Can New Orleans’ Anti-Displacement Blueprint Survive Election Season? – Next City

AP Photo/Gerald Herbert

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Can New Orleans’ Anti-Displacement Blueprint Survive Election Season?

Increasingly expensive, the Crescent City finally has a plan to keep affordable housing in gentrifying neighborhoods. Will it be able to outlive Mayor Mitch Landrieu?

Story by Nina Feldman

Published on Jul 24, 2017

Last October, Michael Esnault found an eviction notice posted to the door of the New Orleans apartment that had been home for five years. A Vietnam veteran who relies on a housing voucher from the U.S. Department of Veterans Affairs to pay rent, Esnault was devastated.

The 69-year-old Louisiana native had struggled to find good housing he could afford before finding his apartment inside the American Can Company Complex overlooking Bayou St. John in the city’s walkable Mid-City neighborhood. Carless and disabled, Esnault had bounced between isolating suburban complexes before happily settling into the friendly, loft-style apartment development.

“I tell you, I fell in love with it,” he recalls. “It was just what I was looking for.”

In May, the affair ended when Esnault moved out, taking with him a well-worn manila folder packed with notarized letters and legal correspondence documenting a difficult goodbye. “Paper clippings,” he says.

Until this year, Esnault’s apartment was one of 53 at the American Can reserved for low-income tenants. Back in 2000, when New Orleans-based developer HRI was raising funds for the project, the city awarded the prominent local company $29 million in tax exempt bonds. In exchange, HRI promised to set aside 20 percent of its 268 apartments for people earning less than $30,000 a year, for the first 15 years of the development’s life. With those rent protections expiring, the property management company that bought the building from HRI began serving those tenants notice last year. Housing advocates got involved. Mayor Mitch Landrieu’s administration urged American Can’s owner to work with tenants to at least delay evictions until tenants had somewhere to go, with a spokesman calling it a “moral responsibility.”

Esnault doesn’t like to dwell on the details. Even so, he took documentation of the unwanted move with him to his new home at the Pythian in New Orleans’ Central Business District — another tax credit-funded renovated historic building. The information can’t hurt in case something comes up, he says. But for now, eviction notices and cease and desist letters feel like a thing of the past. The Pythian’s subsidized units must remain affordable for at least 50 years under the building’s innovative community land trust model.

“I feel blessed,” he says. “Fifty years is a long time and I’m not getting any younger.”

When Esnault first got out of the military in the early 1970s, affordable housing for veterans was a simpler prospect. The VA gave home loans and subsidized mortgages, enabling many of Esnault’s peers to buy property in suburbs that had grown fast to accommodate earlier waves of veterans in the 1950s and ’60s. Others rented subsidized apartments in buildings most often owned and managed by public agencies.

Facing eviction, Michael Esnault discussed his plight inside his home at the American Can Apartments in New Orleans. He was one of dozens there affected by the loss of affordable housing subsidies. (AP Photo/Gerald Herbert)

Over the past few decades, that model has changed as government agencies from the VA to the U.S. Department of Housing and Urban Development take steps to get out of the real estate business and instead, rely on subsidies as incentives for developers to provide housing for veterans, people with disabilities and others who qualify for government support. These incentives come in the form of tax breaks, density bonuses, waived fees and expedited permits.

But less than two decades into New Orleans’ experiment with the model, city leaders, including Landrieu, realized that some of the deals may have come at too great a cost for low-income residents. An estimated 1,200 housing units across New Orleans have affordable leases due to expire between now and 2021 thanks to time-limited affordable housing deals struck over the last two decades. Another 5,000 are scheduled to expire by 2031.

This fall, New Orleans will elect a new mayor to replace the term-limited incumbent. Landrieu’s successor will inherit a city deep in debate about how best to grow an increased supply of affordable housing in the face of clearly intensifying need. In a final state of the city address given in a renovated theater just a few blocks from the Pythian earlier this month, Landrieu mentioned housing eight times and described his administration’s focus on the issue as “relentless.”

“We want the people of New Orleans to be the ones to rebuild New Orleans, and everyone should share in the opportunity and prosperity,” the mayor said. “That’s why our team is focused on equity, and is instituting an equity lens in our entire budgeting process. That’s why we are investing in new bus lines, and new streetcars. And that’s why we’re investing in affordable housing.”

But while Landrieu can point to a new streetcar line rolling cheerily through the city’s booming CBD, his landmark five-year strategy for affordable housing remains a work in progress.

Conceived with partners in the private and civic realm and introduced a little more than a year ago at Landrieu’s 2016 state of the city address, the plan includes recommendations for inclusionary zoning, affordability terms of 50 to 99 years (like the Pythian), and increased density in exchange for more affordable housing. It takes on a pernicious local habit of clustering subsidized units and recommends steps toward building the kind of integrated neighborhoods that were imagined in idealistic planning sessions nearly 13 years ago, after Hurricane Katrina laid bare the city’s extreme patterns of segregation.

In his speech this month, Landrieu said that his administration has nearly met the five-year strategy’s goal of building 7,800 affordable homes, pointing to city-backed projects like Esnault’s new home. Yet the mayor is the first to acknowledge that adding units is only part of the solution; comprehensive policy reform is needed too. The city, he wrote in a June memo to the New Orleans Industrial Development Board, “is working … to evaluate our past and current practices for awarding incentives and to learn how we can align our current resources and tools for incentivizing public investment to achieve our economic, equity, housing and resilience goals citywide.”

How that alignment happens will depend on Landrieu and his successor as well as the City Council, which for the better part of the year has been reviewing a related policy brief that must be converted into legislation before the substance of the mayor’s plan can be voted into law. Earlier this summer, the plan dodged a bullet from the state legislature, when an effort to ban mandatory inclusionary zoning policies statewide didn’t get out of committee. There are other signs of forward momentum. Cashauna Hill is the director of the Greater New Orleans Fair Housing Action Center. She says ideas like this aren’t new for New Orleans, but the seriousness of conversation in City Hall is. The mayor’s strategy and the related plan now under council review are a “step in the right direction” and indications of growing legislative momentum.

“This is a transformative moment,” says Hill. “One thing we know is that we have been losing African-American residents, and low-income residents since Katrina. People are being pushed out. We haven’t gotten to the point that Nola is wholly unaffordable. Not yet. But this is the time to make the change and address the issues that have led to the affordability crisis.”

Esnault admits he hasn’t been paying super close attention to the proceedings at City Hall. But as election season heats up, there is no question that he will be listening for clues on how the various candidates plan to help his former neighbors and the thousands of others who are in similarly tenuous housing situations.

“I was lucky,” says Esnault. “The Pythian, they sought me out. They took a lot of people with low incomes from the American Can Company because they heard about us getting evicted and wanted to help. If it weren’t for them, there is no telling where we’d be at and there are a lot of other people out there who haven’t found good places to go. … They need a mayor who can help them.”

The Post-Katrina Housing Market Transformation

Before Hurricane Katrina in 2005, not many developers were interested in investing in New Orleans’ residential areas. Crime was high, abandoned buildings were plentiful and demand was low. City leaders saw deals like American Can Company as great opportunities to boost what was then a working-class neighborhood. But because these projects carried high risk, the city had to make the deal attractive enough with incentives for developers. One such provision was putting only a 15-year limit on the affordable units, after which the developer could rent at market rate.

The American Can Company was heralded by the Urban Land Institute as an exemplary deal for catalyzing residential and commercial growth in a difficult development area. But that was before the 15 years were up. Marla Nelson is an associate professor of planning and urban studies at the University of New Orleans. She says deals like these were made to draw in developers, not protect residents.

“Looking at what happened with American Can, we can see that more thought needs to go into this backend and say, ok well what happens at year 15 or when it expires? I think that when this program was created — 15 years, that was sort of far away for people.”

A lot can change for a city in a decade and a half, even without experiencing the costliest catastrophe in American history. Four years after the American Can Company welcomed its first tenants, Hurricane Katrina and the subsequent levee failure transformed New Orleans into the most blighted city in America. (The building itself flooded and is reportedly the setting for an in-production Katrina movie, “The American Can.”) Post-Katrina, drawing in investment became even harder than it was before and as a response, federal tax credits poured in. The city received nearly 20 times its normal allocation of federal tax credits for development of residential and commercial real estate. According to Nelson, at that time, the city wasn’t in a position to be picky.

“In places that have historically been less robust or stagnant or declining, you know, maybe a little bit more in desperation, ‘we’ll take anything,’” she says, of the climate after Katrina. “In very strong markets, you know, local government has become arguably more sophisticated about asking more from developers.”

By many measures, the market incentives worked. From 2005 to 2015, home values increased in New Orleans by 54 percent. Across the city, including in Mid-City, large public projects, such as a landscaped pedestrian and bike path known as the Lafitte Greenway, which connects Mid-City to the French Quarter, have spurred private investment. Local megadeveloper Sidney Torres is planning a 382-unit development along the path.

“A lot can change for a city in a decade and a half, even without experiencing the costliest catastrophe in American history.”

But as interest and investment in previously blighted neighborhoods has grown, so have housing prices. Since Katrina, rents have increased by 50 percent. According to a 2015 report issued by Housing NOLA, an affordable housing advocacy group, 70 percent of New Orleans renters spend more than a third of their income on rent — the threshold considered affordable by HUD. A third of renters spend over half their income on rent. Demographic changes in the same time period have been drastic. Minority-led households have shifted to the outskirts of the city, and neighborhoods like Mid-City have become up to 25 percent whiter from 2000 to 2013. While the city has rebuilt its public housing and made piecemeal attempts to help vulnerable populations, there has until now been no comprehensive, city-backed answer to housing pressures.

Zoning for “High-Opportunity” Neighborhoods

New Orleans is a city that prides itself on its historic, low-rise architecture and charming human-scale streets. But as housing needs intensify, long-held fears of bigger buildings are being pushed aside. In 2015, the city’s revised Comprehensive Zoning Ordinance included a voluntary density bonus in some areas of the city, meaning that developers could opt for more units in exchange for including affordable units. In 2016, after Housing NOLA released its study, which found the city would need 33,000 units of affordable housing in the next 10 years, Landrieu issued his five-year affordable housing plan calling for the construction or preservation of 7,800 affordable units. One of the principle strategies he outlined was the introduction of policies that include mandating the inclusion of affordable housing in market-rate developments.

Last year, the New Orleans City Council requested that the City Planning Commission study the feasibility of what’s been dubbed the Smart Housing Mix Ordinance. The commission’s report, released in February, considers best practices from cities across the country, as well as local context. The findings are still under council review and awaiting legislative action.

If a plan were developed based on the study’s current recommendations, which the mayor endorsed, the new zoning would be mandatory in a handful of “high-opportunity” neighborhoods throughout the city, including Mid-City. In those areas, the law would require developers building or substantially renovating rental housing of more than 10 units to set aside 12 percent of them for residents earning less than 60 percent of the area median income. For-sale properties would be reserved for those earning 80 percent or less of AMI. In exchange, developers could receive tax credits, build more units per complex (a density bonus) and bypass parking requirements. The study recommends that the units would remain affordable for a period of 50 to 99 years, following the Pythian’s lead.

Ellen Lee heads the Office for Community Development for the city. She says the recommended policies are all about a give-and-take between what developers need to keep the deal moving forward, and what residents can afford. “[We’re] finding the right balance of how many units would need to be affordable for what period of time and what would be options available for developers,” she says. In June, the mayor said that he would not support any property tax breaks for residential real estate projects that don’t include reduced-rate units.

Inclusionary zoning plans are becoming more popular as wealthier families continue to take interest in walkable, urban living and local leadership recognizes that affordability needs be a front-end priority in growing municipal economies. Robert Hickey is a policy expert on inclusionary zoning. He works with communities to develop their mixed-income development plans. He says nationwide, the number of communities with inclusionary zoning policies on the books has just passed 500, and most of them are in suburban areas. Hickey estimates in the greater scheme of inclusionary zoning, New Orleans’ plan falls about in the middle. Some cities, where growth is expected to be fast and the risk to build is low, require developers to set aside greater portions of their projects as affordable. In Mayor Bill de Blasio’s plan for mandatory inclusionary zoning in New York City, that number is 25 percent. Some places offer fewer rewards. Until recently, San Francisco didn’t offer any sort of density bonus for developers, but still mandated they include affordable units. On the other end of the spectrum, many cities’ inclusionary zoning policies are voluntary, meaning developers can opt in and receive benefits if they choose, but they aren’t required to participate.

Hill and other fair housing advocates are pushing for New Orleans to emerge as a leading model of how a growing city can develop without pushing longtime residents out.

“The next mayor and city council need to be able to show that they are willing to pass an inclusionary housing policy,” says Hill. “We are working with a coalition to make sure that all the candidates know this is an important issue for folks. And once the election happens, we need to make sure the accountability is there.”

A Model for Affordable Housing Development in Southern Cities

Already, among peer cities in the South, New Orleans is at the front edge of the inclusionary trend. Atlanta passed a law last summer requiring that developers include affordable units in new construction projects, but only if they are receiving public subsidy. A recently approved plan in Nashville awards developers density bonuses and height variances in exchange for including affordable units. State lawmakers in Tennessee passed a bill in response to Nashville’s ordinance outlawing mandatory mixed-income development — much like the one that failed in Louisiana. Metro Nashville is currently being sued by a conservative think tank for violating the state’s ban on mandatory inclusionary zoning, despite what supporters say is a voluntary incentive program. In Texas, too, local municipalities find themselves at odds with the state government. Texas has a ban on mandatory inclusionary zoning for for-sale properties, but in Austin, density bonuses for developers have produced over 12,000 units of affordable housing. The city also offers fee waivers and expedited permitting for the developers to sweeten the deal.

Because they haven’t had much time to play out on a large scale, the success of inclusionary zoning policies is hard to measure. While the first policy of this kind is attributed to Montgomery County, Maryland, in 1974, it has only been in the last few years that Hickey says he has seen cities lean so heavily on inclusionary zoning policies. Hickey estimates that to date, inclusionary zoning is probably responsible for just 160,000 units of affordable housing nationwide. He says that while its impact is smaller than outcomes of other affordability programs, like the Low-Income Housing Tax Credit and Housing Choice Voucher program, inclusionary zoning fills several niches they cannot.

The first is the geography of low-income housing. Because voucher values are determined on a citywide basis, Housing Choice Vouchers often segregate low-income renters into high-poverty areas on the outskirts of cities, where rents are more affordable and vouchers will be accepted. Because developers want to build in marketable neighborhoods, inclusionary zoning is much more likely to situate affordable units in high-opportunity areas. According to a 2012 RAND study, over 70 percent of low-income units created through inclusionary zoning were in low-poverty areas.

Hickey says that inclusionary zoning is cost efficient too.

“At a time when matching federal and state contributions may be drying up,” says Hickey, “it helps that [inclusionary zoning] can produce affordable homes with less need for public subsidy.”

Along with operating on a small scale, inclusionary zoning has another notable shortcoming: It doesn’t work for the very low-income. In New Orleans, 60 percent of AMI is about $30,000 for a family of four. Housing NOLA’s 2015 report estimates that the greatest housing need over the next 10 years will come from those earning less than $12,000 annually.

The emphasis on creating new affordable housing in low-poverty, or high-opportunity, areas goes hand-in-hand with New Orleans’ role as one of the first cities nationwide to comply with HUD’s 2015 Affirmatively Furthering Fair Housing requirements by creating a plan for how to reduce segregation. Because of its ability to locate low-income housing in low-poverty neighborhoods, inclusionary zoning and other elements of the smart housing strategy are critical to the plan approved by HUD.

Even as HUD Secretary Ben Carson makes noise about doing away with the fair housing rule, city officials are in the process of using the blueprint they submitted to HUD to develop a final consolidated plan. Through this process, the city has the opportunity to serve as a model for communities nationwide.

“Regardless of what happens on a federal level, partnering with local officials is more important than ever,” says Hill of the Greater New Orleans Fair Housing Action Center. “We’re lucky that city officials here are committed to affordable housing in New Orleans.”

The proposed zoning changes likely won’t be put to a vote before the mayoral election in October. Council Member LaToya Cantrell is running for mayor, and although she co-sponsored the commissioning of the smart housing mix study with Council President Jason Williams, she doesn’t seem to be pushing to see the plan passed before the election. But even without a policy like this on the books, its spirit is playing out in city politics.

Last year, Sidney Torres asked to sidestep the affordability requirement he had signed up for through the city’s current voluntary inclusionary zoning plan. His 382-unit development along the Lafitte Greenway calls for 14 affordable units. He requested permission to create a fund for affordable homes off-site, instead of integrating the units into the development. The Smart Housing Mix Ordinance Study did look at exemptions for such funding pools, or “in-lieu fees” developers could pay instead of setting aside affordable units. But ultimately, the report’s authors decided against those options, stating, “Creating such a structure could prolong the roll out of the program — further exasperating the housing crisis.” The City Council, too, denied Torres’ request.

Nina Feldman is an independent journalist focused on audio production. She worked as a regular contributor to NPR member station WWNO in New Orleans and as editor at American Routes. Her work has also appeared on Marketplace, Morning Edition and PRI's The World.