workforce housing policy in dc metro region
DESCRIPTION
A paper that studies the need for workforce housing option in the Washington DC Metro Region and looks specifically at policies in Alexandria, Arlington, Montgomery County, and the District of Columbia. Completed as course work for a Housing Policy class being taught by Derek Hyra in the Urban and Regional Planning program at Virginia Tech.TRANSCRIPT
Workforce Housing Policy in DC Metro Region
Matthew L. Steenhoek
UAP 5604: Housing Policy
Virginia Polytechnic Institute and State University
Urban Affairs and Planning, Alexandria Center
Professor Derek Hyra
Fall 2010
Workforce households in the DC area are increasingly feeling what the Urban Land Institute calls
the “Beltway Burden,” a function of the combined cost of housing and transportation in the region. It is
generally accepted that households making between 80% and 120% of Area Median Income (AMI)
qualify as “workforce households.” The core of this group is the school teachers, police officers, and fire
fighters, and EMT’s who serve and protect our communities. Policy interventions are necessary to ensure
that workforce households, particularly the core group described above, can afford to live near their place
of employment.
According to the one-year estimate from the 2009 American Community Survey (ACS), the AMI
for the Washington-Arlington-Alexandria, DC-VA-MD-WV Metro Area for a family of four is
$102,340[1]. As indicated by the official name of the metro area, this AMI calculation covers an
extremely large geographic area. The focus of this paper is on workforce housing conditions and policies
in the District of Columbia and three of the most affluent and urbanized surrounding jurisdictions: City of
Alexandria, Virginia, Arlington County, Virginia, and Montgomery County, Maryland. Within these
close-in jurisdictions, there is significant variability in the AMI, where more than sixty thousand dollars
separates the District of Columbia from Arlington, its neighbor across the Potomac River. This highly-
localized disparity has implications on how each jurisdiction attempts to address the issue of workforce
housing affordability.
Defining the Need Nationally
Historically, the focus of public housing support in the United States has not been on the
workforce housing segment. Most current measures utilized by housing affordability programs, the
mortgage interest deduction excluded, are only available for, or heavily weighted towards, households
that are below the 80% AMI threshold. This is evidenced by the Community Development Block Grant
(CDBG) program which must dedicate at least 70% of its funds to benefit low- and moderate-income
programs at or below 80% AMI, the HOME Investment Partnership program which only assists
households below the 50%, 65%, or 80% AMI levels, the federally-regulated multifamily housing bond
programs which must be primarily used for households with incomes up to 50% and 60% AMI, and the
various housing trust fund programs that traditionally focus on households earning below 50% or 80%
AMI (Schwartz 2006, 180-192).
One program that featured a break from this mold was the Section 221(d)3 Below Market Interest
Rate program, established in 1961 under the Kennedy administration. This program enabled developers
to secure below-market rate, FHA-insured mortgages from private lenders which, in turn, allowed rentals
at below-market rates to median income families whose incomes were too high for public housing
qualification yet too low to meet market demands. Section 221(d)3 did not produce a great number of
units during its limited lifetime. Generally an unpopular program, it was excessively expensive from a
short-term accounting perspective and it was seen to be helping “those who were too well off to deserve
it” (Schwartz 2006, 130).
Today, a need remains to provide housing choices for workforce families who are too affluent to
qualify for traditional housing programs but who cannot afford median-priced market rate housing in the
communities they serve. While it has become possible for workforce families to purchase median-priced
homes in more markets, due to the drop in interest rates between 2008 and 2009, many markets remain
where core workforce families cannot afford purchase. The Center for Housing Policy’s Paycheck to
Paycheck shows that elementary school teachers cannot afford to buy a median-priced home in 40% of
national markets. Police officers are in roughly the same position, with 41% of markets falling outside of
the affordability range; and licensed practical nurses are being priced out of almost 70% of housing
markets.
Affordability is generally better for rental products. Two-bedroom fair market rents are below
median mortgage payments in 88% of markets. While this statistic is promising for workforce families,
there are other contributing factors that may threaten to reduce rental affordability for workforce families
in many markets. As the residual effects of the foreclosure crises continue to be felt, and as more families
revert from home ownership to renting or remain renters longer due to uncertainty in the market, the
available number of family-sized apartment units at a fair market rent may dwindle. This scarcity could,
in turn, drive up demand and associated pricing which will create a further reduction in affordability of
rental housing. The vast majority of rental markets between 2008 and 2009 have seen steady or growing
fair market rents (Center for Housing Policy 2010).
One relatively new program within the CDBG regulatory framework is the Neighborhood
Stabilization Program (NSP). NSP grants are structured to be utilized by programs that benefit
households with earnings that do not exceed 120% AMI (HUD.gov 2010a). The institution of NSP is a
signal that workforce housing is making its way onto HUD’s agenda.
The need for workforce housing affordability is now part of the national conversation. The
Terwilliger Center for Workforce Housing at the Urban Land Institute, a non-profit real estate
development think tank, has identified workforce housing and mixed-income communities as a priority
and is helping to promote research, education, and outreach on the subject. By adopting the promotion of
workforce housing as a national resolution in June of 2008, the U.S. Conference of Mayors (USCM) has
recognized the lack of affordable housing incentives for the workers who provide essential community
services, the negative effect that forced commuting can have on smart growth efforts, the impact on
businesses related to job recruitment/retainment and to productivity/profitability, and the dangers
associated with community services worker shortages.
The USCM resolution calls for increased lobbying of Congress and the administration to consider
programs that will help create “economically integrated workforce housing near employment centers and
transit corridors” (U.S. Conference of Mayors 2008). This lobbying effort could conceivably lead to an
enhancement of HUD’s Good Neighbor Next Door (GNND) program, the only HUD program currently
in place that is designed to provide housing assistance to essential community service providers.
The GNND program allows police officers, teachers, firefighters, and emergency medical
technicians a 50% deduction of the sales price of a house located in a HUD-designated revitalization area
(HUD.gov 2010b). While this is a significant discount, the actually applicability of the program is
limited. GNND works by providing a second mortgage and note worth half of the HUD-appraised value,
which is forgiven after fulfilling thirty-six months sole residency in the house. Homes are only available
in HUD-designated “revitalization areas,” which are typically areas characterized by very low income,
low home ownership, or high mortgage default rates; and to be eligible, one’s employment has to serve
the area where the home is located.
Another limitation of this program comes from the availability of qualifying revitalization area
homes in high-demand markets. A recent search for available homes on www.HUD.gov/HUDhomes
yielded only nine homes in all of the District of Columbia, Maryland, and Virginia. Of these nine homes,
only three of them were located within the Beltway. While the intentions of GNND are certainly good,
the actual utility of providing affordable homes to core workforce families is limited at best.
Defining the Need Locally
As noted above, HUD’s GNND program does not begin to address the needs of workforce
families in the DC metro region; and the needs run deep. Refer to Figures 1 and 2 in the Appendix for a
snapshot of the for-sale and rental housing affordability gap in the Washington, DC market provided by
the Center for Housing Policy. As illustrated, every one of the ten workforce positions included on the
charts (Elementary School Teacher, Family Social Worker, Fire Fighter, Nurse (LPN), Nurse
(Registered), Police Officer, Preschool Teacher, Retail Salesperson, Secondary School Teacher, and
Urban Planner) falls short of the annual income required to afford the $285,000 price tag for a median-
priced home in 2009. Registered Nurses are the closest to affordability, with only a $16,745 salary gap;
and Retail Salespersons are the farthest from affordability, with a salary gap that exceeds $60,000.
Mindful of the national trends discussed earlier, the picture is not quite as dire for the rental
market in the DC metro region. Affordability for a fair market rent one-bedroom apartment is achievable
for half of the ten workforce sectors identified. However, two-bedroom affordability is out-of-reach for
all but the Registered Nurses, who make approximately 14% more per hour than is required to afford the
two-bedroom fair market rent apartment. This is particularly problematic in the case of workforce
households with children, requiring, at minimum, a two-bedroom dwelling unit. This scenario makes
dual incomes a precondition for affordability and may create acute hardships for single-parent workforce
households, households where only one member is capable of being a member of the workforce, or other
non-traditional households. With 40% of the workforce households in the DC metro area consisting of
three or more people, 30% being two-person households, and many defined as single-parent or multi-
generational, this income gap can pose a very real problem to thousands of households in the region
(Urban Land Institute 2009b).
Of course, the issue of affordability for workforce households is also contingent on transportation
costs. This issue of combined housing and transportation affordability is identified as one of the
Metropolitan Washington Council of Governments (MWCOG) core Accessibility Targets in their Region
Forward planning document. Setting comprehensive targets for the DC area on the burdensome issue of
combined housing and transportation, MWCOG set a goal that, by 2020, these costs will not exceed 45%
of AMI for regional activity centers. Currently, the entire DC region spends approximately 47% of the
AMI on combined housing and transportation costs; and the percentage spent by households in the
District is even higher (ULI 2009a). Clearly, there is room for improvement across the region.
Of the jurisdictions being evaluated in this paper, households in the District of Columbia bear the
highest burdens in transportation, housing, or both: slightly more than eighty percent of the households in
the District suffer from one, or a combination, of these high costs. For the City of Alexandria, roughly
forty percent of households bear a similar burden; Arlington County has high burdens for around twenty-
five percent of households; and approximately half of the households in Montgomery County have high
burdens. As an overall metro region, sixty percent of households have above-average transportation
and/or housing burdens.
For workforce households in the District of Columbia, local affordability is limited generally to
the Northeast and Southeast sections of DC. If workforce households cannot find homes or apartments
that suit their needs in these more affordable areas of the District, they are generally forced to “drive ‘til
they qualify” and locate in remote outer ring suburbs (ULI 2009b). Considering the fickle nature and
unknown future of gasoline prices, it may only be a matter of time before these more remote suburbs are
rendered unaffordable for workers making the long commute by way of single-occupancy-vehicle.
Workforce housing policies that address accessibility and transportation costs by enabling workers to live
in the actual communities in which they serve or in close-in, transit accessible neighborhoods can greatly
reduce the transportation burden and, in turn, increase housing affordability for workforce households.
Localized Programs: City of Alexandria, VA
Alexandria has two main programs that address moderate workforce housing affordability. Both
of these programs focus on improving affordability through loans that can be used for down payment or
closing cost assistance. The first program is the Moderate Income Homeowner Assistance Program
(MIHP).
MIHP is structured to give up to $30,000 in financing through special no-interest, 99-year
deferred payment financing. Recipients of this loan must be first-time homebuyers and must have lived
or worked within the corporate limits of the City of Alexandria for at least the most recent six-months
prior to applying for the program. This time-limit clause is removed for employees of Alexandria Public
Schools and of the City of Alexandria government, a feature designed to benefit key members of the
workforce. Buyers who wish to use the MIHP program must contribute a minimum of $3,000 towards
the purchase and are limited to a maximum home price of $399,600. Further, applicants must complete
more than eight hours of Virginia Housing Development Authority approved training and financial
counseling to increase their financial home buying literacy (City of Alexandria 2008).
There are two tiers of loan assistance for MIHP that are based on income limits. Currently, a
four-person household with a gross household income that does not exceed $82,161 per year can qualify
for the full $30,000 in assistance. This income limit falls between the 80% and 100% of AMI. The
second tier offers up to $20,000 in assistance, and it is constrained by an upper income limit for a family
of four or more of $102,700 which is approximately 100% AMI[2].
The 99-year deferred payment loans that MIHP will make to qualifying workforce households are
subject to an equity-sharing agreement. This feature of the loan helps to ensure that some of the
affordability benefit of the program is passed along to the next income-eligible homebuyer. With the
equity-sharing program, the original beneficiary of the MIHP program must share with the new purchaser
of the home a portion of the equity growth of the property that is proportional to the original loan value
relative to the purchasing price of the home. The loan original balance must also be repaid upon sale of
the home.
The second program available in Alexandria is a subsidiary to MIHP which provides special
assistance to law enforcement officers, called the Law Enforcement Moderate Income Homeownership
Program (LEMIHP). LEMIHP operates similarly to MIHP by offering no-interest second-trust loans for
qualifying City of Alexandria police officers and deputy sheriffs. Up to $50,000 in assistance is
available, only in areas designated by the Alexandria Police Department (Alexandria 2010). Both MIHP
and LEMIHP are funded through the City’s Housing Trust Fund. This trust fund is composed of
contributions from private real estate developers who have built in the city, and it is an example of a
Housing Trust Fund that dedicates monies for workforce housing programs.
Participants in the MIHP and LEMIHP programs are encouraged, but not required, to use
financing through the Virginia Housing Development Authority (VHDA). The VHDA is a quasi-
governmental agency that is primarily funded by the sale of taxable and tax-exempt bonds to the private
sector. VHDA offers loans that are generally below market to Virginia first-time homebuyers who are
within the income limits established. For Alexandria, the gross household income for three or more
persons is $121,900 and permits the purchase of homes up to approximately $500,000 (Virginia
Housing Development Authority 2010). These income thresholds allow for workforce households
making up to approximately 120% AMI to qualify for VHDA loans. Alexandria households who are
eligible for the MIHP program can also qualify on a first-come, first-serve basis for the Sponsoring
Partnerships and Revitalizing Communities (SPARC) program which offers a ½% interest rate reduction
below VHDA conventional first-time homebuyer loans.
The combination of the MIHP, LEMIHP, VHDA, and SPARC programs help increase home
purchase affordability for first-time homebuyers in Alexandria. However, none of these programs
addresses the needs of workforce households that may choose to live in rental units. Also, the shared
equity restrictions that are placed on the MIHP and LEMIHP can be seen as restricting the financial
growth and independence of workforce households that participate in the programs. Regardless of any
potential shortcomings, the focus by the City of Alexandria on providing special support and assistance
for the city’s teachers, government workers, and police officers is commendable.
Localized Programs: Arlington County, VA
There are many laudable goals enumerated in the annual report published by the Department of
Community Planning, Housing and Development in Arlington, Virginia. However, the majority of the
goals identified are aimed at supporting and providing for families who are below the 60% AMI
threshold. Arlington also has the highest median housing costs of the jurisdictions being evaluated. ACS
data indicates that the median cost of housing is more than 10% above the metro region for
homeownership and 22% higher than regional median for rental. While this may seem to indicate a
serious housing affordability problem for residents, the Arlington County median family income, which is
more than 33% higher than the metro region median, more than offsets the elevated housing costs.
Accordingly, Arlington County is the fifth richest county in America (Newsweek 2010). While housing
burdens may be relatively low for those that can afford to live in Arlington, there remains a need for
support of workforce housing to allow members of the workforce to live close to their jobs.
Arlington County’s Moderate Income Purchase Assistance Program (MIPAP) is designed to
increase housing affordability for moderate income first-time homebuyers. To qualify for MIPAP,
homebuyers must have a maximum household income of 80% AMI, which falls at the lower end of the
workforce housing spectrum, but do not have to be employed or reside in Arlington. However, the
property, of course, must be located in Arlington County. Both single-family and multi-family properties
are eligible for the MIPAP program, provided that the purchase price is not above $362,790
(ArlingtonVA.us 2010).
The MIPAP program works by providing a subordinated loan of up to 25% of the purchase price
of the home through a shared-appreciation model. There are no monthly payments associated with the
loan; but, similar to Alexandria’s MIHP program, participants in the program must repay the full principal
of the subsidy plus a proportionate amount of any increases in home-sale value above the original
purchase price upon sale of the home.
However, one component of the Arlington MIPAP program that varies from Alexandria’s MHIP
is that participants in MIPAP can refinance, repay the county, and then receive the full appreciation on the
house going forward. This allows workforce homeowners who purchase through the MIPAP program to
rid themselves of the downside of the shared-appreciation model. This “loophole” brings the money back
to the county sooner than later and is actually suggested by the county on their website (ArlingtonVA.us
2010). Arlington maintains its ability to preserve affordable stock though MIPAP because, when a home
is finally sold, the county has first right-of-refusal to purchase the home at its appraised value. Arlington
County can then add the housing unit back into its affordable housing stock. This structure allows for
workforce households to make the initial purchase of a home and eventually grow their equity to its full
extent while Arlington County can still maintain its stock of affordable units.
Another program available in Arlington is the Affordable Dwelling Unit (ADU) program, tied to
bonus density increases that are granted by the County to developers who are looking for site plan
approval at a density of over 1.0 Floor Area Ratio (FAR). The ADU requirements can be satisfied in one
of four ways: on-site units, off-site nearby units, off-site elsewhere units, and cash contribution. The units
created through the ADU bonus density program, which varies between 5% to 10% of gross floor area
above the 1.0 FAR based on where the unit is constructed relative to the primary development, must be
affordable at the 60% AMI level for a period of thirty years (Arlington 2009). This program does not
attempt to assist workforce households in the 80%-to-120% AMI bracket, but it could be modified in the
future to incorporate a workforce component in the bonus density instead of focusing on a single
monolithic 60% AMI block.
The Arlington programs evaluated tend to focus on homeownership over rental programs. There
also are no specific programs dedicated to assisting teachers, police, fire fighters, or emergency medical
technicians. However, despite a lack of programs dedicated to supporting these key civil servants, the
county does promote that “through its array of programs, Arlington already has helped thousands of
residents – firefighters, teachers, blue-collar workers, recent immigrant – and their families to find
a home” (emphasis original) (Arlington 2008). Arlington County appears to recognize the importance of
supporting these workers but has yet to implement a program focused on their specific needs.
Localized Programs: Montgomery County, MD
Listed as the sixth richest county in America, Montgomery County has long been an innovator in
affordable housing policy (Newsweek 2010). In 1974, Montgomery County instituted its Moderately
Priced Dwelling Unit (MPDU) program. The oldest inclusionary zoning program in America, MPDU
had, as of 2008, produced 12,500 housing units which included both for-sale and rental. The program
stipulates that developments of twenty or more units must provide at least 12.5% of the units to be
affordable to households earning less than 65% to 70% of AMI. The affordability restriction on for-sale
units is thirty years and for rentals is 99 years, with annual adjustments to ensure that affordability at 65%
AMI remains. With approval of the Department of Housing and Community Affairs, developers may
also elect for alternative compliance measures--including payments for the creation of affordable housing
or the construction of affordable housing on an off-site location (MontgomeryCountyMD.gov 2010b).
During the 30-year period, MPDU units that are sold are limited in profit to the original purchase
price, adjusted for inflation, plus the cost of eligible improvements. If the MPDU unit is sold after the
initial 30-year period, half of the “excess profit” must be given to the County’s Housing Initiative Fund.
Excess profit is determined by the sales price of the unit less the base purchase price adjusted for
inflation, plus the cost of eligible improvements. Initial sales of the MPDU units are managed by the
Montgomery County Department of Housing and Community Affairs (DHCA), which certifies and
maintains a waiting list for eligible households. Eligible households in the sales program cannot have
owned a home in the past five years, must complete a number of educational seminars, and must live in
the MPDU unit as their primary residence. DHCA gives priority to those applicants who live and/or work
in Montgomery County.
While the MPDU program has laid the ground work for the development of a significant number
of affordable units, it does not provide any housing assistance for workforce households in the 80%-to-
120% AMI. Montgomery County has instituted a number of other programs that are aimed at housing
affordability for workforce households. One program, House Keys 4 Employees (HK4E), is dedicated to
helping reduce household affordability thresholds for employees of Montgomery County, through up to
$13,500 in closing cost assistance. Limits for HK4E are set by the State’s Maryland Mortgage Program:
income limits at $124,200 for households of one or two and at $144,900 for households of three or more,
and borrowers must be first-time home buyers or have not owned a home in the past three years
(Montgomery County 2010). These income thresholds are set high enough to allow the full 80%-to120%
AMI spectrum of workforce housing employees of Montgomery County to be eligible for closing cost
assistance.
The HK4E program’s funding has three sources. Of the total $13,500 maximum closing cost
assistance that is available, $10,000 comes from the Montgomery County “5 for 5” closing Cost
Assistance Loan program. This program provides closing cost assistance for 5% of the sales price, not to
exceed $10,000, through a ten-year closing cost loan at a 5% interest rate. The maximum home price for
“5 for 5” is $429,619, and it sets the income limits for HK4E as described above (Montgomery 2009).
The second tranche of funding is a dollar-for-dollar funding match for HK4E from the State of Maryland
with a maximum of $2,500. The third and final tranche comes from the State of Maryland’s Smart Keys
4 Employees (SK4E) program. SK4E is an innovative program that supports workforce housing
affordability, in defined high-growth areas and for homes within ten miles of a borrower’s place of
employment, by providing an additional $1,000 in closing cost assistance. The HK4E funding match and
SK4E program are provided to borrowers as a 0%-interest, deferred payment loan that is repayable at the
time of refinance or sale of the home (Montgomery 2010).
While the HK4E, HK4E funding match, and SK4E programs do not address the overall
affordability of a home for workforce households, they do provide a significant form of assistance in the
initial home purchasing stage and are focused on supporting key county government employees and their
families. The Housing Opportunities Commission (HOC) of Montgomery County offers an additional
program to help enhance workforce housing affordability. Through the Mortgage Purchase Program,
below-market interest rates on first trust mortgages are offered to first-time homebuyers in Montgomery
County, which are subject to the same income and sales price restrictions as the programs discussed
above. As of October 22nd, 2010, HOC offered these 30-year fixed-rate loans at 4% with zero points.
Restrictions associated with the HOC program include requirements for being owner-occupied, limits on
the amount of the home that can be used for trade or business, and the potential to be required to pay
recapture tax to the federal government if the home is sold within the first nine years of ownership
(Housing Opportunities Commission 2010).
In 2006, Montgomery County took another bold step towards enhancing affordability for all
ranges of household AMI by developing the Work Force Housing (WFH) program. This is an
inclusionary zoning measure with many programmatic similarities to the county’s MPDU program, but it
focuses on workforce households between 71% and 120% AMI. Another key difference between the two
programs is that WFH has a geographic focus around Metro Station Policy Areas. This smart-growth
measure encourages the development of workforce housing in key transit-accessible locations. Projects
with more than thirty-five market rate units that are located in these transit-oriented areas must include
10% of the total proposed market rate units (excluding MPDU units or resulting bonus density units) as
workforce housing units. In order to accommodate the required WFH units, additional density can also be
granted (DHCA 2008). For-sale WFH units have affordability requirements of twenty years, and rental
WFH units have a control period of ninety-nine years. Alternative compliance measures are also
available for developers, which include building WFH units in an alternative location within the same
Metro Station Policy Area, converting non-residential uses to WFH units, or purchasing WFH units
whose control period has expired and maintaining them as WFH units.
The WFH units must be divided to price points that are calculated to 75% AMI (affordable to
71%-to-80% AMI), 90% AMI (affordable to 81%-to-100% AMI), and 110%AMI (affordable to 101%-to-
120% AMI) and which are based on the assumption of 1.5 people per bedroom (DHCA 2007). There are
further subtleties in the code regarding the determination of what is considered affordable at the various
AMI levels; but this formula, while complicated, should provide for the development of WFH units that
fit the needs of a variety of workforce households.
The Montgomery County DHCA maintains a list of eligibly households that are interested in for-
sale WFH units, which are prioritized by working for the county government, living and/or working in the
county, already owning or renting an MPDU unit, or participating in the employer assisted HK4E
program described above. Selected through a random online drawing, purchasers of WFH units have sale
restrictions placed on the units for a period of twenty years. During this time, the sale price of the WFH
unit is limited in growth to the original purchase price, adjusted for inflation, plus 15% of the difference
between the original purchase price and the appraised value of the unit at the time of resale, plus the costs
of eligible improvements made to the home. Similar to the MPDU program, units which are sold after the
initial twenty-year period must contribute half of the “excess profit” to the County’s Housing Initiative
Fund (DHCA 2008). The WFH restrictions during the initial twenty-year control period are slightly less
restrictive than the MPDU program and can help WFH residents build some equity in the home and move
towards a goal of traditional market rate homeownership.
One other interesting aspect of both the WFH and MPDU program is that the HOC can buy or
master-lease 33.3% of WFH units or 40% of MPDU units. MPDU units may also be purchased or
master-leased by approved non-profit organizations. This provision allows Montgomery County to use
the WFH and MPDU programs as a means of constructing new HOC-managed housing units in the
county.
Despite the promising potential of the inclusionary WFH program, as of the end of 2010, no units
have actually been produced. The program was officially adopted in December of 2006 while the
housing market in the DC metro area was still booming. However, all of the projects that were under
construction, or in planning, that actually got built at that time were “grandfathered in” and were not
required to comply with the new mandatory WFH regulations. To date, the economic slowdown has
stopped any new eligible projects in Montgomery County from proceeding; and, earlier in the year,
Montgomery County changed the WFH program from mandatory to voluntary and made modifications to
shift the focus of the program toward homeownership. According to one Montgomery County planner,
this was done to limit the burden on private development in an already slow market in the near term but
was being kept on the books so that it could be converted back to a mandatory inclusionary program more
easily once market conditions changed.
While the WFH program may have failed to produce any workforce housing units using
traditional inclusionary zoning techniques, Montgomery County has implemented a separate program, the
King Farm Workforce Housing (KFWFH) program, at the Village at King Farm development in
Rockville, Maryland. Because this development was completed on land sold to the developer by the
county, there were additional requirements for workforce housing that were included in the project. The
49 units subject to the KFWFH program follow the affordability and income guidelines designated by the
county-wide WFH program.
One modification to the WFH standards is an alternative “priority points” scheme that is used to
determine which eligible households will be given an opportunity to purchase a KFWFH unit. In addition
to the priority factors discussed above for the WFH program, KFWFH also includes enhanced priority for
those applicants who live and/or work in the City of Rockville and, more interestingly, for those
households that are primarily employed as “first responders.” These first responders include police,
firefighters, and emergency medical technicians (MontgomeryCountyMD.gov 2010a). This requirement
was a result of community input that recognized the value of these critical civil servants in their
community and prioritized accordingly. Curiously, no special provisions are made for teachers, the third
part of the “holy trinity” which includes police and fire fighters/EMTs.
Localized Programs: Washington, DC
Here at the core of the metro region in the District of Columbia, the issue of housing affordability
is most pronounced. According to the American Community Survey, the AMI for the District is more
than thirty thousand dollars less than the AMI for the metro area and, as discussed above, residents of the
District bear higher burdens in housing and transportation costs than residents of the surrounding
jurisdictions. A simple ratio of the DC median income, $71,208, to the median monthly cost of
homeownership, $2,231, shows that median-income households are paying more than 37% of their gross
income on housing each month. This is well above the 30% rate commonly used to measure the housing
affordability burden and is more than 40% higher than the average burden of the surrounding jurisdictions
(26.6%). The median rental housing burden for median-income households in the District is less severe at
17.8%, but it is still the highest of the jurisdictions being evaluated.
One program that the District Department of Housing and Community Development and its
partner, the community-based Greater Washington Urban League, administer is the Employer Assisted
Housing Program (EAHP). This program offers District of Columbia government employees a deferred
second trust loan of up to $10,000 and down payment assistance up to $1,500. The down payment
assistance is structured as a matching program, where $500 of funding is given for every $2,500 paid by
an employee as a down payment. Participants in EAHP must be first-time homebuyers and have been
employed by the District of Columbia government full-time for one year prior to application. Special
exceptions are made to this requirement for teachers, police officers, firefighters, and emergency medical
technicians that allow them to participate upon appointment. This provision indicates that the District of
Columbia values these core workforce households and understands the financial strains of workforce
homeownership in the District.
The EAHP program is typically associated with the larger Housing Purchase Assistance Program
(HPAP) which offers up to $40,000 in down payment assistance as a low-cost loan. HPAP is designed to
give a “Desired Purchasing Power” of $218,000 to an income-eligible family of four (Department of
Housing and Community Development 2010). With a median value of owner-occupied units in the
District topping $440,000, this purchasing power calculation may leave few suitable housing options.
The financial guidelines associated with HPAP place the maximum qualifying income for a family of four
at $83,000, which falls just below the 80% AMI workforce level of $86,500. At the upper income levels
of HPAP, down payment assistance falls to as low as $400 and is really more of a token of assistance than
an actual effective tool.
Recognizing the workforce housing challenge at hand, the DC Council enacted the “Workforce
Housing Production Program Approval Act of 2006” which ultimately resulted in the creation of a
“Washington, DC Workforce Housing Land Trust: Design and Implementation Plan.” Proposing a 1,000-
unit pilot program to be undertaken by City First Homes (CFH), a non-profit subsidiary of City First
Enterprises/City First Bank (CFE), the plan was approved by the DC Council; and $10 million in public
funding was delivered to the program. The basis of the program is investments made through the federal
New Markets Tax Credits (NMTC): CFE will leverage the $10 million grant from the city to generate
$65 million in investments for a total fund of $75 million (Coalition for Nonprofit Housing &
Economic Development 2010).
CFH is utilizing a shared-equity component in the developments that creates a subsidy tied to the
home through a covenant, not through the homebuyer. This covenant will constrain the price of the
home for future generations without providing additional subsidy. The per-unit subsidy created will be
$75,000 which comes as a second mortgage on the property. Homes created by CFH through this
program will be affordable to the core workforce and will have an average affordability for households
making 80% AMI, but homebuyer incomes may go up to 120% AMI. With the shared-equity structure,
homeowners selling their units will receive their entire down payment, their loan repayment, the
appraised value of improvements that they completed, plus 25% of any equity that is gained through
appreciation. The 75% that remains will stay with the property in addition to the initial subsidy of
$75,000 to help ensure that the home remains affordable for the next qualified homebuyer (Gass 2008).
This structure is designed to allow families to use the shared-equity model of homeownership as a
stepping stone towards traditional homeownership. A study of a similar program in Burlington, Vermont
shows this can be a viable approach. Approximately three quarters of the shared-equity homeowners who
sold their homes went on to purchase homes that were not burdened with restrictive covenants or
subsidies (Jacobus 2007). The use of NMTC and the creation of a permanent unit-based subsidy for these
homes show the innovative ways that federal and local governments can utilize private investment to
create a stable stock of affordable workforce housing units.
The government of the District of Columbia has at its disposal significant acreage of under-
utilized land that can be disposed of for development. Much of this land is along the Anacostia River and
Washington Channel, but it also includes “in-land” parcels such as the Walter Reed campus and
McMillian Reservoir. There is currently a bill being reviewed by the DC Council that would include a
requirement for mixed-income housing in all projects built upon land disposed of by the District
government. This bill, the Mixed Income Housing Amendment Act, Bill 18-050, would require that 20%
of the units created be affordable--with a distribution of 5% to very low income households (30% AMI or
below), 5% to low income households (between 30% and 50% AMI), and 10% to moderate income
households (between 50% and 80% AMI) (Council of the District of Columbia 2009). If Bill-050 is
approved, the housing created through it and the disposition of public land will have an affordability
ceiling too low for most workforce households.
There are current regulations that provide housing affordability guidelines to projects developed
on former Anacostia Waterfront Corporation (AWC) and National Capital Revitalization Corporation
(NCRC) lands. Both corporations were dissolved in 2008, and control of the land was transferred back to
the Mayor; but projects that were formulated under these agreements, such as the redevelopment of the
Southwest Waterfront, remain beholden to the AWC/NCRC requirements. The AWC/NCRC
requirements for affordable housing are that 15% of the units must be affordable to households making
30% AMI and 15% of the units to those making 60% AMI. These affordability requirements are the
same for rental and ownership units, but rental units must remain affordable for 50 years while
homeownership units are limited by restrictions for 20 years (Council of the District of Columbia 2008).
Again, the former AWC/NCRC projects that are developed in accordance with these requirements will
have market-rate housing as well as housing that is affordable to lower-income households but no
accommodations for workforce households making between 80% and 120% AMI. As much of the
AWC/NCRC land is highly desirable waterfront property, the income disparity between the affordable
and market-rate units is likely to be vast.
In the summer of 2009, the District of Columbia’s new Mandatory Inclusionary Zoning (MIZ)
program went into effect. DC MIZ has some structural similarities to the MPDU program in
Montgomery County, but its efficacy has yet to be tested since the slow-down of the housing market has
allowed but a few residential projects to move forward and none of them have been subject to the law
(DC Affordable Housing Alliance 2010). In the 2010 Inclusionary Zoning Annual report, the Department
of Housing and Community Development (DHCD) identifies approximately 430 MIZ units that will be
constructed based on the volume of units in various stages of the Planned Unit Development process and
subject to MIZ regulations.
New residential buildings of ten or more units are subject to MIZ and are eligible to receive up to
a 20% increase in Floor Area Ratio FAR to help offset the costs of building affordable units. The
percentage of units required and affordability requirements vary by zone category and density. Low
density areas in any other zones are required to provide the greater of 10% of residential FAR, or 75% of
bonus density, in units that are affordable to 50% and 80% AMI. For higher density areas with residential
zoning, the income requirements remain the same but amount of area required shifts down to 8% of FAR
or 50% of bonus density. Non-residential zones in high density areas have the same area requirements as
high density residential zones, but the affordability requirements adjust to only include units at the 80%
AMI, which was done to promote a mix of housing and office use in more commercial areas of the city
(DHCD.DC.gov 2010). There are a number of other high density zones which are constrained on the
FAR bonuses that can be provided and are exempted from MIZ. Additionally, several historic districts
and overlay zones such as the Downtown Development and Transferable Development Right zones are
exempted from MIZ.
As with the old AWC/NCRC affordable housing regulations and the proposed requirements of
Bill 18-050, the District’s new MIZ regulations do not have any provisions that address affordability for
all but the lowest economic strata of workforce households. In an environment of growing fiscal restraint
and shrinking budgets across all sectors of the District government, it is not surprising that the limited
funds available are being routed to those with the most severe needs. However, in this political landscape
the needs of workforce households, particularly the teachers, police, fire fighters, and EMT who give the
most to our communities, must not go unaddressed. These “holy trinity” members of the workforce are
the glue that holds our communities together and makes them safer places to live.
Recommendations and Conclusion
The District should consider harnessing the private sector for development of workforce housing
through modifications to proposed Bill 18-050, the old NCRC/AWC regulations, and the new MIZ
regulations by adjusting the composition of the existing affordable component in each program. The
programs should maintain the over-all percentage of cost-controlled units required (20% for Bill 18-050,
30% for NCRC/AWC, and 8%-to-10% for MIZ) to avoid putting unnecessary fiscal pressure on private
sector developers and builders already operating in a challenging market, but they should include a
balanced component of workforce housing that is affordable to households in the 80%-to-120% AMI
range. Similar to the WFH program on the books in Montgomery County, the workforce component
created should be further divided to provide price points affordable to workforce households at 80%,
100%, and 120% AMI. Given the particular strains seen in the existing market, these new workforce
units should be designed to allow for households with children and other non-traditional households, such
as single-parent and multi-generational households. Creating a stock of workforce housing units with a
balanced range of unit size and price points will give workforce households at many different stages of
their career and family life the chance to afford a home in DC.
Including the workforce housing component will create a more normal distribution of incomes in
each project, and the workforce housing residents may even prove to serve as an intermediary group that
can ease some of the potential tensions between highly-subsidized and market-rate households.
Additionally, further diversifying the income mix of the inclusionary units may help to limit the perceived
negative effects that inclusionary zoning can have on the marketing of market-rate units. Reducing this
stigma will create better, more successful projects and will give developers the confidence to move
forward with new projects which will in turn create more mixed-income units. An inclusionary zoning
program that is overly burdensome on the private sector and which stops any units, market-rate or
otherwise, from getting built is not a good housing policy.
These programs would create workforce housing units at little to no cost to the District
government. The administrative costs of incorporating a workforce housing component into existing
regulatory framework should be minimal, since the infrastructure would be similar. The selection process
designed for the workforce housing units should also look to Montgomery County for guidance. The
“priority point” system, which was developed for the KFWFH program, includes enhanced priority for
those already living and/or working locally and for being employed as “first responders.” As noted
above, the KFWFH’s point system does not include any priority for teachers; this is a modification that
the District should consider in structuring the selection process for the new workforce units to give
priority to all members of the “holy trinity.” Creating a direct incentive for teachers who work for DC
Public Schools (DCPS) or in the flourishing public charter school system through a workforce housing
priority program would be a great way to encourage the best and brightest to teach in the District, which,
in turn, would help DCPS improve their system and continue to make strides towards their goal of being
the best public school system in America.
The resale restrictions on the workforce units should be designed to balance the need to maintain
affordability for future generations of workforce households with the goal of having upwardly mobile
ones eventually move to non-restricted, non-subsidized traditional homeownership. These units should
have an initial affordability requirement of 15 years that limits the sale price of the workforce housing
unit to an increase determined by inflation and the level of home value appreciation seen in the immediate
area. After the initial period of affordability, regulations could be modified to allow workforce
households greater access to the equity gained in their home.
In conclusion, the greater DC metro region has real housing affordability issues for workforce
households. This is felt most acutely in the more urbanized core jurisdictions which have both a high
density of jobs and high housing costs. This combination creates an environment where many workforce
households are forced to choose between a long burdensome commute and unsustainably high housing
costs. All of the jurisdictions evaluated have programs which begin to recognize the needs of workforce
households. The District and the surrounding jurisdictions should look to the proven techniques already
included in their affordable housing tool kit for further direction on how to address the mounting issue of
workforce housing. In addition, it is critical that all jurisdictions place a particular focus on the housing
needs of their school teachers, police officers, fire fighters, and EMTs. These workers give so much to
the community and do not deserve to have their needs neglected.
[1] This differs slightly from the current HUD 2010 Median Family Income for the Washington-
Arlington-Alexandria, DC-VA-MD HUD Metro FMR Area of $103,500 due to a HUD formula that
utilizes data from the 2000 Census as well as 2008 ACS data and which utilizes an annual trending factor.
Also, the HUD estimate makes slight geographic adjustments to eliminate some of the furthest outlying
jurisdictions from the metro area definition.
[2] The Alexandria Median Family Income is $102,969 according the 2009 ACS data. This value
approximates the ACS and HUD Washington DC metro AMI’s of $102,340 and 103,500, respectively.
BIBLIOGRAPHY
ArlingtonVA.us. 2010. “Opportunities for First Time Homebuyers” Last Modified: July 13th, 2010. Viewable at: http://www.arlingtonva.us/Departments/CPHD/housing
/housing_info/CPHDHousingHousing_infoMIPAP.aspx Arlington County, Virginia. 2008. “Issue Brief: Affordable Housing” Retrieved from: http://www.arlingtonva.us/departments/CPHD/housing/pdf/file76858.pdf Arlington County, Virginia. 2009. “ACZO Section 36. Administration and Procedures” Retrieved from: www.arlingtonva.us/departments/CPHD/planning/zoning/
pdfs/Ordinance_Section36.pdf City of Alexandria, Virginia: Office of Housing. 2008. “Homeownership Assistance Programs” Retrieved from: http://alexandriava.gov/uploadedFiles/
housing/info/Homeownership%20Brochure%2008.pdf City of Alexandria, Virginia: Office of Housing. 2010. “Moderate Income Homeownership Assistance Program (MIHP)” Retrieved from: https://docs.google.com/viewer?url=http://alexandriava.gov/uploadedFiles/housi
g/info/ModerateIncomeHomeownershipAssistance2010.pdf Center for Housing Policy. 2010. “Paycheck to Paycheck 2010 Executive Summary: Is
housing affordable for America’s workers?” Retrieved from: http://www.centerforhousingpolicy.org/media/files/P2P_2010_ExecutiveSummary.pdf
Coalition for Nonprofit Housing & Economic Development. 2010. “An Affordable Continuum of Housing…Key to a Better City” Council of the District of Columiba. 2008. “National Capital Revitalization Corporation and
Anacostia Waterfront Corporation Reorganization Act of 2008” Council of the District of Columbia. 2009. “Bill 18-050: Mixed-Income Housing
Amendment Act of 2009.” Retrieved from: www.dccouncil.washington.dc.us/ images/00001/20090108162315.pdf
DC Affordable Housing Alliance. 2010. “Affordable Housing and Homelessness Issue Briefs” Department of Housing and Community Affairs. 2007. “Montgomery County
Executive Regulation: 18-06AM: Workforce Housing Program”. Retrieved from: http://www.montgomerycountymd.gov/content/dhca/housing/housing_P/workforce/wfh_execreg_amend_18-06am_7202007.pdf
Department of Housing and Community Affairs. 2008. “The Workforce Housing (WFH)
Program” Retrieved from: www.montgomerycountymd.gov/dhca
Department of Housing and Community Development. 2010. “Home Purchase Assistance Program (HPAP)” Retrived from: http://www.dhcd.dc.gov
/dhcd/frames.asp?doc=/dhcd/lib/dhcd/info/pdf/hpapassistancetable8-10.pdf DHCD.DC.gov. 2010. “Inclusionary Zoning – Residential Developers”. Viewable at: http://dhcd.dc.gov/dhcd/cwp/view,a,1243,q,647475.asp Gass, Anne. 2008. “Post Foreclosure Community Stabiliztion Strategies: Case Studies and Early Lessons 2008” NeighborWorks America. Housing Opportunities Commission of Montgomery County. 2010. “Mortgage Purchase
Program” Retrieved from: www.hocmc.org/housing/mortfin/2009AB-Interim%2520RateFlyer%2520incomeincrease%252005-06-09.pdf
HUD.gov. 2010a. “Community Planning and Development: Neighborhood Stabilization
Program Grants” Viewable at: http://www.hud.gov/offices/cpd communitydevelopment/programs/neighborhoodspg/
HUD.gov. 2010b. “About Good Neighbor Next Door” Viewable at:
http://www.hud.gov/offices/hsg/sfh/reo/goodn/gnndabot.cfm Jacobus, Rick. 2007. “Shared Equity, Transformative Wealth” Center For Housing Policy Retrieved from: www.nhc.org/media/documents/chp_se_transwealth_0407.pdf
%3FphpMyAdmin%3Dd3a4afe4e37aae985c684e22d8f65929 Metropolitan Washington Council of Governments. 2010. “Region Forward: A Comprehensive Guide for Regional Planning and Measuring Progress in the 21st Century” Retrieved From: www.mwcog.org/uploads/pub-documents/p15fX1g20100407104951.pdf MontgomeryCountyMD.gov. 2010a. “King Farm Workforce Housing Program”. Viewable at: http://www.montgomerycountymd.gov/dhctmpl.asp?url=/content/DHCA/housing
housing_P/workforce/king_farm_workforce_housing_program.asp MontgomeryCountyMD.gov. 2010b. “Moderately Priced Dwelling Unit (MPDU) Program” Viewable at: http://www.montgomerycountymd.gov/dhctmpl.asp?url=
/content/dhca/housing/housing_P/mpdu.asp Montgomery County, Maryland. 2009. “5 for 5”. Retrieved from:
http://www.hocmc.org/housing/mortfin/RCCAP%25202009%2520FLYER%2520HOC%2520FT%2520revised%25205-6-09.pdf
Montgomery County, Maryland. 2010. “House Keys 4 Employees” Retrieved from: www.hocmc.org/housing/mortfin/HouseKeys4Employees/
HK4E_FLYER2010.pdf Newsweek. 2010. “The Richest Counties in America” Newsweek November 10th, 2010. Retrieved from: http://www.newsweek.com/2010/11/10/the-richest-counties
-in-america.all.html Urban Land Institute. 2009a. “Beltway Burden: The Combined Cost of Housing and Transportation in the Greater Washington, DC, Metropolitan Area” Retrieved from: http://commerce.uli.org/misc/BeltwayBurden.pdf Urban Land Institute. 2009b. “Priced Out: Persistence of the Workforce Housing Gap in the
Washington, D.C., Metro Area” Retrieved from: http://www.uli.org/ ResearchAndPublications/~/media/Documents/ResearchAndPublications/Terwill ger/Reports/PricedOutFinal_10%209%2009.ashx
U.S. Conference of Mayors. 2008. “2008 Adopted Resolutions: Promoting Workforce
Housing”. Virginia Housing Development Authority. 2010. “New Income and Sales Price Loan
Limits” Viewable at: http://www.vhda.com/Homebuyers/ VHDAHomeLoans/Pages/IncomeSalesPriceLoanLimits.aspx