Zoned out

Programs won't end high housing costs

Programs won't end high housing costs

September 12, 2004|by Tom Firey

Washington County residents have heard a lot recently about Moderately Priced Dwelling Unit programs, which require developers to sell a percentage of new units to low-income purchasers at below-market prices.

In a June 22 public meeting, County Commissioner James Kercheval noted that the commissioners have been studying Montgomery County's MPDU program for possible adoption locally. Two weeks later, Herald-Mail editorial page editor Bob Maginnis glowingly described the program in his Sunday column, saying that people who are "sincere" in their concern for affordable housing should "borrow from" Montgomery County.

Two weeks after that, THe Herald-Mail printed a letter from James Upchurch, president of the Interfaith Housing Alliance, who praised MPDU programs' "strategy of making sure that everyone has a place to live" and said "MPDU is an effective way to produce affordable housing." He called on Washington County to show "visionary policymaking" by adopting the program locally.

Often, when someone suggests an ambitious-sounding policy response to a pressing problem, people fail to ask - will this work? Will it deliver the results we want? Those are especially important questions in this case because Montgomery County's media are presenting a vastly different picture of the effectiveness of that county's affordable housing efforts.


Two days before Upchurch's letter appeared, the Montgomery Gazette led with the story that a majority of the county council "has proposed sweeping changes that would allow taller buildings, permit denser development and reduce green space in exchange for affordable housing."

Councilmember Nancy Floreen was quoted as saying, "If we mean what we say about affordable housing, we need to make some changes about the way we do things today."

Change is needed. Over the past five years, housing prices in the D.C. metropolitan area have increased 65 percent, according to the Office of Federal Housing Enterprise Oversight (OFHEO).

Why isn't Montgomery's MPDU program making housing more affordable?

Part of the reason is that it is neither intended to, nor can, improve overall housing affordability. The program is extremely small - it delivered only 480 housing units to the market in 2002-3, as compared to the 7,398 market-rate units that were completed in that time. (Even if the county's much-chastised "developer buyout" option were abandoned, that would have provided only 280 additional MPDUs.)

In the three-decade history of Montgomery's program, only about 11,500 MPDUs have been created, as compared to the roughly 150,000 market-rate units that were completed over that time and to the nearly 350,000 total housing units in Montgomery County.

The meager ratio of MPDUs to market-rate housing is far below what is needed to create a meaningful quantum of affordable housing. The units are little more than prizes for the fortunate few low-income families who, through a lottery, win the right to buy an affordable home.

Arguably, the program's biggest beneficiaries are politicians and other community leaders who can point to it and say, "See, we care about affordable housing."

Why is housing so expensive in Montgomery County and the rest of the D.C. region? As explained in a recent three-part Washington Post series, "zoning and other development controls" have severely limited the number of housing units that can be created. The result: A scarcity of housing and skyrocketing prices.

The Post series echoes what economists have known for some time: Restrictive zoning is largely responsible for the nation's affordable housing woes. Harvard's Ed Glaeser and Penn's Joseph Gyourko, in much-heralded research, calculated that 90 percent of housing's nonstructure cost is due to zoning-imposed artificial scarcity.

That is why Montgomery's County Council, in a sincere attempt to improve overall housing affordability, is considering relaxing its zoning regulations.

The effect of restrictive zoning on home prices can be seen in Washington County, which implemented de facto downzoning with the adoption of the current rural building moratorium in late 2002.

At that time, county housing inflation was about 6.5 percent a year, according to the OFHEO. As soon as the moratorium was adopted, county housing inflation jumped to 9.5 percent and has now hit 15 percent. In other words, the moratorium has added more than $4,250 to the median price of county housing.

It is ironic that, at the same time that Washington County's commissioners are considering MPDUs, they're also preparing to formally adopt downzoning, which will have a far greater negative effect on general housing affordability than the most radical MPDU program could begin to offset.

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