Why affordable housing mandates don’t work

by Wood Caldwell, For The Tennessean, July 20, 2015 - Metro Council may pass an ordinance Tuesday evening that will make Nashville’s current affordable housing situation worse.

The ordinance — # BL2015-1139 — would mandate that 14 percent of the units in all new or renovated residential real estate in Nashville/Davidson County be set aside as “Affordable Housing” or “Workforce Housing,” which means they must be rented or sold at below-market rates.

While it may sound like an attractive idea to simply mandate that Nashville’s affordable housing issues disappear by councilmatic decree, the reality is anything but attractive.(link)

Since The Tenneseean's content is now hidden behind a paywall and you may not be able to access this article I will summarize it. Here are the main points:

• This is  basically a tax on the development of residential real estate and the more you tax any activity, the less of it you get.
• Affordable housing has to be subsidized by someone. Artificially reducing rent for 14 percent of the residents in a development means the other 86 percent have to make up the difference by paying above-market rates.
• There is still affordable housing in the Nashville, but maybe not where one wants to live. If you want affordable housing you may have to live in Madison or Antoch rather than Greenhills or Downtown.

Unfortunately, the ordinance passed Tuesday night with only Council members Phil Claiborne, Robert Duvall, Tony Tenpenny and Charlie Tygard voting against it. The money we are going to spend on consultants to develop this price control ordinance and the effort expended in advancing this proposal for rent and housing price control  may have been wasted. At an event for Governor Scott Walker on Tuesday night, I had the opportunity to speak to several state legislators. State law may already prohibit this type price control and if it does not, such legislation may be introduced to prohibit it. City government and our Metro Council would have been wise to ensure what they were proposing was legal before advancing this price control proposal. This is not over. Now may be the time to direct attention to the State legislature to stop this move before it further advances. The Council and Metro legal would have been wise to seek a determination of the legality of this objective before advancing it. If this is passes it is likely to result in less affordable housing, not more.