Baltimore may require some developers to set aside affordable housing. But a compromise bill doesn’t go as far as many other cities

Published on: October 04, 2022 6:00 AM EDT|Updated on: October 04, 2022 3:32 PM EDT

Terrel Askew, 35, Hieu Truong, 38, and Loraine Arikat, 26, all from Baltimore hold up signs in support of affordable housing. A rally in support of the BMOREEquitable Council Bill 22-0195, which demands equitable and affordable housing options for all, took place outside of 401 Light Street on October 3, 2022.

A proposed bill before the Baltimore City Council would require developers of certain residential buildings that receive subsidies from the city to set aside a percentage of units to be more affordable, a policy that supporters say would help address both the city’s shortage of affordable housing and socioeconomic segregation.

Dozens of supporters gathered Monday afternoon across from the 414 Light Street Apartments, a towering glass building that benefited from more than $3 million in tax credits from the city in 2020 but still offers no units below market rate.

“It makes sense that if you’re already getting a subsidy, that you give back, and that’s what we’re asking,” said Council Member Odette Ramos, who introduced the bill in February.

As housing advocacy groups have rallied around the proposed legislation, developers have argued that it would pose an obstacle to new development in the city — pushback that has already produced a bill weaker than many other inclusionary-housing policies across the country.

According to the new bill, residential projects containing more than 20 units that receive a major subsidy, such as tax credits or tax increment financing, would be required to set aside 10% of units for low- and moderate- income people. Projects that receive greater subsidies would be required to set aside an additional 5% of units for even lower-income families. Supporters estimate that as many as 939 affordable-housing units would have been created had the current measure been in place since 2014.

The new bill was introduced months before the city’s previous inclusionary-housing policy was set to expire in June. Although that policy lapsed, the new bill has yet to receive a hearing. A hearing date is pending the Department of Housing and Community Development’s completion of a report on inclusionary housing that it commissioned from Enterprise Community Partners, a national nonprofit, and amendments from Ramos’ office that it hopes will ease developers’ concerns.

The delay has put the city out of compliance with its own fair housing action plan, which it submitted to the U.S. Department of Housing and Urban Development in 2020. It identified reforming the inclusionary-housing law as an action item for increasing affordable-housing opportunities.

In a statement, Council President Nick Mosby, who is a co-sponsor on the bill, said that his office will continue to work toward “a robust and scalable inclusionary housing law that we can all be proud of,” and that he “eagerly wait[s] for the administration, and in particular the Department of Housing and Community Development (DHCD), for feedback and agency reports.”

The housing department said it hopes to have the report completed by the end of October.

While the new proposal has proved controversial, housing stakeholders are largely in agreement about the bill’s predecessor: it was a failure, creating only 37 affordable units since it was enacted in 2007.

A draft of the Enterprise report published in 2021 concluded that the measure’s impact was limited because it required the city to directly subsidize the creation of each unit while at the same time setting a cap on the amount of funding the city could provide for those units. If the projected cost of providing those units exceeded that threshold, developers were granted exemptions from the requirement.

“[DHCD] made waivers and exemptions pretty much automatic,” said Barbara Samuels, former managing attorney of the ACLU of Maryland’s housing program, rendering the law “toothless.” The widespread issuance of waivers stemmed from the housing department relying on a formula to calculate the subsidy necessary for each unit that inflated those costs, she explained, while the limit on city spending per unit was fixed and did not increase as development costs and inflation rose.

The new law removes the waiver option and proposes that instead of subsidizing each affordable unit directly, the city will apply the affordability requirements only to developers that are already receiving significant subsidies from the city.

For example, it would apply to developers that receive the High Performance Market-Rate Rental Housing tax credit, which grants a reduced tax rate for 10 years to eligible developers constructing rental properties with 10 or more market-rate units. Approximately 6,261 apartments have been developed in Baltimore City with the tax credit at a cost to taxpayers projected to be nearly $73 million since 2014, according to city budget documents. The vast majority have been located in predominantly white, high-income neighborhoods.

“In many ways with tax credits, the city has kind of subsidized segregation,” said Char McCready, executive director of the Citizens Planning & Housing Association. An effective inclusionary-housing policy would make these subsidized developments more accessible to lower-income people, reducing economic segregation.

But developers contend that additional subsidies beyond these tax credits are necessary to balance out the costs of creating affordable units, especially given the challenges facing developers already, such as the city’s relatively high property tax rate.

“There is clearly a recognition that we need more high-quality affordable housing in Baltimore, but there are legitimate doubts about the legislation’s approach, which mandates inclusionary housing without accounting for the significant costs of providing it,” said Jon Laria, an attorney at Ballard Spahr, which represents developers.

In a February letter to Mosby about the proposed bill, Isaac Ambruso, director of legislative and regulatory affairs at the Maryland Building Industry Association, wrote that the group was “concerned about the damage this approach could do to the housing industry and, relatedly, to the city.”

Ramos said that her office is talking with developers about the bill and anticipates that the final legislation will likely include amendments that address their concerns.

The current draft has already been made less ambitious than many affordable-housing advocates had wanted to make it more palatable to development interests, said Ramos.

“We really compromised here,” she said.

Across the country, inclusionary-housing policies have become an increasingly popular tool for addressing affordable-housing shortages. Many of those programs go much further than Baltimore’s proposed legislation does, according to a 2019 study of the over 1,000 inclusionary-housing programs in 734 jurisdictions by Grounded Solutions Network, a national nonprofit that provides support to local affordable-housing programs.

Baltimore’s bill would apply to a smaller share of buildings than most other policies: it would only require buildings with over 20 units to provide affordable units, whereas over 90% of the cities that responded to the survey reported policies that applied to buildings with fewer than 10 units.

And Baltimore’s bill would be an outlier in applying only to buildings that receive significant subsidies. Only 6% of the programs that responded to the Grounded Solutions survey provided a tax relief abatement, and only 4% provided a direct public subsidy as an incentive for developing affordable units. Over half instead offered a density bonus as an incentive, allowing developers to increase the number of dwelling units.

Baltimore’s bill requires that units remain affordable for at least 30 years. Some cities have affordability terms up to 99 years or in perpetuity.

With all of the limitations, the bill does not promise to be “the answer to an affordable-housing crisis in the city,” McCready acknowledged. “But [it’s] one tool that’s necessary, not just for what’s happening right now but for future generations.”

A relatively limited inclusionary-housing policy makes sense for Baltimore, said council member Mark Conway, who joined the rally on Monday. “We’re not a Washington, D.C. — we don’t have quite the level of investment that some other cities have,” he said, noting that the final bill should balance the demands of developers with those of renters seeking affordable housing. “We don’t want to do too much of one and too little of the other.”

Affordable-housing advocates question whether the requirements would actually discourage developers from building in Baltimore.

“What I want everybody to know is we need to stop having a sense of poor self-esteem. They can’t build it anywhere else because there’s only one Baltimore,” said Lisa Hodges-Hiken, housing chair of the Baltimore branch of the NAACP, speaking at the rally. “They need to build it here and they need to build it for all.”

An earlier version of this article incorrectly reported the number of years that units set aside by developers would remain affordable under new legislation before the city council. The correct figure is at least 30 years.

Read more: