7th Iteration Fights Price Theory

Scoring table of housing

AshevilleThe City of Asheville continues to make changes to its Land Use Incentive Grant (LUIG) policy. First adopted in 2010 in order to incentivize what members of city council used to term “the kind of development we want” with an emphasis on affordable housing, the program attracted the passing interest of only a few developers long enough to determine it was unworkable. Not only would they have to build with a negative profit margin, they would have to convince a bank to finance the losing prospect.

In 2013, developer Harry Pilos humored members of council trying to persuade him to use the policy and crunched the numbers. When council saw he would have to build at a $3,500 per-unit loss, they admitted they had been pulling numbers out of the air when they put the policy together. They then convened meetings with a group of developers to rework the policy. What council considered at their last meeting represented the program’s seventh revision. While the first changes were needed to make the program functional, the latest revision was merely compliance with council direction that LUIG be subject to annual review.

LUIG is designed as a point system. Developers of residential projects can score points in categories such as the percentage of units qualifying as affordable to various income levels; the duration of rent controls; “locational efficiency,” or measures of how well tenants can reach jobs and services without an automobile; brownfield remediation; and participation in green building initiatives. For every 5 points earned, up to a maximum of 105 points, developers qualify for one year of incentives, annual incentives being equal to the difference of a property’s tax assessment at the time all certificates of occupancy are released and its assessment at the time the LUIG agreement begins.

City staff, legal counsel, and members of city council developed the latest changes. Several were made to clarify basic elements of the program, like how to assess tax value and how to calculate tax credits. Others filled in blanks.

The new changes require qualifying housing developments to offer at least 5% of units to tenants eligible for federal rental assistance like Housing Choice Vouchers, and at least 20% of units, which may include the 5%, at rents consistent with the city’s definition of being affordable to persons earning no more than 80% of Area Median Income (AMI).

Tying up loose ends, the latest changes instruct landlords how to deal with increasing costs of living, increases in tenant income, etc. For example, if the income of a tenant who initially qualified for an affordable unit increases to up to 120% of AMI, he will be able to continue renting the apartment at the subsidized rate. If he earns more, he will have to pay market rate or relocate. Income verification will have to occur 120 days before lease termination, so tenants can make necessary arrangements. Tenants must also be given fair notice of the expiration of their subsidies in the 21st year. Landlords will be able to increase rents up to the lower of 2.5% per year or another cap set by the city.

In addition, LUIG subsidies will be capped at $80,000 per unit, payable through the term of the grant. Developers may, however, negotiate the cap with council. Examples of mitigating considerations included the type of building, depth and term of affordability, whether or not a project provides shared parking, and when revaluations occur.

During public comment, regular Ashley Cooper said she didn’t really understand the agenda item, and made some suggestions Councilor Julie Mayfield and Community Development Program Director Paul D’Angelo clarified were already in the program. Mayfield then amplified Cooper’s recommendation to focus more on providing housing for persons earning no more than 60% of AMI, saying too much had been going on this year to work that into the changes. The amendments, expected to promote equity and diversity, were adopted unanimously.

In Other Matters

Asheville City Council postponed action on reparations for slavery. Mayor Esther Manheimer said council needed more time “to develop a roadmap for how to proceed with the implementation” of the resolution that, she reminded, had already been adopted. She said council would convene a work session on the topic once the newly-elected members were sworn in. This, of course, went over like a lead Zeppelin with the few who, per comments at the last meeting, seem to be the only ones with the time and technological know-how to participate in these COVID-era meetings.

Paul Schulman, for example, cried foul. Council had, at the last minute, decided to remove from consideration decisions on how the $4 million they had committed to reparations would be spent. Even more fundamentally, he thought $4 million was “laughable,” relative to the “unbelievable harm” perpetrated against people of color.

Sarah Benoit faulted council for promising reparations during the election cycle and then kicking the can down the road. She and Cooper had hoped members of council would have shown more strength of character than Democrats at the national level, Benoit saying elected representatives need to stand up to the way high-ranking Republicans are bending norms. Linda Wolf wondered if it was by design that, after capturing national attention, the city was dragging its feet so proponents would move on to other things.

Most who spoke praised outgoing Councilors Brian Haynes and Keith Young for their leadership in following their agendas.

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