Fair Housing Guidance, Property Value Research May Help Respond to LIHTC Siting Challenges

Published by Mark Shelburne on Monday, November 28, 2016 - 12:00am

Two unrelated announcements made this month could combine to assist developers with siting low-income housing tax credit (LIHTC) properties. First, the U.S. Departments of Housing and Urban Development (HUD) and Justice (DoJ) provided guidance on how the Fair Housing Act applies to zoning. Second, Trulia published research about the effect of affordable housing on surrounding property values.

Both the guidance and research could help address the problem of community opposition to development, often referred to as NIMBY (not-in-my-backyard). Such resistance has often faced LIHTC developers, but increased emphasis from policymakers on building in low-poverty “opportunity areas” could result in more frequent and/or better funded challenges. (An example of such a policy is the new method for designating metropolitan difficult development areas (DDAs).) In these locations, the current residents are more likely to have concerns about subsidized apartments and are more able to back up protests with resources.

Fair Housing Guidance

Developers have several ways to respond to NIMBYism, including pursuing legal options and explaining why neighbors’ concerns are unsubstantiated. The HUD-DoJ guidance addresses the former approach. The joint statement, which updates a similar version issued 17 years ago, recognizes land use regulation is “traditionally reserved to state and local governments.” However such regulation cannot violate the Fair Housing Act.

In a series of 27 questions and answers, the guidance describes three areas where state and local practices could fail to comply with federal law:

  1. intentional discrimination,
  2. disparate impact, and
  3. reasonable accommodations.

The guidance states that intent is not simply the mindset of those making decisions, rather “municipal zoning practices... that reflect acquiescence to community bias may be intentionally discriminatory, even if the officials themselves do not personally share such bias.” Furthermore, the agencies say that state and local governments may not act based on “the fears, prejudices, stereotypes, or unsubstantiated assumptions” of their constituents.

The concept of disparate impact, affirmed by the U.S. Supreme Court last year, applies even without evidence of ill intent by any party. Instead, policies violate fair housing due to their “effect on persons because of their membership in a protected class.” The guidance lists “minimum floor space or lot size requirements that increase the size and cost of housing” and “prohibiting low-income or multifamily” as examples of potentially problematic practices.

The last group of questions and answers discusses regulation of group homes. The main focus is on making reasonable accommodations, which the guidance says means a “change, exception, or adjustment to a rule, policy, practice, or service that may be necessary for a person with a disability to have an equal opportunity.” In other words, treating persons with disabilities the same as others may conflict with federal law. Questions about reasonable accommodations most often come up at the property level, but the same law also applies to programs. The application of this concept is very complex and fact-specific.

Property Value Research

One reason often cited by area residents when resisting land use approval for affordable housing is it will have a negative effect on the value of their property. (Other objections include increased traffic and school crowding.) In its research entitled “There Doesn’t Go the Neighborhood: Low-Income Housing Has No Impact on Nearby Home Values,” Trulia casts doubt on such concerns. The findings have received a great deal of media attention.

The research is limited to LIHTC developments. Trulia inaccurately characterizes the LIHTC as being HUD-administered (HUD does maintain a database of properties). Instead the program is a partnership between the U.S. Department of Treasury and state allocating agencies. This error is worth noting but does not diminish the report’s overall value.

Trulia’s analysis of the nation’s 20 least affordable housing markets compared sale prices of homes within 2,000 feet of LIHTC developments to those farther away. The result was “no statistically significant difference in price per square foot” in 17 cities.  Being close to a LIHTC development in Boston and Cambridge, Mass. did have “a negative effect on nearby homes in terms of price per square foot.” By contrast, Denver actually saw an “increase in property values for the neighborhood versus the region.”

Therefore, in all but one area (since Boston and Cambridge are adjacent), there is no evidence to support a claim that LIHTC developments reduce property values. This conclusion follows other research showing benefits, including Stanford professors who recently determined “affordable housing appears to be a desirable way to invest in and revitalize low-income communities.”

Conclusion

There is no single approach to addressing NIMBYism, but there are a few common themes. The HUD-DoJ guidance will help LIHTC developers provide a clear reminder of the federal limitations and requirements on zoning decisions. Trulia’s research provides compelling data rebutting what is often the major concern.