EHI issues report on approaches to preventing displacement in gentrifying, urban neighborhoods

Resistance by local residents to proposals for new housing in their vicinity is the chief, underlying obstacle to housing stability, fairness and affordability for low- and moderate-income Americans—and an increasing proportion of middle-income Americans. Exclusionary zoning and other regulatory barriers to needed housing growth tend to flow from concerns of current residents about possible adverse effects on them from new development in their vicinity. 

An increasingly frequent concern of low- and moderate-income city dwellers in recent years has been displacement from their neighborhoods, as a result of gentrification (an influx of higher-income people into a lower-income neighborhood).

EHI issued a report in June 2021 on Approaches to resolving displacement concerns in gentrifying, urban neighborhoods. It discusses a range of strategies for preventing or minimizing displacement. The report focuses on several anti-displacement strategies that sometimes may be crucial to the wellbeing of residents at risk of displacement, and also to minimizing resistance by residents to new development in their neighborhood--including needed, new housing. Those strategies include:

  • Moderate rent stabilization (sometimes called “anti-gouging”) laws; 
  • Stepped-up use of programs to increase the supply of housing affordable to low- and moderate-income residents of gentrifying neighborhoods, such as the federal low-income housing tax credit (LIHTC) program; and 
  • A “community preference” policy that gives residents who otherwise would be displaced the first opportunities to rent or purchase new, affordable units in the neighborhood when they become available.

In our view, strong anti-displacement policies in gentrifying, urban neighborhoods can promote greater residential mobility for minority group members, more integrated housing, and a healthier, more stable and affordable residential market. To do so, however, we think they should be part of an effective, overall strategy to cure the shortages of housing affordable to low- and moderate-income people--and to end housing discrimination--throughout the jurisdiction. To access EHI’s new report, you may click on Resolving displacement concerns in gentrifying, urban neighborhoods.

Pursuing “win/win” solutions with current residents, to resolve concerns about permitting needed, new housing in their area

Residents’ resistance to permitting new housing in their area is probably the chief, underlying obstacle to creating enough housing in the right places, suitable for the low- and moderate-income people who need it. That resistance—often called NIMBY (“Not In My Back Yard”) sentiment—is quite powerful, because the local officials responsible for decisions on housing issues are either elected by those residents, or appointed by elected officials.

Any new housing development, or any other land use that has potential side-effects on existing residents, will get a predictable response from those residents: “How will the development impact me and my family?”

Residents in the area may have a myriad of concerns. Typically, among the biggest worries are the risks of increased traffic congestion, loss of open space, lower property values, and/or higher taxes resulting from the development. Such adverse impacts generally can be avoided, but doing so takes careful planning and follow-through.

The surest way to overcome the NIMBY syndrome is to make sure that the vast majority of people in the area understand that the benefits that will flow to them and their community from the new development will outweigh whatever costs and impacts they are likely to experience. It appears that such a “win/win” solution often can be achieved through: (1) sufficient analysis and explanation to residents of the actual facts, combined with (2) a reasonably supportive attitude by the local government.

For example, the local government often can provide assurances pro-actively, early on, that it can commit adequate funding to make the needed infrastructure improvements (roads, schools, and other public services)—without heaping new tax burdens on current residents. The necessary public funding usually can be supplied from the increased tax revenue generated by new development overall, including commercial growth (such as new office, retail, and industrial development). Commercial growth typically provides a great deal of net tax revenue to the locality.

For more about strategies to address residents' concerns, please click on PURSUING “WIN/WIN” SOLUTIONS TO MEETING HOUSING NEEDS.

EHI has analyzed the deficiencies of governmental land use planning that result in housing shortages and excessive housing costs. A central problem is the failure to plan for a true balance of jobs and suitable housing opportunities in a community. For more, please click on EHI ANALYSIS OF JOBS-HOUSING REPORT.

 

EHI responds to Wall Street Journal article on new exclusionary policies in Phoenix and Denver suburbs

 

On April 17, 2014, the Wall Street Journal published a feature story about current efforts by local government officials of certain suburbs of Phoenix (AZ) and Denver (CO) to stifle proposed private housing developments, because of perceived adverse effects on the local governments’ finances. Kris Hudson, An Unwelcome Development, Wall Street Journal , April 18, 2014, p. A3. (The online version is Kris Hudson, Towns Taxed by Shift to More Homes, Fewer Stores, Wall Street Journal, April 17, 2014. To access it, CLICK HERE.)   

EHI filed comments on the Journal’s website explaining that those officials’ perceived financial problem is due to their local governments’ abnormal and ill-advised reliance on sales taxes. EHI noted that zoning regulations prohibiting additional housing in order to maximize a locality’s fiscal gains have been declared illegal by numerous state supreme courts. EHI’s letter follows. 

The regulatory constraints on housing development in the Phoenix and Denver suburbs discussed in Towns Taxed by Shift to More Homes, Fewer Stores (April 17, 2014) hopefully will not become a model for others. Those suburban towns (Queen Creek and Gilbert, Arizona, and Louisville, Colorado) are resisting apparently solid residential development proposals—despite indications of strong, underlying housing demand—in order to accommodate the towns’ unusual tax structures. And there is no indication the towns are coordinating with nearby communities to meet the housing demand.

 

Increasing governmental restrictions on housing supply have caused housing prices in the Phoenix and Denver metropolitan areas—and many other major American metros—to rise much faster than construction costs for basic housing, since 1970. Leading housing economists Edward Glaeser and Joseph Gyourko, for example, found that in such metros “the evidence points toward a man-made scarcity of housing in the sense that the housing supply has been constrained by government regulation as opposed to fundamental geographic limitations.”

 

Glaeser and Gyourko concluded that regulatory problems definitely exist where factors other than building costs and intrinsic land values exceed 40 percent of the value of a basic, one-story house. They found that by 1999, housing prices in the Phoenix area were more than 40% above construction costs and that by 2000, housing prices in the Denver area were 100% above construction costs.

 

The unusual dependence in Arizona and Colorado on sales taxes for government revenue aggravates the fiscal challenges of their communities. The rise of online shopping and the decline of bricks-and-mortar retail stores suggest that that dependence is not advisable going forward.

In fact, Queen Creek’s consultants have concluded that, based on the city’s current revenue streams, any form of development other than retail would increase governmental expenses more than revenue. Thus, even profitable office and industrial development—fiscal cash cows in most states—would be a fiscal negative in Queen Creek!

 

Except for certain Western states like Arizona and Colorado that are abnormally sales-tax-dependent, new housing and residents generally produce little or no net drain on local government finances, when all taxes collected as a direct or indirect result are taken into account. . . .

The officials in Gilbert and Louisville indicated as much about the housing proposals reported on. In Gilbert, 110 homes on 55 acres would have cost the city an estimated net of about $57 per home per year by 2020 (a total of $6,258). In Louisville, building 190 apartments on the site of an obsolete shopping center would have been “a financial wash.”

 

Zoning to maximize fiscal gains by excluding additional housing has been prohibited by numerous state supreme courts (such as Virginia, Pennsylvania, New Jersey, New York, New Hampshire, and California) and by statute in several states (such as Massachusetts, Oregon, New Jersey, and Illinois). Local officials also should take into account the benefits of including families with children—which demonstrably add to the social capital of their communities and hence to the value of homes.

 

Reasonable housing opportunities for all citizens are more important than maintaining a local government’s flawed tax scheme. (For further information on the points raised here, please visit our website (http://www.equitablehousing.org).)

Thomas A. Loftus, President
Equitable Housing Institute
Vienna, Virginia