Last Thursday, as the seven city council members offered their thoughts on the Kirkwood Apartments project, something seemed to be afoot. The approval of the project was a forgone conclusion. The developers had crossed their t’s and dotted their i’s and had come up with a proposal in full compliance with the city’s code. The votes already in hand, I hadn’t anticipated anyone would have much to say beyond the standard airing of grievances from the usual suspects. But then, as member after member spoke, the vote that was marketed as a boring bureaucratic approval turned in an interesting and unexpected (and at times contentious) direction. The council members would vote yes, sure, but they also wanted something more. What they wanted was to touch the political third rail of Kirkwood politics. What they wanted was affordability.
Council member after council member asked the developers to try and make some units affordable or at least attainable. Council Member Duwe defined both of those terms and then tried to press the developers into committing to including them in the project, which she called “interesting.” Member Zimmer asked the developers to consider using lower-quality construction materials to keep some of the units at a lower price point. The development team ducked, dipped, dived, and dodged entreaty after entreaty and demand after demand.
In a word, watching the meeting was awkward. Everyone seemed to want affordable housing, but no one seemed to know how to get it. The politicians came across as looking feckless; the developers came across as looking like assholes, even though there was very little either could do.
But affordable housing is a hard, complex game, with its own rules, its own teams, and its own players. It makes sense that, in our first time playing, we struck out. Knowing what we’re after is half the battle, now we just need to head back to the drawing board and come up with a new game plan for how to get it.
Before we do that though, I want to talk a bit about where all this sudden passion had come from. And it seems the answer is that it’s mostly coming from a bunch of old ladies. It’s coming from Kirkwood Attainable Housing.
Kirkwood Attainable Housing’s Big Debut
In short, Kirkwood Attainable Housing (KAH) is a group of (mostly) middle-aged and senior Kirkwood women who (mostly) met through a group called Women’s Voices Raised for Social Justice. At the first meeting I logged into, most of the members introduced themselves by way of the church they attended and very few registered having had much particular prior interest in land use policy, urbanism or development at all.
Instead, KAH seemed to have been borne simply out of a shared desire to further the cause of social justice, and in Kirkwood, they came to the conclusion that tackling social justice, at least in part, means tackling the issue of housing.
Last Thursday, it became evident that they had caught some pretty important ears. The question is now that they have those ears, what should they do with them? To answer that question, we first need to distinguish what exactly we mean by attainable housing.
Attainable Housing
Since I started writing The Kirkwood Gadfly in 2017, the blog has focused on making Kirkwood more attainable. It has also focused almost exclusively on achieving that attainability via the supply side of housing: How can we build enough homes in Kirkwood that supply equals demand and prices stabilize or, ideally, fall.
Under that paradigm, however, even success beyond my wildest dreams would mean some people would never be able to afford to live in Kirkwood. The zoned-for capacity of the city will likely never rise fast enough to meet the full demand to live here, so as demand outpaces supply, we’d expect the city and it’s schools to become an increasing exclusive enclave unless some homes were set aside for lower incomes. Even if supply eventually did catch up with demand and rents really did start to shrink, eventually we’d reach a low enough rental price that developers would stop being incentivized to continue to develop new homes. The profits simply wouldn’t be there. For people whose incomes fall on the wrong side of this equation, the market is not efficient and a different set of tools really are needed.
Those tools basically boil down to subsidizing the demand for housing, and subsidized housing is generally what we mean when we speak of capital-A capital-H affordable housing.
Attainable housing, at least as I understand it, means the marriage of these two concepts: To make Kirkwood more attainable, you must both increase the supply of housing and, for the people who are still falling short of achieving that dream, subsidize it as well. Calling for affordable housing specifically might be a political third rail, but calling for attainable housing feels like an idea the whole community can get behind.
Market Rate Housing Still Priority
I haven’t talked about the demand side of the attainable housing equation much on here because the activity seemed purely academic. I’m interested in the politics of the possible and trying to think of a politically viable way to bring explicitly affordable housing to Kirkwood seemed like an oxymoron. When every new luxury market-rate apartment buildings faces fierce backlash, the odds that the public and their elected representatives on City Council would acquiesce to units set aside specifically for the poor (and all the stereotypes that accompany them), seemed like a dead-end way to achieve real gains on the housing front.
And to a certain degree, I still think that’s true. Adding to the housing supply is still the most important thing we can do. If we squeeze all the unsqueezed juice out of the zoning-lemon, it would leave Kirkwood (and the entire region) a dramatically more equitable place while simultaneously unlocking the kind of unrealized economic growth that lifts all boats. Allowing more homes to be built in Kirkwood really does mean you are improving the attainability of Kirkwood, one unit at a time. Keeping a laser like focus on increasing supply still should be our number one priority. But if there is political momentum to achieve some affordable units while we’re at it, we should capitalize. We just have to make sure we’re smart about it and we’re not pitting the two ideas against one another.
Rigorous Policy is Needed
The question of how, specifically, Kirkwood can help to subsidize housing and achieve this immediate attainability for lower income people is incredibly important. As I just said, we are working within incredibly tight political constraints, but we’re working within incredibly tight economic constraints as well. Getting the finances to pencil-out for housing developments is incredibly difficult on market rate units, and even more complicated in rent-subsidized developments. The money developers lose out on by having a lower rental income has to come from somewhere else or they won’t be able to get financing to acquire the land and construct the project. The big question where to find that extra money. And the answer is that it all comes down to leveraging the granddaddy of all housing subsidies: The Low-Income Housing Tax Credit.
Low Income Housing Tax Credits
To put it as simply as possible, we need more Low Income Housing Tax Credits projects in Kirkwood. LIHTC (pronounced “lie-tech” in housing jargon), is a federal programs that issues tax credits to developers in exchange for setting some of their units aside for people making below a certain income level. Those developer then trade those tax credits to banks (for whom they are much more valuable), and in exchange, banks help to finance the projects.
Developers have three options for how they organize the affordability of these projects based on combinations of two factors: what percentage of the units will be made affordable, and just how affordable those units will be (i.e. who will be eligible to live there —as measured by the percentage of the Area Median Income (AMI) they make— and the corresponding amount of Fair Market Rent (FMR) those tenets will be expected to pay). Those three options are as follows
- 40% of the total number of units affordable to persons at 60% of AMI; or
- 20% of the total number of units affordable to persons at 50% AMI; or
- 40% of the total number of units are affordable in a range of 20-80% of the AMI, so long as the average is no higher than 60% of AMI
Because the AMI for a family of four St. Louis is $97,200, if a developer picked Option 2 and received LIHTC, 20% of their units would have to be set aside for families making below $48,600 (HUD, the federal agency responsible for administering the program makes a couple of additional adjustments that make the math slightly more complicated that that, but not much).
Those low-income families are then only required to pay what’s known as the Fair Market Rent (FMR), which is 30% of their income. Again, there are some more adjustments that come into play here that make the numbers a little fuzzy, but basically, that means that a family of four making exactly $48,600 would only have to pay ~$1,000 per month in rent for a two-bedroom apartment.
LIHTC is the single most important tool in establishing low-income housing nationwide and has been responsible for the financing of more than 3.44 million units since the program was established in 1987. The problem is that very few of these LIHTC projects have found their way to Kirkwood.
LIHTC in Kirkwood
Kirkwood has five LIHTC projects that were built from 1987-2014, all of which are located in Meachem Park. Kirkwood also has several income-restricted homes that are only available to seniors like Concordia House, Rose Hill House, and Fillmore Place/Life Skills, the exact details of which have been tougher to track down, but are very likely to be LIHTC projects as well. Kirkwood House, alternatively, is full-fledged public housing owned and administered by Kirkwood’s Local Housing Authority.
The fact that non-age-restricted affordable housing is completely barred from all portions of the city besides Meachem Park, is really bad, but it is not surprising. LIHTC is systemically concentrated in the country’s poorest neighborhoods, with elderly LIHTC slightly more equitably distributed thanks to the reduced level of backlash the elderly poor seem to inspire locally compared to their younger counterparts.
This fantastic ProPublica piece uses Connecticut’s LIHTC projects as a case study to explore the exact political and economic mechanisms through which this segregation occurs, but the patterns revealed are repeated in broad strokes across the country, including in Missouri.
Missouri’s LIHTC allocation is distributed by a state agency called the Missouri Housing Development Commission (MHDC). MHDC picks which projects receive the credits via the Qualified Allocation Plan (QAP, pronounced Kw-app). Developers apply for LIHTC for specific projects using the QAP and then MHDC scores the applicants and distributes credits to the projects scoring the highest.
Kirkwood has some advantages and some disadvantages when it comes to QAP scoring. On the plus side, because of our low-poverty rate and good schools, Kirkwood qualifies as an Opportunity Area. Projects proposed in Opportunity Areas are given priority because it’s good to give poor people access to good schools and good jobs and it’s also good to integrate communities.
Unfortunately for us Kirkwood housing advocates, the QAP also puts tremendous value on local support for the project. Because tax credits are limited and valuable and residential development takes a long time to plan and finance, you don’t want these credits getting tied up in the approval process and going unused while it gets sorted out. Our zoning and political environment makes that support much more of an unknown here than it is in places lower-income communities. That uncertainty discourages developers from proposing projects here in the first place and make the ones that do get proposed here less likely to gain approval either from MHDC or the city.
Perhaps even more importantly, financing affordable housing is much more expensive in Kirkwood than it is in other places because our land is so expensive. Any given lot in Kirkwood is much more valuable than an equivalent lot in Florissant or Oakville. More valuable lots are more profitable to developers. That’s even more so true of our developable lots in Downtown, where any given lot could be worth millions to developers that would cash-in if they could pull off something like The James.
The developers of affordable housing have to out-bid every other person with an idea of how to profitably use the land. Kirkwood’s mission, if we want to see affordable housing, is to make rules that, when paired with LIHTCs, tilt the deck in favor of these affordable developers so that affordable housing is the most profitable use of the land and they can win those bidding wars. There are two primary methods local communities have at their disposal to tilt that deck.
Tax Incentives
Tax abatement allows developers to avoid a percentage of their tax liability in exchange for making some units income-restricted. New York City long had a program known as 421-a that did just did this, setting a schedule for what percentage of units had to be held affordable at which AMIs in order to receive full property tax abatement for 25 years. The problem with running a variation of this scheme in Kirkwood is two-fold:
The first issue is implementation. The majority of property taxes in Kirkwood are levied by Kirkwood School District rather than the city itself. The School Board isn’t going to vote to defund themselves (nor should they) and the boundaries of the Kirkwood School District are also not contiguous with the city of Kirkwood which makes the idea even more unviable.
Even if you considered abatement of just the portion of the property tax that the city levies in exchange for affordable units (something that would seem to require the establishment of an Urban Development Corporation and the decleration that a portion of the city was “blighted” under state law), or a more creative approach (perhaps sales tax abatement (TIF) for ground-floor retail or fee/permit rebates for affordable projects), I think it unwise to forego existing tax revenue in a town that does not seem very inclined to raise taxes on itself. Less tax revenue inherently means lower-quality services and lower quality services are not a good way to convince the general public of the merits of affordable housing. So I think tax incentives are out.
Development Incentives
The more viable option in my opinion would be a rewriting of the zoning code to allow for more profitable development of land at the hands of affordable developers. By allowing developments with an affordable component —say 20% of their total units affordable at 80% of AMI, (or even 120% which you could market as “workforce housing”)— to receive additional allowances in terms of height, density, or reduced parking requirements, we could help restore the profits lost to the forgone rents. Developers will lose some money by charging lower rents for the income-restricted units than they otherwise would, but they’ll make up for that lost money with more units (known as cross-subsidization) or reduced costs in the form of parking.
I don’t know how big these bonuses would need to be to move the needle (I envision something like a 10ft height bonus, a 15% density bonus, and perhaps a reduction in the minimum parking requirement to .75 spots per affordable unit in exchange for adhering to one of the three LIHTC schedules), but this approach has a few huge advantages: 1) The city has the power to do it (and already has similar tools in place like height bonuses for mixed-use buildings), 2) it adds to the city’s coffers rather than taking from them 3) it achieves goals that would be worthwhile on their own: More homes in Kirkwood, less traffic.
Politics of the Possible
I think this is a win Kirkwood Attainable Housing can achieve. Politics is the strong slow boring of hard boards. It takes both passion and perspective. KAH has passion, and they’re working very diligently to achieve that perspective. Time to get boring.