After wading through the latest draft of the inclusionary housing ordinance, I was left with three questions about who the winners and losers will be if the ordinance is approved.
Who gets to buy?
The draft ordinance, in section 5-7-11-C, provides for public announcement on the city’s web site of the availability of affordable units.
But it offers no mechanism for sorting out who should be chosen to win the subsidized units if there are more than enough qualified applicants.
This leaves open the possibility of favoritism and corruption in the sales process. Given the choice, why wouldn’t a developer who hoped to do more projects in the city prefer to sell an affordable unit to, say, the moderate-income child of an alderman?
More publicity to be sure all prospective buyers are informed and a random drawing to select from among qualified purchasers could address that problem.
How much will it cost to run the program?
The draft ordinance, in section 5-7-15, authorizes spending up to 15 percent of the affordable housing tax fund each year for administrative costs. Given the long lead times for project development, this could end up consuming most of the fund.
It appears the city staff hasn’t come up with any firm estimates yet of what running the program will actually cost.
Gambling on a weak housing market?
The resale price control provision of the draft ordinance, section 5-7-11-E, could lead to some curious results.
If housing prices continue to rise sharply, purchasers of affordable units will take a bath when it comes time for them to sell, because their gain will be limited to the overall increase in the cost of living — which has gone up at less than half the pace of homes in recent years. This could trap them in subsidized housing for a lifetime, unless they’re able to set aside other funds to cover an eventual move to market rate housing.
By contrast, if the housing market lags the rest of the economy, as some forecasters anticipate after the long run-up in prices, the purchasers of subsidized units will do better than those who buy market-rate homes. The subsidized buyer will be able to walk away with his consumer-price-index based gain capturing some or all of the initial subsidy value, while the market rate buyer will be left with only the smaller increase provided by the housing market.
Housing ordinance adds density bonus