After months of delay, a pair of bills that would require — and incentivize — developers to build more affordable housing units will be presented before the full Baltimore City Council Tuesday, and could be called for a vote.
The bills are part of a package of what’s known as inclusionary housing legislation because they would require all new developments exceeding a certain size and value to reserve a portion of units for people earning below the Baltimore-area median income. Another bill would allow developers to apply for a property tax credit.
Jurisdictions around Maryland are racing to propose solutions to dueling housing supply and affordability challenges. Baltimore’s inclusionary housing discussion has been building since at least June 2022, after a previous inclusionary housing policy expired and has been strongly supported by several housing justice and advocacy groups.
Here are 3 things to know ahead of Tuesday’s City Council hearing.
What is the bill designed to do?
At its core, inclusionary housing policies aim to increase access to housing that otherwise may not be affordable to people who historically have been excluded from living in certain areas. Supporters of inclusionary housing say policies can reduce segregation, improve neighborhood diversity and add more legitimacy to the city’s tax credit and subsidy system, which typically benefits developers who build and manage properties in more affluent communities.
In the city’s case, early versions of the bills called for multifamily buildings with 20 units or more to reserve 10% of them for people earning at or below 60% of the area median income. That works out to about $48,762 for a one-person household and roughly $69,660 for a four-person household in the city. Projects that receive greater subsidies would be required to set aside an additional 5% of units for families with even lower incomes.
In the version of the bill that will be considered Tuesday, the requirement has changed to “up to” 15% of the units of all multi-family buildings already receiving “a major public subsidy” or planning to apply for one. Ten percent of the units must be for people making 60% of the area median income, and if additional subsidy is available from city government or the Housing Authority of Baltimore City, it can be applied to people earning 50% or below of the area median income. The latest bill also creates a 9-member board to monitor inclusionary housing.
Under this iteration of the bill, there are no waivers from the requirements, and it applies citywide.
Crafted by City Councilwoman Odette Ramos, the bill has been criticized by some housing equity advocates for not requiring a larger percentage of the units to be designated at more affordable levels and for failing to capture people at incomes lower than 60% of the area median income.
Earlier this year, Ramos also introduced a 15-year, 15% high-performance tax credit bill to complement the inclusionary housing mandate and help offset the lost revenue from the affordability requirements. That bill has been changed significantly ahead of Tuesday’s hearing; now, the tax credit will be calculated as the difference between the market rate rent and the rent collected from the reduced-price units. Property owners can collect up to $14,400 per affordable unit per year under this new formula, or as much as $1,200 a month. The credit is available for 30 years.
Developers oppose the current bills
But despite the introduction of the tax credit bill, those who build and manage properties in the city say the inclusionary housing package still does not meet their bar for passage.
Doug Schmidt, founding principal at Workshop Development, who has been involved in discussions about the bills, said the legislation poses too many economic and logistical problems for those in the housing business, which could result in decreased supply overall.
“It would put a real chill on a number of projects out there and would fundamentally change how a project performs, how it attracts funding and capital and investors,” said Schmidt, whose portfolio includes the Canton Crossing complex, the HOHM Highlandtown Apartments and Arundel Preserve.
Specifically, he pointed to a report published by Enterprise Community Partners about the city’s inclusionary housing policy options, which recommended the city could only support inclusionary requirements in areas of the city with the highest rents and strongest market demand. The report found that a 10-year, 15% tax credit would be required to make the projects financially feasible for developers.
Schmidt also said the bill has other problems, but declined to give specifics.
“A lot of details and things need adjustment and clarification ... and then we can put together a bill everyone can be happy with and pass,” he said. “But we’re not there yet.”
A budget problem for Baltimore
Another voice that may express opposition Tuesday: Baltimore’s Department of Finance, which issued an unfavorable report on the tax credit bill earlier this year based on the Enterprise Community Partners report findings.
In a memo written by Deputy Finance Director Robert Cenname, the finance department laid out some recommended tweaks to the bills, including limiting the tax credit to more affluent neighborhoods over a 10-year period instead of 15-years, and requiring developers to reserve 5% of the units at 60% of the area median income and another 5% at 80% — instead of 10% of the units at 60% of the area median income.
The memo also warned that the bill could increase financial pressure on the city, which is facing state-mandated requirements to increase funding to pay for school improvements; a citywide staff shortage and greater financial pressures to increase wages; and mounting demands for improved services delivery to city residents.
“Adding an additional new unbudgeted program, with the guarantee of either new General Fund costs or lost revenue, adds too much risk to the City’s already precarious financial position,” the memo says.
It’s unclear how the latest version of the bills will address the finance department’s concerns. The city’s Department of Housing and Community Development has deferred to the finance department on the specifics.
This article may be updated.