhelmingly favor single-family homes over multifamily homes. Zoning boards have banned the ability for anyone to build anything other than a single unit of housing on that land.

In many towns, zoning boards exclude all types of multifamily housing from their neighborhoods.

And not just large apartment buildings. Things like duplexes and fourplexes are illegal on most residential land in many American cities.

Single-family housing is the law in 70 percent of Minneapolis, 75 percent of Los Angeles, and 84 percent of Charlotte, N.C., to name a few. This is a huge determining factor for the housing shortage in the U.S.

We need states to step in and preempt municipalities from enacting and enforcing land-use restrictions that raise housing costs. Land-use control is constitutionally guaranteed to states, not municipalities.

States often delegate the authority to municipalities. But they can and should take it back when cities don’t use it for public benefit.

Gary Bennett and Hugh Gordon are longtime Frederick County residents and members of Frederick’s Affordable Housing Council.