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Changing the cost conversation

5 min read

If you don’t like what is being said,
then change the conversation.
– Don Draper

When the conversation turns to high cost, we wish it would go away.  We are defensive, hesitant, technical and long-winded; modes of argument that make the industry look like complacent apologists for the status quo. Though our mode of argument hasn’t cost us yet, if we allow others to frame the debate, inevitably it will.

To change the conversation, we have to change the voices having it.

Why are costs high?
As thoroughly documented elsewhere in this issue, costs are high because only high-cost properties make it through the state and local approvals gauntlets and cheaper alternatives are uniformly killed along the way.

At the state level, as I wrote years ago, QAP is DNA:

No matter what a state says, the QAP is a truth measured in numbers. What is scored gets proffered, and what is not scored is valued at zero and hence ignored. Accessibility, walkability, green, design, amenities – they’re all good things, they all get points, and they all add non-revenue costs.

What doesn’t the QAP value?  Cost-effectiveness. Being cheaper does not score.

Even more cost-magnifying are the local lollypops: doled out at intervals to placate the neighbors who want the walking trail, the preserved ‘historic’ tree, the street-facing window treatments ‘in keeping with’ the neighborhood, and of course, the protracted public meetings, design charrettes, listening sessions, hearing, and expert reports on parking, soil, water, air, noise and more.

We in the industry know what boosts costs and we know how they could be cut (this issue of TCA is testament to that), but to achieve lower costs requires forcing changed behavior from those who secretly like high-cost properties.

Who likes high-cost properties?
Anyone seeking to develop a LIHTC property knows that he or she must do battle with the objectionists:

  • NIMBYs, or more precisely, NIMBY homeowners, the great free riders on development restrictions.  Though for any other asset class stifling competition would be seen as selfish and bad, when homeowners do it, the media reports are always framed as community concerns.
  • Single-issue advocates. Be they green, accessibility, unionized jobs, anti-discrimination or added social amenities, these folks see a property as merely a device to advance their particular agenda and seek to block anything that doesn’t do enough for the cause.
  • Trade associations and the award-winners’ surcharge. Such groups like bestowing awards—virtue by association—and the award-winner is always the most press-release compatible, photogenic and heartstring tugging, meaning most expensive.
  • Housing finance agencies become high costs’ reluctant enablers, because a QAP that responds to the bulk of public comments invariably reconciles conflict by giving the objectionists their additive and boosting the property’s LIHTC allocation.

These four groups objectively like higher development costs because, whether or not they realize it, what they want pushes costs up, and they dismiss out of hand any objection based on cost.

How do we change the conversation?
The industry is losing the cost campaign because we are letting the four objectionists dominate the discussion and define its terms – and program participants can’t make the case because in fact developers, syndicators and investors are not losing out due to high costs, they’re just adapting.

No, to change the conversation, we have to change the speakers, by bringing to the microphone, the TV camera and the viral video those who truly suffer from higher costs – the unhoused, the people who can’t find what they can afford because our industry can’t build it while placating the objectionists. To do that, we need to elevate three groups of voices who want us to succeed in lowering costs and producing more affordable housing:

  1. Urban employers. As I showed in last month’s Guru, when universities, hospitals, high-tech startups and low-bono non-profits cannot keep the energetic idealists who flock to their cities, they are a natural voice for inclusion.
  1. Urban thinkers. Even Paul Krugman thinks development restrictions are strangling the city; Harvard’s Ed Glaeser has shown America now has exclusionary zoning; and MIT’s Matthew Rognlie has proven that every bit of Thomas Piketty’s supposed increase in wealth concentration can be traced to rises in the value of owned homes. MakeRoom, a joint initiative of Enterprise, MacArthur, Ford and others, is building the policy case that the objectionists are exclusionary.
  1. Urban millennials. The best voices are Millennials being frozen out by static land markets, who are forming groups to challenge their communities’ righteous exclusionary orthodoxy. The San Francisco Bay Area Renters’ Foundation and A Better Cambridge are both spontaneous community groups led by young workers who’ve seen through their elders’ smokescreens.

All these people want what we want: more affordable housing at lower cost. They can say what we can’t, confront people we can’t, use arguments we can’t, be portrayed as the industry never will. We can help them because we can elevate their visibility. Feature them at our conferences. Fund their research and advocacy initiatives. Connect them to the policymakers we know, whether in Washington, state capitols or city halls.

David A. Smith is founder and CEO of the Affordable Housing Institute, a Boston-based global nonprofit consultancy that works around the world (60 countries so far) accelerating affordable housing impact via program design, entity development and financial product innovations. Write him at dsmith@affordablehousinginstitute.org.