Louisiana Governor Vetoes Affordable Housing Bill

Filed in Codes and Regulations, Land Development by on June 8, 2018 2 Comments
mississippi river bridge

A bridge spans the Mississippi River in New Orleans.

A fight to provide more affordable housing has not had a happy ending for the HBA of Greater New Orleans – or for the Louisiana families it was designed to help.

With support from NAHB’s State and Local Issues Fund, the HBA had drafted a bill (SB 462) to curtail mandatory inclusionary zoning practices and instead encourage cities and parishes to create voluntary programs, in which developers and local governments negotiate incentives that make it possible to provide affordable units in a market-rate development without increasing the costs to build the rest of the homes.

The incentives can be additional density, an expedited permitting process, tax abatement programs or something else. “It needs to be a negotiation,” said HBA EO Jon Luther. “The builder needs to know that he can provide these affordable homes but still make a profit,” rather than lose money on a project or hike the prices on the market-rate homes in the development. “It needs to pencil out.”

“Of course we are not against housing affordability,” Luther had said earlier in a letter to Gov. John Bel Edwards (D.) asking for his support. “It would make no sense for us, business or otherwise, to ignore a segment of the housing sector that is obviously underserved. And although we understand how to implement voluntary, market-driven solutions that can contribute to the resolution of this problem, we have often not been welcomed to sit at the proverbial (municipal) table,” the letter said.

“Despite its proponents’ claims otherwise, [mandatory inclusionary zoning] has proven in numerous U.S. cities to be an overly subscribed, regressive scheme that rarely yields the number of affordable units on any type of scale that truly moves towards meaningful levels of housing affordability,” the letter said. “National data from many U.S. cities with [these] policies and regulations attests to this fact.”

Raising the rent or selling price on market-rate units to subsidize the affordable units has the effect of pricing even more families out of the market. Meanwhile, the cities or counties that enact these ordinances need to have the administrative capacity to deal with the deed restrictions on the “affordable” properties and to help find qualifying families, issues most communities don’t anticipate having to manage.

“The lending, the title – it all needs to flow accordingly,” Luther said. And it also makes those units harder to sell: For example, deed restrictions can make it more difficult for potential buyers to obtain FHA mortgages.

But instead of supporting the home builders’ legislation, the introduction of SB 462 brought a firestorm of opposition from affordable housing advocates and others who did not understand the bill’s intention or the real-world consequences of its passage, Luther said.

“Only with screaming demand and screaming appreciation do these mandatory programs work,” he said. “New Orleans doesn’t have either.”

The anti-SB 462 advocates leaned on Louisiana’s governor. While the bill passed the legislature, Gov. John Bel Edwards (D.) vetoed the measure.

“Regrettably, Gov. Edwards was misinformed, and misled, as to the actual intent and reach of SB 462,” Luther said in a statement after the governor’s action. He vowed that the home building industry, including the builders, developers, subcontractors, real estate agents, bankers and others, would remember the governor’s decision on Election Day. “He turned his back on thousands of professionals who create jobs and he is going to pay the price for it,” Luther said.

Despite the loss, Luther said his HBA was appreciative of the support of NAHB legal, economic, political and land development experts who provided resources and expertise to the home builders’ battle. “NAHB was terrific, and we took this as far as we possible could until pure raw politics got in the way.

“The fight’s not over yet. Despite the governor’s veto, we’ve successfully combated the city of New Orleans’s attempts to pass mandatory inclusionary zoning for the past two-plus years. We’ll continue to wage our battle locally and point out for the public record the real inefficiencies and shortcomings of mandatory inclusionary zoning. It’s not the magic panacea that its proponents purport it to be,” Luther said.

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  1. Al Zichella says:

    Inclusionary zoning is not a solution, but an exacerbation of the problem. As a price control and hidden tax on all other units produced, basic economic truths tell us that this policy constricts all housing. These deals do not pencil out, and builders simply do not participate or move to areas that do not impose this on them. The best solution is for government to lessen the cost of regulation for these projects, and incentivize builders thereby to undertake them. If impact fees are reduced for this class of buyer, as an example, and builders can build it profitably, supply will increase dramatically. If not, they obvious question will be: who will build it if they cannot make any money doing so?

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