Making Inclusionary Housing Programs a Force for Racial Equity

Three city administrators go beyond the press release to talk about what it takes to make inclusionary housing programs truly serve households of color.

A street in San Francisco during the daytime hours. San Francisco’s inclusionary housing programs have been in place since the early 1990s.
San Francisco’s inclusionary housing programs have been in place since the early 1990s. Photo by flickr user simple thrill, CC BY-NC-ND 2.0

The history and impacts of racist housing policies and practices in the United States have been well documented. Now we must advance anti-racist housing policies and practices to right past wrongs. Done right, inclusionary housing programs can be an important tool for advancing racial equity in housing. But what exactly does “doing it right” look like in practice?

Grounded Solutions Network recently held a conversation about racial equity in inclusionary housing with staff from three of our member cities that have inclusionary housing programs: Maria Benjamin, deputy director at the San Francisco Mayor’s Office of Housing and Community Development; Ricardo Lopez, affordable requirements ordinance project manager for the city of Chicago; and Elfric Porte, the director of the housing policy and development division of Minneapolis’ department of Community Planning and Economic Development. The following is an edited summary of that conversation.

Why is it important for you to use a racial equity lens in developing and implementing your inclusionary housing program?

Maria Benjamin

Maria Benjamin: Like most cities, San Francisco has a legacy of discrimination and policies that kept Black folks and other folks out of housing, especially homeownership opportunities. Or we displaced many of those that were able to get a home through eminent domain. Like every other city, we have not reversed that legacy, but we are making inroads. We are working hard to address some of the systemic racism and the policies that were put into place. We are focusing our racial equity efforts on increasing homeownership rates for Black folks—it’s the curb-cut effect.

Elfric Porte

Elfric Porte: Minneapolis has one of the highest homeownership rates in the country but one of the worst homeownership disparity gaps in the country. In Minneapolis, 85 percent of BIPOC renters make less than 80 percent of area median income (AMI) and over 60 percent of Black [people] make less than 30 percent of AMI. The city of Minneapolis seeks to eliminate racial disparities in homeownership through a diverse program pool, including our Minneapolis Homes program, which aligns with our inclusionary housing program.

Ricardo Lopez

Ricardo Lopez: Every person deserves a safe, healthy, accessible, and affordable home. This is not yet a reality for too many Chicagoans. Chicago has a longstanding affordable housing crisis, with a citywide shortage of nearly 120,000 affordable homes. What is more, we know that the legacy of racist and classist actions like redlining, contract buying, and restrictive covenants has resulted in Chicago’s status as one of the most segregated cities in the country. The cost of this segregation is high, both for the city’s overall economic vitality and, even more, for those who find their access to jobs, grocery stores, transit, and other opportunities limited by their ZIP code. As a city, we are responding both by investing to ensure that every community has a high quality of life, for example, our Invest South West Initiative, as well as by using tools like inclusionary housing to ensure Chicagoans who want to remain in or move to a higher-cost neighborhood are able to do so.

Ricardo and Elfric, your communities recently went through a process of updating your programs (Chicago’s Affordable Requirements Ordinance and Minneapolis’s Minneapolis Homes program). How did you incorporate racial equity into that process?

Lopez: The revised Affordable Requirement Ordinance (ARO) is the result of an 18-month process that began in October 2019 with a public call for applications for an Inclusionary Housing Task Force, which published its report in September 2020. Our criteria for selecting ARO task force members were based on racial and ethnic, gender, and geographic diversity, as well as experience, skills, and knowledge. Our goal was to get the widest, most representative, and equitable range of participants possible.  From 200 applications, 20 people were chosen from neighborhood organizations, affordable housing buildings, market-rate developers and financiers, and other stakeholders. In addition to the task force, the Department of Housing solicited input from various focus groups, we held a 30-day public comment period, held a city council subject matter hearing, and did months of follow-up meetings with developers and housing advocates and community leaders to inform the proposal as introduced.

Porte: Two years ago, we partnered with Grounded Solutions to conduct a study and identify a solution that would allow the city to invest more efficiently in long-term affordable ownership opportunities. We came to it with an equity lens in mind. We convened several BIPOC focus group discussions with [real estate agents], lenders, and developers. And we hosted public meetings at locations out in the neighborhoods, particularly in historic communities of color, at times when residents of those neighborhoods could participate.

Benjamin: San Francisco’s inclusionary programs have been around since the early 1990s. While the ordinance is updated by the Board of Supervisors, the manual that governs the implementation of the program is updated every five years through a community engagement process. Here is where we are able to reevaluate with a racial equity lens, policies and procedures that can lead to barriers for under-resourced BIPOC communities, ensuring equitable access to these valuable affordable housing resources.

Most inclusionary housing policies have tended to serve households earning between 60 percent and 120 percent of AMI. But in many communities, renter households of color are disproportionately represented in lower income groups below 60 percent of AMI. How did you choose which household income levels to serve in your programs?

Lopez: We know that the most need is in communities with households below 60 percent of AMI and those households are mostly Black and Latino. One approach we’ve taken in the new revision is a weighted AMI average where we offer options, i.e., developers could elect to provide greater affordability in exchange for a lesser set-aside. For example, developers required to provide six or more on-site or off-site affordable units may elect to lessen their 20 percent set-aside requirement to 10 percent by providing ARO units affordable to households at a weighted average of 30 percent of AMI. On the other end of the spectrum, if a developer chooses to provide affordable units at a weighted average of 60 percent of AMI, they must make 20 percent of units affordable. To ensure that every development provides units affordable at lower income levels, developers that choose the weighted average of 60 percent of AMI, cannot exceed 80 percent of the AMI, and must ensure that at least one-third of the affordable units must be affordable to households at or below 50 percent of the AMI, of which one-sixth must be affordable to households at or below 40 percent of AMI.

Porte: Our program had previously served households making up to 115 percent AMI. But when we saw that 85 percent of BIPOC renters make less than 80 percent of AMI, we changed our program to only serve households making up to 80 percent of AMI, with meaningful pathways for households at 60 percent of AMI and 40 percent of AMI.

Some inclusionary housing programs provide a preference for residents that meet certain requirements, such as local residents or workers. Preference policies have the potential to either help or harm households of color. For example, in a city or neighborhood where the majority of current residents are white, a preference for existing residents can make it more difficult for households of color to access affordable homes. On the other hand, in a gentrifying community where the majority of current residents are people of color, a preference policy can help those residents remain in their community. On top of that, certain types of preferences can violate fair housing laws, even when that is not the intent of the policy. Do your programs use preferences and, if so, how did you navigate these complex dynamics?

Benjamin: A few years back we advocated for a lottery preference that was difficult to get HUD approval for because they feared it may violate fair housing laws. Under then-supervisor, now mayor, London Breed, we created a neighborhood preference that gives folks within a half-mile of the project or in the supervisorial district priority in affordable housing lotteries. We conducted intensive disparate impact analysis to ensure that we were indeed within fair housing laws by not giving priority to one demographic over another. Our analysis determined that if we set aside a certain percentage of units in the lottery for people meeting that preference, there would not be a disparate impact despite HUD’s well-meaning fears.

If there’s no disparate impact, how can there be a racial equity benefit? Our understanding is that, for the relatively small number of projects in majority-Black or majority-Latinx neighborhoods, there is most definitely a racial equity benefit of the preference policy for residents of those neighborhoods. But because San Francisco is so diverse generally, the disparate impact analysis doesn’t show a significant disparate impact across the city. Is that right?

Benjamin: Exactly.

Porte: We just embarked on developing a preference policy. We received state funds to do a scattered site housing development and the state had concerns about preference policies. Now we’re in conversations with them about whether there is a way that we can structure it where the portions of their funds that are coming into the project may not have the preference policy applied.

Lopez: Our ordinance has an incentive for developers to provide family-sized units; if developers provide larger unit sizes, they can get a lower set-aside requirement. There’s then a preference in leasing or selling units of two bedrooms or more to a multi-person household. We’re also looking at preferential leasing for people with disabilities to occupy accessible units.

That’s very interesting about the incentive for family-sized units, since that’s also a racial equity issue. In some communities, new market-rate multifamily development is largely composed of smaller units—studios, one-bedrooms, and two-bedrooms. But low-income renter households of color often have disproportionately larger household sizes; for example, people of color are more likely to live in multigenerational households than white people.

Lopez: Similar to the issue of AMIs, community advocates have also brought up bedroom count as an exclusionary outcome of the 2015 ARO based on the mismatch between the types of units produced and the household sizes of low-income Chicagoans, and particularly Black and Latinx Chicagoans. Indeed, the Metropolitan Planning Council’s analysis of American Community Survey data found an average Black household size of 2.7 in Chicago, and an average Latinx household size of 3.7.

What other creative strategies have you implemented in your programs to advance racial equity?

Benjamin: We’ve done a lot of work on limiting screening requirements. If a private developer says you have to have a 700 credit score and first/last month plus a deposit, no evictions, no criminal background, this leaves out a lot of people and effectively blocks access to a lot of the folks who would otherwise apply to live in our housing. We have standardized our screening requirements for rental inclusionary units—placing limits on the use of credit scores and criminal and eviction screenings—so they’re more equitable and allow for folks to get into units. We’ve also created laws that say a landlord can’t discriminate about the source of their rental income (for example, if they have a Section 8 voucher or other rental assistance).

Lopez: The revised ARO expands off-site options while focusing on anti-displacement measures that allow longtime residents to remain in their community and benefit from redevelopment. In neighborhoods where there is evidence of displacement based on housing market and demographic changes, the ARO prioritizes generating affordable units close to the triggering market-rate development to stem displacement. In stable, high-income neighborhoods, where ongoing displacement is less pronounced, the ARO offers greater flexibility in delivering affordable units in areas citywide that lack legally restricted and naturally occurring affordable housing. In each of these, off-site units whose triggering project is in a Transit-Oriented-Development (TOD) zone are required to also be built in a TOD zone. Further, the revised ARO encourages delivering off-site units through partnership with affordable housing developers.

Porte: We’ve contracted with vendors that would provide outreach and credit repair and budgeting to prospective homeowners. The entities that we’ve contracted with are viewed as trusted advisers within communities of color. The individuals participating in our affordable homeownership programs have to go through one of those portals. That step allows us to create that even playing field for participation. As a result of that, our rate of service to BIPOC households doubled to over 70 percent.

Even if an inclusionary housing program does all the things we talked about—uses a racially equitable process to make program decisions, targets households with income levels that match those of renters of color, designs a racially equitable preference policy, incentivizes family-sized units—that is still not a guarantee that the program will actually serve households of different racial and ethnic backgrounds at an equitable rate. Collecting data on the race and ethnicity of residents served by your program is essential to determine whether the program is serving the desired populations at an equitable rate, or whether further steps are needed to ensure equitable access.

Benjamin: Exactly. For a while we had higher numbers of Black folks moving into our inclusionary homeownership units, but in the last several years the numbers are very low. We have to ask ourselves why, and what can we improve? What can we do differently? What are we building? Are we building homes families can live in or are we building 400-square-foot studios? How are we advertising and marketing our units? Why is it that one community is very present in our applicant pool and another is hardly there at all? Even after implementing a preference policy, does that mean that all of the people that were most harmed by city policies and kept out of housing are now getting in? No, they’re not!

Porte: We need to ask what challenges our residents are facing and what systems can we put in place to ensure that they move from point A to point B. Absent that, I think we will be short-changing the process.

Benjamin: I fear that as an industry we are not including that very important evaluation piece as we’re creating these policies and procedures. The evaluation piece has to go hand-in-hand with every new program or initiative we try. After all the promises that we as localities have made to Black folks, to BIPOC, to the most underserved people… we’ve made promises to them over and over that unfortunately have gone unkept. Without evaluation and addressing what you’re doing and looking back and making improvements, it’ll just be the same old same old, and we in San Francisco are committed to not repeating the past.

For more thoughts on incorporating racial equity into inclusionary housing programs, see these two recent policy briefs co-authored by Grounded Solutions Network and the National Initiative on Mixed-Income Communities.

Until recently, Stephanie Reyes was the state and local policy manager at Grounded Solutions Network.
Ruoniu (Vince) Wang is a research manager at Grounded Solutions Network.

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