Illustration by Vahram Muradyan

Illustration by Vahram Muradyan

With one quarter of all renters spending more than half their income on housing in the United States, as Harvard’s Joint Center for Housing Studies found in 2017, about 11 million Americans are one financial crisis away from homelessness. But the affordable housing problem is especially acute in urban areas, where entire tranches of the workforce—teachers, laborers, first responders, restaurant and transit workers, for example—are squeezed out of their communities by rising real estate prices. Mardie Oakes (MBA 2002), president of the nonprofit developer Hello Housing, points out that these people are critical to healthy communities: “Some portion of the housing market has to be free from speculation to ensure there’s a place for the people who are supporting the economy to actually live.”

Since 2005, Hello Housing has been crafting innovative ways to make that happen in the Bay Area, where median home prices sail north of $1 million. In Oakland, for example, the nonprofit used a little-known tool called the Chapter 8 Tax Sale to acquire 24 blighted, tax-defaulted lots that had amassed liens of up to $300,000. By partnering with the county (which sold each property for $13,500), the city (which released the liens), and mission-driven developers, Hello Housing is creating two dozen new affordable homes for sale, deeded to ensure they’ll stay that way in perpetuity.

“There was nothing straightforward about that project,” says Oakes, who brings experience in finance and development to the table, plus a degree in architecture and the ability to flowchart anything. “It takes figuring out where there might be opportunities, and then being willing to do the messy stuff.” Hello Housing’s next big challenge: helping lower-income homeowners add a second unit to their property, both to create financial stability and expand the housing supply in singlefamily neighborhoods. Here, Oakes takes your questions about zoning, displacement, and best practices for affordable housing.

Why is the focus on building affordable housing instead of allowing developers to build new higher-priced housing? If there was more high-priced housing in the market, wouldn’t other tiers become cheaper?
—Gene Pao (MBA 1997)

OAKES: We have to make it easier to build both market rate and affordable housing. For seniors, people with disabilities, and lower-wage workers, the cost to build simply cannot be covered by the rents they can pay—there has to be a subsidy of some kind. In regions like the Bay Area, middle-income rents can’t cover the cost to build either, so the result is a pipeline of luxury apartments. Meanwhile, the housing crisis is steadily moving up the income stream, and we have a growing “missing middle” with very few housing options and the virtual disappearance of the twoto five-unit density that historically made neighborhoods affordable to a broad mix of incomes. Modest increases in density within existing neighborhoods would improve the supply problem, which is driving our strategy to help owners add second units. That approach requires significant political will and a “Yes In My Backyard” (YIMBY) perspective.

Should we distinguish between the unemployed, the unemployable, and the worker who has a job but can’t make ends meet?
—Rick Holliday (MBA 1963)

OAKES: Yes, their needs are quite different. For individuals with mental illness or disabilities or who have experienced homelessness, we have learned that just providing an affordable place to live isn’t enough. The most effective models integrate supportive services to provide stability and reduce management costs for property owners. For example, a service provider can work with new tenants to create a monthly budget, ensure they pay their rent on time, and effectively navigate the emotional, physical, and logistical transitions that come with moving.

Do we need comprehensive reform to address issues related to land values?
—Dick Carlson (MBA 1961)

OAKES: It’s essential. “Exclusionary” zoning policies result in segregated communities (both economically and racially). Mandating large minimum lot sizes, for example, paired with high land prices, ensures that homes will be unaffordable to most. I highly recommend Richard Rothstein’s The Color of Law: A Forgotten History of How Our Government Segregated America, about how land use policies have shaped some of the greatest challenges facing our communities. There is a growing movement toward “inclusionary” zoning policies, which, when done well, can result in more diverse, mixed-income communities.

Many people’s homes are their greatest asset, and proceeds raised from the sale of a long-held home are used for retirement. How do you handle the lost equity resulting from properties that are deeded to stay affordable? Aren’t those buyers in effect renters (albeit with a tax deduction) if there’s little to no upside to long-term ownership?
—Lynn Miller (MBA 1989)

OAKES: We certainly don’t want to create “glorified renting” through affordable homeownership by asking buyers to take on the risks and responsibilities of owning a home without any financial upside. The covenants that limit an owner’s resale price allow them to benefit from a modest rate of appreciation when they sell. But rather than tracking this rate of appreciation with surrounding home values, the rate typically tracks with changes in their area’s median income. So if the median income increases 10 percent during their tenure as owners, they could sell their home for 10 percent more than they paid for it. This way, the home remains comparably affordable to the next buyer, and the owner benefits from some additional equity (assuming incomes rise).

And unlike paying rent to a landlord, each time the owner pays their mortgage they are paying down principal and building equity, just like a market-rate owner. Taken together, these features lend themselves to a meaningful financial upside when compared to renting. And when paired with the many qualitative benefits of owning a home, this model creates greater stability and access to opportunity for working families.

From Baker Library | Bloomberg Center:

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