DMPED Deals, Affordability Crisis & Housing Discrimination
Housing
discrimination is at the root of Washington, D.C.’s housing
affordability crisis. The primary driver of this discrimination has been
the city’s Office of the Deputy Mayor for Planning & Economic
Development (DMPED) and its deal methodologies. Specifically, the
methodologies used by DMPED in structuring and executing many of its
land disposition deals purposely limits access to new housing units by
Section 8/Housing Choice Voucher Program (HCVP) certificate holders by
artificially manipulating higher housing prices. In doing so DMPED is
violating the city’s Human Rights Law.
A recent DMPED deal in DC’s Hill East neighborhood, illustrates DMPED’s
discriminatory practices. In the Hill East neighborhood a HCVP
certificate pays up to $1,363/month for a one bedroom unit which is the
market price. In this same neighborhood under DMPED’s current deal
methodology, DMPED will subsidized to the tune of over $6.8M in public
subsidy the building of market rate units with target market rents
starting at $1,750/month for a one bedroom apartment. The $1,750 deal
price is being set artificially by DMPED, the price is above market and
structurally baked into the deal. This has been DMPED’s deal pattern
over the last 10 years and is designed to limit voucher holder's access
to housing. A pattern that discriminates against voucher holders, but
also limits the access of working and middle class families to housing.
This is at the root of today’s affordability crisis in the city.
Any
serious attempt to address the City’s housing affordability crisis and
the shameful conditions at DC General will require DMPED’s new Deputy
Mayor Brian Kenner, the Mayor, Council and civic leaders to immediately
restructure discriminatory deal and methods being used by DMPED.
Vouchers Market vs. DMPED's Market Table
Blue - Approved by DMPED November 2014
Red - Minimum unit size of use to typical DC General Family, at least 2 bedrooms @ 30% AMI
** Upscale Luxury Project receiving 20 year property tax abatement
%% Project Flagged by multiple DC Audit Reports for Non-compliance
/+ Land Banked by DMPED over 7 years
Note:
Park Place and Highland Park were DMPED dispositions awarded in
2004/05, while Hill East and 3829 Georgia Ave. (3829) were dispositions
started in 2008 both finally approved in November of 2014.
DMPED’s deal methodologies are morally and ethically
contrary to our city’s values and violate DC's Human Rights Law. These
methodologies not only harm low income families attempting to leverage
HCVPs, but they also harm moderate/middle income families, unnecessarily
destabilizes mix-income neighborhoods, stymies small business
development, job and retail growth in neighborhood business corridors.
Effectively, these methodologies are a tax on housing accessibility as
the old “poll tax” was to voting accessibility under Jim Crow.
The "Vouchers Market vs. DMPED's Market"
table above highlights how DMPED uses luxury unit price subsidy targets
in its deals to limit voucher holder access to new luxury housing being
subsided by public dollars. Park Place, Highland Park, Hill East and
3829 Georgia Avenue (3829) are DMPED developed projects leveraging
government subsidies. In no case would a HCVP voucher holder (limits
highlighted in red) have access to market rate units at any one of these
projects. In fact, units most in need by HCVP voucher holders, 2 and 3
bedroom units were negotiated and structured by DMPED to be priced 45%
and 30% respectively higher than voucher limits and “market rates”.
"Typically
in October to December of each calendar year HCVP conducts a rental
market analysis of the unassisted rented units in District of Columbia. Unassisted
comparables do not include any units rented that are tax credit,
subsidized with local funds, or subsidized with Federal funds (including
existing voucher assisted units). HCVP will only review
unassisted units rented in that legal submarket (i.e. Anacostia,
Capitol Hill..). HCVP utilizes resources from an unbiased legal searchable database (that includes the MRIS database/Realtor MLS), validation of market rents
paid from conducting a canvass of the submarket asking market tenants
what they are paying, or data that has been validated to determine what
is a market rent in each submarket – with/without utilities included."
- HCVP Submarket Rent Methodology Disclosure
The Hill East deal just completed in November of 2014 and its “Term Sheet”
is just the latest manifestation of these discriminatory methodologies
out of DMPED funded by public dollars. Ironically, fighting this form of
State sponsored discrimination was one of the foundations of DC’s
modern Home Rule movement. Makes one wonder whether today’s Home Rule
movement is morphing into a States Rights movement.
"In
concluding the land value estimate under this premise, we have examined
market rents for comparable rental projects in the Hilll East and
Capitol Hill extended Area, to determine a basis for our adjustment to
the market value estimate. Our review of projects indicates market rents
for respective unit types in a hypothetical subject building are as
follows:
Studios: $1,300 to $1,500 per month
One Bedrooms: $1,700 to $1,800 per month
Two Bedrooms: $2,300 to $2,400 per month
Three Bedrooms: $2,700 to $2,900 per month"
- DMPED Supporting Document to PR20-1153
Here’s
how DMPED bakes discrimination into its land disposition deals. Instead
of basing its Land Disposition Deals on “Market Rates” as determined by
the HCVP, DMPED determines "Market Rate" by hiring a certified
appraiser and negotiating with the selected developer based on the
developers proposed project in a closed door process. In other words,
DMPED in its deal makiking methodology biases the market on behalf of
the Seller/Developer against the Buyer/Citizen.
In its Hill East disposition which borders the DC General Homeless
Shelter, DMPED baked in market rental rates of $1,400, $1,750, $2,350
and $2,800 for studios, one bedrooms, two bedrooms and three bedrooms
respectively. These rates are 45% and 30% higher respectively for 2 and 3
bedroom units than HCVP “Market Rate” will pay. And these are the very
units which would be most relevant for providing permanent housing for
families living at the DC General Shelter which just about everyone
agrees needs to be closed. Instead DMPED’s Hill East deal is designed to
price these families out of new construction while the city pays
through other means approximately $14,000/yr or $1,200/month
to house families in substandard conditions at DC General. Clearly it
makes little economic sense to subsidize the building of market rate
units that are beyond the very tools designed to get families into those
units and then pay again to house those same families in substandard
units. However, if your goal is to limit access to new developments by
HCVP voucher holders this makes perfect sense.
Another way in which housing discrimination is encouraged in Washington, D.C. by DMPED is manipulation of unit size.
Unit Size Table
Red - Minimum unit size of use to typical DC General Family, at least 2 bedrooms @ 30% AMI
** Land banked by DMPED over 6 years
%% Project Flagged by multiple DC Audit Reports for Non-compliance
Along with
Hill East, 3829 Georgia Avenue (3829) is another city subsidized project
recently negotiated and approved by DMPED. After allowing the developer
to sit on the city owned 3829 parcel for 6 years DMPED approved a deal
which allowed the developer to shrink unit sizes in the project to very
one small bedroom units. As the “Unit Size” table above
shows not a single unit at 3829 would be accessible to a DC General
family. This was not a new pattern for DMPED, in 2010 the developer of
Highland Park Phase II in Columbia Heights was allowed by DMPED to
shrink unit size by dropping 2 bedroom units from the project, reducing
the size of one bedrooms resulting in a project of all studios and very
small one bedrooms. In these cases unit size instead of price directly
is used to limit access by HCVP holders. In the case of 3829 helping to
undermine process on DMPED’s own Park Morton New Communities Initiative.
Again, Hill East, 3829 and Highland Park are heavily subsidized by the
city and the city pays extra to keep them inaccessible to HCVP holders.
Housing discrimination by DMPED should not be dismissed as something reminiscent of the past like the march from Selma to Montgomery. It is real today and has a real cost. At Hill East with over $6.8M in public subsidy and $18M in public financing only 25 out of 354
would potentially be available to address the challenge at DC General
because of small unit size and DMPED price manipulations. This in the
face of what began as a trickle in 2010 DC General today typically
houses approximately 200 families. Since 2008 considering just 3
projects under its control, DMPED has kept approximately 525 units off the market, colluded with developers to drive up housing prices. 30% or about 158 of these 525
units were to be set-a-side as affordable nearly enough to have closed
DC General. However, after applying DMPED’s discriminatory deal
methodologies only about 25 out of these 525 or 5% city sponsored units would be applicable to solve DC General. If we estimate that the city spent $14K/year x 200 families x 5 years to house families at DC General, we come up with a minimum of $14M in opportunity costs. In total that would be at a minimum of $20.8M
in discrimination costs not counting other public subsidizes provided
at Hill East, 3829 and Highland Park to keep HCVP holders out.
Housing
discrimination is at the root of Washington, D.C.’s housing
affordability crisis and unfortunately it is state sponsored through
DMPED. The good news is that the first step in resolving the crisis is
simple, follow DC’s own Human Rights Law and remove the state’s
sponsorship for housing discrimination. On a practical level this means
restructuring how DMPED does deals, and forcing DMPED to immediately
base deals on the HCVP rate and change its negotiating position from a Seller/Developer bias to a Buyer/Citizen
bias. Then and only then can we begin to address with honesty our state
sponsored affordability crisis. This is not just the ethically and
morally right thing to do, but will stimulate overall economic
development by removing DMPED discriminatory “poll tax” on market rate
housing, freeing up more disposable income to support small business
development, job and retail growth in neighborhood business corridors.
End
State Sponsored Discrimination in Housing Policy. With DMPED's
leadership we can do this and resolve our affordability crisis.