Mark Zimmerman: Another path to affordable housing

05/12/2014 12:29 PM

02/15/2015 11:19 AM

Can we afford to address the affordable-housing crisis in Chapel Hill? One local group wants the Town Council to put its money where its mouth has been, and start budgeting to provide more affordable housing instead of just talking about it.

Whether their idea will pay off deserves a rigorous review and debate. Meanwhile, some recent Council decisions may have revealed another path to addressing at least part of the problem.

The Orange County Affordable Housing Coalition represents over a dozen local housing and social service agencies, including Habitat for Humanity, the Community Home Trust, EmPOWERment, the Arc and the Partnership to End Homelessness.

Recently, the coalition petitioned the Chapel Hill Town Council to budget one cent of each tax dollar for low-income housing. That would generate a little over $700,000 a year at the present tax rate. Currently, the town spends considerably less than that from local tax revenue on affordable housing.

The coalition’s idea isn’t novel. Two years ago Durham increased its tax rate by one cent to fund its “Penny for Housing” program – a detailed five-year plan to build housing and provide services for the homeless and low-income families.

The Chapel Hill proposal does differ from Durham’s in two important ways. First, the coalition didn’t ask for a tax increase, per se. They want the council to find the money in the current budget, if possible. Second, they don’t have a specific plan to spend the money, only general strategies that came out of a task force last year. They want the town’s new Community Housing Advisory Board to decide how to spend it.

The coalition’s “Penny for Housing” request tries to put the council on the spot this year. Elected officials love to say affordable housing is important, until they need to make budget tough choices. Unfortunately, not knowing how the “Penny for Housing” money will be spent makes a meaningful assessment of the concept impossible. Tax revenue is too tight to be set aside for a promise. So, the council will probably be off the hook until the advisory board develops a plan later this year.

In the interim, some recent activity has shown we may be able to harness the power of the market to help with affordability – at least in part of the rental sector. Starting next fall, two new large, private student housing projects will open. The Lux at Central Park (formerly Bicycle Apartments) and the Shortbread Lofts will add nearly 1,000 bedrooms to the available stock.

Theoretically, increasing supply should intensify competition and drive down prices. In practice, that’s already happened. The Warehouse Apartments immediately responded to the new kids on the block by dropping its prices over 20 percent.

It’s great to see the power of supply and demand in action. While these are high-end apartments, there will be a cascading effect. Other apartments will now have to respond to Warehouse, and student housing will become more affordable.

Adding new student housing will also impact the broader market. Since student population is relatively stable, demand will stay constant. Increasing supply will then force some current student housing to start marketing to other groups.

Actually, that’s always happened. Ask UNC graduates which apartment complexes were student enclaves a couple decades ago, and visit them now. Many are almost entirely occupied by lower-income families. They’ve evolved into workforce housing. Usually that process is too slow to be noticeable. But the large Lux and Shortbread impact shows the power of the market more quickly.

The lesson for the council: Approve as many new student housing developments as the private sector proposes. That will accelerate the transition of older, non-competitive properties to serve needy populations. Eventually, the market should adjust to the point that students will be lured out of jam packed single-family homes around town, too.

Restricting supply created the high cost of housing in Chapel Hill. We now have proof that increasing supply can make housing more affordable. The private sector may not be able to take care of groups who require subsidies, like the homeless. But harnessing the market’s power to provide affordable housing options will help other segments of our population from being priced out of our community. That plan won’t cost us a penny.

Mark Zimmerman lives and owns a real estate business in Chapel Hill. He can be reached at

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