19.8 Case Study: How Local Governments & CDCs Partner to Create Affordable Housing

Affordable housing refers to housing that is reasonably priced, so people with low to moderate incomes can afford it without spending too much of their earnings. Many communities lack enough quality affordable housing, making it hard for families to find safe and stable places to live. Creating affordable housing is important because it ensures that everyone has access to a decent home, which is essential for their well-being, stability, and overall quality of life.

Local governments and community development corporations (CDCs) often join forces to address the critical need for affordable housing in their communities. This partnership leverages the strengths and resources of both entities to create sustainable and impactful housing solutions. Here’s a step-by-step look at how such a collaboration can unfold:

Initiating the Project

A CDC identifies a need for affordable housing in a specific neighborhood and proposes a development project. The CDC might plan to build new housing units or rehabilitate existing buildings to provide more affordable options. Recognizing the potential benefits, local government officials agree to collaborate on the project. They will then hire architects, contractors, and maybe a general manager. Some CDCs need more help, so they partner with developers.

A real estate developer is a professional or company involved in the planning, financing, construction, and management of real estate projects. Developers often take the initial risk by purchasing land and developing it into a profitable venture, working through various stages such as securing financing, obtaining necessary permits, and overseeing the construction process. They play a crucial role in shaping the built environment and contributing to community growth and development. But sometimes they need government and CDC support to initiate projects.

Zoning Adjustments

One of the first steps involves adjusting zoning regulations to accommodate the new housing development. Zoning refers to the division of a city or municipality into designated areas for different purposes, such as residential, commercial, industrial, and recreational. The local government works with the CDC to change the zoning of the targeted area, if needed, ensuring that it is suitable for residential development. This might involve changing the designation from industrial or commercial use to residential use, making it legally permissible to build housing units.

Providing Tax Incentives

To make the project financially viable, local governments can offer various tax incentives. These might include:

• Property Tax Exemptions – Reducing or eliminating property taxes on the land where the housing will be developed, lowering the overall cost for the CDC.
• Sales Tax Exemptions – Exempting sales tax on building materials and supplies needed for the construction, which helps in reducing the project’s expenses.

Federal, state, and local governments provide other tax incentives such as:

• Federal Historic Rehabilitation Tax Credits
• State Historic Rehabilitation Tax Credits
• Low-Income Housing Tax Credits
• New Markets Tax Credits

These incentives can significantly reduce the financial burden on the developer, making it easier to move the project forward. Many affordable housing developments use multiple sources of public tax incentives to make projects work.

Infrastructure Support

Local governments can also provide crucial infrastructure support to enhance the project’s success. This support might include repaving streets, building new sidewalks, upgrading water and sewer lines, and ensuring adequate street lighting and public transportation access. These improvements not only support the new housing development but also benefit the existing community by improving overall infrastructure.

Streamlining the Permitting Process

Permitting is the official process of obtaining authorization from the local government for construction and development activities. Local governments can streamline this process for CDC projects by simplifying application procedures, reducing fees, and expediting review times. By minimizing bureaucratic obstacles, local governments help ensure that housing projects move forward more quickly and efficiently, allowing residents to access new affordable housing options sooner.

Ongoing Collaboration and Support

Throughout the development process, local governments and CDCs maintain close communication and collaboration. Regular meetings, progress reports, and joint problem-solving sessions help address any issues that arise and keep the project on track. This ongoing partnership ensures that both entities are aligned and working towards the common goal of providing affordable housing.

This case study illustrates how local governments and CDCs can effectively partner to create affordable housing. By adjusting zoning regulations, providing tax incentives, offering infrastructure support, and streamlining the permitting process, local governments can significantly enhance the capacity of CDCs to develop and deliver much-needed housing solutions. This collaborative approach not only addresses the immediate need for affordable housing but also contributes to the long-term stability and vitality of the community.

It’s also important to note that nonprofits like Cleveland’s Habitat for Humanity and Laura’s Home fund, build, and refurbish affordable housing for families. Both organizations are led by Levin College graduates. And both work with local governments and CDCs.