City Elections 2023 - Housing and Land Use Policy Guide (Affordability)

posted on Mar 12th, 2023

It’s city election time in Bloomington, Indiana. The candidates have all filed and the race is underway. This is the first in a series of posts covering city policy.

There are four major policy areas that tend to come up in municipal policy discussions. They are:

  • housing and land use
  • transportation
  • public safety and policing
  • economic development

There are other things that the city has jurisdiction over that don’t fit neatly into those categories (parks, utilities, etc). There are very important issues that represent cross cutting concerns - things like climate response and antiracism touch on most of those policy areas. Solutions to things like homelessness often touch on several.

But those categories tend to be the most significant areas of city policy.

I’m going to start with housing and land use. There are two major questions we need to address: “How do we make housing affordable and available to everyone?” and “What kind of built environment should we live in?” I’ll address the first in this post and (hopefully) deal with the second in a future post.

Arial shot of house rooftops - Photo by Breno Assis on Unsplash

How do we make housing affordable and available to everyone?

We have a pretty good idea how to improve affordability. It’s just not easy to do. In the case of Bloomington, a lot of the strategies that have been effective elsewhere have been banned by the state government in Indianapolis.

We Have to Build More

First off, we need to build a lot more housing. There are 30,000 people who live in the surrounding counties and commute into the city every day. While some of those people wouldn’t choose to live in the city, a fair number of them were simply priced out.

The city released a housing study in 2020. The study referenced two vacancy rates, the American Communities Survey run by the Census Bureau reported a 9% vacancy rate for Bloomington. The city ran its own survey that found a less than 2% vacancy rate. The ACS doesn’t account for seasonal variation in vacancy that comes with being a college town, but the city’s study involved asking landlords to self report their vacancy rates. Make of that what you will. My guess is the true number is somewhere in between.

Even if the vacancy rate is 9%, that’s not enough vacant housing to house even a third of the commuters. That vacancy rate is definitely not high enough to push landlords to lower rents.

When developers build a new project they do the financial math with an assumed vacancy rate based on the market they’re building into. It’s often between 5% and 10%. To get rents to go down, we need the vacancy rate to be significantly higher than the one they assumed and built in.

So we need to build a lot of housing. This is necessary to achieve housing affordability, but not sufficient.

Building housing is slow. When you look around town, it may seem like we’re building a lot. But when you count the beds, it comes out to surprisingly little. The biggest of the megahousing projects we’ve built lately was around 1000 beds. Most “big” apartment projects are a few hundred beds. Many are less than 100. They often take several years to build.

Put it all together and we’re only adding a few thousand new housing units a year. Many years we add less than a thousand. We only started building at that rate a few years ago. So it’s going to take us years to catch up.

When the vacancy rates do finally rise, the rents will begin to fall. We’re already seeing this in other cities that are ahead of us on building.

But we can’t count on that for permanent affordability. When rents start to fall, the developers will eventually slow down or stop building. Vacancy pressure is necessary, but not sufficient.

We’re Limited by State Government

It’s important to make note of what we can’t do here. We can’t do rent control, it’s banned at the state level. We can’t do inclusionary zoning, where we require developers include a certain percentage of permanently affordable housing in all projects, that’s also banned at the state level.

We can do density bonusing, where we allow developers extra density (another floor) in exchange for holding some percentage of units permanently affordable. But that only helps in so far as developers are building.

So we need to put other pressure on the landlords to lower rents. There are a lot of things we could explore to do this.

Renter’s Bill of Rights

A Renter’s Bill of Rights (like this example) with things like requiring cause for eviction, fee limitations, and right of first refusal would help.

Once again, the state government is standing in our way. We have a rental inspection program that allows us to do some of this. But it’s grandfathered in. New rental inspection programs are banned at the state level. Past city governments have been very afraid to try new things with the grandfathered program for fear the state would decide they invalidated the grandfathering and kill it.

It’s unclear what would happen if we attempted to implement a Renter’s Bill of Rights independent of the rental inspection program, or whether we even could under state code.

At the very least, we can properly fund HAND - right now they don’t have enough resources to keep up with inspections.

Vacant Rental Fee

We could also explore a vacant rental fee: where we only allow a landlord to hold a rental vacant for a certain time period (6 months or a year) before we start charging a monthly fee. The fee has to be high enough that it actually causes pain and incentivizes the landlord to lower rents to find a renter. Some cities in Europe have been exploring this. It’s likely it would be banned at the state level as soon as we try it, but it’s still worth trying.

Finally, we need to explore and support alternative housing development and ownership structures. Public housing is the obvious one and we need to build more of it. But there are other forms as well.

Housing Cooperatives

Cooperatively owned housing allows tenants to collectively govern their own rental housing. We have a housing cooperative already in Bloomington Cooperative Living. The cooperative owns three properties and leases two more. It’s structured as co-living, with members renting a room and sharing living areas, but housing cooperatives don’t have to be co-living. BCL manages to get rents down to $400 - $600 a month, which includes utilities and food.

BCL has been steadily growing and the city should invest in its continued growth. It’s also worth putting effort into forming additional cooperatives, because diversity is good. It’ll take a while, but if we can eventually reach a point where a significant chunk of the rental market is cooperatively owned, that would put real pressure on the landlords.

Community Land Trusts

Cooperatives work best on rental housing, but what about keeping owner occupied housing affordable? For that we need a Community Land Trust.

Community Land Trusts are non-profits that can be democratically run by their members, but don’t have to be. A community land trust works by owning the land owner-occupied housing is built on and giving the housing owner a 99 year ground lease. This allows the occupant to own the building, get a traditional mortgage, accrue equity, but it allows the land trust to dictate how much the value of the property can rise. It effectively removes housing from the normal housing market and gives it a set rate of appreciation.

Community Land Trusts are very effective at keeping gentrification at bay, as long as local governments recognize them and support them. Home owners who are worried about being priced out of their homes - which usually happens when their property taxes rise with the value of their property beyond what they can pay - can put their homes in the land trust and then that prevents the price from going up, and thus the taxes from going up.

Activists in Bloomington recently formed a land trust. The city should support it financially, and work with the county to ensure the land trust is accounted for when calculating property values and taxes.

This is just examining the affordability aspect of housing and land use policy. There are many other things to consider: the sustainability of the built environment, histories of racial exclusion and how we make amends, and what we do for those who struggle to stay in housing for reasons other than the cost alone.

I’ll try cover all those things in future posts.

But these give you a pretty good idea what to look for on the issue of housing affordability. Almost all of the candidates will give lip service the issue of housing affordability at some point. The good ones know what it takes the create it. The bad ones will talk the talk, but when it comes to following through, they’ll balk.