Tag: affordable housing

More on the announced affordable housing plan

A few days after the Mayor announced his affordable housing plan, I posted this initial assessment. Since then, the Council’s Ad Hoc Affordable Housing Committee met with MDHA for two hours on April 15. After that long meeting, I’d like to expand on a few points from my initial post.

Timing of new funding.  Matt Wiltshire from MDHA (and formerly from the Mayor’s office) confirmed that no new money will be allocated to affordable housing this year. The earliest we would see any new operating spending proposed under the Mayor’s proposed plan would be in Fiscal Year 2021. Part of me wants to more or less ignore the entire proposal until there is an effort to approve new spending. But it is worth at least noting some important points that might get lost between now and next year.

Going from cheerleader to investor. The biggest point I want to underline is that this proposal would move Metro from being a very interested cheerleader for the Envision projects to being a major investor. This shift demands that Metro learn more and be more actively involved.

Timing of building the Envision projects. Up until a few weeks ago, every public statement from MDHA about timing indicated that they would complete all six Envision projects relatively quickly. In fact, one (Cayce) is already out of the ground, and two more are well into the planning process. MDHA has always been careful to not state a specific timeline, but their public statements and the fact that they have started working on three Envision projects have suggested strongly that the Envision projects certainly would be finished in about a decade.

With the new affordable housing proposal, though, the Mayor’s office and MDHA are telling us that the reason why Metro should spend $350 million over 10 years is to hurry all of the Envision projects to completion. In this Tennessean opinion piece, MDHA’s director says: “The city’s investment in this work will enable us to add more subsidized housing than was originally projected and will also help us accelerate the timeline.” (I added the emphasis.)

There are a few other data points about timing. At the Council committee meeting on April 15, Mr. Wiltshire repeatedly told us that, without Metro spending $350 million over 10 years, the Envision projects would be “multi-generational.” Also, when asked whether the $350 million would allow all Envision projects to be completed in 10 years, Mr. Wiltshire said “no.” He was not able to guess what percentage could be completed in 10 years with $350 million from Metro, but he was sure that they would not all be completed in that time.

These timing questions are not academic. We have to explore where the truth is. Up until a few weeks ago, every indication was that everyone involved thought that all of the Envision projects could be completed by MDHA. Now, we are told it will be a multi-generational effort without Metro’s help. Separately, on one hand, the Mayor’s pitch clearly indicates that all the affordable units would be built in 10 years. On the other, MDHA has clearly told the Council that they will not be built in 10 years even with the $350 million from Metro.

My personal theory is that Mr. Wiltshire — the new guy at MDHA — is correct when he says that without Metro spending substantial money the Envision projects cannot be completed for a long time and that even $350 million over 10 years is definitely not enough to complete the projects.

What is the real cost? Up until a few weeks ago, nobody had ever suggested that Metro would use its general obligation bonding capacity to build affordable housing units for MDHA. Even when MDHA has provided a super-detailed list of potential financing strategies for Envision projects, it has never included Metro money to pay for unit construction costs. For example, check out MDHA’s 115 page Envision Napier and Sudekum Transformation Plan from June 2018, at pages 109-111. They list 10 financing strategies. Metro is only mentioned as a possible source that “may be able to include funding for…parks and infrastructure…”. Metro is never mentioned even as a potential source of building construction financing.

With the new proposal though, we hear that Metro would contribute $350 million in construction financing over 10 years, and that this won’t be enough to finish the projects. When the Council ultimately is asked to approve spending, we should ask for more information about what exactly Metro is getting for its investment.

Why does it matter? Listen, I don’t mind a developer having to look for a new partner once a project has started. Things change. Markets evolve. But, I do expect that the new partner (Metro) is entitled to a no-BS explanation about why the developer (MDHA) is looking for a new partner. To put it in terms Nashville understands, let’s imagine a downtown developer had spent five years telling the market about a full city block that he was planning, and developing, and even breaking ground on. And, then he starts shopping for a new partner. Immediately, you have questions. Why now? Did something change? What’s wrong? Did you misjudge the project? Were your public statements about the project not entirely on target? When you get asked to invest in a partially complete project, you really need to understand in detail what happened and why.

If MDHA had been saying all along that the Envision projects were going to be “multi-generational,” we might all be evaluating the proposal on its merits. Here though, we need to make sure we have a full understanding of the new facts before we evaluate whether it is a good investment of Metro’s bond spending dollars.

The new affordable housing initiative

A lot of people are asking me what I think about the Mayor’s newly announced affordable housing plan. His press release is here. And his office has set up a web site that basically says the same thing. If you made me boil it down to a single thought, it would be: “There are parts of the plan I think I might like…doesn’t sound like anything is going to happen before FY21…let’s talk then.”

In more detail, I think that…

  • Ben Eagles had a nice Twitter thread on this yesterday. It starts here:
  • The numbers in the press release are cleverly phrased, or generously characterized, or possibly just a touch misleading. The $500 million in the press release counts about $350 million that the city was probably going to spend anyway. Ben’s thread covers this point pretty well. In the end, adding $150 million to Metro’s existing commitment level over 10 years is still a big deal. But people need to not buy into the idea that this plan commits a half a billion dollars in new spending.
  • Aside from quibbling over the spin, the most important line of inquiry is about what Metro would get for the new spending. This is unfortunately complex.
    • MDHA has claimed for years now that it is completely capable of rebuilding multiple low income housing communities on its own. Even after the announcements this week, MDHA and the Mayor persist in this position. That said, my opinion is that almost nobody who is close to the situation believes this claim. I haven’t believed it since I got in office. The first piece of legislation that I sponsored was motivated in response to MDHA’s apparent inability to finance Envision Cayce without liquidating real estate in another part of town. (I wrote about that here in January 2016.)
    • I’m not asking about MDHA’s independent ability to complete the Envision projects on its own for sport. Getting a straight answer on this should drive how you feel about the Mayor’s new program.
    • For example, if MDHA’s long-time claim that it can absolutely complete the Envision projects on its own were true, then we should analyze the new initiative against that. In this scenario, the press release claim that Metro’s money will build 10,000 units is false. Super-false. If MDHA can do Envision on its own, then nearly all the units are getting built anyway with no Metro money. The city would be paying $350 million for about 1,000 new low income housing units. That would be a bad deal.
    • On the other hand, despite the denials, we might instead understand the Mayor’s proposal as an acknowledgement that MDHA really was never going to be able to make the Envision projects happen without significant aid from Metro. This is a stark scenario where MDHA won’t get the Envision projects completed on its own for a generation at least. While startling because it is different than what we are being told, if this were the situation, perhaps Metro should be putting its affordable housing dollars into helping MDHA??? That’s a question to think about.
  • If you end up believing that MDHA does need financial assistance to complete the Envision projects, then you have to ask, “Why do we think that $35 million per year in capital will be enough? Where did that number come from?”
    • Back (last week) when MDHA was going to complete these projects on its own and get bank financing on its own, the Metro Council was more or less a cheerleader for the Envision projects. The finances were up to MDHA entirely.
    • Now, with Metro as a significant $35 million per year investor, there are a lot more questions to ask. Is $35 million per year going to get all of the Envision projects built in 10 years? (I’m suspecting not. I bet that if a reporter were to ask this question directly, the answer would be something like, “We hope so” or “Well, that will depend on federal funding” or some other answer other than “Yes.”)
  • There is also the question of when do we start? I cannot fathom that this initiative involves any spending in the next twelve months. This is an important question because Metro’s current revenue is not sufficient to pay for the new affordable housing initiative. I think that means that this announcement doesn’t turn into action for at least another year.

To wrap this up…I’ll get over the numbers being spun so much. But, by the time we get to a future budget season where this plan will require spending, I’ll want to understand whether MDHA would build the majority of these units anyway without Metro money, or if the Envision projects are a pipe dream without Metro dollars. I’ll want to see some analysis about how people determined that $350 million is the right amount to get this done in 10 years. I’ll want to see where we are with the city’s revenue at that time.

(If you want a refresher about Metro’s budget problems last year, you can read my FAQs, a summary of my budget proposal last year, and this worksheet showing Metro’s expected new costs in FY20 and FY21. Every number in these posts came from Metro Finance.)

What is the opposite of land banking?

The purpose of a land bank is to save surplus real estate to be available for future affordable housing developments. Since the cost of land in Nashville is what makes affordability difficult, land banking is an important tool for affordable housing.

Affordable housing advocates in Nashville have been asking the city to form a land bank for some time. And most recently, Mayor Barry’s Transit & Affordability Taskforce recommended in its final report that Metro should “Use community land banks…to obtain and hold property for affordable housing needs.”

Unfortunately, the proposed Metro budget seems to be going in the opposite direction. Instead of saving surplus land for future development, the budget presented to the Council would sell $23 million of prime surplus property. This May 7 letter to the Council has all of the details that are currently available.

The three properties to be sold are Murrell School in Edgehill, the Green Hills Fire Station, and 3800 Charlotte. As you can tell from the projected $23 million sales price, this is desirable real estate in desirable locations. Instead of saving this land for future Metro needs or for future affordable housing developments, Metro is proposing to have a one-time sale to prop up its operating budget for the next fiscal year.

It is terrible policy to be selling surplus real estate to make ends meet for an annual operating budget. Just terrible.

Beyond this generally bad policy, there is some dark irony in the proposed budget for affordable housing advocates. According to page 22 of the Budget Presentation, the $10 million for the Barnes Fund this year will come from the one-time property sales proceeds!!! This means that the very surplus property in desirable locations that would be perfect to be banked for future use is being sold off to fund the Barnes Fund this year. So, no land banking and the Barnes Fund funding is contingent on one-time, non-recurring real estate sale proceeds. There’s no way to consider this as anything but a step backwards in Nashville’s commitment to affordable housing.


NOTE: Some will read this post along and conclude that I am an irresponsible tax and spend guy. Not so. As I have said in another post, in addition to properly funding the revenue side of its budget:

“I am confident that the Metro Council is going to reassess how economic incentives are judged and awarded. Most citizens believe that downtown has enough momentum to be self-sustaining and they would like to see more tax dollars spent in communities outside of downtown. Unfortunately, any reassessment and realignment like this won’t happen overnight or in a single year.

“In the short-term then, we must look at revenue and expenses and how to make ends meet while also honoring obligations to schools and employees.

“On the expense side, I expect that the Council will be proposing many cuts to many items in the upcoming budget. We are too early in the process for me to have an idea of what those cuts will be. However, I am certain that there is not enough fat in the budget to cut that would allow Metro to honor its school and employee obligations. We have to look at the revenue also. This has been true historically, and it is true now.”

Transit/Affordability – April 16 Update

This is my next update about how affordability will interact with transit-oriented development in Nashville. This post is a little (a lot??) wonky — sorry about that. If you need orientation on the issues, it might be helpful to read my two previous posts here and here.

This week, the Council is considered a Substitute Ordinance to approve a Donelson Transit-Oriented Redevelopment District. I believe we will adopt the Substitute and then defer public hearing and second reading until our May 15 meeting. This will allow time for the public to consider the Substitute and for the Planning Commission to have a public hearing about it on April 26.

This Donelson TOD legislation is critically important because it is a real-life demonstration of whether Metro will be as committed to affordability as it will be to building transit infrastructure. It is also important because this legislation will likely serve as a template for future transit development if the referendum passes. I think we are making good progress on the legislation.

For now, to see the proposed Substitute Ordinance, you need to look at the package of amendments and substitutes that Councilmembers get the day before Council meetings — see here, at page 2 to 28 of the PDF. If the Council updates the legislation with the proposed Substitute Ordinance tomorrow, I’ll update the link later this week.

I’ve been working with MDHA for at least a month now about changes to the legislation to make the affordable housing obligations more clear. You should know that Councilmember Jeff Syracuse from Donelson is working really hard on this legislation. His district should be proud of him and his commitment to making this work well for his community.

The proposed Substitute Ordinance is largely agreed to by MDHA…but there are things that we are still discussing. I’m going to run through the changes I have asked for and the current status.

  1. Amend to clarify that a minimum of $10 million of the approved tax increment financing (TIF) will be used for affordable housing. STATUS: The Substitute creates a bucket of $10mm of TIF for affordable and workforce housing. (Remember “affordable” is 0-60% of the area median income, and “workforce” is 60-120% of the area median income.) The Substitute calls for a periodic (at least every 5 years) reassessment of the balance between affordable and workforce housing TIF funds. The Substitute requires that during the initial 5 year term, ALL of the money from this $10mm bucket would have to be used for affordable housing. There is an ongoing debate I am having with MDHA whether to permanently set this bucket for affordable housing only, or to reassess the balance between affordable and workforce TIF every five years. My position is that this plan is being approved for 30 years and that this is a long, long time. I want the Council to be able to reassess the balance between affordable and workforce TIF every 5 five years. I want this Council-involved periodic reassessment to be in the template we use for these districts going forward.
  2. Amend to state that, for every project with residential units that asks for tax increment financing, there will be a minimum of 10% of the units that are affordable. This requirement must apply even if the total amount of tax increment financing for affordable housing in the district has exceeded $10 million. STATUS: Achieved in the Substitute. MDHA agrees.
  3. Amend to state the minimum period of mandatory affordability for residential units financing by tax increment financing. STATUS: Achieved in the Substitute. MDHA agrees. The minimum affordability period will be 15 years (which is pretty long in the affordable housing world.)
  4. Amend to state that, because a TOD is designed for Nashville residents to live along transit corridors, no investor-owned (Types 2 and 3) short-term rentals will be allowed in the TOD. STATUS: Not achieved. I’m giving up on this one. Others will need to pick up this ball and run with it if they think it is important.
  5. Amend to require creation of a unified process for approving design and zoning changes in the district. STATUS: This one is a work-in-progress. MDHA and Metro have told me that they will enter a memorandum of understanding to work to re-invent the way this will work for transit-oriented development districts. The idea is that people shouldn’t have to go to MDHA and Metro to get projects approved. A more efficient process should be built. I haven’t seen a proposed MOU yet. So, for now the Substitute is clear that the design review process in the plan is temporary and can be replaced later. I am hopeful there is more progress on this between now and 3rd reading in May.
  6. Amend to allow both the Metro Council and MDHA to initiate amendments to the plan (instead of just MDHA), subject to the approval of the other body. STATUS: Achieved in Substitute. MDHA agrees.
  7. Amend the plan to expressly acknowledge the new requirements of Metro Code provisions 5.06.020, 5.06.050, and 5.06.060 passed in 2016. STATUS: Achieved in Substitute. MDHA agrees.
  8. Amend to add language in the plan to expressly forbid the use of tax increment funds from this district in any other economic redevelopment district or transit-oriented redevelopment district. STATUS: Not quite fully resolved. MDHA is asking that spending tax revenue from this district could be allowed outside the district if approved by the Council. The Substitute currently calls for this practice to be prohibited. This one is important to me. It is really bad policy to use tax revenue from one development district in some other part of town. I’ll stand firm on this one.
  9. Have the administration (aka Mayor) commit publicly to conduct a survey of affordable housing in the area surrounding the district before creating the district. STATUS: In a video released on April 13, 2018, Mayor Briley said he was “committed to the recommendations” of the Transit & Affordability Taskforce. This was one of the recommendations…but he didn’t mention it by name. I have separately received assurances from people in the administration that I believe that this will be done. So, I consider this issue kind of resolved…resolved, but not in a way I can really prove to anyone.
  10. Have the administration commit publicly to set firm goals for affordable units to be built and preserved in the TOD. STATUS: In the video, Mayor Briley committed to set “ambitious and achievable goals” in each of our TODs. I have also received separate assurance that firm affordability goals will be set for the Donelson TOD. I consider this resolved.
  11. Commit to additional funding above existing levels for affordable housing according to the recommendations of the Taskforce. STATUS: In the video, Mayor Briley promised that, “in the coming years,” he would work with the Council and housing advocates to establish a dedicated funding source for affordable housing and land bank. Honestly, given his short time in office and the looming budget and election cycles, this is probably as strong a statement that he could make and stand by in the future. I consider this resolved.
  12. Prior to the May 1 referendum, commit to create both a community land trust and a community land bank, and commit to funding levels and the timing for each. STATUS: In the video, Mayor Briley expressed support for a community land trust and a land bank. This is good, but falls short of explaining a timeline and funding level. But, again, given his short time in office and all that is on his plate, I don’t know that he could credibly give more detail at this time. I am going to trust him on this one too.

The summary is that I feel good about the direction of this legislation. The goal is to have this legislation be the backbone of a real and continuing commitment by Metro to value affordability as much as we value the physical transit infrastructure.

If you have questions or comments, email me at bob.mendes@nashville.gov, or catch me on twitter @mendesbob.

Transit/Affordability Taskforce Update

About 5 weeks ago, I wrote about the status of Metro implementing the recent Transit & Affordability Taskforce recommendations related to affordable housing. You can read that post here.

Since then, on March 20, I sent a letter to the Metro Planning Commission expressing concerns about the pending Donelson Transit Oriented Development legislation. That letter is here. In the letter, I listed out 10 things I wanted to see changed by MDHA with the development plan, and listed another 4 things I would like to see from the administration.

I can report progress is being made on the development plan as it relates to affordable housing. It is still a work-in-progress though. I believe the scheduled Metro Planning Commission meeting on April 12 to discuss MDHA’s transit oriented development plan for Donelson will be deferred until April 26. And I believe CM Jeff Syracuse may defer the Council’s public hearing on this, which is scheduled for April 17, until May.

Frankly, now isn’t a great time for a meaningful update because things are mid-negotiation. But with early voting starting today, a lot of people have asked me where things stand. So…here’s an update…

First, some background…

Everyone agrees that high-capacity transit corridors tend to increase property values, which in turn decreases affordability. The question is whether Nashville can build a culture around transit construction that values maintaining, or even increasing, the number of affordable housing units as much as we value the transit infrastructure itself.

To address this important topic, last November, Mayor Barry appointed a Transit & Affordability Taskforce chaired by Bill Purcell and Brenda Wynn. I was asked to chair the affordable housing subcommittee. The taskforce met extensively for nearly two months and issued a lengthy report with many recommendations. Through the process, the affordable housing subcommittee had in mind that plans were underway for a transit oriented development district in Donelson. I think I can speak for the full subcommittee when I say that we considered the proposed Donelson district as an important test case. This is because whatever we create in Donelson will likely be the template for perhaps another one or two dozen similar transit oriented development districts on all of our major transit corridors.

Another bit of background you need to know is about the players. A transit oriented development district is a new concept — there are currently none in Tennessee. To create a district, MDHA’s board must approve a development plan. Then the Metro Council has to approve it. Once approved by the Council, these districts typically last for 30 years!! And they typically give MDHA the power to offer many tens of millions of dollars of tax increment financing.

The final background I will offer is that MDHA’s board approved a Donelson transit oriented development plan in late January. After my March 20 letter, and discussions with me and others, I understand that MDHA’s board approved a revised version yesterday (April 10). I haven’t seen that yet, but I’ve been told what to expect. The development plan still needs to go before the Metro Planning Commission (on April 26, I am expecting) and ultimately the Council (in May).

The current status…

In my March 20 letter, I had 10 items I wanted to see MDHA change in their development plan. As of today, I believe that we have an agreement to add 7 of the suggestions to the plan, that we are still talking about 2 of them, and that 1 has been rejected. Again, if it weren’t for early voting starting and people wanting to know about the status, I wouldn’t want to give a mid-negotiation update — partial information can be more confusing than no information. MDHA is working in good faith with me and others to help build a good template for future transit oriented development. But I don’t have a final revised plan to share with you today.

In my March 20 letter, I also listed 4 things that I would like to see from Metro before we pass the Donelson transit oriented development legislation. With the understanding that it may be another month before the final legislation is before the Council for a final vote, I have to report that none of those 4 things have been accomplished. I will repeat again…it is a month at least until a final vote, so there is time…and clearly our new Mayor has a lot on his plate…and I am only giving an update now because early voting has started and people are asking me for an update. For these reasons, I am not making any final conclusions one way or another about these items remaining incomplete as of today.

People will need to make their own decisions about what this all means for Metro’s commitment to be as serious about affordable housing along transit corridors as it is about the transit infrastructure itself. A glass-half-full view would look at MDHA’s engagement on the taskforce recommendations as a strong positive. A glass-half-empty view would look at the other recommendations and wonder whether affordable housing will always play second fiddle to the transit infrastructure instead of being a co-equal objective.

I am hoping that this update doesn’t create more confusion. Feel free to email me at bob.mendes@nashville.gov or tweet at me @mendesbob with questions or comments. Thanks, everyone.


Transit/Affordability Taskforce – 2 Months Later

Transit is about more than trains and buses. It is also about how high-capacity transit corridors will interact with neighbors, residents, and existing small businesses. Last fall, the Mayor appointed a Transit & Affordability Taskforce to address these issues. The taskforce’s final report and recommendations came out on January 10, 2018. You can find it here.

I promised the housing advocates on the taskforce that I would help with after-the-fact accountability.

Fortunately, there was always going to be an early opportunity for Metro to implement the recommendations. In the next few Council meetings, the Council will see legislation to create a Transit-Oriented Redevelopment District (or “TOD”) in Donelson. I have seen a draft of the written redevelopment plan, which has already been approved by the MDHA board, and I have seen an early draft of the legislation.

This Donelson TOD is critically important. It will be used as a template for transit-oriented development on every major transit corridor in Nashville. The administration and transit planners intend for there to be a TOD district along every transit corridor and at every major transit hub. The long-term transit plan expressly intends to use TOD districts to capture a portion of increasing property taxes to pay for the necessary major infrastructure and to spur private development along the transit corridors. So while the referendum has not yet passed, this Donelson TOD will lay the groundwork for how transit-related development will work throughout the city.

This is a good time to take a first look at how Metro is doing with some of the taskforce recommendations. I will list some of the recommendations and describe the status of implementing the recommendation:

Recommendation: “Full neighborhood assessment of affordable housing stock and housing-related wrap-around services before transit development begins…This pre-transit development assessment must not be limited to just the 0.25 miles on either side of the corridor. Instead, the assessment must take into account typical neighborhood boundaries.”

Status: No action taken.

Recommendation: After conducting the full neighborhood assessment of affordable housing, firm goals for preserving and creating affordably housing units should be established: “Once there is enough information, firm goals should be established. All policies and tools must work in concert to achieve these minimum numbers.”

Status: No action taken. No goals for the number of affordable unit to preserve and build have been set.

Recommendation: “For funding and building affordable housing in TODs, Metro and MDHA should seek to reduce or eliminate the current structure where there are two separate decision-making tracks – one with Metro and one with MDHA.”

Status: No action taken. This is a big deal. In existing economic redevelopment districts (like around Rolling Mill Hill), MDHA has the full power to set the level of affordable housing (even 0%) for each building getting tax increment financing in the district. These districts last for 30 years, and Metro has no say on issues like this during the 30 years. Remember that MDHA is not part of the Metro government (because it is created separately under state law) and does not have to listen to the Mayor or the Council when deciding on the level of affordability to require in a building. As the train is leaving the station on transit-oriented development, we need a new model about how Metro and MDHA work together to make sure Metro gets the final say on how these things will work on our transit corridors over the next 30 years.  (This is not a knock on any of the people in and around MDHA or its board. My objection here is about the process. MDHA is simply not a part of the Metro government, and its board is not elected. It doesn’t make sense to hand over so much final decision-making to an outside authority for all of the real estate around all of the important transit hubs on all of our transit corridors for multiple decades. We can do better than that.)

Recommendation: “In advance of the anticipated May 2018 transit referendum, Metro should make a public statement committing to the timely creation of a community land bank and community land trust, describing the timeline for creating these, and describing anticipated funding levels.”

Status: No action taken regarding a community land bank. For a community land trust, the administration has said that one will be funded in fiscal year 2020. No information has been provided about a funding amount.

Recommendation: “A resounding recommendation from all committees was the need for a dedicated public funding source for both affordable transit-related housing and small business space development and support. The new public funding should be an amount equivalent to at least 2% of the expected capital project costs for the Let’s Move Nashville program (which is proposed to be approximately $5.4B in 2017 uninflated dollars). This new resource should be designed so that each dollar of public funding is leveraged with other funding sources with a goal of a 3:1 leverage ratio. This is in addition to any pre-existing levels of affordable housing funding, and also in addition to any financing funded by tax increment financing (TIF).”

Status: No action taken. No information has been provided about accomplishing this goal.

Recommendation: Because we are trying to build housing stock along transit corridors for Nashville residents and not visitors, the recommendation was: “No investor-owned (Types 2 and 3) short-term rentals in TODs.”

Status: No action taken. This restriction isn’t in any of the documents I have seen so far. (And, yes, it would be legal for Metro to withhold permission there to be short-term rentals in projects that are funded by our property tax dollars through tax increment financing.)

I recognize that there are powerful forces pushing all of us on the referendum. This post isn’t meant to comment on that. My goal is to provide some early feedback that Metro is not yet doing what it will take to succeed in maintaining and building our neighborhoods and meaningful affordable housing around transit development.

I also recognize that it is only a few months since the Mayor’ taskforce released its recommendation to her. But life is coming at Nashville fast, and we can’t afford to be wait. The legislation for the Donelson TOD is still being pushed forward. I hope the administration can find the time and resources to implement these recommendations.

As we head into 2018…

There are a lot of issues brewing for the Metro Council in the new year. We’ll hit the ground running with a meeting on January 2 that may last until midnight. Here’s my take on a bunch of the hot upcoming issues:

Ft. Negley: I wrote about this back in August. The only new fact since then is that, in early December, we all learned that the preliminary archaeology work showed a high likelihood of human remains on the site. Further results were supposed to be available by the end of December, but I’ve not heard anything further yet.

My prediction is that this project will keep moving in slow-motion with more digging and studying and considering until at least after the expected May 1, 2018, transit referendum. Remember, there is no legislation pending before the Council on this project — there isn’t anything for us to pass or not pass.

Transit Referendum: In the Council’s next several meetings, we will decide whether to put the proposed transit referendum on the May 1, 2018, ballot. The legislation with the referendum language is here. People should realize that the legislation also attaches the full 55 page Transit Improvement Program. This document was first released on December 13 and I do not believe many people have read it yet. Please read it. Unlike a lot of the information that has been available over the last six months, the full Transit Improvement Program is largely spin-free, especially in how it describes the proposed sources and uses of money for transit over the next 15 years.

In the coming weeks, I will put out a more in-depth set of thoughts about the full Transit Improvement Program. I think it is very likely that the Council will approve putting the referendum on the May 1 ballot so that the voters can decide this important issue themselves. Reading the full Transit Improvement Program will help voters make an informed decision.

New Federal Tax Law: I believe that the new federal tax law will impact Metro significantly. The affordable housing industry believes that federal Low-Income Housing Tax Credits (LITCH) will be worth less and, therefore, financing large affordable projects may get more difficult. Article here. Similar, according to the Brookings Institute, financing infrastructure will become more costly for cities under the new tax law. Article here.

I think we will want to reconsider how to approach tax increment financing too. A rough rule of thumb for TIF projects is that the TIF loan might cover anywhere from 4-8% of the total project cost. But, the effective tax rate for most every real estate venture in America is likely going to drop by more than this amount. If real estate projects are about to be roughly 10% more profitable because of tax cuts, it begs the question of whether Metro should offer any TIF at all going forward.

Also, corporate tax rates generally just dropped dramatically. Again, this begs the question of what our incentives are worth now to companies. And it begs the question of whether Metro should offer incentives if we are having to deal with higher financing costs for infrastructure.

I don’t know the answers, but there are two things I feel strongly about. First, this is a developing situation and we may not know the impact on Metro for a few years. Second, I think Metro should proactively figure out how we will be affected and try to stay ahead of the impact.

Nashville General Hospital: My most recent post about this was Nov. 29. That post links to others from the last two years. My thoughts today aren’t much different than they were on Nov. 29. There’s just one thing I would add…

If I were allowed to choose a path forward I would want to re-boot whatever process is currently underway. My strong sense is that a whole lot of people have preconceived and conflicting notions about what the proper end-game should be for the hospital. What’s needed is an independent third-party subject matter expert (probably from outside of town). This person would need to have expertise in solving hospital financial problems AND also have the ability to act as a mediator. The person would need truly to have an open mind about where we will end up, and the person would need to be trusted enough to engage in shuttle diplomacy among the many groups. If the hospital is going to end up in a place where all or most of the constituent groups are going to be happy, I think it will need to be an outside person who guides us there.

Soccer: We all know by now that Nashville was awarded a new franchise. It’s very exciting.

Several important details were left to be dealt with after the franchise was awarded. Most notably, the Council will need to approve (by 27 votes) the demolition of some existing fairgrounds buildings before stadium construction can begin. Like with the administration’s Ft. Negley development plans, I’m going to guess that the 27 vote fairgrounds demolition legislation won’t make it to the Council until after the May 1 transit referendum.

Community Oversight Board: I wrote about this in early November. So far, not enough community-wide consensus-building has been done. I think that needs to happen before moving the legislation forward. I had hoped that Metro would hire Barry Friedman from the Policing Project to moderate a consensus-building process…but that doesn’t seem to have happened. I’m looking to learn more about the status in the new year.

Short-term rentals: In spring and early summer 2017, the Metro Planning Commission unanimously recommended Bill -608 and the Council was about to pass it in June.

Bill -608 got through the Planning Commission unanimously because it was a compromise. It allowed short term rentals in every building in Nashville with more than two units. It allowed short term rentals through all of downtown and the Gulch. It allowed every homeowner in Nashville to host short term guests in their primary residence. The only material trade-off was that we would phase out short term rentals in our traditional interior family neighborhoods with 1 or 2 homes on a lot.

In the second half of 2017, -608 has been re-positioned by the short term rental industry as extreme. I’ve stayed quiet on short term rentals in 2017 (except for a few discrete measures designed to stop cheating cheaters from cheating) and let the debate play out. When it comes time to vote, I plan to hear out my colleagues — especially the district Council members with large numbers of short term rentals — to see if they reach a consensus to move away from Bill -608. I think the majority of district Council members still believe that -608 has a good balance of allowing unlimited Type 1 (owner-occupied) and unlimited Type 3 (investor-owned in multi-unit buildings) short term rentals, allowing all short term rentals downtown and in the Gulch, while phasing them out of our traditional family interior neighborhoods.

Wrap-up: If I have forgotten an important issue, let me know at bob.mendes@nashville.gov. I’ll let you know what I think.

Affordable Housing

I support both affordable housing bills that are on 3rd reading on September 6. This includes the inclusionary housing bill and the Mayor’s incentives bill. These have been discussed at length at many Council committee meetings, and both the development community and the housing advocacy community have participated extensively. Both bills will have a final amendment come out, probably tomorrow.

To me, the end product is a small, cautious experiment that cannot possibly hurt the market, and may give Nashville a real opportunity to produce new affordable and workforce housing.

It is a small experiment because it is limited to just $2 million (plus any “in lieu of” fees collected by the program). With the size of our economy, $2 million can only be described as a discrete pilot program.

These bills – especially the Mayor’s incentives bill – have been crafted to make developers whole. The bills will always pay cash incentives in exchange for affordable/workforce units. This is capitalism not socialism, folks. I give the Mayor’s office, especially Matt Wiltshire, credit for having extensive conversations with the development community and major national multi-family housing lenders to see exactly what format the incentives would need to take to be useful for developers. I think the end product is innovative, and will probably end up being copied in other cities.

The bottom line is that this is a small experiment. Let’s pull the trigger and see how it works.

With all of the focus recently on affordable housing…

With all of the focus recently on affordable housing in Nashville, I woke up this morning thinking about my first trial, back in 1991.

For my legal career, it was an awesome experience. I worked in my law school’s legal aid clinic between 1st and 2nd year. One day in my first few weeks, I did intake interviews for two women, Ms. Turner and Ms. Donner, who lived in different Chicago Housing Authority high-rise projects. They did not know each other, but they both told the same story about being evicted from their CHA apartments because of the actions of their adult sons who no longer lived with them. Ms. Turner and Ms. Donner ended up being the named plaintiffs in a class action lawsuit that the legal aid clinic filed against CHA.  Over the course of the next two years, I got to work on the class certification process, take depositions, win a partial summary judgment, and try a case in U.S. District Court a month before graduation. At the trial, I handled several witnesses, and did the closing argument. We won the case. The court enjoined CHA from evicting tenants due to the actions of people who did not live with them. To be able to do all of that before I picked up my diploma made for perhaps the best legal aid clinic experience for any law student ever.

The case also taught me about being ‘all in’ for your clients.  I mentioned that Ms. Turner and Ms. Donner did not know each other. But they were strikingly similar.  At the time, they were both in their early 40s and had spent their lives in public housing.  That means they were post-war children who lived in the projects when they were new and there was promise of the American Dream.  But as the 1950s turned into the 1990s, they found themselves jobless, poorly educated, living in very dangerous high-rise public housing, and taking care of their grandbabies. They were smart, caring, proud women.  They also each had adult sons who had problems with the law.  Each had a son that no longer lived in the projects, but who got arrested in the projects.  At the time, if you got arrested on CHA property, but didn’t live there, you got charged with trespassing in addition to whatever else you were getting charged with. So, each son gave their mom’s address when they got arrested to avoid the extra criminal charge.  In turn, CHA reviewed arrest (not conviction) records and moved to evict any tenant whose address appeared on an arrest report.  The result was that mom was getting evicted for something her son allegedly did a half mile away.  I don’t recall the exact number, but I want to remember that our class of plaintiffs included several hundred tenants – mostly moms getting evicted for the actions of their adult sons who no longer lived with them.

It was easy to get fully invested in trying to help the plaintiffs, but especially Ms. Turner and Ms. Donner, who had the courage to stand up to CHA.  Between their willingness to stand their ground, and a U.S. District Court Judge, we were able to preserve their place to live.

I considered working in public interest law after graduation because I found that case so gratifying. At the time, though, one of the legal aid clinic professors suggested to me that the better path might be a big firm job in order to get good experience (and pay off my loans). She argued that I’d me more useful for public interest work after getting quality training at a firm.  With that, I went on to a 200 lawyer firm in Chicago.  I met Sue, and we moved to Nashville in 1995.  It’s been 25 years since winning that trial for Ms. Turner and Ms. Donner.

I never talked about it on the campaign trail, and I am not sure it occurred to me since so much time has passed. But that lawsuit – and getting to know Ms. Turner and Ms. Donner – showed how proper housing is a matter of human dignity. Nashville needs to keep pushing forward in figuring out how to encourage and maintain economically diverse neighborhoods where all our neighbors can thrive.

Thoughts?  Email me at bob.mendes@nashville.gov

Where Are We On Affordable Housing?

Last summer, the Metro Council passed an ordinance requiring the Planning Department to submit an inclusionary zoning law back to the Council within 6 months.  On January 14, the Planning Commission rejected the Planning Department’s proposed incentive-based affordable housing zoning changes. To comply with the 6 month deadline in the ordinance, the Planning Department filed its proposal (separated into two ordinances) with the Clerk’s office earlier this week.

According to the Council rules, however, unless a Council member signs on as a sponsor, the department’s proposals would not ever go to the Council for consideration.  I think some Council members will sign on to the Planning Department’s proposals as sponsors.  I will ask to be a co-sponsor.

Why would I sign onto a proposal that everyone spoke against at the Planning Commission?  The main reason is because I don’t want to see the momentum behind doing something about affordable housing in Nashville go to waste.  The public discussion needs to continue.

One of the things we are grappling with is that the “affordable housing” discussion is really a handful or more of interrelated issues. Unfortunately, it is hard to talk about any one issue without people who are passionate about another issue saying, “no, no, no, you’ve got it all wrong…we should focus on this instead of that.” The Planning Department’s proposal is a good example.

In my view, the current proposal focuses on trying to get more housing in the core of the city and along major traffic corridors for individuals and families in the range of 60-100% of the area’s adjusted median income. It doesn’t help people who have no home, or the typical MDHA resident. It doesn’t help preserve existing affordable housing stock from being torn down.  It doesn’t do much to slow down gentrification concerns. And, so, there is an appropriate tendency for people who are passionate about other parts of the problem, or who want to see a full set of solutions now, to want to cry foul.

We have to keep moving forward. Housing is a complex issue. We are challenged by layers of problems. We will need to find layers of solutions.  The next step is to move the public discussion forward.  That’s why I’ll sign on as a co-sponsor for the Planning Department’s proposal.  It most likely won’t pass as drafted, but the conversation must go on.

For Affordable Housing We Need To Think Big

I went to the Planning Department’s Second Stakeholders Group meeting on November 10. The consultant hired by the department to help formulate inclusionary zoning regulations was there. David Schwartz from Economic & Planning Systems in Denver gave an extended presentation to the group. You can see his slides here.

I continue to have faith that the process is going to lead us to a countywide, consistent approach to affordable housing. But there were parts of the presentation that have left me wondering whether we are going to see proposals that are big and bold enough for the affordable housing challenges that Nashville faces.

My sense is that Mr. Schwartz is going to tell us that our affordable housing issues are localized, not widespread, and certainly not countywide. I think this view is too narrow. And, if this is his perspective, I think the solutions he will propose also will be too narrow.

So, why do I think he’s going to tell us our problems are localized, not widespread, and not countywide?

Mr. Schwartz uses the term “central County.” I haven’t heard that defined precisely yet. But it is obvious that he means to refer to downtown and areas that are very close to downtown. To him, “central County” means the area at the center of Nashville that is approximately 4% of the county’s land mass.

Affordable Housing (2) - Nashville Inclusionary Zoning Feasibility Study

I am concerned that when we get Mr. Schwartz’s recommendations about affordable housing policies, they are going to be limited to apply only to his concept of the “central County.” If you were to ask people who attended the presentation, I think you would find general agreement that Mr. Schwartz repeatedly made reference to the “core” being different, and that different policies should apply to areas with different characteristics.

It isn’t just this definition. When Mr. Schwartz moved into presenting his data, it also showed too narrow a view of our affordable housing struggles.

The data presentation started by suggesting that real property values are appreciating at above average rates pretty much only in his “central County” area. You can see his slide below. In his map, Mr. Schwartz shows rapid price appreciation to be limited to the area from the Gulch across downtown and through lower East Nashville.

Affordable Housing (1) - Nashville Inclusionary Zoning Feasibility Study

But notice how this chart includes data from 2000 to 2015. By including the years before and during the height of the recession, the results on this map are skewed to show generally lower price appreciation. To me, this map fails to capture the rate that price appreciation is changing now…this year…in 2015.

The small area in his “central County” that shows the most aggressive price appreciation is surrounded by Wedgewood-Houston, the Nations, Jefferson Street, Madison, Inglewood, Donelson, and Woodbine. Each of these areas is shown on Mr. Schwartz’s map as having average, or only slightly above average, price appreciation over the last 15 years. But, c’mon…for those of us who live here, we know that these neighborhoods are the current front lines of advancing rapid price appreciation. Intuitively, we know that, if you limited the data to the last several years, the map about price appreciation would look very different. It would show a much larger area with well-above average price appreciation.

To test this theory, I went to the web site for our Assessor of Property. There is a tool there that lets you draw a border around an area, and it will give you housing sales data. When I drew a box around Woodbine (which is shown on Mr. Schwartz’s map as having average appreciation of 4.1% or less over 15 years), I saw that the median home sale price went from $127,450 in the beginning of 2013 to $158,000 in the third quarter of 2015.

Affordable Housing (2) - Sales Charts

So, if the map in the presentation had been limited to the last three years, Woodbine would have been colored two shades darker than on Mr. Schwartz’s map. I got the same result for Donelson ($141,500 in 1Q 2013 to $170,000 in 3Q 2015). This shows appreciation that is nearly twice the pace that is shown in the consultant’s 15 year data map:

Affordable Housing (3) - Sales Charts

I could keep going, but you get the picture. (Try it for yourself at http://davidson.tn.my-pii.com/)

The bottom line is that the map in the presentation does not show the full area that is currently experiencing high price appreciation. To me, this means that the areas that need affordable housing solutions are being understated.

Listen, I know that you can make data say anything, and I know that this process with Mr. Schwartz is very much a work-in-progress. And, the presentation was already more than an hour long and had 38 slides. It is possible, or maybe probable, that the concerns I am sharing are fully on his radar. That would be great, and I am definitely keeping an open mind about his data and ultimate proposals.

But, for today, after hearing the presentation this week, I think it is fair to say that the idea of limiting affordable housing solutions to the “central County” would be too narrow. It is fair to say that showing price appreciation data over 15 years instead of the last 3 years might be used to (incorrectly) support a conclusion that our affordable housing problems are limited to the “central County.” It is fair to say that, if the policies that end up being recommended are based on this approach, we would be thinking too small for the challenges we face.