The city of Annapolis, Maryland, is changing a 15-year-old policy meant to produce modestly priced homes after finding that the program has barely worked.
In 2004, Annapolis created the Moderately Priced Dwelling Unit Program, requiring that new subdivisions in the city include some units for people earning 100 percent of the Baltimore area median income, or about $95,000 a year for a family of four. The program was meant to provide a range of housing choices in a city where new homes can often top $1 million, says Sally Nash, acting director of planning and zoning for the city of Annapolis. There are no strict income limits for people who are participating in the program, but it was meant to provide homes for teachers and city employees and other residents who have enough income to qualify for a mortgage but would struggle to find reasonably priced housing in the city.
The program requires that developments of 10 units or more carry moderate prices for 12 percent of the for-sale units or 6 percent of the rentals. But in the last 15 years, the program only produced 18 moderately priced rental units and 10 for-sale homes, according to a report submitted to the city council by Annapolis’ planning department. And 11 developers had paid a fee in lieu of offering moderately priced units, which generated around $1 million over the last six years, according to the report. That money was used for a housing trust fund that supports settlement assistance for first-time homebuyers, according to the report, but it has never been enough to allow the city to build new affordable housing. So last week, as the Capital Gazette reported, Annapolis City Council voted to update the program, requiring moderate prices on 15 percent of both for-sale and rental units, and eliminating the in-lieu fee altogether.
“Our fee-in-lieu was not high enough,” says Nash. “With this legislation, the thought was, we can tweak the fee to make it more effective, but the aldermen felt like the most important thing was getting the units, because land prices are so high and there’s not much, if any, vacant land. So it’s not like the city is going to go out and buy land and build housing.”
The council also extended the duration of price controls on the moderately priced units to 30 years for the for-sale houses and 99 years for rentals. That change was based on the Department of Planning and Zoning’s look at moderately priced dwelling unit programs around Maryland and throughout the United States. According to the report submitted to the council, the required length of affordability (or moderate affordability, in this case) is “trending upward” around the country. In newer programs, the average term of affordability is 47 years for rentals and 44 years for homeownership, according to the report. All of the changes were made in recognition of the fact that the program simply hasn’t been working as well as it is supposed to, Nash says.
As concerns have grown around the country about the availability of affordable housing for different income levels, many cities have adopted new inclusionary housing policies, which require or incentivize the inclusion of reduced-price units in market-rate projects. The programs have had mixed results. Just last week, a researcher from the Mercatus Center at George Mason University, a right-leaning think tank (Charles Koch is a board member), published a study suggesting that inclusionary programs in the Baltimore and Washington area have made housing marginally more expensive across the board. In-lieu fees are a popular way to let developers opt out of providing on-site units while still paying into funds that, in many cases, support affordable housing production. But Annapolis hasn’t been able to turn the fees to its advantage the way some other jurisdictions have, like Montgomery County, Maryland, which has an older and relatively more successful moderately priced dwelling unit program, Nash says.
“The goal here is more units,” Nash says.
The legislation was sponsored in the city council by Alderman Marc Rodriguez, who says the council acknowledged that after 15 years, the program wasn’t working effectively. One of the reasons was that the in-lieu fee was too low — “a developer-driven number” — and that the city wasn’t in a place to take advantage of it even if it were higher. They considered raising the fee to be more in line with Montgomery County, but decided that there were not enough development opportunities in Annapolis overall for it to be effective. They wanted to squeeze as many moderately priced units out of the program as they could, Rodriguez says.
“The numbers are the numbers,” he says. “Obviously [developers] would love being able to pay the fee-in-lieu, and they were doing what was allowed by law. But the law was flawed, and it’s very hard to argue against that.”
Neither Rodriguez nor Nash give an exact number of units they hope the changes will produce. Nash points out that there will still be complications for making homes in new developments moderately priced. For example, a lot of new development that would meet the 10-unit threshold is higher-end condos, which would probably include steep HOA fees even if the sale price were kept lower. The city is also exploring other options for providing housing for people with low and moderate incomes, even though it doesn’t believe it can make big investments in production on its own. Rodriguez says he plans to introduce a bill soon that would legalize accessory-dwelling units in many areas of the city, and the Department of Planning and Zoning is researching the best ways to structure that legislation.
“It’s about making our city more inclusive,” Rodriguez says.
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Jared Brey is Next City's housing correspondent, based in Philadelphia. He is a former staff writer at Philadelphia magazine and PlanPhilly, and his work has appeared in Columbia Journalism Review, Landscape Architecture Magazine, U.S. News & World Report, Philadelphia Weekly, and other publications.