Best Practices for Affordable Homeownership
Acquisition & De-Commodification of Land for Non-Market Housing Allows Higher ROI From Public Investment
De-commodification and non-market housing are two sides of the same concept. Decommodification refers to the action of transferring properties out of the real estate commodities market and into permanent ownership in public trust. Non-market housing refers to the inventory of residential properties that are publicly owned or held in public trust by a dedicated organization such a community land trust. The report, “Racial Justice in Housing Finance: A Series on New Directions” by Haberle and House and published in 2021, offers a broad array of tactics for producing affordable housing units. Many of these tactics depend on the community land trust model for the delivery of structural support, including funneling funds for down payment assistance through CLT organizations, purchasing existing multi-family NOAH buildings, and developing new subsidized multifamily housing (Haberle & House, 2021). To meet the housing needs of workforce populations in regions with high land values, new funding sources are needed for the acquisition of developable land and re-developable properties (Haberle & House, 2021). In their report, “Community Land Trusts: Combining Scale and Community Control to Advance Mixed-Income Neighborhoods,” Thaden and Pickett assert that when community land trusts control a “sufficient percentage” of housing in a community, specific benefits for the stabilization of home prices and local economy are achieved (Thaden & Pickett, 2021). Community land trusts can have a demonstrated stabilizing impact on surrounding housing markets, reduce displacement, and foster mixed-income communities (Thaden & Pickett, 2021).
Expanding community land trust property holdings is one way for governments to invest in a permanent supply of non-market housing, with the land trust acting as an intermediary body between public funding, private ownership, and community benefit. By diverting a portion of residential property out of private markets to be held in trust on behalf of the community, land trusts mediate between public investment and private ownership (Palmer 2019). In 2018, Shelterforce reported 225 Community Land Trusts in North America, but roughly 60 of those are either startups or have not yet acquired homes – leaving only 165 operational CLTs with an approximate collective inventory of 12,000 homes. Of the total CLTs holding an inventory of occupied homes, only a handful have more than 50 units in their portfolios (Palmer 2019).
Despite their relatively small numbers, the CLT model shows a steady success rate as a community wealth building strategy. As reported by Palmer, a study conducted by the Urban Institute in 2013 shows community land trust homeowners earned 22% to 39% rate of return on their original purchase investment when selling their homes. While this is substantially less that than the rate those home sales could have earned on the open market, those home sales did create access to a reliable wealth building investment for low- and middle-income households that would not have been available from the open real estate market (Palmer, 2019). In addition to creating a more accessible investment product, CLT homeowners are ten times less likely to be in foreclosure proceedings, and six times less likely to be delinquent on mortgage payments than conventional homeowners (Palmer, 2019). This number would likely be even higher if compared directly to conventional homeowners with equivalent income levels. Because of these emergingly quantifiable benefits, affordable housing stakeholders are looking at ways to expand community land trusts and limited equity cooperative land holdings.
Decommodification also allows for greater recapture and retention of public investment and subsidies (World Economic Forum Insight Report, 2019). While Section 8 housing vouchers are some of the most effective housing subsidies in short-term programs, all public funds that are spent to subsidize low-income households rent paid to private market property owners is lost to the pool of public resources (Haberle & House, 2021). Expanding the supply of de-commodified and non-market housing and residential properties allows for greater long-term return on investment of public subsidies and funding, as rental support vouchers can be spent on CLT and LEC properties, and public funding can be spent directly for ongoing maintenance and stewarding of residential properties.
Incremental Development Builds the Missing Middle
“Incremental,” when used in the context of urban planning and housing development, is usually a criticism, implying that a tactic is ineffective or too slow to produce any meaningful outcomes. But as described here, Incremental Development is a framework for allowing a wider range of community members to participate in the local economy of housing development. In this context, incrementalism is a tactic of inclusion, not a restriction on the total number of units that can be produced. Incremental development is not new – it is a return to the type of traditional urbanism that built early American Cities (IncDev Alliance, n.d.), and it is a regulatory structure that enables Missing Middle housing types. My literature review found two distinct approaches to incremental development: as a design concept, incremental development focuses on building design and occupancy, while incremental development as a policy principle focuses on land use regulations and development financing.
“Six neighboring homes developed by a nonprofit housing developer in California in the late 1980s. The bottom image shows present-day aerial imagery. The top image shows a three-dimensional model analyzing the incremental changes; features in white and gray represent the original homes, and features in red represent post-occupancy modifications made by the owners. Sources: Top—Mukhija and Scott-Railton (2013); bottom—Google Map”
Incremental Development as Design Concept:
Structural Forms, Use & Occupancy
Incremental development, as a strategic approach to building design, entails the creation of entry-level affordable housing products that are designed with planned stages of expansion and improvement over time, as shown in Figure 14 (Mukhija, 2014). Rather than constructing fully developed structures from the outset, this tactic involves crafting a basic, livable dwelling that offers essential amenities and functionality, designed to allow for future growth and customization by the occupant. The occupant is then able to customize, expand, and improve the home, according to their evolving needs and financial capacities. This approach can foster a sense of ownership and investment in the community, empowering individuals to shape their living environments and create sustainable, resilient neighborhoods that evolve organically with the passage of time. By prioritizing entry-level affordable housing products with planned stages of expansion and improvement, incremental design fosters sustainable and inclusive living spaces that can adapt to the changing needs of residents and communities.
There is a place making practice often employed in the Post-Colonial global south, of intentionally leaving structures unfinished to accommodate future growth. This practice is beginning to be observed and documented more and more by English speaking researchers and is slowly being translated into applications in the North American context. The primary case studies of this methodology are the Half a House project in Santiago, Chile; Grow Homes in Alberta, Canada; and MiCasita in Texas, United States (Brendenoord, n.d.; Carrasco & O’Brien, 2022; Enterprise Community Partners, 2023). Figure 15 shows illustrations of some adaptive re-use designs for single family buildings that lend themselves to incremental development in the United States(Kumon, 2020).
Incremental Development as Policy Principle:
Land Use Regulations and Development Financing
As described by the Incremental Development Alliance, incremental development is an inclusive “all hands on deck” approach to real estate development. This philosophy centers on breaking down complex projects into smaller, manageable phases to allow for flexibility and evolution over time. Incremental development as a policy principle encourages collaboration between architects, developers, and local stakeholders, empowering smaller players to participate in the creation of dynamic and responsive built environments. With a focus on economic inclusion and social cohesion, incremental development seeks to revitalize neighborhoods and promote equitable urban growth, creating resilient and thriving communities that evolve harmoniously with their inhabitants.
Building on this approach, incremental design acts as a counterbalance to the large-scale, top-down development projects that are often dissonant to the unique needs and identities of local communities. Instead of imposing monolithic structures that may not reflect the community’s character, incremental development celebrates local narratives, heritage, and aspirations. By adopting a phased approach, it becomes feasible for developers to respond to feedback, make timely adjustments, and ensure that each step is in sync with the community’s evolving requirements and visions. Furthermore, it fosters an environment where local entrepreneurs, craftsmen, and artisans can play a vital role in the shaping of their surroundings. The outcome is not just physical infrastructure, but a fabric of spaces that resonate deeply with those who live, work, and engage within.
Identifying Best Practices for Creating Equitable Access to Affordable Homeownership
At the direction of the state Legislature’s 2021-2023 Operating Budget, Washington’s Department of Commerce convened the Homeownership Disparities Working Group, chaired by Department of Commerce Director Lisa Brown and made up of affordable housing stakeholders from across the state and housing industry, including representatives from community land trusts, housing providers and developers, state and city governments, banking institutions and tribes. They published a final report in August 2022, the results of which evaluate existing affordable housing policy and funding structures and reviews barriers to homeownership impacting racial minorities and low-income communities. The working group report also “provide[s] budgetary, administrative policy, and legislative recommendations to increase [affordable] ownership unit development” and access to a greater variety of affordable homeownership financial products (Homeownership Disparities Work Group Home Web Page, 2022). The report also outlines a comprehensive set of recommendations for expanding access to affordable homeownership financing, through amendments to state legislation and local regulations, and supporting the expansion of community-based organizations and affordable housing developers.
The proposed strategies listed below serve to enhance BIPOC homeownership focus on increasing state funding for affordable housing programs, improving technical and financial assistance, and reducing administrative burdens. Key recommendations include targeted support for BIPOC communities, incentives for home sellers, and expanded debt and credit repair programs. The strategies also emphasize the importance of culturally specific outreach and industry awareness to ensure broader access and understanding of homeownership opportunities for BIPOC individuals.
Barriers to BIPOC Homeownership, Identified by the Working Group:
- Lack of Supply: Too few affordable homeownership options, including insufficient incentives to create affordable units.
- Lack of Finance Subsidies: There is insufficient assistance for BIPOC households who want to become homeowners, including down payment assistance, closing costs, support with maintenance and repair needs, and/or mortgage payment assistance when necessary.
The 12 ready and actionable recommendations from the Working Group are:
Improving Homeownership Rates for Black, Indigenous, and People of Color in Washington:
- Increase biennial state funding for affordable homeownership programs, including land acquisition and predevelopment costs.
- Fund a technical assistance/capacity-building program to build the nonprofit organizational infrastructure to develop, finance, facilitate, build, and steward all types of affordable homeownership projects.
- Provide technical planning assistance and resources to municipal governments to increase affordable homeownership units.
- Revise Housing Trust Fund and Housing Finance Commission programs to reduce the administrative burdens on applicants.
- Increase the amount of funding available for direct assistance to homebuyers and homeowners.
- Make current programs more flexible by increasing the per-household limits on existing assistance awards.
- Target homeownership assistance to the BIPOC community via historical ties to culturally specific areas.
- Provide incentives to home sellers to accept offers from purchasers using down payment assistance programs.
- Expand debt mediation and credit repair programs.
- Ensure that awareness of homeownership programs is part of licensing and education requirements for people in the real estate industry.
- Fund culturally specific organizations for outreach to increase the visibility of and access to homeownership assistance programs for BIPOC communities.
- Explore policies to improve connections with BIPOC communities to ensure that interest in homeownership is understood by funders.
Recommendations from the Homeownership Disparities Work Group
September 2022 Final Report
American Planning Association, Equity in Zoning Policy Guide
The APA’s Equity in Zoning Policy Guide (2023) emphasizes the importance of inclusivity in decision-making processes, urging that those shaping zoning rules should reflect the demographic composition of the community, including representatives from historically disadvantaged and vulnerable communities. The guide underscores the necessity of engaging not only property owners but also business and residential tenants in the drafting of regulations.The Policy Guide’s overarching goal is to eliminate zoning regulations that disproportionately burden historically disadvantaged and vulnerable communities, including people of color, older adults, individuals with disabilities, and LGBTQIA+ communities. It recognizes the critical role zoning plays in perpetuating inequitable planning policies and underscores the need for specific changes in zoning regulations, public engagement processes, mapping, and enforcement to dismantle these barriers. By integrating these equity-focused principles into our research methodologies, the APA aims to develop affordable home ownership solutions that address the unique needs and challenges of marginalized populations, fostering more equitable and inclusive communities.
Filling-In Gaps Across the Housing Ecosystem
This literature review looked at currently published best practices for creating greater equity in urban planning, housing development, and community wealth building. While I have chosen to focus specifically on the tactic of increasing homeownership, it is important that homeownership be addressed as one small piece of a housing ecosystem that also includes new market rate multifamily and rental units, tenant protections, permanent supported housing, and emergency housing. The list below describes a more complete housing ecosystem, beyond the extreme binary of land and property ownership verses rental tenancy:
- Increase Inventory of Permanently Supportive Housing
- Enact Tennant Protections to Reduce Rates of Turnover
- Preserve Existing (Naturally Occurring) Affordable Housing – Multifamily
- Expand Overall Portion of Residential Property Owned in Community Land Trust or Limited Equity Cooperative
- Expand Opportunities for Entry Level Homeownership
- Expand Access to a Greater Variety of Homeownership & Tenancy Models
Expanding Access to a Greater Variety of Ownership Models
The financial and real estate industry structures that are needed to expand access to a greater variety of ownership and co-ownership models are beyond the scope of this field study. But expanding this access is essential to creating a more complete range of affordable homeownership options (Abromowitz, 2013; Axel-Lute, 2021; Charles & Hurst, 2002; Graziani, 2021; Haberle & House, 2021; Lawton, 2015; Nelson et al., 2020; Palmer, 2019; World Economic Forum Insight Report, 2019). The negative public health impacts of social isolation are well documented by numerous different quantitative studies, and yet our existing housing stock has been formed from within a mindset that prioritized the white, nuclear family: this is what single-family zoning is designed to perpetuate (Bird et al., 2018; Raymond et al., 2018; ROSE, 2002). Informal Co-Housing and Co-Living are often survival strategies for low- and middle-income households to access affordable housing through the economy of shared space. Beyond economic survival, co-living often offers residents a preferred lifestyle option, combatting the isolation imposed on us today by the legacy of single-family zoning. This legacy exists both through the architecture of our existing building inventory and the real estate financing options that are available to home buyers.
Co-Housing, Co Living, and Social Housing are gaining momentum in the United States – both as an architectural form and as a finance model for establishing autonomous, self-owned multifamily developments that offer the privacy of an individual unit, the camaraderie of a large family manor house, and the financial stability of ownership (Lawton, 2015; Palmer, 2019; Ruiu, 2016). One key principle of Co-Housing and Co Living as architectural forms is the incorporation of a variety of different unit types, as well as great care in the design of shared communal spaces (Laforteza, 2022; Ruiu, 2016; Vestbro, 2000). This development type also lends itself well to use by multi-generational, extended family, as well as chosen family household groups.
One tactic that should be added to this land acquisition toolkit is multi-party co-buying amongst private individuals. Whether comprised of extended family groups, chosen family, business partners, or friends, co-buying increases economic inclusion by expanding the total pool of funding that group has access to. But Co Living and co-ownership of residential property have been aggressively marginalized through the standardization of single-family zoning. There are very few financial products that cater to an unrelated group of co-buyers, and the inability to get a bank to back a mortgage for co-buying is the primary frustration that prevents would-be DIY Co Housing Developments from moving forward. Simply allowing and providing appropriate loan products for co-buying immediately expands homeownership opportunity for middle income households by including them in the entrepreneurial and economic opportunities of real estate development. This field study will use the best practices outlined above as a framework for identifying opportunities to revise the municipal code and land use policies in Bellingham and Whatcom County, to better enable production of entry level homeownership opportunities through small-scale real estate development.
Case Studies
Guided by informational interviews with subject matter experts, including staff and trainers at the Incremental Development Alliance (IDA) (IncDev Alliance, n.d.), my case studies are focused on affordable housing innovations occurring in Eastern and Southern regions of the United States. Founded and based in Atlanta, Georgia, the Incremental Development Alliance is a decentralized network of planning consultants and small-scale middle housing developers across the United Sates. These consultations led to conversations with professional experts working on affordable housing development across the United States.
Affordable Housing Strategies found in Cities of the South and Midwest Regions of the US
The three cities I reviewed in the most depth: South Bend, IN; Chattanooga, TN; Durham, NC; are all located in Midwest and Southeast regions of the United States. Why look here? As noted above, these case studies were identified by the subject matter experts I consulted with as having programs and policies that reflect those outlined in my literature review. Indiana, Tennessee, and North Carolina are all states where the median new home price is between $300k-$400k, and close to 40% of residents can afford median home prices, as shown in Figure 19 below. These case study cities are also located in Republican-dominant states. In seeking to interrogate this fact, I was guided by the work of researcher Jenny Schuetz. In her book, “Fixer Upper: How to Repair America’s Broken Housing Systems, Schuetz defends an imperative to build more homes in the locations that people want to live – that is, typically high density areas with jobs and economic opportunity (Schuetz, 2022). But these high density/economic opportunity zones are often the places where housing is most expensive to build. By the laws of supply and demand economics, land value goes up when it is more desired.
When compared to Field’s Value-by-alpha map in Figure 20, the “Home Affordability In the U.S.” map in Figure 19, does indeed show some correlation between a state’s aggregate political party vote and the percentage of people who can afford the Median Home Price. Ezra’s discourse in the interview with Schuetz suggests Republican majority states have a regulatory environment of fewer fees and fewer administrative restrictions. Democratic regions do have a track record of adding increasing regulatory costs to housing development (Klein, 2022). Through permitting fees, parking requirements, design review, or required investments in public development funds, high-density urban municipalities are looking for ways to yolk economic growth to the development of public infrastructure like roads, sidewalks, sewars systems, and affordable housing. Schuetz’s work suggests that these policies are not working the way we want them to in Democratic states. Within those Democratic states and high-density urban zones, the established mechanisms of community participation in local planning have been weaponized by wealthy and white populations and used to exclude renters, low-income community members, and marginalized racial populations from decision-making processes (Klein, 2022). Studying land use policies and affordable housing strategies developed in high density/economic opportunity zones located within majority Republican states (a state-wide atmosphere of de-regulation), offers a roadmap for identifying restrictive regulatory frameworks here in the State of Washington that serve to increase housing costs with negligible public benefit.
This map uses color to indicate the party’s vote share in each county, and opacity (called “alpha channel”) to indicate the population of a given area of the county. A bright, vibrant blue indicates a high Democratic vote share in a densely populated area. A light pink indicates a high Republican vote share in a sparsely populated area. Purples portray areas where one party or another won by a narrow margin. Methodology explanation from the WIRED.com article titled “Is the US Leaning Red or Blue? It All Depends on Your Map.”
Also identified on this map are the primary three cities included in the case studies conducted for this report: South Bend, Indiana; Durham, North Carolina; and Chattanooga, Tennessee.
South Bend, Indiana – population 102,686
In recent years, the city of South Bend, Indiana has been a national leader in demonstrating and implementing practical city programming and municipal zoning reforms as a tactic for increasing affordable housing production through small-scale infill development. City leaders have rolled out the New Neighborhood Homes Initiative, “a multi-faceted effort to support the construction of new residential housing units within the city”. These reforms and policies are implemented through the Department of Community Investment. South Bend’s multi-faceted approach focuses on these primary strategies: reducing regulatory barriers, offering a catalogue of pre-approved designs, issuing targeted Requests for Proposals for infill development, and directly funding affordable housing projects combined with technical assistance for small-scale developers (Smith, 2022; South Bend, IN, n.d.).
The Community Investment initiative encompasses a comprehensive approach to enhancing urban residential development through a supported cohort of small-scale developers (A New Generation of Town Makers, 2021; South Bend, IN, n.d.). Technical assistance to The Swarm is supported with the work of The Neighborhood Development Team, aiming to stimulate local development and community enhancement (“Neighborhood Development,” n.d.). South Bend’s catalogue of pre-approved building designs is by far the most extensive in the United States, designed to streamline the construction process and encourage a diverse range housing types (South Bend, IN, n.d.). The Sewer Lateral Reimbursement Policy reimburses property owners up to $20,000 for the cost of lateral sewer hookups to neighborhood-scale infill development (City of South Bend, n.d.). This reimbursement significantly reduces the upfront cost to add new housing units and directly funds the installation of essential utility infrastructure. South Bend’s new Neighborhood Homes Initiative aims to empower small-scale developers, improve neighborhoods, and expedite the housing development process with efficient and cost-effective measures.
Chattanooga, Tennessee – population 181,370
In Tennessee,the Chattanooga Neighborhood Enterprise (CNE Inc)empowers communities through comprehensive housing services including financial education and sustainable development initiatives, fostering economically inclusive neighborhoods and empowering residents to achieve their homeownership dreams. CNE Inc operates as a public utility housing developer, property manager, and small-grant financial institution to offer a range of housing support services – including rent relief, down payment assistance, home improvement and foreclosure prevention, and developing new housing units in bulk when large parcels of land become available via landbanking or funding from a local Housing Trust Fund. Founded in 1986, CNE Inc has over 30 years of experience to hone its service models, while becoming adaptable as changes in community demographics, organizational partnerships, and funding opportunities.
Durham, North Carolina – population 276,341
Option for Small Lot & “Flag Lot” Subdivisionsallows large single-family lots to be subdivided into two small lots with an access easement on one(Durham, n.d.; Hoffler, 2023; Small Lot Options in Durham – Information and Inventory, n.d.). This small lot subdivision allows a greater range of options for how homeowners and home-buyers might choose to develop their property. Property owners can either redevelop the new small lot themselves as an equity investment, or they can sell new parcel as a developable lot. In tandem with the small-lot allowance, Durham Community Land Trusteesbuilds ADUs on privately-owned and donated lots, and operates as property manager to offer the resulting units as affordable rental units.
Table 2 below shows a more detailed list of local policy innovations to support entry-level homeownership and infill development, identifying examples in cities across the US and within the state of Washington.
Table 2 – Policies to Support Entry Level Homeownership and Infill Development
| Strategy | Across USA | In Washington |
|---|---|---|
| Catalogue of Pre-approved Building Designs | Boise, ID Chattanooga, TN South Bend, IN | Seattle, Spokane, Lacey, Olympia |
| Grant funding to support ADU construction on privately-owned single-family properties. | State of California (CALHFA) | |
| Funding Incentives for Cost of Lateral Sewer Hookups available for Small-Scale Infill Development | South Bend, IN | |
| Training Curriculum & Technical Assistance for small-scale property developers | South Bend, IN Chattanooga, TN | |
| City Departments Dedicated to Economic Engagement & Empowerment, and Neighborhood Development | South Bend, IN Chattanooga, TN | |
| Small Lot Subdivision (flag lots) | Durham, NC Portland, OR | |
| Pocket Neighborhoods of small footprint cottages on half-acre property. | Clarkston, GA | |
| Community Land Trust Operating as Property Manager for Privately Owned Rental Units | Durham, NC Charlotte, NC | |
| Community Land Trust Operating as Property Manager of ADUs on built on single-family properties, in collaboration with homeowners seeking to remain in place with infill development. | Charlotte, NC | Ferndale |
| Community Land Trust Building ADUs on new CLT Land Acquisitions, donated from city or private homeowners. | Durham, NC Charlotte, NC | Ferndale |
| Donations of small parcels from large single-family properties where mortgage is paid off. | Durham, NC Charlotte, NC | |
| Small/prefabricated entry level homes designed to be added onto over time. | Rio Grand Valley, TX Pittsburgh, PA | |
| Pink Zone, Zoning Vacation, Relaxed Permitting Process in Exchange for Provision of Affordable Housing | Chattanooga, TN | Burien |
| Convene and pay Salary/Stipends for an advisory board of participants from low-income, BIPOC, disabled, and racial minorities as consultants based on the expertise of their lived experience. | Tacoma, Vancouver |
Summary
These case studies have explored innovative affordable housing strategies implemented in various U.S. cities, particularly in the Eastern and Southern regions. It highlights case studies from South Bend, Chattanooga, and Durham, showcasing diverse approaches like small lot subdivisions, community land trusts, and support for accessory dwelling units (ADUs). South Bend’s initiatives include reducing regulatory barriers and offering a catalogue of pre-approved designs, Chattanooga focuses on comprehensive housing services through the Neighborhood Enterprise, and Durham employs small lot subdivisions and ADU development with their local CLT. The strategies across these cities represent a blend of regulatory, financial, and developmental tactics to address housing affordability, illustrating a matrix of policy actions that can guide future recommendations for expanding affordable housing options. I see four key strategy principles emerging that relate most specifically to scope of city government land use policies and permitting processes: acquire buildable land and infill lots, collaborate directly with target populations, reduce zoning and land use restrictions, and support small scale developers.
