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Progressive Voice: Better Incentives Needed for Housing Conservation Districts to Succeed

by Progressive Voice August 9, 2018 at 3:15 pm 0

Progressive Voice is a weekly opinion column. The views and opinions expressed in the column are those of the individual authors and do not necessarily reflect the views of their organizations or ARLnow.

By Ralph Johnson

This past December, the Arlington County Board voted to establish 12 Housing Conservation Districts (HCDs), from areas in Westover and Penrose to portions along and near Lee Highway. The expressed intent was to “preserve and enhance” market-rate* rental housing in Arlington. Apartments in these districts are no longer allowed to be replaced “by right” with townhouses.

The County Board promised to develop “incentives” to the owners of these apartments for removing the “by right” option, such as the relaxation of some zoning requirements to allow an increase in the size of existing units or additional density to the site for in-fill and bump-outs. If the owner uses one of the options, the owner would be required to commit a number of his market-rate affordable units to become “committed affordable” units, with direct county oversight and guaranteed lower rents.

These apartments are market-rate affordable because they are old (many 75 years old), functionally obsolete buildings, with small units and few, if any, amenities. The infrastructure of the apartments is rapidly deteriorating and market rents are not keeping up with the expense of maintaining them. It is highly unlikely that a private owner will invest money to build new units that will be attached to his old structure. And, his reward for doing this is to give up some of his market units to become committed affordable units. This is not going to happen.

With this plan, the county is punishing the very owners that are now providing low-income housing. The “incentives” being discussed so far do not provide an adequate trade-off for loss of the “by right” option.

Having your apartment building placed in one of these districts reduces the value of the property. The townhouse “by right” option was the exit strategy for the owner and the lender as well. As the apartments age, the value will fall, continually and inexorably.

The owner can still apply to build townhouses on his site but now he must go through the onerous and costly site plan process, leaving him little if he comes out on the other side of this long process. He could replace his old apartment with a new building but most, if not all, of these old apartments were built prior to current zoning regulations. Under current zoning regulations for a new apartment, the owner would end up with significantly fewer units than he owns now.

So what can be done to preserve market-rate affordable housing while still ensuring property owners in HCDs can operate cost-effectively?

County staff have been working this spring and summer to recommend incentives beyond bump-outs and in-fill, and a citizen group has been advising them. Staff and the citizen group are looking into the idea of awarding TDRs (transfer of development rights) to property owners if they agree to maintain their apartment rents at or below 80 percent of Area Median Income (AMI). TDRs are a tool to help preserve a special condition (such as open space or affordable housing) on a parcel of land by “transferring” its density and other development rights to a different parcel.

Here’s an example of how TDRs could work. Six years ago the County Board approved a plan that would award TDRs to owners of a historic designated apartment building if they would agree to permanently preserve the apartment building. With the sale of the TDRs to a developer, the owners were able to pay off their debt. The preserved apartment building in question faced a huge plumbing replacement job this past year but, because there was no debt payment, the owners’ cash flow was sufficient to meet this challenge.

The buildings were preserved, 84 market-rate affordable units were preserved and the means to maintain the old buildings was set. This is the kind of innovative idea that must be incorporated into the HCD program if it is to be successful.

Without creative and aggressive incentives and options for apartment-building owners in HCDs, the plan will be nothing other than an effort to hold back the tide — a futile effort and a prescription for a slow death of market-rate rental housing in Arlington.

* Market-Rate Affordable Units (MARKs) are owned by the private market, with apartment rents that are affordable (generally at 80 percent of Area Median Income [AMI]) to low- and moderate-income households by virtue of the age, location, condition and/or amenities of the property. Rents in Committed Affordable Units are generally at or below 60 percent of the AMI.

Ralph Johnson is a longtime Arlington resident who has owned and managed apartment buildings in Arlington for 45 years.

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