Building more unsubsidized housing is key to improving affordability

Many of Connecticut’s leaders have grown increasingly frustrated with 8-30g, the state’s affordable housing law, in recent years. It’s not hard to see why.

Under the statute, if a town’s housing stock is not at least 10% “affordable,” developers can override local zoning regulations to build affordable housing, unless the town can give a compelling reason why a development shouldn’t be allowed.

But the phrase “affordable housing” is less simple than it seems. The U.S. Census Bureau considers housing to be “affordable” if a household pays 30% or less of its income on housing costs (including rent or mortgage, property taxes, home insurance and utility costs). Under this definition, more homes are “affordable” than a decade ago. Which makes sense given that the number of homes built in Connecticut has outpaced the rate of population growth since 1970. For all the talk of a “housing crisis,” there appears to be none as defined by the Bureau.

But Connecticut’s housing market has had to overcome some very counterproductive housing policies. When the General Assembly passed 8-30g in 1989, it redefined “affordable housing” as housing built or maintained under one of four specific types of government subsidies. Housing that did not receive an 8-30g-eligible subsidy did not meet this new legal definition of “affordable.” As a result, it became virtually impossible to distinguish between the state’s statutory definition of “affordable housing” and housing that falls within a low-income household’s means.

Through this ambiguity, subsidized housing began to seem like the only option to make housing attainable for those of modest means. Consequently, for more than three decades, 8-30g has introduced two perverse incentives to Connecticut’s housing market.

First, it assumes that all towns compete on an equal playing field when it comes to building subsidized housing. This is verifiably untrue. Under 8-30g, towns are able to consider only four types of subsidized housing as “affordable housing” ( four maps within Yankee Institute’s latest report, “Getting a Handle on Affordable Housing,” illustrate this). While some towns can easily get all four types of subsidies, others can only receive funds for one or two types of subsidized housing, due to high median income levels or population density.

Second, 8-30g irrationally treats all unsubsidized housing as if it were harmful to Connecticut’s housing market. Unsubsidized, low-cost homes and opulent mansions alike put communities further behind their 10% thresholds, because the only homes that 8-30g counts favorably are the subsidized homes. This means a town will have to build one subsidized home to avoid losing ground on 8-30g for every 10 unsubsidized middle-income homes built.

It is little wonder that the bulk of 8-30g challenges occur in a few of the same municipalities — most municipalities have never been taken to court by a developer. Many towns are simply not economically attractive enough for a developer to consider building there, even with the “sweetener” of (very narrowly applicable) government subsidies included.

What types of housing should be added to 8-30g to boost the choices available to those of modest means? Our Yankee Institute report details unsubsidized options including starter homes, single-room occupancies and

It is common sense to start counting these options as affordable under 8-30g, because they make housing more attainable for low-income residents.

Including these options will allow municipalities to count homes that have already been built toward 8-30g’s 10% threshold. Better still, it will allow developers  — who may reject building on certain municipal sites because of unduly rigid regulations  — to consider housing that would more easily fit within an individual town’s character. Greater flexibility in building will allow better homes to be built, satisfying town officials, developers and most importantly, prospective owners and renters.

But 8-30g is not the only barrier to building more housing. Construction costs have increased dramatically in recent years, which in turn drives up new housing prices. To counter this trend, Connecticut can start recognizing out-of-state credentials for tradespeople, making it easier to hire apprentices, stop paying prevailing wage for subsidized housing, and striking out energy efficiency measures in the building code that have increased the cost of a typical single-family home by around $30,000 in the past 15 years.

Of course, once a family has moved into their new home, capping the growth of property taxes would instantly makes homes more affordable— as will reducing the other taxes that make Connecticut the second-most taxed state in the country.

It’s important to ensure that there’s an adequate supply of housing for the economically vulnerable among us. But throwing unwieldy subsidies at housing has not made it more “affordable” under any definition over the past three decades. Common sense reforms — like rethinking regulations that make building needlessly expensive and broadening 8-30g’s definition to include various types of unsubsidized but truly affordable homes — would be a welcome start.

David Flemming is Director of Policy & Research at the Yankee Institute.