Innovations in Housing Development with James Stockard

In this episode, Sarah sits down with James Stockard, an expert in afforable housing and community development, current lecturer in Urban Planning and Design at Harvard University, and former curator of Harvard’s Loeb fellowship to talk about key challenges in the development of affordable housing and innovative ideas being implemented to meet US housing needs.

Transcript

James Stockard (00:01):

I wouldn’t have said this a few years ago, Sarah, but it’s becoming a bigger and bigger issue. Are there enough architects, lawyers, property managers and especially contractors these days? Carpenters, electricians, plumbers? The important thing for your listeners to remember, Sarah, is that housing costs and housing price are two very different things. 

(00:17):

Cost is brick and mortar, two by fours, labor rates, land cost, etc. and price is an entirely different number. It’s entirely controlled by supply and demand. But what is also critically important and often overlooked is good quality property management. My wife served as a property management manager for affordable housing for over 25 years, and I learned a great deal from her about the importance of management.

Sarah Johnson (00:41):

Welcome to the Pathway podcast. I’m your host, Sarah Johnson, and thank you for joining us for this episode. Pathway to tomorrow is a nonprofit with initiatives in housing, environmental conservation, and water security. 

(00:53):

In this podcast series, we engage with leaders working on solving some of the world’s most challenging problems by exploring innovative solutions being implemented by leading NGOs, nonprofits, think tanks, companies and institutions focused on issues like homelessness, environmental conservation, climate change and water security. 

(01:15):

Our guest today is Jim Stockard, an expert in affordable housing and community development. Jim served as the curator of the Loeb Fellowship at the Harvard Graduate School of Design for 17 years. As a principal for over 25 years with Cambridge based consulting firm Stockard Engler and Brigham, he has worked with nonprofit groups and public agencies across the country on such issues as affordable housing development, property management, neighborhood revitalization, and supportive services planning. 

(01:41):

Shortly before coming to the Harvard Graduate School of Design, Jim served as the court appointed Special Master for the Department of Public and Assisted Housing in Washington, D.C.. Jim has taught courses on housing policy at MIT School of Architecture, Tufts University, and the Harvard Graduate School of Design. Jim is the coauthor of the book Managing Affordable Housing A Practical Guide to Creating Stable Communities, and also wrote the epilogue for the book New Directions in Urban Public Housing. 

(02:10):

Jim was the principal investigator for the Public Housing Operating Cost Study commissioned by the United States Congress. He’s also served as a commissioner of the Cambridge Housing Authority for over 40 years, including eight terms as chair, and is a founding trustee of the Cambridge Affordable Housing Trust Fund. Jim is a past president of the Citizens Housing and Planning Association, which is Massachusetts largest research and advocacy group for housing and community development issues. Jim is also an alumnus of the Loeb Fellowship at Harvard, and earned a master of City Planning degree from the Harvard Graduate School of Design.

Sarah Johnson (02:41):

Jim, it’s such a pleasure to have you on today. Thank you so much for joining us.

James Stockard (02:45):

Oh, thank you so much for asking me to come along, Sarah. It’s a pleasure to talk about these matters.

Sarah Johnson (02:50):

Wonderful. Can you start us off, Jim, by telling us a bit about your background and experience as a principal at Stockard Engler and Brigham?

James Stockard (02:51):

Well, Sarah, I’m a very lucky person. I’ve had a wonderful career with chances to work on housing issues at many levels and in many places. So let me talk about a few of those that I think might interest you and your listeners. We were a small consulting firm, just 2 or 3 of us over the years, and we each had our specialties. Bob Engler worked on helping developers use the chapter 40 B process in Massachusetts, a very, very unusual program by which the state can override local zoning if the community hasn’t built enough affordable housing. Gordon Brigham focused on larger planning efforts regarding housing and urban development policy, and I focused on public housing, consulting with community groups to build affordable housing and training for professionals and citizens in the field. 

(03:35):

If I had to pick three projects from that time period, they’d probably be the following. The first is United Front Homes, where I helped an excellent community group build 200 affordable housing homes in New Bedford, Massachusetts. The key points here are the value of a locally committed group of citizens in the development of affordable housing. The parts of the process that work pretty well, and the parts that don’t work so well, and what it takes to make a successful community of 200 households in addition to providing homes that they can afford. 

(04:03):

Secondly, I was a special master for the Department of Public and Assisted Housing in Washington, D.C. and in that role I served a really excellent judge as the eyes and ears inside the agency, while he tried to decide what to do with a very troubled public housing authority. And a key issue to talk about here are what causes a large public agency to fail its constituents, how do you know it’s failing and what can you do about it? I did have a chance to do a lot of training in affordable housing property management. 

(04:29):

Most people in the affordable housing world focus on developments, building more homes that can be affordable thanks to various subsidy programs. That’s really important work. As you can see from above, I did a lot of that. But what is also critically important and often overlooked is good quality property management. My wife served as a property manager for affordable housing for over 25 years, and I learned a great deal from her about the importance of management. 

(04:54):

Once a family of modest means gets an affordable home, and we only have enough for about a quarter of all the people who are eligible, the property manager and his or her skills become way more important to them than all the work that people did to build the homes. Whether they can get a problem solved, whether the manager will understand their own personal situation for their family, and whether they can get their maintenance needs taken care of on time. You solve a problem with a neighbor. Those are the kinds of things that property managers can help you with. And so I trained a lot of people. I wrote a book for, for lists on how to undertake good property management for affordable housing. And then I did a number of training sessions all across the country. 

(05:30):

The other work you mentioned, revising the public housing operating cost formula, was actually undertaken after I left the firm and was employed by the Harvard University Graduate School of Design. I was a principal investigator for the Public Housing Operating Cost Study commissioned by the US Congress. The old formula was an overly simplistic dollar figure per home that the Housing Authority was managing. We developed a much more sophisticated approach, which weighed specific factors that impact the cost of management. High rise versus low rise, is there an elevator in the building, elderly residents versus families, the age of the buildings, and so on. So we found a way to do that and created a much better formula. Unfortunately, the Congress doesn’t fund that formula and anything better than about 82% now. But I did think that was an important project, and I’m glad I had a chance to be a part of it.

Sarah Johnson (06:22):

Thank you so much for sharing that, Jim. So my next question for you, in your view, what are some of the key challenges to developing affordable housing today?

James Stockard (06:32):

Oh, Sarah, I have a long list. Uh, and it varies by the location that you’re talking about. In some cases, some of these items on my list are more important and present a bigger barrier to building affordable housing, some are less. But let me tell you what the things are that I think  are important. The first thing on my list is the local political situation. Do the elected officials in the community have the staying power to move for housing solutions in their community, or are they cowed by the NIMBYs that don’t want any more affordable housing built at all? 

(07:04):

Second is the zoning regulations. We write the zoning codes for our communities, and of course we can change them if we want to, but there are many places that have zoning ordinances that limit the construction of multi-family homes, and almost every affordable housing complex needs to be a multifamily home. It’s very hard to do this for single family possibilities. 

(07:22):

The third possibility, a third issue, is the local development capacity. Are there good nonprofit organizations? Are there good housing authorities? Occasionally a good for profit organization, that know how to do this work? Fourthly, you need an adequate number of professionals. I wouldn’t have said this a few years ago, Sarah, but it’s becoming a bigger and bigger issue. Are there enough architects, lawyers, property managers and especially contractors these days, carpenters, electricians, plumbers who know how to build this kind of housing and know how to do it efficiently and at a reasonable cost. 

James Stockard (07:54):

And now we’re on item five. We have to have adequate financial subsidies. That is, is there money to do this? Because housing is a kind of stock that simply cannot be produced for a reasonable cost for people of low income. That is to say, take a fair construction cost, take fair property prices, take fair rents, take fair utility costs, etc., etc. and whatever you build, when you charge a reasonable rent for it, no gouging going on at any of these parts – a person of modest means simply can’t afford that cost. So it isn’t evil landlords. It is the cost of this product that keeps it from being available. And therefore you need subsidies. Usually on the development side, you need equity. That is, you need some kind of  subsidy that you don’t have to pay back. Low income housing tax credits is the best example right now. There are other kinds. Free land, for example, helps on that side. 

(08:47):

On the operating side, you typically need operating subsidies of some kind, something that will help you reduce the costs so that what you pass on to the resident is less money. And the third kind of subsidy is to give or provide a subsidy to the tenant themselves. And we have some of those – section eight housing vouchers are the most common type of that these days. There just aren’t enough of them. Again, we have about one for every four people who are eligible. 

(09:10):

Six, finally, I would say another barrier for building affordable housing is finding enough sites or buildings that are suitable for construction or renovation into affordable housing. Some places are just so tightly built and the land costs are so high it’s hard to build more housing. So somewhere in every community, those six factors play some kind of role in making it hard to build affordable housing.

Sarah Johnson (09:32):

Right. Thank you for sharing that, Jim. Now, can you speak to innovative ideas you’ve observed that are being implemented in the affordable housing space that show promise?

James Stockard (09:42):

Yes, sure. There are creative people all over the country at every level of government and in the nonprofit world who have found some ways of doing this. A common one, that is, it’s part of the solution – affordable housing trust funds that are usually local, sometimes states have affordable housing trust funds. The problem with the trust fund is how do you finance it? In Cambridge, for example, we have three sources of funding for the Affordable Housing Trust Fund. Some city budget, some budget from a couple of state programs that we have, and some budget from what we call incentive zoning ordinance, which says that people who are building non housing activities in our city have to pay into a fund, which goes to the Affordable Housing Trust Fund, since they are increasing demand by bringing more employees to town, they need to help us keep the rents down by building more affordable housing. 

(10:30):

So those three sources of funds provide us with almost $20 million a year that we can use to build more affordable housing. And so that’s an important innovation. However, the critical part is how do you fund it? Just creating the fund won’t help if you don’t have the funding. The second innovative issue is not so new, but inclusionary zoning ordinances work in certain markets. That is, where the rents for market-rate apartments are high enough. One can require that if a developer wants to build any homes like that, a certain percentage of those homes have to be made available to low and moderate income citizens. And usually that number is somewhere between 10% and 20%. 

(11:08):

And that’s an internal subsidy that we’re saying to the developer, you’re making so much profit on the 80% of your homes that you’re renting at those market- rate rents, that you can afford to rent some of your homes at a very low cost to people that have modest income levels. And that works well in hot markets.  It doesn’t work so well where the rents for the market-rates aren’t very high. But in hot markets, which are some of the places where we have our worst affordable housing problems, it’s a really good solution. 

James Stockard (11:37):

The third creative thing is linkage fees, like the ones I just mentioned. That is if you’re going to build office space, if you’re going to build a hospitality space, if you’re going to build laboratory space, that’s going to attract more people to work in your new facilities. Some of those people are going to want to live in our town. They’re going to increase demand. They’re going to drive prices up. The important thing for your listeners to remember, Sarah, is that housing costs and housing price are two very different things. Cost is brick and mortar, two by fours, labor rates, land cost, etc. And price is an entirely different number. It’s entirely controlled by supply and demand. So if you can build a home for a certain amount of money in a town where nobody particularly wants to live, as long as you can rent it for a little bit more than those costs, that price will work for you. 

(12:24):

But in a town like Cambridge, where I live, demand just can’t keep up with the supply. So if you’re going to add more to the demand, you have to give us some money so we can add more to supply. And so that’s – in our town we call it an incentive zoning ordinance. It’s sometimes called a linkage fee. 

(12:39):

Here’s a fourth idea- several cities across America have developed a change in their zoning ordinance, which, for example, eliminates single family only zones. It doesn’t mean you can’t build a single family home someplace, but it does mean that if somebody wants to build 2 or 3 or 4 homes on that piece of land, they can do that also. That means that the cost of that land will be slightly reduced for the person that wants to build more homes, and therefore, those homes can be a little bit less expensive than if  one home has to bear the entire cost of buying that piece of land. Those are pretty new and creative issues, and we haven’t seen yet how well they work. Minneapolis is the most famous place that’s tried that. We’re waiting to see how it’s working. Is that going to increase the supply of affordable homes? 

James Stockard (13:23):

In Cambridge we’ve done a really creative thing that I like a lot. It’s called an affordable housing overlay. This is a zoning ordinance that lays over the entire city. So it applies to every single square inch of land in our city. And what it says is if you’re building 100% affordable homes, then you can build more densely. Actually, it says, well, highly. In the neighborhood where the zoning ordinance says you can only build three stories, under the affordable housing overlay, you can build five. On the avenues where housing is allowed to go, by the normal zoning, a little higher, like seven stories, you can go to ten stories. And so the idea behind this scheme is, land is very expensive in Cambridge, and if a market rate developer is going to buy it, they can only build three homes on this piece of land. But if you’re an affordable housing developer, you can build higher and more. And maybe you build ten homes on this piece of land. So you have ten homes over which to spread the cost of the land, whereas the market rate developer only has three. 

(14:25):

And that’s likely to mean that our nonprofit developers in our housing authority can be in the game, bidding for that property. Doesn’t mean they’ll win every bid, but it gives them a chance to be competitive in bidding for pieces of land and therefore perhaps find more places where they can build. It’s very creative. I haven’t heard of that happening anywhere else. It’s called an affordable housing overlay. It also has some nice additional features, for example, under the affordable housing overlay, if you’re close enough to a subway stop or a large bus stop at Cambridge, you can eliminate parking, which is a very big help in terms of developing a piece of land, because it gives you much more flexibility on what you can build on that piece of land.

James Stockard (14:57):

I do like, I mentioned it earlier – chapter 40 B – which is our law in Massachusetts that says if your city and town hasn’t built at least 10% affordable homes, and a developer comes to town to add some affordable homes to your stock, if you turn that developer down, or if you put so many demands on him or her for what their property has to look like, that they think that you have made it economically unfeasible, the developer can take that case to the state, and the state can actually override local zoning. I like that idea of our state saying affordable homes  have to be built all over the state, 10% in every community. And if you’re not willing to do that, we’re going to step in and override your local zoning. 

(15:37):

Oregon has a version of this, which is somewhat different. They require cities and towns every ten years to measure the amount of affordable homes they have in their community. They have the same 10% requirement, and what they must do is zone enough land for multifamily housing that if a developer showed up to build affordable homes there, they would be able to do it as of right. They don’t have a state override, but they have this requirement that you zone properly. And when they come back in ten years and say, well, look, part of that land that you zoned for multifamily got bought up and used by market rate developers, so you’re going to have to zone some more land in order to have room for the 10% that you’re supposed to have. I like both of those areas. I like the idea of the state taking a stance on this.

(16:20):

There are some other ideas. Some states have tax programs that mimic the federal low income housing tax credit. That’s another way to put equity into building some of these homes.  Four states in the country have a state financed public housing program. I think it’s another really good idea. States are closer to where people are that need to know their needs, are closer to being able to say, this is a community where some more public housing will work, that’s a community where it’s not so valuable. So I like state financed public housing programs. The states I know that have those programs haven’t financed them a lot in the last few years. I wish they’d grow them a little bit further. 

James Stockard (16:54):

There are cities that have very good accessory dwelling unit policies, ADUs, smaller houses, almost tiny houses that go in the back of somebody’s property or they turn their garage into a small home. It used to be called granny flats in some places. But allowing those to be built- they make a low impact in neighborhoods, but they can increase housing stock a good deal. And if they’re handled right, they can be made affordable. I myself, Sarah, am a fan of manufactured housing in various forms, panelized containers, other ways of building affordable housing off site, and then bringing it to the site and installing it. It saves certain kinds of funds, doesn’t make it absolutely inexpensive, but it does save certain kinds of funds and is a much more efficient way to build. And it cuts down on the interest cost during the construction period. So I like manufactured housing, and I wish our cities and our states would be more aggressive about making that possible. 

(17:46):

And the last thing I’ll say is in some ways a little bit radical, Sarah, but it’s okay, I’m going to say it anyway. And your listeners can fight with me if they’d like to. In towns where affordable housing is lowest supply, that is where rents are very high and people of modest means are having a very hard time finding a place to live, I’ve come to the conclusion that having rental housing for anybody other than people at the very high luxury end,  in the hands of private, for profit owners, it’s just never going to work. They are not going to leave money on the table. And if the supply and demand makes the rents $3,500 a month as they are in Cambridge right now, that’s what they’re going to charge. So therefore, I think a creative idea and Austin, Texas has tried some of this, and we’re beginning to think a little bit about it in Cambridge, I would like cities or housing authorities to find ways to buy that private stock from the private landlords and then turn it into affordable housing. We’ve done that. 

(18:39):

The housing authority in Cambridge has done that with at least two properties, where they have bought a building from an owner and used the proceeds from those market-rate rents to finance the purchase. And then over time, they have substituted low-income residents with a section eight voucher for the people who are moving out. They haven’t evicted anybody. It’s been a slow process, it takes maybe ten, 15, sometimes 20 years before that property is 100% affordable housing. 

(19:06):

But that kind of process of turning much of our rental housing stock from private ownership into public or nonprofit ownership is a way that we can add stock to our towns without going through the construction process, without upsetting neighborhoods by brand new buildings in their neighborhood, which might be a little higher or a little more dense than they’re used to. These are taking existing buildings the neighborhood has already gotten used to, and turning them from market-rate housing with high rents, into affordable homes with lower rents. I like that idea. It’s a little bit dramatic, I understand that, but I would be supportive of an idea like that. And I’d say at least Austin has started trying that kind of thing, and Cambridge is working on it, and I’m sure there’s some other communities in the country that have tried that or are trying it or thinking about that I just don’t know about.

Sarah Johnson (19:51):

Well, thank you so much, Jim, for sharing that. I have actually been hearing more about the last innovation you proposed. And so hopefully more cities will catch on and implement that as a solution. Again, thank you so much for joining us. It’s been a pleasure to learn more about your work at Stockard, Engler and Brigham, and get your insights on some of the key challenges and potential solutions to our nation’s affordable housing crisis. 

(20:13):

To our listeners, thank you for tuning in, and don’t forget to subscribe to the Pathway Podcast to get alerts on new episodes featuring thought leaders working in housing, environmental conservation, climate change and water security.