The Baltimore City Council could create the city’s first affordable housing tax credit in an effort to satisfy developers’ concerns about a proposed requirement that they create affordable units in new housing.
Developers say that bill, introduced in City Council over a year ago, would create additional barriers in a city where relatively high property taxes already make development more costly. Supporters say that the bill would help address both the city’s socioeconomic segregation and its shortage of affordable housing.
According to the latest version of the proposed bill, new residential projects containing more than 20 units that receive a major public subsidy, such as tax credits or tax increment financing, would be required to set aside 10% of units for people who make 60% or below the area median income.
The affordable housing tax credit, introduced by Councilwoman Odette Ramos at a City Council meeting Monday evening, would provide developers who comply with the affordable housing requirement with an additional 15% tax credit on top of existing subsidies that go to builders of market-rate housing.
“I tend to think that our major developers can afford to provide 10% of their units as inclusionary units because they are already getting substantial subsidy,” Ramos said at the Council meeting. “I introduce this tax credit today to further the discussion and ensure that we are successful in providing units for families in areas that they would otherwise not be able to reach.”
Ramos, who told the Banner in October that the inclusionary housing bill had already been weakened to satisfy developer interests said she introduced the additional incentive only begrudgingly.
“I’m not excited about it, but if that’s the way we have to do it, that’s the way we have to do it,” she said.
Affordable housing advocates who have expressed frustration with developers’ stubborn opposition to the inclusionary housing policy and what they see as the Council’s “stall” on passing the bill said they hope that the proposed additional credit can put the drawn-out debate to rest. The city currently has no inclusionary housing policy in effect after its previous policy expired in June. That policy, enacted in 2007, was encumbered by complicated requirements, a lack of city funding, and a broad system of waivers and exemptions and produced just 34 affordable units, according to the Department of Housing & Community Development.
“At the end of the day we understand that we’ve got to give some incentives,” said Lisa Hodges-Hiken, housing committee chair for the Baltimore Branch of the NAACP. “What we don’t want to see is the city giving away everything and not getting anything. We’ve got to stop funding segregation, and this is a way to do it.”
The Baltimore Branch of the NAACP last week sent a letter to the U.S. Department of Housing and Urban Development alerting the agency of its intent to file a complaint against the city for failing to comply with its own fair housing action plan submitted to HUD in 2020. The plan identified reforming the inclusionary housing law as a way to increase affordable housing opportunities.
“The fact that we had to go this far is really embarrassing,” said Hodges-Hiken of the letter. While the city has failed to have a successful inclusionary housing policy in place for decades, she added, nearby jurisdictions including the city of Annapolis and Montgomery and Howard counties have been far more successful. Howard County offers no incentive for compliance with its legislation; Annapolis offers participating developers a density bonus, allowing them to build more units in the development than typically permitted.
Other affordable housing advocates noted that the additional incentive would be far less costly to the city than the subsidies it already provides to market-rate housing developers. A recent report by the city’s Bureau of the Budget and Management Research found that the city’s portfolio of tax credits cost the city $126.7 million in last year’s budget.
“The question is not why should we provide a relatively small 15% for projects that have inclusionary housing but why are we giving tax credits to projects that are 100% market rate,” said Barbara Samuels, former managing attorney of the ACLU of Maryland’s housing program. “This is what we should be using tax credits for — this is not the problem.”
The bill is likely to come under fire from the city’s Department of Finance, which filed a memo opposing the proposed inclusionary housing policy in November based on an analysis of the bill’s fiscal impact that factored in an additional 15% tax abatement.
In an analysis of 20 projects in the areas of the city where the majority of new market-rate development currently takes place, the finance department found that such a subsidy would have cost the city an additional $9.9 million to produce 349 affordable additional units in the last 10 years.
“The Department of Finance supports the intent of this legislation, but does not believe that the City can support a broad-based inclusionary housing requirement as envisioned,” the memo concluded.
Doug Schmidt, principal at Workshop Development, a local developer group, said that while he and many other developers support some form of an inclusionary housing policy, it would take more analysis to understand whether the 15% credit would be sufficient to offset the costs to developers.
“I think we have to sort of run some scenarios and really understand what the implications are,” said Schmidt.
“We’ll be digging into the numbers and rolling up our sleeves and trying to work towards a compromise that everyone can live with, I’m just not sure what that is yet,” he added.
On the housing advocates’ side, some are losing patience. If developers continue to oppose the bill, Hodges-Hiken said, “they’ll really be showing their hand. They’ll really be showing that there is no world in which they will be a part of the solution to dismantle segregation.”