A proposal to require developers of certain residential buildings receiving city subsidies to set aside a percentage of affordable units received a long-awaited hearing by Baltimore City Council members Thursday evening.

The council chambers were packed with supporters — who testified the bill would help address both the city’s socioeconomic segregation and shortage of affordable housing — as well as detractors, including some city officials, who argued the legislation would create additional barriers to development in a city where relatively high property taxes already pose challenges.

Council members and city agency representatives expressed their commitment to passing an inclusionary housing bill, but disagreed about certain key provisions, including whether the bill would provide an additional subsidy to developers in exchange for affordable units and if exemptions should be made available to developers.

According to the proposed 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 people who make 60% or below the Area Median Income. In Baltimore, that works out to $48,762 for a one-person household and up to $69,660 for a four-person household.

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Projects that receive greater subsidies would be required to set aside an additional 5% of units for families with even lower incomes.

“Not only is there an overall shortage of safe and affordable rental homes, but they are rarely located in high opportunity neighborhoods that have quality schools, parks, reliable transit and proximity to jobs and services,” testified Claudia Wilson Randall, executive director of the Community Development Network of Maryland, a nonprofit that represents local community development groups across the state.

“We need a city with opportunity. Opportunity starts at home, where you live,” she continued.

Developers argued the bill would present infeasible costs to their industry. “The result will be that most private returns will be crushed, buildings will not be built, and Baltimore will suffer from even less capital infusions,” said Doug Schmidt, principal at Workshop Development, a local developer group.

Pushback from developers has already led the bill’s author, Councilwoman Odette Ramos, to compromise on some aspects, making it weaker than many other inclusionary housing policies across the country.

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The hearing comes months after the city’s previous inclusionary housing policy expired in June. That ordinance was encumbered by complicated requirements, a lack of city funding, and a broad system of waivers and exemptions. About 34 units have been created since the legislation was enacted in 2007, according to the Department of Housing & Community Development.

The expiration of that policy 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. The plan identified reforming the inclusionary housing law as an action item for increasing affordable housing opportunities.

Despite the compliance violation, advocates’ calls for a hearing on the new bill, which was introduced in February, went unanswered for months pending the completion of a report commissioned by the city from Enterprise Community Partners, a national nonprofit that advocates for increasing the supply of housing.

The final version of that report was published this month and recommended an inclusionary housing policy with a few key distinctions from Ramos’ bill. It suggests providing developers with an additional 15% subsidy to offset the costs of the requirement for affordable units, as well as offering the option to pay a fee to the city rather than provide affordable units. It also recommends cutting in half the number of units available to people with incomes at or below 60% of the Area Median Income, and instead making half of units available to people with incomes at or below 80% of the Area Median Income.

Supporters of the bill argue that those changes would detrimentally weaken an already compromised bill.

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“We are already providing huge subsidies for these developments,” Ramos said. A recent report by the city’s Bureau of the Budget and Management Research found that the city’s portfolio of tax credits costs the city $126.7 million in this year’s budget.

And she argued that a fee-in-lieu option would disincentivize developers from building affordable units in the areas of the city that most acutely lack economical options.

In a bill report filed Tuesday, the city’s housing department wrote that while it does not support Ramos’ bill as currently written, it would support one with the amendments laid out in the Enterprise report, including the proposal for an additional subsidy.

“DHCD recognizes the value of and supports Inclusionary Housing as a tool to achieve the Administration’s objectives around equitable neighborhood development,” wrote Housing Commissioner Alice Kennedy, while adding that the “proposed legislation presents some areas of concern.”

The report also proposed removing the bill’s requirement for the creation of a new Inclusionary Housing Advisory Board.

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In comments about the bill shared with the council on Thursday, the city’s Department of Finance expressed its opposition to the bill as written.

“Market-rate multi-housing family development for the vast majority of the City is already financially challenging even before adding in new inclusionary housing requirements,” wrote Budget Director Robert Cenname.

Cenname argued the additional subsidy of 15% would be necessary for developers, but said it would be immensely costly for the city.

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 only 349 affordable additional units in the last 10 years.

Despite these lingering disagreements, Ramos said she’s hopeful that the parties can reach a compromise. A work session for the bill is scheduled for Dec. 12.

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“We’re almost there,” said Ramos in an interview with The Banner ahead of Thursday’s hearing. “I’m actually really, really optimistic.”

Proposed bill is weaker than other cities

Since it was introduced in February, the inclusionary housing proposal has become a flashpoint in the debate between affordable housing advocates, developers and policymakers over the city’s acute lack of affordable housing.

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

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.

Developers say that while they recognize the need for increased affordability in high-opportunity areas, additional tax credits are necessary to balance out the costs of creating affordable units, especially with the city’s high property tax rate.

The current draft bill has already been rendered weaker than many other cities’ policies in order to address these concerns.

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 recent study. The study — which was conducted by the Grounded Solutions Network, a national nonprofit that provides support to local affordable housing programs — captured more than 1,000 such programs in 734 jurisdictions.

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 Network survey provided a tax relief abatement, and only 4% provided a direct public subsidy as an incentive for developing affordable units. Instead, over half offered a density bonus as an incentive, allowing developers to increase the number of dwelling units.

“There’s so much more that we need,” Ramos said.

The bill is just one tool the city can use to address the affordable housing shortage, she said.

But she insisted, “This is an important one.”