Mixed-income housing might be an unlikely candidate for controversy. It has been lauded for helping low-income households enter the economic mainstream, and it has been seen by many developers as a financial tool, with revenue from market-rate units helping reduce rents on the affordable units in the same development.

But even advocates of mixed-income housing have noted that it’s hard to get investors and lenders comfortable with the hybrid tenant base in these developments (see Affordable Housing Finance, December 2005, page 6). Meanwhile, the Bush administration has moved steadily away from a strong federal commitment to subsidized housing in recent years, a pattern that some experts believe could continue, even if the parties in control of Congress change, due to the realities of the federal budget.

Increasing the amount of mixed-income development is one of the proposals being considered by affordable housing leaders seeking to improve the tax credit marketplace (see page 20). As part of this magazine’s efforts to stimulate discussion on this proposal, Affordable Housing Finance spoke with two high-profile experts on different sides of this issue.

Howard Husock is director of public policy case studies at Harvard University’s John F. Kennedy School of Government. He is also the author of the controversial book America’s Trillion Dollar Housing Mistake: The Failure of American Housing Policy (for more on the book, see Affordable Housing Finance, June 2004, page 54).

Husock may not be a popular figure in the tax credit housing world, but his “opinions seem to be the ones that count with the Bush administration officials making decisions at [the Department of Housing and Urban Development] these days,” wrote Sheila Crowley, president of the National Low Income Housing Coalition, in 2004.

Renée Lewis Glover (see page 38) has served as CEO of the Atlanta Housing Authority since 1994. She has been credited with turning around many of that city’s most-troubled neighborhoods and is a leading advocate of mixed-use and mixed-income communities.

Howard Husock

Q. In a recent roundtable on Salon.com, you mentioned mixed-income housing financed with tax credits as something that would not likely be successful in the rebuilding of New Orleans. Could you explain more about what your criticism is of mixed-income housing?

A. If you look at American housing patterns broadly, neighborhoods are generally defined by the socio-

economic status of their residents. We have what I call a housing ladder from low income to high income. People work their way up this ladder. They go from renting to owning a two-family or they get a small single-family and they rent out a room. Historically this was the pattern we saw. There’s a powerful sociology to the structure of American neighborhoods. That makes a lot of sense and gives people an incentive to invest in their neighborhoods and work their way up.

If we have the right kind of zoning and regulation … there should be no need for an explicit use of financing or other mechanisms to house people of different socio-economic groups next to each other. What’s the point of that? It flies in the face of all of our housing patterns. That’s the lesson some people drew from the failure of public housing: We just had too many poor people; therefore we’ll kind of hide the poor people in these mixed-income developments and good things will happen to them.

This is problematic. First of all, by providing a below-market-rate unit for somebody, somebody else has to be paying above market rate. Why should those who are getting below market rate qualify for that as opposed to all the hundreds of thousands of others who might qualify for that? So there’s an arbitrariness [to the situation, and it] boosts the prices for others. In an urban context, this could have the effect of driving out the middle-income families. Second, I think in terms of the sociology of this, it’s ill-advised social policy to in effect provide for people a housing unit beyond their own capacity to afford. This is what people work for. So what’s the message you’re sending to those who do – as Bill Clinton used to say – work hard and play by the rules: “You’re foolish?”

Q. So what role if any should government have in housing?

A. I don’t think it’s a wise policy for the commodity of housing to be supported by the government. It has distorting effects on neighborhoods. It’s very expensive as a good to provide, so it’s very expensive to assist the poor [this way]. So if we feel as a polity that a lot of people are in an economic position we think needs to be ameliorated in some way, it’s just so much more efficient to use the earned-income tax credit; give them a supplement to their earnings. Even a housing voucher has a terribly distorting effect. The only thing they can use that for is housing, and we know that vouchers get confined to certain neighborhoods, and that has certain distorting effects.

I think the government has a role in [providing] safety and sanitation, but I think the things we rely on – tax credits and vouchers – have a very distorting effect.

Q. Isn’t mixed-income development a way of including the profit-driven side in the provision of affordable housing?

A. People call this a public-private partnership, but I think that’s a misnomer. Essentially we bribe private developers to do public work by buffering them from risk. The key question is whether private or nonprofit groups will have any more incentive than public housing authorities have had over time to maintain this housing. What happens when the tax-credit proceeds have waned and maintenance needs to be done and you don’t have the income stream to be able to do the maintenance? Building new versions of subsidized housing – call it affordable housing – always has the maintenance problem over time, and just because a few projects look good – [such as] the HOPE VI projects – the prognosis over time doesn’t look good.

Q. If owners are unable to afford the maintenance on low-income housing even with a subsidy, then how could they do it without subsidy?

A. The market does a pretty good job. Most low-income people don’t live in subsidized units. They live in a variety of situations. Most of them live in used housing. I live in used housing myself – 100-year-old housing.

This is where [Congress for the New Urbanism President] John Norquist and I are in such strong agreement: We have to revisit our zoning laws so more housing can be built on lots.

Q. Norquist said at AHF Live in October that single-use zoning had created a lot of problems. Do you agree, or is that overstating the importance of single-use zoning?

A. It’s not just single-use. It’s large-lot zoning. Density is the issue. You can zone an area for residential only – though as an urbanist, I think it’s nice to have a mix – but you can have five, 10 or 20 units on one lot.

I think private developers will do it. Private developers will of course protest if the tax credit were cut back and if Sec. 8 were cut back because they’ve become accustomed to doing business with them, and you can’t blame them. But they would adapt.

Renée Lewis Glover

Q. Why did you say at AHF Live that mixed-income developments are still considered to be an unproven form by many – including many lenders?

A. They certainly have become accepted in the Atlanta area, though there’s the opportunity to broaden the context because a lot of folks think about mixed-income communities as looking at subsidized housing and market-rate housing, as opposed to looking at it as housing for workers, middle management and senior management. I think that’s really where we ultimately need to be.

I don’t think the idea is really that revolutionary. I think that it’s something that got lost during planning, particularly during the 1980s and ’90s when there was so much income stratification around housing development. As a consequence, we’re seeing a lot of urban sprawl because if you don’t have the housing for workers, middle management and senior management, then people are going to have to commute.

Q. There are some who say neighborhoods are by nature socio-economically stratified. Is it unrealistic to expect diverse income groups to live together in one building?

A. First of all, there’s so much evidence to the contrary. If you look at the great communities and the great neighborhoods, all of them have a mix of uses and a mix of incomes. I would say the thing that is quite frankly the unnatural phenomenon is all this severe income stratification, and it’s had some extraordinary social costs. If you look at what’s happened with some of our major public school systems, they’ve been abandoned because of the flight of middle and upper class [residents]. School systems have had to struggle with all the social ills of society because families who have more capacity and more resources and can actually be a stabilizing influence on the public schools are not there.

Q. What’s the best reason for mixed-income development in your view?

A. I think the strongest case for it is that it’s the only way we’re going to have strong, vibrant communities. When you look at what makes them, you’re talking about communities where everyone in society has the opportunity to contribute and be a part of the vibrancy and the opportunities. That’s the only way we’re really going to have great schools. I don’t think we want to have some schools that work and some schools that don’t because that means we’re losing too large a percentage of our workforce. And if you look at the economic disinvestment when you have this income stratification, you have too many large portions of the city where land goes underutilized or land is not on the tax rolls. I would say cities and states and this nation can’t afford to continue to develop their cities and grow the society with this large chasm.

Q. Have you had any problem filling market-rate units in mixed-income developments that include low-income tenants?

A. Absolutely not. As long as the standards are high and the rules are enforced – and that’s true in any community. We’ve had no resistance because quite frankly people are living in the community around a common sense of values: a great environment to raise children in and have a good quality of life.

In all of the mixed-income communities, there’s been no problem in leasing the market-rate component, and by the way, there’s a homeownership component now in each one of these communities, and there’s no resistance in the home sales. In fact, the homes are selling very well, and in an increasing sales-price scenario.