Building a Regional System to Support Livable and Competitive Communities: A Response to the Affordable Housing Crisis Caren Dewar and Joanne Barron
	Session:Fair Growth: Connecting Sprawl, Smart Growth, and Social Equity (March 13, 2:30pm)

Abstract: This paper reasons that the terms of the affordable housing debate must change to achieve a sustainable approach to affordable housing production. It urges a systems approach that encourages the production of housing for workers to benefit regional and local economies and housing for all life stages to support livable communities. It reasons that we must move from a focus on subsidies alone to an integrated approach that links housing to transportation, jobs, parks and open space. The Metropolitan Council is supporting this systems approach through regional leadership, the alignment of policies and resources, incentives that support demonstration models and active citizen engagement. CHANGING THE TERMS OF THE AFFORDABLE HOUSING DEBATE Most metropolitan regions are experiencing an affordable housing crisis that will only worsen as growth and housing demand continue to increase. A subsidy approach focused on unit production is no longer adequate to address this crisis. New approaches are needed that link funding with integrated strategies, and the terms of the affordable housing debate must change to achieve a sustainable approach to affordable housing production. Unfortunately, ‘affordable’ housing has become nearly synonymous with ‘undesirable’ housing. A stereotype of affordable housing exists in the minds of many people, based on failed public housing developments of the past, and in many places, including our region, a bias against rental housing. In the worst scenarios, affordable housing has become a synonym for inept government programs, poorly designed or maintained housing, social decay and crime. An approach that accentuates housing for workers to support the local economy–its teachers, salespeople, medical assistants, bank tellers, school bus drivers–must be emphasized. Employers are recognizing that affordable housing is critical to their ability to attract workers. Cities should be places where people can live their entire lives if they choose, developing attachments that promote strong neighborhoods and civic involvement. This is disrupted when young adults, senior citizens and those serving communities such as childcare workers, police officers and nursing aides are priced out of the market. Appeals for more affordable housing have often been made with the suggestion that housing should be provided for lower-income people because it’s the right thing to do. This approach is sometimes received by community residents with negativity, and met with resistance and barriers. Instead, the argument should be that we will provide affordable housing for our workers and those who serve our communities because it’s one of the best things we can do to support economic vitality and strong communities. Affordable housing must be part of the smart growth debate. It is sometimes, but not always, included in the constellation of issues that defines smart growth. Housing is a land use component that must be linked to transportation and to jobs, and parks and open space. It should not be viewed in isolation. A REGIONAL CRISIS The affordable housing crisis has been a long time coming. For decades, housing subsidy programs have attempted to make up for the shortcomings of the housing market in producing lower-priced housing, but this is becoming more difficult. Lack of affordable rental production, wages that have not kept up with inflation, and more households in the market for housing have combined to create a ‘sellers market’ in which rents are rising. On the ownership side, good economic times have fueled a hot real estate market that is driving up land costs. This trend is likely to continue. The Metropolitan Council estimates that at least one in five of all Twin Cities households live in homes that exceed 30 percent of their income. An estimated 161,000 moderate-income, mostly suburban households pay 50 percent of their income for housing and/or live in substandard housing conditions. The Council’s best estimate of the rental need to 2010 for persons earning 50 percent or less of median income ($33,000 for a family of four) is 115,000 households. On the ownership side, our estimate of the 2010 ownership need is that 81,500 households earning 80 percent of median income ($50,200 for a family of four) are paying more than 30 percent of their income for housing. Added to the market factors are regional growth issues that have led to sprawl–separation of homes and workplaces and job growth on the region’s edge without corresponding increases in housing for workers. To address these issues, an approach that largely depends on subsidy is no longer adequate. More dollars are needed, certainly, to increase affordable housing production. But government and the nonprofit sector cannot do it alone. A regional approach to support the private market is needed that connects housing to transportation and jobs, and integrates affordable housing into communities. The magnitude of the affordable housing need requires approaches that go beyond a focus on simply producing units. We must implement a systems approach that builds on multiple strategies that encourage people to remain in their community when their housing needs change, that provide adequate housing to support job growth linked to multi-modal transportation options and that promote housing as a community asset. To succeed, there must be strong regional leadership, alignment of policies and resources, incentives that support demonstration models and active citizen engagement. A REGIONAL RESPONSE: THE METROPOLITAN COUNCIL The Metropolitan Council is the regional planning agency for the seven-county Twin Cities metro area. Within this jurisdiction is a population of 2.6 million, about the same as Kansas, and an area of 3,000 square miles, the size of Delaware and Rhode Island combined. Our region includes 189 cities and townships, and is characterized by two centers, Minneapolis and St. Paul (some might argue three if you count the Mall of America). The Council has had a regional responsibility and role in housing since its creation by the Minnesota Legislature in 1967. The Legislature established the Council to guide regional development. It gave the Council authority to ‘prepare and adopt a comprehensive development guide for the metropolitan area’ that ‘shall recognize and encompass physical, social, or economic needs of the metropolitan area and those future developments which will have an impact on the entire area.’ The Council adopted the first elements of the metropolitan development guide in 1968. The Regional Blueprint, adopted in 1994 and revised in 1996, serves as the current development guide. The 1976 Metropolitan Land Planning Act gave the Council authority to review comprehensive plans of local governments for conformity with its development guide and the metropolitan systems plans, which include transportation, aviation, waste water services, parks and open space. The Council may require local governmental units to modify any comprehensive plan that does not substantially comply with a systems plan, but may only review and comment on additional aspects of comprehensive plans as they relate to other development guide policy, including housing. This distinction is important to the Council’s authority regarding affordable housing. The law requires cities to include goals in their plans for providing low- and moderate-income housing opportunities (affordable to households earning 30 to 50 percent of median income) consistent with regional goals identified by the Council, and to identify programs, official controls and fiscal tools to implement their affordable housing goals. Cities must also guide an adequate supply of land for multifamily housing development to ensure that housing goals can be realistically achieved. However, because the law does not define housing as a metropolitan system, the Council cannot require communities to make changes in its plans to conform to regional housing policies. While the Council has legal authority through the systems plans and administrative influence through its policy guides, its willingness to use that authority and influence has been shaped by state leadership. Because the 17-member Council is appointed by and serves at the pleasure of the Governor, its level of regional impact depends on gubernatorial support. Governor Jesse Ventura has selected an activist Metropolitan Council with a focus on smart growth and affordable housing. This Council is taking advantage of that support and pushing hard to incorporate system changes that will support affordable housing production for decades to come. Regional Housing Policy And Implementation 1970s: Expanding Housing In The Region. The Council adopted its first housing chapter of the metropolitan development guide in 1971. This document cited the large and growing gaps between the region’s actual and projected housing needs and its actual and projected housing supply. It described the adverse social and economic implications of concentrating lower-income citizens in some sections of Minneapolis and St. Paul. It set as a central Council goal the provision of suitable housing for all residents throughout the metropolitan area. The housing policy plan was revised several times in the 1970s and 1980s, each time retaining the core housing policies of choice and affordability. The Council influenced the distribution of funding for housing units in several ways. Beginning in 1971, the Council used its ‘A-95’ authority as the agency designated by the federal government to review requests for federal grants, to carry out its housing policies. Throughout the 1970s the Council used A-95 review authority to comment on requests from local governments for federal funding, based on the applicants’ housing performance in providing housing for low- and moderate-income persons. Funding applications for parks, sewers, highway construction, open space, aging and criminal justice funds were ranked according to the community’s performance in providing housing affordable to people with low and moderate incomes. The Council’s funding recommendations influenced funding decisions of the local office of Housing and Urban Development on a wide range of community development funding requests, and raised community awareness of the need to provide affordable housing. The subsidized housing allocation plan was used to make recommendations and establish priorities among communities competing for federal housing funding. It identified general priority areas at first, and later numerical housing goals for communities, based on the objectives to locate housing in areas with good levels of services and in cities that offered limited low-cost housing options. Aided by the flow of federal dollars to the region, the number of subsidized housing units in the region doubled from 18,700 in 1971 to 39,300 in 1980. The allocation plan influenced suburban expansion of housing. While in 1971 fully 90 percent of the region’s subsidized units were located in the central cities, by 1980 the percentage share had dropped to 59 percent. 1980s: Diminished Resources and Tools. Federal administration policies and budget decisions in the early 1980s caused federal housing subsidies to drop dramatically, and the subsidized housing allocation plan fell into disuse. Without funding, the plan was irrelevant. During the period 1981-1986, only 2,600 new subsidized units were added in the region, compared to over 2,000 added each year during the 1970s. By the mid-1980s, the federal government eliminated A-95 review authority, further diminishing Council tools to promote geographic housing choice and affordability. The 1986 Tax Reform Act largely eliminated rental housing production incentives for developers. The federal dollars and tax incentives that supported housing production had dried up. 1990s: New Directions And Incentives. By the early 1990s, a more holistic approach to housing had emerged. Community development corporations, which had become more active in funding housing to fill the void left by federal government cutbacks, were concerned not just with funding housing units, but also focused on the health and vitality of neighborhoods. Suburban job growth was occurring, causing people to look at access to transportation as well as housing. In response, the Council approached policy from a multidisciplinary point of view, and adopted the Regional Blueprint in 1994. The Blueprint makes connections among housing, jobs, transportation, the economy, reinvestment and neighborhood revitalization. It acknowledges that housing, the largest user of land, can be a major shaper of development in the region, particularly in transit corridors. By the early 1990s, more people were unable to find housing they could afford, and housing was a subject of heated debate in the Minnesota Legislature. A bill passed in 1994, but was vetoed by the Governor, to require cities to produce a certain amount of affordable housing. A compromise approach resulted in the 1995 Livable Communities Act (LCA), which put into place a voluntary, incentive-based arrangement between local government and the Council to achieve housing goals. LCA implementation promotes and supports housing policies to expand availability of life-cycle and affordable housing. The law requires participating communities to negotiate affordable and life-cycle goals with the Council and prepare a housing action plan that identifies programs and activities local governments will implement to achieve the goals. The LCA also established the Livable Communities Fund. Communities participating in LCA are eligible to receive grants for polluted site cleanup, construction and rehabilitation of affordable rental and ownership housing, and models of compact, transit-oriented development that include mixed uses, and mixed housing types and a range of affordability. More than 90 percent of the targeted developing communities have agreed to participate in the LCA goal-setting process. To set achievable goals in an environment of limited funding for housing production, the LCA goals agreed to by local governments and the Council were modest. Even so, these goals have been difficult to achieve, given the available funding. Community interest and applications for funding exceed the dollars available to the region for housing. The region will achieve only two-thirds of the rental goals and 82 percent of the ownership goals that were established. The LCA program has met expectations to influence cities to set goals for affordable housing. It has heightened awareness of communities’ housing needs and responsibilities, and led to a demand for more funds–and an approach that supports multiple strategies. Circumstances in the 1990s had produced a holistic approach to housing, but one that was still focused on subsidies for production of housing units. A REGIONAL SYSTEMS APPROACH The current Metropolitan Council, appointed two years ago, is pursuing a strong stance in using its authority, influence and resources to support affordable housing. Council members are committed to aligning the work and funding of its three divisions–community development, transportation and environmental services–on smart growth objectives. The Council’s focus is to enhance the region’s competitive edge, improve the livability of its communities and provide housing choices for all of the region’s residents. Council members are advocates for these goals and play a key role in delivering the message and building regional support. Affordable housing is a key priority. The Metropolitan Council recognizes that in order to meet the affordable housing need, it must support strategies that offer a market incentive to produce affordable housing. Because the majority of housing is built by the private sector, the Council is implementing approaches that make it attractive to implement the Council’s goals and smarter to invest where the public sector is invested. The Council is supporting this approach through regional leadership, the alignment of policies and resources, incentives that support demonstration models and active citizen engagement. Leadership The Metropolitan Council has significant influence on the region’s development patterns. However, its legal authority is limited to systems review. It is at the city level that the real battle for affordable housing occurs. Last year the Council enlisted the help of 17 mayors to encourage their leadership on increasing affordable housing production. The Mayors Regional Housing Task Force, representing metropolitan area cities large and small, met over a period of six months and produced its report in November 2000. Their recommendations call for additional funding but also a number of changes that would make it easier to produce affordable housing. Their findings and recommendations include: Findings: Affordable housing can and must be synonymous with quality housing Mixed income developments are a preferred way for providing affordable housing Higher densities are necessary to increase the supply of affordable housing Most affordable housing will not be produced in the marketplace without incentives Funding partnerships are needed The effective solution will be a regional solution Allow cities the flexibility to customize their affordable housing strategies Cities need technical assistance Human and social services play a limited but important role Recommendations: Provide leadership; be ambassadors for affordable housing Ensure that local planning and zoning enables affordable housing Change government practices and policies to reduce the cost of building housing Secure additional funding Invest in skill-building and expertise Develop a support structure for those in need of services The Mayor’s Task Force recommendations are part of the Governor’s legislative housing initiative. The Council along with the mayors and the Minnesota Housing Finance Agency have proposed a bill that will support a number of these recommendations. Alignment The Council is in the process of adopting an alignment policy that will tie all funding decisions to housing performance. Cities and counties will be scored on an annual basis based on housing performance criteria. This score will become part of the funding decision-making package, including transportation, environmental and livable communities (LCA) funding programs. This housing performance scorecard is intended to influence communities to increase affordable housing production and consequently compete more successfully for public funding. The solicitation process for federal TEA-21 transportation funding will be the first opportunity to apply the new housing performance criteria. The Council has directed the Transportation Advisory Board (TAB), the entity that is responsible for TEA-21 solicitations, to incorporate housing performance criteria as part of the overall scoring. This request was initially met with substantial resistance, but negotiations over a period of several months have led to TAB endorsement of housing performance criteria. In addition, the Council has requested a TEA-21 set aside to support transportation investments in locations linked directly to affordable housing production. This set-aside will range from $ 3 million - $ 6 million over a two-year period. Paired with other funding sources, these dollars could make a significant impact on affordable housing production. Incentives and Demonstration Models This year, the Metropolitan Council will award over $14 million in grants from the Livable Communities Act incentive funding programs to help produce affordable housing, clean up brownfields for jobs and housing, and assist with projects that link housing and other land uses with transportation. To be eligible for funds, communities must establish housing goals and must have an approved comprehensive plan that is consistent with the Council’s development guide. There is no substitute for seeing and experiencing quality affordable housing to confront negative biases. The Livable Communities Demonstration Account funds projects that demonstrate compact and connected land use patterns that are linked to transit and support walkable neighborhoods. Funded projects have a mix of housing types and support an economic mix near commercial, civic or other uses that support daily needs and community activities. The most successful models have involved strong community input and buy-in. Our goal is that these demonstration models will successfully change development and lending practices to make higher-density, mixed uses and mixed-income housing options more widely acceptable and available. Over the five years this program has existed, interest and demand has grown four-fold. This demonstration program is attracting market interest and community support. Based on this success, we are currently seeking increased funding to accelerate results. Citizen Engagement This Council is committed to a strong citizen engagement strategy. Including people in planning the future of their communities allows them to focus on the benefits affordable housing and mixed-use development can bring, rather than on their fears. Design does matter. Design workshops help people explore ways housing can be designed to be attractive and acceptable in their communities. Aided by planners and design professionals, residents can discover how design influences the perception of density, the feel of a place, and that affordable housing can be integrated into residential or mixed-use neighborhoods and be indistinguishable from market-rate housing. In 2000, the Council launched a regional initiative called Smart Growth Twin Cities that will very proactively engage the public in shaping both regional development scenarios and ‘opportunity site’ planning in six selected cities. The Council hired California-based Calthorpe Associates to facilitate the process. A New Blueprint The Council will adopt an updated Regional Blueprint in December 2002. The new document will link and align the agency’s community development, transportation and environmental goals, objectives and policies. It will move the physical framework of the Blueprint from a focus on managing expansion at the edge (paired with redevelopment objectives in the urbanized area) to a more comprehensive strategy that focuses on transportation and natural resource corridors, and development patterns that reflect the Council’s Smart Growth objectives. The 2000 census data will enable inclusion of up-to-date housing needs data for all population groups and provide a stronger basis to shape future affordable housing strategies. The new Blueprint will serve as the ‘systems’ framework for growth and change in the region to 2030 and will provide an integrated guide for future comprehensive plan review. IN SUMMARY The Metropolitan Council is undergoing a sea change to make affordable housing an integral part of the region and our communities, not an add-on. We are taking a leadership role and engaging our citizens as we work on changing the debate in the region from ‘we should’ provide affordable housing to ‘we will’ provide it because we understand the benefits affordable housing can bring to our communities’ economic well-being and quality of life. We use incentives to raise awareness of affordable housing needs and put available dollars into communities working to achieve housing choice, economic prosperity and vital communities. Our approach to the regional housing crisis focuses on systems, not housing units. We will use our funding resources to put demonstration models on the ground and guide production of affordable housing in places where it can link to jobs and transportation, to parks and green space. We think this just makes sense, and we believe we are on a path to making a real difference. [back to Fair Growth Symposium] Author and Copyright Information Copyright 2001 by Authors Caren Dewar is director of the community development division of the Metropolitan Council, having been appointed in October 2000. Prior to that, she served as a member of the Metropolitan Council and chaired its Livable Communities Committee and Housing and Land Use Advisory Committee, and was a member of the Transportation and Rail Transit Committees. She has been leading and implementing comprehensive urban planning and development initiatives for twenty years. Caren founded and was president of Dewar and Associates, Inc, focused on public/private ventures that attract significant private sector participation. Prior to that she was Vice-President of the Ackerberg Group, an investment and development company; and Executive Director of Seward Redesign, Inc., a community development corporation. Contact her at 651.602.1306 or caren.dewar@metc.state.mn.us Joanne Barron is a planning analyst in the community development division of the Metropolitan Council, and has been with the agency for 25 years. She has worked on housing policy, land use standards to reduce housing costs, and other housing and land use studies. She was a member of the staff team that shaped the Council’s development guide, the Regional Blueprint, and served as lead staff for developing the Blueprint’s strategies for reinvestment and building strong communities. Joanne has worked on education efforts with local governments to encourage more compact land use patterns. She developed the Livable Communities Demonstration Account program to fund land use models and administers the program. Contact her at 651.602.1385 or joanne.barron@metc.state.mn.us