Detroit's inclusionary housing ordinance, explained

Last September, housing advocates and members of city council stood outside the Spirit of Detroit statue downtown for an announcement about the just-passed Inclusionary Housing Ordinance (IHO).

The ordinance, which stipulates that housing developments subsidized with over $500,000 in city or federal funds must include affordable housing, was a milestone moment for the city—a degree of housing equity had been enshrined at a time when property values and rental rates were booming. 

And yet, there was a noticeable amount of dissent at the announcement. Some developers thought that requiring affordable units would freeze development at a critical juncture. On the other hand, housing advocates, and even Mary Sheffield, the councilmember who shepherded the ordinance, thought the requirements were too lenient.

Half a year later, questions remain. Has the IHO had its intended impact? Who, if anyone, has been and will be affected by it? And, most importantly, is it sufficient to ensure mid- and low-income Detroiters will have housing options in the most desirable parts of the city?

Detroit's rental scene

Housing in Detroit today is not affordable for many of its residents. A little data proves this point. 

According to an analysis by the Federal Reserve Bank of Chicago, at some point this decade over half of Detroiters became renters. The average monthly rental price citywide in 2016 was $702—a number which has almost certainly increased since. In downtown and Midtown, rents are even higher.

Assuming a common recommendation that 30 percent of a household's income should go towards rent, individuals making $28,080 a year, or about 60 percent of the area median income (AMI), could comfortably afford that amount. (Area median income is determined by the Department of Housing and Urban Development and locally encompasses the Detroit-Warren-Livonia Metropolitan Statistical Area.)

Detroit's median income, however, is $28,099, meaning about half the population would struggle to save or pay off debts, have to forgo certain necessities, or barely scrape by to afford these rates. 

Many in Detroit's housing scene, including a broad swath of developers of multi-family buildings, recognize that average Detroiters cannot and will not be able to afford almost all the new market rate units being built without making sacrifices. 

See the right sidebar for a list of some of the multi-family developments underway in Detroit  --->>>



That's why, back in 2014, Sheffield convened experts and stakeholders to craft what would eventually become the Inclusive Housing Ordinance. Francis Grunow, an urban policy consultant who was part of those discussions, thinks it was wise of Detroit to get ahead of the negative consequences of gentrification. 

"If you look at examples from other cities that struggle with affordability like San Francisco, New York City, or D.C.," he says, "they would probably say from a policy perspective that they wished they had passed something years before."

Francis Grunow - photo by Marvin Shaouni

Sheffield points out how reasonable the IHO is—developers can waive the obligation on one building if they find a "substitute structure" and it only affects developers who receive subsidies. "The ordinance brings the City closer to delivering a real and tangible benefit for Detroiters for the tax incentives and public funds/assistance developers receive," she wrote by email.

Imperfect but important

While some have voiced concerns about the IHO's potential to inhibit development, there's little indication it's had that effect. A symbolic version of the ordinance took place in 2015 when Mayor Mike Duggan announced his goal that all new residential contain affordable housing. Since, numerous developments that voluntarily meet the city's affordability goals have been announced.
Richard Hosey
"The effect was already in place prior to the ordinance," says Richard Hosey, a developer and president of the Detroit Housing Commission who was also part of Sheffield's IHO working group. "The push from the mayor's office and city council let people know this is important, this is not going away. … Developers in 2010 knew the only way to get the bankers on their side was to build something of quality. Developers now know the only way to truly get the city on their side is to include affordable housing—even without subsidies."

Most of the debate around the ordinance relates to where the affordability line was drawn—developers must make 20 percent of a building's units affordable at 80 percent AMI. While that number may be considered affordable for the rest of Wayne County, that's still well above the median income in the city of Detroit. 

For that reason, the ordinance originally also included stipulations for units at 50 and 60 percent AMI. "Unfortunately," Sheffield wrote, "an amendment was proposed and the spread was eliminated by a majority vote."

While Sheffield was a little disappointed in the final outcome, many felt that given the competing interests and the importance of getting something done, the final result was acceptable. 

"I don't think it's unreasonable to subsidize people at that level," says Hosey. "These are folks who aren't thinking about buying a new Benz, but thinking rather, 'If I save everything, I should be able to retire.'"

Hosey adds that the solution to creating affordable housing options for people at every income bracket will come from a variety of sources, such as the growth and upkeep of affordable single-family homes (which make up 70 percent of Detroit's housing), and what planners refer to as "naturally occurring" affordable housing funded through federal programs like block grants. 

The Detroit Affordable Housing Development and Preservation Fund, also part of the IHO, will be another part of the solution. Funded through penalties accrued from developers who don't abide by the IHO guidelines and sales of city-owned commercial property, the fund will generate $2 million annually to use towards housing projects affecting people at 50 percent AMI or lower. Such projects could include making a building ADA compliant, preventing homelessness, or supporting the activities of a nonprofit that develops affordable housing, to name a few.

Another positive to take away from the process is the way the ordinance was systematically crafted. The city recognized a need, spent years engaging important actors in the field, then passed something accepted by most. 

"Is it perfect? No," says Grunow. "There are valid questions around providing quality housing for people at lower income brackets. But at the same time, everyone made an attempt to split the difference. … This was good example of how community interests and the city can work together on crafting something. Not everyone was 100 percent pleased, but at least everybody had some say in how it evolved and what it looked like."
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