How is Raleigh Addressing the Housing Crisis?
In a recent post, RaleighForward reviewed some of the most commonly used tools and techniques used across the Country to provide housing options for those struggling to rent or purchase a place to live. As a follow up, we want to now summarize some of the specific actions Raleigh has taken to address the housing affordability crisis. Some people may be surprised to know that most cities in North Carolina are not the primary developers or managers of affordable housing. This is true in Raleigh as well. Though there are limited exceptions, most affordable housing in Raleigh is built, owned and managed by the Raleigh Housing Authority (“RHA”), nonprofits and private developers.
RHA was established in 1938 by the Raleigh City Council but operates as an independent agency pursuant to state enabling legislation. It is controlled by a Board of Commissioners appointed for 5-year terms by the Raleigh Mayor. Though the Mayor appoints the Board of Commissioners, neither the Mayor nor the City Council has direct authority over the actions or policies of RHA.
RHA owns and manages approximately 1,444 public housing units, including 13 communities for families, 2 communities for seniors and the disabled and 106 single-family homes scattered throughout the City. RHA manages another 484 affordable housing units that are owned by a nonprofit corporation it created several years ago called Capitol Area Developers. RHA also administers approximately 3,921 Section 8/Housing Choice Vouchers. Combined, RHA assists over 5,800 families with various types of housing.
In addition to the City and RHA, a variety of nonprofits own and manage affordable housing including, but not limited to CASA, Passage Home, and DHIC. These nonprofit developers build, own and manage affordable housing often using a combination of government subsidies, Low Income Housing Tax Credits, and private financing. Finally, there are for-profit developers that use similar financial arrangements to build affordable housing. In Raleigh, these include Greystone Affordable Communities, Evergreen Construction, and Carolina Project Equites, among others.
Though the City may not build or own significant amounts of affordable housing, it does play a vital role in the preservation and production of affordable housing. The City provides direct financial assistance to Raleigh residents struggling with housing instability. It provides supplemental or “gap” financing to make developing new affordable housing financially feasible. In other situations, Raleigh provides loans or grants to facilitate the acquisition of naturally occurring affordable housing (“NOAH”). It also has begun accelerating efforts to identify City-owned property to transfer to developers at substantially below-market value for the construction of new affordable housing units contingent upon meeting performance criteria like offering units at specific rent targets ranging from 30% to 80% of Area Median Income. Beyond financial subsidies, the City is using its legal authority to continually refine the zoning and land use regulatory framework through incentives designed to encourage the development of new affordable housing while also lowering construction costs.
The following is not intended to be a comprehensive list of City efforts to address the affordable housing crisis, but rather to give a general idea of what the City has been doing recently.
Direct Financial Assistance:
When the Sir Walter Raleigh Apartments for low-income seniors was at-risk of being redeveloped for market-rate housing, the City committed $3 million in local and Federal funds to preserve to ensure it remains affordable.
Since 2016, the City has provided financial assistance for the development and construction of approximately 3,910 new affordable rental units. Some of those units have been completed, while others are in various stages of permitting or construction.
Council authorized staff to rezone City-owned property on E Martin Street for either development of affordable units or to fund affordable units with proceeds from sale of the upzoned property.
On June 6, 2022, Council voted to accept a proposal from Southeast Raleigh Promise to develop 27 affordable housing units on City-owned property in the downtown area.
Duplex Village. The City is preserving an affordable housing development on New Bern Avenue. Rental property Duplex Village is comprised of 66 units that were built in 1949. The eastern portion of the site, consisting of 24 units in total, has been purchased by the City for future affordable housing.
East Lane-Idlewild. On July 6, 2021, Council selected Raleigh Area Land Trust (RALT) as the developer for the Lane-Idlewild assemblage. The properties are on the 300 block of Idlewild Avenue and the 900 block of East Lane Street. The development will include units for qualifying low- and moderate-income families.
Raleigh purchased a hotel on September 14, 2021, to provide permanent emergency and transitional housing for Raleigh residents at-risk of becoming homeless.
On March 15, 2022, Council set aside $12 million for site acquisition for affordable housing near future BRT routes, and also agreed to contribute $4 million to a fund established by Wake County in partnership with Self Help Credit Union designed to preserve existing affordable housing near transit corridors.
On June 21, 2022, Council authorized staff to initiate the sale of City-owned property through a competitive bidding process for the development of affordable housing. At least 20% of the units must be made available for people making 60% AMI or less. Other parcels will be sold and the proceeds used for affordable housing initiatives around the City.
The City offers a buyer’s assistance program and homeowner rehabilitation and repair program for lower-income residents.
Recently Council approved $300,000 for a partnership with Campbell University Law School to help residents in need of eviction assistance.
Council regularly provides grants to various nonprofits offering services to people struggling with housing instability. Here are just a few examples of the types of grants Council approved recently:
January 18, 2022- $10 million to various nonprofits.
May 21, 2021- over $3.5 million to various nonprofits.
May 2021-$3 million loan from the 2020 Affordable Housing Bond proceeds to Healing Transitions to help fund the cost of expanding its facilities. Healing Transitions provides long-term recovery services focused on individuals that are homeless and often uninsured.
Council approved a $300,000 grant to Campbell University Law School to help residents in need of eviction assistance.
Like most cities across the Country, Raleigh has not been producing enough residential units, including affordable housing for decades. In recent years, however, the housing affordability crisis has worsened because the cost of land and materials skyrocketed. And those costs are essentially fixed whether or not development is intended to be affordable. In other words, land, labor, building materials and maintenance costs do not vary based upon the financial status of buyers or renters. And those costs are so high presently that no city has the resources to provide enough financial subsidies to significantly expand construction of affordable units.
For example, the absolute bare minimum of $250,000 per unit to build a new apartment community in Raleigh. That means it costs at least 87,500,000 just to build one new 350-unit apartment community. To put that into perspective, in 2020 Raleigh voters approved an $80,000,000 affordable housing bond (the largest in its history). That does not even begin to address taxes, operational costs and maintenance once the community opens to residents. When all those are added in, it is virtually impossible to build vast quantities of affordable housing at subsidized rents, particularly for people making 30-50% of AMI.
The next logical question might be for Raleigh to buy existing affordable apartments (“naturally occurring affordable housing” or “NOAH”). Even if those properties were available, they also sell at prices that are very difficult to justify without access to substantially more (and predictable) additional funding needed to subsidize rent for residents making 30-50% AMI. A 392-unit apartment garden-style apartment community off of Six Forks Road just north of Lynn built in 1980 sold in February of 2022 for approximately $79,031,937 ($201,612 per unit).
Without substantially more assistance from the State and Federal government to finance the construction of new affordable units and the acquisition of existing apartment communities, the City must seek other ways to reduce the cost to build new affordable units.
Here are some of the specific reforms Raleigh is making to expand housing options and affordability:
Council legalized accessory dwelling units on July 7, 2020.
Council reduced the regulatory burden on developing senior housing by reducing required buffers and eliminating a minimum acreage requirement. This change will reduce the cost to build new senior housing and make more land available where senior housing can be built.
On March 15, 2022, Raleigh became just the 24th American city to eliminate parking minimums. Because land is so expensive, mandatory parking adds to the cost of building new units. If developers are no longer required to build a minimum amount of parking for each new apartment community, it lowers the cost to build new communities and reduces future maintenance costs.
Raleigh enacted Missing Middle 1.0 and Missing Middle 2.0 text changes to allow for the construction of duplexes, tri-plexes and quad-plexes, and flag lots, among other reforms in traditional single-family zoning districts across the City. Over time, these changes will allow modest increases in residential density (“gentle density”) throughout the City and reduce some of the harmful impacts of exclusionary zoning. At least in areas that do not have private restrictive covenants or Character Preservation Overlay Districts.
Council also relaxed the height regulations to make it easier to build a new type of residential development called Cottage Court.
To encourage additional density and offer incentives to developers of property located along the future Bus Rapid Transit Routes, the City created a a Transit Overlay District (“TOD”). This overlay district does not change the underlying zoning district of particular parcels, but rather prohibits development that is incompatible with BRT like gas stations, convenience stores and other auto-dependent uses. It also prohibits very low-density residential development, while offering incentives for building affordable units. Council recently considered 2 rezoning cases that will apply the TOD to the planned Western Blvd BRT line (still under review) and the Southern BRT line (approved). On June 21, 2022, Council also authorized staff to file a rezoning to apply the TOD along the proposed New Bern Avenue BRT line.
Raleigh legalized a new form of very small residential dwelling unit (600 square feet or less) called a Tiny House.
To expand the use of Housing Choice Vouchers (formerly Section 8 Vouchers), Council approved a resolution on March 16, 2021, prohibiting source of income discrimination for projects that receive City financial support. In other words, owners of residential communities cannot reject prospective tenants solely because they are seeking to use a Housing Choice Voucher to pay rent.
While none of these actions will solve the affordable housing crisis facing Raleigh, taken together they will help facilitate the construction of new affordable housing, reduce the rate of price and rental increases throughout the City and help address some of the acute issues people face when experiencing housing instability. Unfortunately, it will likely take years before residents see substantial benefits from some of these efforts. But because Council is now willing to make some tough decisions, the ultimate payoff will be a more just and inclusive City.