Terner Center Blog: No Limits

New State Policies Aim to Boost Access to Opportunity through Housing

Posted on by Elizabeth Kneebone and Carolina Reid

In California, the Tax Credit Allocation Committee (TCAC) plays an important role in determining where and how Low Income Housing Tax Credits (LIHTC) get allocated for the production of affordable housing. On Wednesday, TCAC adopted a series of policy changes aimed at increasing the development of affordable housing options for families in higher opportunity communities, signaling a commitment to advancing fair housing goals amid the state’s broader agenda to address California’s housing crisis.

The regulations seek to respond to a growing body of evidence that communities that provide low-income families access to good schools and safer, lower-poverty, and less segregated neighborhoods improve outcomes for residents and boost economic mobility for children. However, only five percent of large family 9 percent LIHTC units (1) placed in service between 2003 and 2015 were located in the state’s most opportunity-rich neighborhoods, even though such neighborhoods account for one-fifth of the state’s census tracts. The incentives included in yesterday’s policy changes represent a concerted effort to address and begin to correct that historical imbalance.

As part of the new regulations, TCAC will rely on neighborhood-level “Opportunity Maps” to inform its allocations. These maps assign each census tract in the state to one of five opportunity categories based on a number of economic, educational, and environmental characteristics that research has shown to be important for improving outcomes for low-income children and adults.

Concerns about the methodology used to identify and assign these categories surfaced during the initial public comment period earlier this year. To respond to these issues, the Terner Center has worked in collaboration with the Fair Housing Task Force over the last several months to review and assess the methodology and propose several important improvements. These include developing a broader and more nuanced definition and categorization of rural tracts within the state, a measure of job proximity that is more reflective of regional labor market commuting patterns, and a revised employment indicator more attuned to the prime-age workforce.

But perhaps the most significant change is the development of an improved filter to identify areas of racial segregation and concentrated poverty. In the previous iteration of the maps, two filters were developed to identify what were referred to as “lowest resource” tracts: the first used an entropy index paired with a relative median income measure to identify lower-income, racially segregated tracts, and the second used a threshold based on student poverty in the three closest schools to identify high-poverty areas (i.e., tracts where 80 percent or more of students in nearby schools qualified for free or reduced price lunch). Together, these filters assigned roughly one-third of California’s census tracts to the lowest resource category, with the school poverty filter alone accounting for more than 90 percent of those assignments.

There is no doubt that schools play an important role in shaping opportunity and laying the foundation for economic mobility, which is why school metrics are included in the education domain. But the relationships between school poverty, school choice policies, and student achievement are not easily reduced to a single metric, making it a problematic filter. As a Stanford study recently found, some schools and school districts do a better job of educating low-income students, even in largely low-income areas.  Our analysis of the school poverty filter yielded similar conclusions, finding that the relationship between student poverty and academic achievement varied widely across regions. Variation in school assignment policies—in some cities, children don’t attend their neighborhood school—further weakens the measure’s effectiveness in serving as a proxy for opportunity.

As a result, we worked with the Task Force to develop a new, single filter to identify neighborhoods that are both racially segregated (using a slightly different measure of segregation based on the relative proportion of racial and ethnic groups concentrated in a census tract) and areas of concentrated poverty (based on a 30 percent poverty rate threshold). The new filter ends up being more narrowly targeted to economically distressed, segregated areas, and thus captures fewer neighborhoods overall—roughly 13 percent of the state’s census tracts rather than the original 32 percent. As Richard Rothstein’s new book The Color of Law points out, these neighborhoods did not happen by accident: they are the product of a legacy of racialized housing policies that segregated whites from blacks, rich from poor. The new TCAC policies offer an opportunity to begin to redress that legacy.

While these are critical improvements, it is also important to acknowledge that the real world is more complicated than what can be captured in the point-in-time snapshots on these maps. It will be important for future iterations of the maps to tell a more dynamic story about access to opportunity at the neighborhood level by incorporating trends over time (including, for example, job or population growth) to account for places that are experiencing rapid change. Spatial shifts in opportunity – for example, as a result of gentrification or the decline of once affluent suburbs – can happen quickly, and policy decisions such as tax credit allocations should be positioned to keep pace.  

Going forward, the Task Force also plans to consider ways in which the factors that promote or constrain the well-being of low-income households might differ in rural communities, and whether potential differences call for alternative metrics.

But even with these latest policy changes and proposed future refinements to the maps, TCAC’s process for allocating tax credits through the Qualified Allocation Plan (QAP) will not achieve the desired results without attention to the larger set of land use and housing policies at the city level that constrain where developers can find suitable sites and/or obtain affordable housing entitlements. The current maps reveal, for example, that of the 1,568 census tracts designated as “Highest Resource” more than 80 percent are comprised predominantly of single family homes, and in more than half (56 percent) of Highest Resource tracts, multifamily buildings with 10 or more units make up less than 10 percent of the housing stock. Without more proactive polices that ensure cities are adequately identifying land and zoning for multifamily housing, and without reforms to the ways in which more affluent communities allow for housing overall, the Opportunity Maps and revised QAP are unlikely to address the historical shortfall in LIHTC projects in prosperous areas on their own.

As TCAC rolls out the new regulations in the coming months, it will be important to closely monitor the effect of these new policy shifts on where and how much affordable housing is being built, as well as the longer-term impact of LIHTC housing on residents’ lives. In early 2018 the Terner Center will offer a contribution to this topic with a study that examines questions of economic mobility from the perspective of residents living in LIHTC-financed properties, revealing the nuanced relationship between affordable housing, neighborhood quality, and opportunity.

While much more work needs to be done on both the community development and fair housing fronts to expand access to better schools and higher paying jobs for low-income residents and communities, the policies TCAC enacted this week were an important step toward realizing those goals.

(1) According to a 2014 blog post from Novogradac and Company, “To qualify as a “large family” development, at least 30 percent of LIHTC units in the property must have three or more bedrooms; four bedroom and larger units must have at least two bathrooms; bedrooms must be large enough to accommodate two persons each; and living areas must be adequately sized to accommodate families based on two persons per bedroom.”

A Reform Proposal for the Federal Housing Administration

Posted on by Carol Galante

Media reports and other sources in Washington, D.C. suggest momentum is building for housing finance reform. According to a recent piece in National Mortgage News, “the White House and congressional GOP are eyeing a tight window between tax reform and the 2018 midterms to pass housing finance reform. And with key policymakers readying their exit, the effort could be the most concerted push yet.” As policymakers debate the future of the nation’s housing finance system, I urge them not to overlook both the importance of the Federal Housing Administration and the improvements it needs in order to fulfill its mission and…

Scaling Off-Site Production in the United States: Lessons Learned from Swedish Leader Lindbäcks

Posted on by Mark Trainer and Carol Galante

When it comes to innovation in housing, what does the U.S. have to learn from Sweden? More than you might think. Though they have different histories, economies and social contexts, Sweden and the United States share many housing market challenges – including significant barriers to new construction and high cost of production leading to rapidly appreciating housing prices, especially in urban centers. The Terner Center recently published a policy brief providing a detailed examination of the Swedish housing system, and a companion summary outlining key similarities and differences with the United States. And last month, the Terner Center for Housing…

Lessons for the Future of Public Housing: Assessing the Early Implementation of RAD

Posted on by Carolina Reid

In its 2018 budget, the Trump Administration is proposing to slash public housing funding by $1.8 billion. This cut represents a 29 percent decline from 2017, and will compound a longstanding trend of underinvestment in public housing and worsen an already dire situation. Over time, these shortfalls in federal funding have resulted in a $26 billion backlog in needed repairs, leaving many residents in public housing units across the country with untenable living conditions and a precarious housing future. In addition, every year we lose valuable units of public housing to demolition because of this lack of investment: HUD reports…

Paying For Dirt: Where Have Home Values Detached From Construction Costs?

Posted on by Terner Center

Home prices reflect the value of the land and the value of the structures and other improvements on that land. In high-cost metro areas of the United States, the exorbitant cost of a house may not seem to be justified by its appearance, suggesting that homebuyers are paying a premium for their location. In a recent blog post “Paying For Dirt: Where Have Home Values Detached From Construction Costs?,” Issi Romem, Chief Economist at BuildZoom investigates the disparity between the appearance and price tag of homes, identifying the places in which home buyers pay mostly for the location. The main…

Richard Rothstein Lecture on The Color of Law at the Terner Center

Posted on by Terner Center

On Thursday, September 28, the Terner Center, in partnership with the UC Berkeley Department of City and Regional Planning, hosted Richard Rothstein, author of The Color Of Law: A Forgotten History Of How Our Government Segregated America. Rothstein spoke to a standing-room only crowd in Wurster Hall about the legacy of the many government policies that fueled segregation in American cities for decades, and discussed the implications of his research with Terner Center Faculty Director Carol Galante. We invited Rothstein to provoke our collective thinking about important, challenging, and uncomfortable issues in housing policy. We believe it is critical to…

From Small Steps to Giant Leaps: What Must Come Next for the California Housing Agenda?

On Friday, September 15th, the California Legislature approved a package of 17 bills aimed at putting a dent in the state’s housing crisis. While the votes came down to the wire, in the end, the need for solutions won the day, and in the coming weeks the Governor is expected to sign each piece of legislation, officially ushering in the most significant housing policy changes in recent memory. You can read our recap of these bills in an earlier blog post here. Drafting, amending, defending and eventually passing these bills was no small feat, and the legislature, the Governor and…

California Steps Forward for Housing

Posted on by David Garcia and Carol Galante

On Friday, September 15th, the California legislative session ended with the passage of 17 individual pieces of legislation aimed at alleviating the state’s ongoing housing crisis. While three particular bills have received the most attention—SB2, SB3, and SB35—several other bills headed for the Governor’s desk are also likely to have an important impact on the landscape of the state’s housing policy. We have compiled a brief overview of each bill that passed, organized into policy categories. While the passage of these newly approved policies is certainly a milestone, we also know there is much more work ahead. Stay tuned for…

Legislation for Information: Sacramento’s Role in Filling Housing Data Gaps

Posted on by Carolina Reid and Echo Bergquist

As California’s lawmakers return to Sacramento next week, it is worth paying attention to current legislative efforts to improve access to data that can inform our understanding of the state’s housing crisis. While the final package of housing legislation is still to be determined, some of the original bills -- including SB 35, AB 1397, and AB 879—have the potential to improve housing data quality throughout California.   Why focus on data?  Despite the severity of California’s housing crisis, and the importance of the housing sector to the overall health of the state’s economy, we lack basic data on many…

Modular Construction in the Bay Area: The Future is Now

This post originally appeared on the ULI San Francisco Blog on August 2, 2017. After years of abstract discussions and false starts, modular building may finally be gaining the momentum it needs to make an impact in the Bay Area. Why now? And why here? On Tuesday, July 18, the San Francisco District Council of the Urban Land Institute hosted “Modular Construction in the Bay Area: The Future is Now”, an event moderated by Terner Center for Housing Innovation Faculty Director Carol Galante. The panel discussion featured four leaders committed to bringing this innovative housing method to scale in the Bay Area: Developers Rick Holliday of Holliday…