Wednesday, March 27, 2019

Briley proposes massive additional debt for Nashville in order to build affordable housing.

Nashville's Mayor David Briley has proposed a plan that commits $500 million in public funds toward an affordable housing push over the next 10 years. As proposed, the money would come through general obligation bonds and would be spread out over the next decade. That is a lot of money.  Already Nashville is one of the most debt-ridden cities in America.  Forbes magazine says that when one includes unfunded metro retiree's health benefits, Nashville is the second most debt-ridden city in America. 

The  organization Truth in Accounting, says that of the largest 75 cities in America, ranked from least debt to most debt, Nashville ranks 62nd.  Among the 75 largest cities, there are only 13 cities where the citizens are burdened with more debt.

Briley's proposal would  provide $350 million to MDHA to help pay for 5,000 low and middle income homes, primarily through the redevelopment of Nashville's public housing. It is unclear if this is net new homes or replacing existing public housing.  Metro would also allocate $150 million to the Barnes Fund during the 10 years, which is a 50 percent increase over the current funding levels.

Currently MDHA is in the midst of redeveloping the Casey Homes project in East Nashville, but development is going slow.  Since 2014, when MDHA began the project, only 70 units have been constructed and MDHA has had to dip into reserve funding to finance the project. To read The Tennesseans article, follow this link.

No one can deny that housing is getting more expensive in Nashville and that many people could not afford the home they now own if they were trying to purchase it. New construction in Nashville tends to be high-end homes.  This is driven by market forces. When the city attracts lots of high paying jobs, that creates a demand for high priced homes.  This means that, that is what builders build and all homes appreciate in value and a lot of less expensive homes are purchased by developers and torn down and replaced by more expensive homes. Anyone who drives around Nashville can see it.  With more expensive housing and growing demand for housing, this means many of the people who work in Nashville can not afford to live here. The loss of affordable housing however, is not all the result of market forces.  Metro government deserves much of the blame. 

Three years ago now a developer tried to build an affordable housing development in Antioch, called
The Ridge at Antioch. The property was already zoned to allow this development, but the Council person from the district and an adjoining district tried to down zone the property. Down zoning is a taking of property. Property rights are more than holding title. If the government takes away the right to develop the property that you already possess, that is a taking of your property.  Eventually, the attempt was unsuccessful. The builder could not develop the property with this hanging over his head however, so for two years the project was delayed.  I don't think the property was ever developed.  The Council members fighting to stop this development argued they did not oppose housing development on the property but argued their part of town already had too much affordable housing.  Also, neighbors filed a law suit to stop the development but were unsuccessful. This was not "the projects."  It was an apartment complex that no one would have known was subsidized housing.  This "not in my back yard" attitude and willingness to trample property rights is one of the reasons for a shortage of affordable housing.
The Ridge at Antioch

That is the kind of thing one faces when the property is already zoned to permit development.  It is much worse when one needs a zone change to develop.  Often, developers need a rezoning to develop and not just a base zoning change but need a Planned Unit Development.  Most of the time when seeking to build an affordable development and seeking a zone change or PUD approval to do so, developers know not to even try to build affordable housing. The developer will approach a council man and be told up front, that there is no use pursuing the proposal. There is a lot of lip service paid to the need for affordable housing but no one wants it in their neighborhood.

I had a casual conversation with a large developer I met at a function recently. I asked him his take on the problem of affordable housing in Nashville. He told me that he had tried to build affordable housing but the city would not cooperate. He was going to build a condo development very near downtown where the units would be priced between $150,000 and $230,000.  He said the development would have open space, tennis courts and playgrounds and other amenities. He said rather than the city helping make it happen, the city threw up ever possible obstacle to making it possible.  He said with what one must go through to develop a property, it just makes more sense to build high priced home rather than affordable homes.

Another actions the city takes that drives up housing prices is the down zoning of whole neighborhoods from a zoning that permits two units per lot, such as R-20, to a zoning that permits only one unit per lot, such as RS-20. This happens almost every council meeting. If you lower the potential for greater density, you drive up housing prices. Less available building sights equals higher priced land.

The city also drives up housing prices by policies that beautify low income neighborhoods. I wish everyone could live on a beautiful street with a park-like setting, but neighborhoods with low income housing are going to look different than neighborhoods with expensive housing.  Rules that restrict the type of commercial services that can be on a thoroughfare such as restricting the number of  used car lots and used tire stores and requiring nice screening and disallowing payday lenders, changes the character of a neighborhood.  It makes the thoroughfare more attractive to higher income people and the affordable housing gets replaced by more expensive housing. 

The sidewalk policy also drives up housing prices. If someone builds a house on a street without sidewalks, they must build a sidewalk in front of their property even if it is a sidewalk that goes nowhere and is the only house on the block with a sidewalk. This drives up prices.

I am not opposed to the city promoting affordable housing, but the first thing the city needs to do is get out of the way and let people build it.  There needs to be a realization that developers are more likely to build affordable housing where the land is more affordable. Also, we need to recognize that neighborhood with affordable housing are going to look like affordable neighborhoods.

While affordable housing may be a lofty goal, Nashville is debt-ridden. We do not need to take on more debt. Now is the time to focus on paying down the debt, not taking on more.

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