Mixed Income, Mixed Results

By Craig Guillot

'There has been more focus on how to bring more affordable housing into opportunity-rich areas and how to have more equitable development.'
—MARIIA ZIMMERMAN, MZ STRATEGIES

Many cities have been adopting mixed-income housing strategies to break up pockets of poverty, revitalize poor neighborhoods, and reduce income inequality.

Planners and housing experts say that while the concept is a viable path for urban development, it doesn't always meet its socioeconomic goals. The ratio of affordable housing units, availability of social services, and location all play a role in how lower-income residents thrive in such communities.

While the idea is to remove some people from the surroundings of poverty and offer more opportunity, it can lead to social isolation and gentrification. Mixed-income projects can also be challenging to put together as they typically require a complex mix of public funds, tax credits, and private investment.

Despite the challenges and criticisms, planners and housing authorities say mixed-income development is often a step in the right direction. In New Orleans, it's being used as a means to fund and rebuild more equitable rental housing since Hurricane Katrina. It's being used as a tool to counter rising rents and income segregation in Austin, Texas. And in Minneapolis, mixed-income housing is being promoted as a means to provide choice and opportunity to citizens living in poverty.

Columbia Parc, 7th Ward, New Orleans. Number of Units: 685. Constructed on the site of the former St. Bernard housing projects, Columbia Parc has been heralded nationwide as a model for mixed-income development. Photo by William Widmer/Redux.

Minneapolis: Choice and opportunity

Due to rapid population growth, Minneapolis and Saint Paul have had a growing need for affordable housing. The Metropolitan Council forecasts that through 2040, the metro population will increase from 2.85 million to 3.63 million residents. The council projects that between 2020 and 2030, 37,400 more low-income and moderate-income households will need affordable housing. A 2015 report by the Institute on Metropolitan Opportunity at the University of Minnesota Law School noted that the city's income and racial segregation concentrate poverty "to a remarkable degree."

Mariia Zimmerman, founder of MZ Strategies in Richmond, Virginia, specializes in urban planning and formerly served as the deputy director for sustainable communities at the U.S. Department of Housing and Urban Development. She wrote a policy brief for the McKnight Foundation on mixedincome housing in the Twin Cities and says local officials have been having more conversations about how to bring more market-rate housing into some lower-income neighborhoods.

While new rail lines have provided more transportation options for job-seeking residents in some predominately poorer neighborhoods, she says there are still large areas of racially concentrated poverty. "There has been more focus on how to bring more affordable housing into opportunity-rich areas and how to have more equitable development," says Zimmerman.

"If these projects can bring in more [middle income] residents to the neighborhood, that's an improvement and a good thing," says Zimmerman.

Andrea Brennan, director of housing policy and development in Minneapolis, says encouraging more mixed-income housing is about "promoting choice and opportunity." She says providing diversity in housing options for different income levels is a key component of creating a sustainable and vibrant community.

But simply funding and building mixed-income developments doesn't always address the socioeconomic problems it's intended to. A report by the McKnight Foundation notes that while developers are increasingly focused on mixed-income development, they are "revealing many challenges such as the need for patient capital, greater gap financing, and a lack of understanding of how such development functions relative to the market in which it is developed."

The foundation also noted that despite the advancement of affordable and mixed-income housing, inequity and income segregation continues to rise. The report found that between 2000 and 2009, the number of very low-income households paying more than 30 percent of their income in rent grew by nearly a third. By 2011, half of all very low-income households in Minnesota were spending more than 30 percent of their income on rent.

Brennan says funding has been a barrier. Postrecession development has largely been either 100 percent market rate or 100 percent affordable as developers find it difficult to mix the two in unusually complex transactions. "It's all about the economics of the deal. When you throw in the market rate units, affordable units, equity, and subsidies, we're seeing it's not always compatible," she says.

As in many cities, challenges with mixed-income developments have often revolved around location. Zimmerman says they're seeing more success creating affordable housing in market-rate neighborhoods and that there's often a challenge with the opposite approach. Bringing market-rate units into affordable neighborhoods can be difficult because "there's usually a stigma with living in that neighborhood." Developers also often fear they may not be able to charge the rents they need to make deals profitable.

'One hundred percent public housing complexes couldn't survive anymore on the subsidies provided by HUD. Mixed income became the best business model because nonpublic housing units would bring in revenues to support the public housing units.'
—GREGG FORTNER, EXECUTIVE DIRECTOR, HOUSING AUTHORITY OF NEW ORLEANS

Zimmerman found in her research that mixedincome projects are working best in Minneapolis on a financial basis with an 80/20 threshold. Projects with a larger mix of market rate can work in low-income communities but are unlikely to attract high-end rents. "What seems to have the best opportunities are projects with 20 percent affordable housing in high-rent market areas. Developers typically need those market rate tenants to make it work," she says.

Three successful developments in the Twin Cities.

A post-Katrina catalyst in New Orleans

Mixed-income housing has played a strong role in the redevelopment of New Orleans since Hurricane Katrina in 2005. According to the Data Center and the Census Bureau, 70 percent of the city's housing, roughly 134,000 units, was damaged in the storm. The rebuilding over the past decade has dramatically changed the landscape of affordable housing.

Gregg Fortner, executive director of the Housing Authority of New Orleans, says the city had already started redeveloping its public housing in the early 1990s. HANO used funds from the HOPE VI Housing Grant, which aimed to better weave housing projects into the fabric of surrounding communities. By the end of 2001, the St. Thomas Housing Project, at one time the most crime-ridden housing projects in the nation, had been demolished and rebuilt as River Garden. "That already started a path to move us into this new urban, mixed-income philosophy. The concentration of poverty was a breeding ground for crime and a lack of opportunity," says Fortner.

When Hurricane Katrina destroyed most of the city's public housing stock in 2005, it "rapidly accelerated" the redevelopment, says Fortner. As the federal government started disinvesting from public housing and offering more subsidies for private property, Fortner says mixed income became the most effective and efficient model to develop housing affordably for the city's poor. Expansion of Section 8 vouchers also spread some lower-income residents into more mixed communities.

Capitalizing on the rock-bottom real estate prices after Katrina, and incentivized by historic preservation and low-income tax credits, local and national investors started buying properties for rentals and for mixed-income development. Dozens of projects over the past 10 years have converted old buildings into chic complexes that combine luxury living with affordable units.

Shuttered public housing projects also continue to be demolished and rebuilt as mixed-income communities. "One hundred percent public housing complexes couldn't survive anymore on the subsidies provided by HUD. Mixed income became the best business model because nonpublic housing units would bring in revenues to support the public housing units," says Fortner.

A far cry from the graffiti-covered slums that existed before, New Orleans's new mixed-income and affordable housing projects feature playgrounds, community centers, gardens, and porches. The developments have played positive roles in changing the communities and have reduced the "feeling of hopelessness" for many residents, says Andreanecia Morris, president of the Greater New Orleans Housing Alliance. Many of these communities also have more retail development in and around their perimeters and better access to public transportation. Columbia Parc, a 685-unit community constructed on the site of a former St. Bernard housing project, has been heralded nationwide as a model for mixedincome development.

Marla Nelson, AICP, PhD, associate professor in the Department of Planning and Urban Studies at the University of New Orleans, says that while there have been some "real positive changes" in some communities, issues of equity and social justice still remain. In many developments, "affordable" units are available to residents who earn up to 80 percent of area median income, up to $33,600 for one person and $48,000 for a family of four. "Mixed income has affordable units, but affordable for whom? An affordable unit at 80 percent of AMI is very different than affordable at 50 percent of AMI. Much of this is not very low-income housing and these are not very poor people," says Nelson.

Many New Orleanians point out that the developments may have accelerated the growing problem of rising rents and gentrification. Make Room, a campaign by nonprofit affordable housing developer Enterprise Community Partners, recently pegged New Orleans as the second worst city for renters. Their data showed that 35 percent of renters in the area were spending more than 50 percent of their income on rent. Other areas with high concentrations of severely burdened renters included San Diego, Miami, Los Angeles, Philadelphia, New York, and Memphis.

'Mixed income has affordable units, but affordable for whom? An affordable unit at 80 percent of AMI is very different than affordable at 50 percent of AMI. Much of this is not very low-income housing and these are not very poor people.'
—MARLA NELSON, ASSOCIATE PROFESSOR, THE DEPARTMENT OF PLANNING AND URBAN STUDIES AT THE UNIVERSITY OF NEW ORLEANS

"Some people were already [rent] stressed and now because of market pressures, it has become worse," says Morris.

Morris says there's ultimately more to making mixed-income housing successful than "simply mixing people up from different economic backgrounds." She says mixed-income communities must have appropriate income levels and feature social and supportive services that can address the needs of households with underlying issues.

And there are varying levels of success, Morris adds. While some developers have simply constructed units, others have taken more holistic initiatives by building neighborhoods designed to create opportunity and stability. "Some have recognized the way to be successful long-term is to set families up for success and give them access to opportunity," she says. "It's not just about building the community, it's about creating the services to sustain it."

Iberville, New Orleans. Number of Units: 821. The old Iberville Projects is currently undergoing a one-for-one replacement of the existing 821 units in a mixed income environment. Courtesy Housing Authority of New Orleans.

Cutting income segregation in Austin

Austin remains one of the fastest-growing cities in the country. Census figures show its population grew 2.9 percent during the 12 months ending in July 2014. Yet despite robust job growth and rising incomes, not all communities in the area are thriving equally.

A recent study from the University of Toronto's Martin Prosperity Institute ranked Austin as the most "economically segregated" metro area in the U. S. It noted housing costs, how residents commute to work, political orientation, and race as factors that contribute to those high levels.

Kelly Nichols, principal of the consulting firm Woollard Nichols & Associates, says the city's problem of economic segregation has been exacerbated by its rapid growth. Nichols says city leaders and planners have become more aware of the issue in recent years and have made targeted efforts to address the problem with mixed-income development. Nichols, who was formerly the planning and policy manager for Austin's Neighborhood Housing and Community Development Office, says the city's Mueller Community is a shining success of mixed-income planning.

Aldrich Street, Mueller's growing activity hub, currently comprises Lake Park, Thinkery (a family science activity center), three multifamily communities, and retail and restaurants fronting Lake Park.

'Some [developers] have recognized the way to be successful long-term is to set families up for success and give them access to opportunity. It's not just about building the community, it's about creating the services to sustain it.'
—ANDREANECIA MORRIS, PRESIDENT, THE GREATER NEW ORLEANS HOUSING ALLIANCE

Mueller, Austin, Texas. Number of Units: More than 5,700. The 700-acre community will feature office and retail space, a farmers market, and 140 acres of open space. Courtesy Mueller Community.

Sitting on the former Mueller Municipal Airport, the redevelopment is a joint project between the city and Catellus Development, the master developer. It is a "huge success in mixed income," says Mandy De Mayo, executive director of HousingWorks Austin, because of its location, mix of units, and varied income levels. Mueller is halfway through its build out and aims to keep at least 25 percent of the for-sale and for-rent residences at affordable rates.

When completed, the 700-acre community will feature four million square feet of office and retail space, more than 5,700 housing units, and 140 acres of open space for 13,000 residents. De Mayo says its success is in providing opportunity and an enhanced quality of life for lower income residents. "It's ultimately better for people to live in areas of opportunity, which includes mixes of income where people go to work every day," she says.

Austin also has its S.M.A.R.T. (Safe, Mixed- Income, Accessible, Reasonably Priced, and Transit- Oriented) Housing Policy Initiative which aims to stimulate the creation of housing for low- and moderate-income residents. Elizabeth Mueller, associate professor of Community and Regional Planning at the University of Texas at Austin, says the city has also been expanding its vertical mixed use zoning where developers can have relaxed site development standards in exchange for inclusion of affordable housing.

The program makes 10 percent of units available to those with a 60 percent median income in what it calls "opportunity" areas around transit corridors. "It's being used in the development of corridors and helping disperse more mixed-income development throughout the city than what you might find in [typical] affordable housing," she says.

But Mueller says Austin is still challenged in offering affordable units for lower income levels. At the Mueller Community, affordable homes are available for sale to residents earning 80 percent of median family income, while rental apartments are targeted at those making 60 percent of MFI and below. "One of the challenges is that those rental units tend to be small and people are trying to figure out how to put more of a mix [of apartment sizes] in there, she says. As in many places, Austin's rental stock tends to have low square footage and bedroom counts, which is a challenge for families.

And not every mixed-income project successfully offers the social benefits that are supposed to come with dispersing the poor amongst middleincome earners. Mueller says mixed income can work when those lower-income residents have access to good schools, services, and opportunities.

Mixed-income developments are also being used to try to help original residents stay in their existing neighborhoods while rents are rising, but Mueller says it can lead to "social loss" or alienation.

"If you end up with just a handful of low-income households, they may lose their social world entirely," she says. "It doesn't always work if you can't preserve the community."

Craig Guillot is a freelance writer based in New Orleans.

Resources

"Segregated City: The Geography of Economic Segregation in America's Metros," Martin Prosperity Institute: tinyurl.com/jqmvkzl.

"The Tension in Affordable Housing: Are Current 'Best Practices' Enough?" McKnight Foundation: tinyurl.com/habkx7s.

Austin's S.M.A.R.T. Housing Policy Initiative: tinyurl.com/hr37cyq.

Thinkery, a museum and family learning center in Mueller's activity hub on Aldrich Street in Austin, serves the entire community, including underserved audiences. Families especially like to explore Thinkery's offerings on Community Nights, when the museum stays open late and admission is by donation.

Elemental Releases Four Open-Source Affordable Housing Plans. The 2016 Pritzker laureate Alejandro Aravena's firm ELEMENTAL, based in Chile, has released four of its social housing designs to the public for open-source use. The designs balance low-rise density, without overcrowding, and allow for families to expand their dwellings as they find the money to do so. The drawings, including plans, sections, elevations, and site plans are intended to help tackle the challenge of massive rapid urbanization and migration. Communities that wish to use these plans would of course need to adapt them to their local conditions and regulations. To download the plans, go to elementalchile.cl/projects/ abc-of-incremental-housing.