This post was written in collaboration with our friend Joel Dixon of Urban Oasis Development. Learn more about Joel and UOD’s work here.
The content in this post came from a recent KUA presentation to the English Avenue neighborhood association. For a deeper dive into the analysis discussed below, take a look at the presentation PDF here.
Over the past year, KUA has been working with the English Avenue Community Development Corporation and local developer Urban Oasis Development to provide affordable homeownership units by enabling housing choice on a vacant lot in the rapidly gentrifying English Avenue neighborhood of westside Atlanta.
The aim of the project is to minimize displacement by providing attainable home ownership options for residents in the neighborhood, and to use proceeds from unit sales to fund more affordable housing initiatives within the community. In order to achieve this economically sustainable infill model, we need the ability to provide enough housing to be both affordable and profitable. This is easier said than done in a neighborhood where nearly all households earn significantly less than 80% of the AMI (area median income), and in a city and economy where the costs of providing housing are rising rapidly.
In order to achieve these goals, the project requires a rezoning. In a city where over 60% of land is dedicated to single-family-only-zoning, a rezoning is typically required to unlock housing choice. However, the English Avenue neighborhood recently underwent a neighborhood-wide rezoning effort (in 2018) with similar goals in mind: to increase housing choice, housing affordability, and home ownership while minimizing displacement. This was formalized through the Westside Land Use Framework. With this process still fresh in English Avenue neighbors’ minds, there were a lot of questions as to why our project goals weren’t achievable under the updated zoning. After all, we had the same goals!
In our talks with the neighborhood and the city about why a rezoning is necessary, we developed the following presentation to help explain the mismatch between goals, zoning, and the costs associated with delivering non-subsidized affordable housing. It is often the case that zoning, even when applied with the best of intentions, precludes the very goals it is trying to achieve. That’s because in typical community engagement discussions about goals, land use and zoning, the aspect of cost is often left out of the conversation. In addition, a history of poor communication and outcomes have created a certain baseline wariness and animosity when it comes to discussing development in neighborhoods like English Avenue. However, when we don’t factor in the financial side of delivering our goals, how can we know if our goals are actually achievable? Or HOW we can achieve them? Our team had local ownership/vested residents (English Avenue CDC) along with local developers and long-time westside residents (Urban Oasis Development). We needed to get at eye level with our neighbors and have authentic discussions with our community to discuss the WHY and HOW, as well as reinforce that there were common objectives that needed to be worked through. While policy is set at the government level, there is a need at this point in rezoning conversations to better include our neighbors—real people in the community—so we can align on policies that ensure affordable housing and healthy communities for ALL.
The Scenarios:
We compared four scenarios for delivering housing and the financial inputs and outcomes associated with each:
1. Single-Family House: The first approach provides one house on one lot, which is the standard allowance for most of the city’s neighborhoods. This is provided primarily as a baseline comparison.
2. ADU: The second approach adds an accessory dwelling unit (ADU), which was recently allowed in some single-family zoning categories in the city (including English Ave).
3. Subdivision + ADUs: The third approach subdivides the existing lot into two smaller lots, allowing for two single family homes and two ADUs. This is allowed under the new English Ave zoning, and provides two fee-simple homes and two potential rentals. Interestingly enough, this option could have achieved the desired goal and NOT required rezoning except current ADUs are not allowed to be fee-simple (enabling home ownership).
4. Small Lot Subdivision: The fourth and final approach subdivides the existing lot into four small lots, allowing for four fee-simple homes. Because of the lot sizes and the number of units, this approach requires a rezoning and a land use change. Even though it provides four detached single family homes, the number of units is considered a “multifamily” approach.
The Outcomes:
In the single-family-only scenario, we get one moderately priced home with a moderate down payment and monthly payment. However, these moderate payments are still well above what the average neighborhood resident could afford. Additionally, the total cost of the house may face appraisal challenges due to its high cost relative to surrounding homes.
Adding an ADU significantly raises the cost of the home and the down payment; that’s because there is a whole second unit to finance. However, monthly payments become more affordable if the ADU is rented, as the rent from the ADU offsets some of the mortgage costs. The ADU can be rented at an affordable rate, but would not provide any additional home ownership opportunities. And remember, as the price of the home goes up, potential appraisal challenges also increase.
Subdividing the lot into two lots provides twice as many housing options, and increases the affordability factor. While the monthly payments are even more affordable (if the ADUs are rented), the cost of the homes and the down payments are still incredibly high (leaving us with the same problems as the previous scenarios).
Finally, subdividing the lot into four small lots with four fee-simple homes drastically lowers the cost of the homes and the down payments, and provides affordably monthly payments. It provides just as much housing as option three, but doubles the opportunities for home ownership and wealth building at price points that are actually attainable to neighborhood residents. In short, this project provides an opportunity for incredible affordability with minimal outside subsidy; the only thing standing in the way is the zoning and land use. If we can achieve incredible affordability with minimal outside subsidy in a way that respects the existing form and character of the neighborhood, why wouldn’t we change the zoning to allow that?
Another interesting thing to note is that scenarios three and four are physically the exact same concept (providing four small units). However, the ability to subdivide to have four for-sale units as opposed to two for-sale and two rental units makes all the difference in the affordability of the homes. This ability is only available with a rezoning at this point, but we are hopeful that the city is working towards a solution where ADUs can be sold fee-simple in the future.
Conclusion:
What we found is that while the first three scenarios provide moderately priced housing in terms of monthly mortgage or rental payments, all three have high upfront costs that require significant down payments. Large down payments, even when down payment assistance is an option, typically create barriers for folks without easy access to capital. This means that these three options would not be attainable for most neighborhood residents. Consequently, it would be people from outside of the neighborhood, instead of long-time residents, who would be able to afford the down payments and reap the benefits of an affordable mortgage and wealth building. It’s not that newcomers are bad, but this is gentrification and displacement in action.
The only option that allows for affordable down payments, affordable monthly mortgage payments and maximizes wealth building opportunities for existing residents is scenario four – the scenario that requires the rezoning.
Financial math aside, it is also important to consider the human side of this conversation. The need to incorporate more homeownership units is not only about lowering costs, it’s also about increasing quality of life. We are not providing enough affordable housing units to meet the demand, and this unmet demand is deeply impacting real people in the westside and across the entire the city of Atlanta in a way that will be felt for generations. An upcoming post in this series will really amplify why the distinction between one affordable unit vs two affordable units vs four affordable units is not insignificant. Giving up those affordable units across 60% of our land usage makes a big difference in the lives of residents in English Avenue and elsewhere.
We hope this presentation helps illustrate how affordability and gentrification are directly tied to our zoning, land use and subdivision codes, and how access to capital factors heavily into housing choice. We also hope that it helps illuminate the mismatch between our commonly held goals and hopes and our current tools and policies. Without the flexibility to provide housing choice, particularly for-sale options, we will continue to see affordability and displacement issues on the rise, especially in our most vulnerable neighborhoods. Understanding these links and advocating for changes that will best promote community goals is critical to providing the housing options that we need and want in our cities and neighborhoods.