Inclusionary zoning could help Pittsburgh generate more affordable housing, but progress has taken years

A cement truck passes by Foundry 41 at 41st and Willow streets in Lawrenceville. (Photo by John Altdorfer/PublicSource)

A cement truck passes by Foundry 41 at 41st and Willow streets in Lawrenceville. Foundry 41 is one of the newest luxury developments in the neighborhood. (Photo by John Altdorfer/PublicSource)

During the past five years, campaign pledges and task forces aimed at boosting affordable housing in Pittsburgh have pointed to the need for an inclusionary zoning [IZ] policy.

More than 800 jurisdictions across the country have implemented IZ policies.

So, what is IZ? How is Pittsburgh implementing it? And will the policy tool ease housing costs for low-income Pittsburghers?

One size does not fit all

Inclusionary zoning is a tool for generating affordable housing. Through voluntary or mandatory programs, policymakers across the country have created affordable housing by linking it to the production of market-rate residential development.

Since the 1970s, IZ policies have come in many forms but share the same basic goal of preserving diverse, mixed-income communities that give the less affluent a foothold in higher-priced neighborhoods.

Because IZ leans heavily on private developers, policies need to be flexible. But too much flexibility — such as voluntary participation or the allowance of developer “opt-out” payments — may result in ineffective programs that don’t meet a region’s affordable housing needs.

Affordable housing is defined as housing costs (rent or mortgage payments plus utilities) that don’t exceed 30 percent of household income.

The actual impact of IZ on affordable housing production is widely debated. Some critics argue that IZ restricts overall housing supply by discouraging the development of large projects affected by the policy. Others claim IZ is less effective than existing housing programs, such as Low Income Housing Tax Credits — federal dollars that can fund up to 70 percent of the cost of constructing affordable housing.

Yet municipalities have increasingly turned to IZ to combat rising real estate costs. Many Pittsburgh officials have publicly embraced the idea, but rolling out a policy has been a process. One reason is that IZ is a form of subsidized housing, and the city hasn’t determined who will pay for it.

Derrick Tillman is president and CEO of Bridging the Gap Development and member of the city’s Inclusionary Zoning exploratory committee. (Photo by Ryan Loew/PublicSource)

Derrick Tillman, president and CEO of Bridging the Gap Development, supports inclusionary zoning yet acknowledges its limitations. “It makes sense from a social standpoint,” he said. “However, on the economic side, it requires creativity to make the numbers work,” especially in neighborhoods that don’t see a lot of market-rate investment.(Photo by Ryan Loew/PublicSource)

Some have expressed urgency around figuring it out, including Derrick Tillman, president and CEO of Bridging the Gap Development and member of the city’s IZ exploratory committee.

“Our affordable housing need is vast and continues to grow," he said. “Therefore, we have to act."

Who subsidizes IZ?

Private developers construct much of the affordable housing units going up today in the United States. They utilize a variety of public subsidies to do so.

IZ offers an alternative: affordable housing subsidized by the private market.

In some cities, IZ essentially makes the construction of affordable housing units a cost of doing business by calling for a percentage of units (up to 30 percent typically) in a market-rate development to be offered at an affordable rate.

One argument against IZ is that it produces affordable opportunities unevenly across a region, according to a recent study by the Lincoln Institute for Land Policy, a Massachusetts-based think tank. For IZ to work, the housing market needs to be strong enough for developers’ profits to cover below market-rate rents, or in some cases, home sale prices. Furthermore, IZ typically applies only to multi-unit projects of a certain size (usually greater than 20 units).

Housing advocates counter that the uneven distribution of affordable housing is already the case — most affordable housing is found in low-income, low-opportunity neighborhoods — and IZ is a way to target higher-income neighborhoods with access to better schools, jobs and other services.

A sandwich board advertises apartments in front of Foundry 41, at Willow and 41st streets, in Lawrenceville. (Photo by John Altdorfer/PublicSource)

A sandwich board advertises apartments in front of Foundry 41 at Willow and 41st streets in Lawrenceville. Inclusionary zoning stands to have more of an effect in a ‘hot market’ like Lawrenceville. Since 2010, the average rent for a one-bedroom apartment there has risen from $913 to $1,300. One-bedroom units in its two newest luxury developments, Arsenal 201 and the Foundry at 41st, start above $1,500 per month. (Photo by John Altdorfer/PublicSource)

Instead of asking developers to do this voluntarily, cities can choose to make IZ mandatory, with or without incentives. In some cases, developers can still opt out of these programs by paying an "in lieu" fee into an affordable housing fund, often run by committees that include local government representatives.

Incentivized IZ can take many forms, including the provision of "public benefits.” Density and height bonuses, for example, allow developers to build more units than the zoning code would otherwise allow, and the additional revenue can offset the cost of lower-priced units.

But incentives may also take the form of direct subsidy, namely tax relief. Pittsburgh’s exploration of IZ policy has focused mostly on the tax relief path.

Pittsburgh's road to IZ

Pittsburgh's march toward IZ has been slow. Mayor Bill Peduto in 2013, during his campaign for the mayor’s office, described IZ as a tool to meet his promise of helping to build more diverse neighborhoods. In 2015, the Pittsburgh City Council created an Affordable Housing Task Force. Nearly a year later, the task force recommended "the inclusion of affordable housing on all developments … of 25 units or greater that receive public benefits."

Last year, the city hired Grounded Solutions Network, a national firm with affordable housing expertise, to assist a newly created IZ exploratory committee. In a memo sent to some city officials in October 2017, it recommends a citywide program that requires developments larger than 20 units to reserve 10 percent for affordable housing; the share increases to 15 percent in higher-cost neighborhoods.

As an “alternative proposal,” Grounded Solutions suggested a pilot program on mandatory IZ in specific areas that would be evaluated for a two- to three-year period before being expanded to the rest of the city.

Ray Gastil, the city’s planning director, wrote in a July 26 email that the city is making progress toward enacting IZ policies. He said the goal is to introduce “a range of strategies, including incentivized mandatory strategies.” The interpretation: Pittsburgh may not see only one citywide policy, but rather a mix of approaches.

Gastil wrote that the city generally supports Grounded Solutions’ recommendations to target assistance toward renters who earn 50 percent of the county’s average median income [AMI] and homeowners at 80 percent AMI. As defined by the U.S Department of Housing and Urban Development [HUD], a three-person household at 50 percent AMI earns up to $34,200. A three-person household at 80 percent AMI earns up to $54,750.

On Oct. 10, city council held a hearing on the Local Economic Revitalization Tax Assistance program [LERTA]. LERTA is an existing tax abatement program that incentivizes residential and commercial development in certain areas designated as blighted. According to a 2017 Pittsburgh Tribune-Review investigation, LERTA often hasn’t been used that way and has not aided development in many distressed neighborhoods, such as Homewood or Beltzhoover.

In early 2017, Peduto issued three executive orders that included ways to advance the Affordable Housing Task Force’s recommendations, including the modification of tax incentives.

Under proposed changes, “Enhanced LERTA” would be available in all areas with deterioration for projects that include affordable housing. The program would provide tax credits up to $250,000 per year for up to 10 years. For developers to earn the credit, they would be required to make at least 10 percent of their units affordable to households making 50 percent AMI or 60 percent of their units affordable to those at 80 percent AMI.

About 20 people testified at the Oct. 10 hearing, a few of whom were developers and others with real estate interest who didn’t directly oppose the changes but expressed concern. About 15 others testified in support of the changes, but asked city council to strike the 80 percent AMI option. Many suggested targeting the 50 percent AMI bracket, at least for rental housing. At 80 percent AMI, housing would be outside the budgets of most of the low-income people targeted in the IZ exploratory committee’s report, they said.

Moreover, the Pittsburgh market already has enough affordable units for households at 80 percent AMI and above, according to Regional Housing Legal Services, a Pittsburgh nonprofit law firm.

Council President Bruce Kraus said council would likely vote on the legislation to modify LERTA rules this year.

The Affirmatively Furthering Fair Housing [AFFH] Task Force wants to see an IZ policy for Pittsburgh that would produce some affordable housing for those at 30 percent AMI. As previously reported by PublicSource, AFFH is an advisory group to the Pittsburgh Commission on Human Relations and has drafted its own recommendations for a “robust mandatory” IZ policy. Greater levels of affordability would help correct what the group says is a violation of "disparate impact" rules established by HUD, which states that housing policies cannot disproportionately burden members of "protected classes" under the Fair Housing Act.

“Racially discriminatory public policies, combined with private market discrimination, have effectively denied most African-Americans a realistic opportunity to live in high-opportunity neighborhoods,” the group wrote in its draft report. The 44-member advisory group highlighted that 25 percent of black households in Pittsburgh pay more than half of their income for housing.

Gastil said the city’s Housing Opportunity Fund programs will direct 50 percent of its funds toward households at 30 percent AMI and below.

Further, he pointed toward two steps the city has taken on initiatives that resemble IZ: the Riverfront Zoning District [RIV] and the Uptown Public Realm District. Both were approved this year.

Pittsburgh’s new Riverfront Zoning District (RIV) established new requirements that encourage sustainable development along the city’s rivers. Newly constructed residential riverfront development in places like the Strip District has come with high rents, and the RIV provides “bonus points” for development that includes affordable housing. (Photo by Ryan Loew/PublicSource)

Pittsburgh’s new Riverfront Zoning District [RIV] established requirements that encourage sustainable development along the city’s rivers. The RIV provides “bonus points” for development that includes affordable housing. (Photo by Ryan Loew/PublicSource)

These two measures established new design and development guidelines for all development along the riverfront and in the Uptown neighborhood. Among other goals, these districts incentivize affordable housing by awarding “performance points” that increase a project’s chances of being approved by zoning. For example, under RIV, a development that sets aside 20 percent of residential rental units at rates affordable to those making 60 percent AMI or below would earn four points, Gastil said. If the developer dedicated 20 percent of units to renters earning 80 percent AMI, they would earn two points.

“The timeline for incentive-based affordability is now,” Gastil wrote.

IZ impact

Inclusionary zoning alone will not solve Pittsburgh’s affordable housing crisis. Instead, it is seen as a tool and its value lies in providing affordable units in neighborhoods where otherwise it’s unlikely. Depending on the neighborhood, other tools may be more effective at promoting affordable housing and economic development.

The Low-Income Housing Tax Credit program [LIHTC] provides vital funding for local developers to build affordable and mixed-income housing.

Using LIHTC, Bridging the Gap Development is currently developing an affordable 36-unit apartment building in the Hill District.

“When we do development, we don't want to displace anyone. We believe you can be socially responsible and make money,” said Tillman, the company’s CEO. He added that he supports IZ yet acknowledges its limitations.

“It makes sense from a social standpoint,” he said. “However, on the economic side, it requires creativity to make the numbers work,” especially in neighborhoods that don’t see a lot of market-rate investment.

Homes in Allentown. Because Hilltop communities, such as Allentown, Beltzhoover and Knoxville, are primarily composed of single-family houses with low market value, it is unlikely that Inclusionary Zoning would significantly affect the area’s housing market or economic development. (Photo by Ryan Loew/PublicSource)

Because Hilltop communities, such as Allentown pictured here, are primarily composed of single-family houses with low market value, it is unlikely that inclusionary zoning would significantly affect the area’s housing market or economic development, according to Hilltop Alliance Executive Director Aaron Sukenik. (Photo by Ryan Loew/PublicSource)

These are the neighborhoods Aaron Sukenik sees every day as executive director of the Hilltop Alliance, a consortium of 11 neighborhood groups on the city’s southern edge and Mt. Oliver. Many of the communities are racially diverse, he said, and households range from below the poverty line to middle income. He said IZ is not the Hilltop communities’ greatest need right now.

“There are areas where we still do see population decline and increased vacancy, so [those are] very different stories from subsidizing hot markets,” Sukenik said.

Because Hilltop communities, like Allentown, Beltzhoover and Knoxville, are primarily composed of single-family houses with low market value, it is unlikely that IZ would significantly affect the area’s housing market or economic development. Sukenik said that for the Hilltop, preventing displacement would mean providing direct assistance to homeowners.

Hilltop home values are low and, for homeowners who don't have much equity, a major problem like a roof collapse creates demand for another unit. “When you combine market realities with needs, priority No. 1...is reinvesting in lower-income homeowners who may otherwise be at serious risk of displacement," Sukenik said.

IZ stands to have more of an effect in a ‘hot market’ like Lawrenceville. Since 2010, the average rent for a one-bedroom apartment there has risen from $913 to $1,300. One-bedroom units in its two newest luxury developments, Arsenal 201 and the Foundry at 41st, start above $1,500 per month.

Ten years ago, about 300 Somali Bantu immigrants resided in Lawrenceville. It is believed that all have left the neighborhood. Many were pushed out by climbing housing costs and decamped to Northview Heights, a neighborhood dominated by public housing.

Their departure doesn’t sit well with Dave Breingan, executive director of Lawrenceville United, a neighborhood advocacy group. Citing the loss of these residents as a consequence of the neighborhood’s transformation, he believes inclusionary zoning could prevent this from happening to other low-income residents in the future.

“There’s more opportunity today, but those who stand to benefit the most are being excluded,” he said. “This squares unfairly in human terms.”

In the past five years, Breingan said, hundreds of market-rate housing units have been built in Lawrenceville that could have produced affordable housing units if an IZ policy had been in place.

Dave Breingan is executive director of Lawrenceville United, a neighborhood advocacy group. (Photo by Ryan Loew/PublicSource)

Dave Breingan is executive director of Lawrenceville United, a neighborhood advocacy group. (Photo by Ryan Loew/PublicSource)

Gastil wrote that the city has begun to work on “a potential neighborhood pilot program for an IZ [district],” which Breingan confirmed to be Lawrenceville.

On Sept. 25, Lawrenceville United hosted the first in a series of public meetings called Housing for All, on the IZ pilot project. Lawrenceville United, along with the Lawrenceville Corporation and Councilwoman Deb Gross, made a presentation about housing and displacement in the neighborhood and what could be done to address it. The second meeting, focused on IZ, will be held at 6 p.m. Oct. 17 at Goodwill's Workforce Development Center, 118 52nd St. The meeting is open to the public.

“We can’t wait much longer," Breingan said. "Lawrenceville’s at a crucial period where if we don’t move on this fast, we’re going to lose the opportunity for [IZ] to be effective.”

Jason Vrabel is a freelance writer based in Pittsburgh. He can be reached at vrabelman@downstream.city.

This story was fact-checked by Tyler Losier.

  • Robert S

    This stack and pack housing is starting to sound very socialist Communist

  • Carl Redwood

    Trickle down housing / inclusionary housing is not a solution for the lack of housing for low income families. The need is so great and so few units trickle down. The problem is the capitalist model of for profit privately owned housing. We need public housing. Majority black public housing has been shut down in favor of the private profit housing market. However public housing / social housing works in other countries and the US military successfully builds and operates public housing all over the world.