Why aren't builders replicating a successful affordable housing development?

Easy access to schools, shopping and the airport. Open, efficient floor plans. Walking paths, a pond and a community swimming pool. These are some of the amenities M/I Homes promoted for its new Minerva Park development, 250 units on 100 acres north of Columbus. But when the developer announced the project in 2017, the biggest selling point was something else—the price. “The price started in the mid-$200,000s, and the average home price was just under $300,000,” says Robert Schottenstein, M/I Homes president and CEO. “Today, the average price is around $340,000.”

Is this affordable housing? For some but not for all. Yet the Minerva Park development, located in the Westerville school district, is on the lower end of new builds in the suburbs. And even though Schottenstein calls the project a big success and it’s entering its final phase, it’s still an anomaly. Schottenstein says the typical M/I home in Central Ohio sells for $400,000 to $500,000.

In a region with a housing crunch and growing income inequality, the question is: Why don’t developers build more housing units and mix in a higher proportion of affordable options in the city and suburbs? A 2018 study by real estate research firm Vogt Strategic Insights found the region should be adding 14,000 to 21,000 new homes and apartments a year to keep up with demand, a figure far above the current annual rate of 7,000 to 8,000.

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The causes of the problem are complex. They involve stagnant wages, restrictive zoning regulations, not-in-my-backyard sentiments (aka NIMBYism), the bottom lines of developers and financial constraints limiting the ability of local governments and nonprofits to create affordable housing—a hard-to-define term based on the financial resources of potential buyers and renters. “There are two dynamics,” says Jason Reece, an Ohio State assistant professor of city and regional planning. “The first is we have a very hot housing market here, and the second dynamic is, coming out of the 2008 recession, wages, especially wages for working-class folks, haven’t kept up.”

These dynamics have led to a steady rise in the cost of the limited housing stock. Central Ohio home values have risen 40 percent over the past five years, according to Zillow, pricing many working-class people out of the purchasing option and making rent more burdensome. Columbus Mayor Andy Ginther says more than 54,000 Central Ohio residents live at or near the poverty line and spend more than half their income on housing. Spending 30 percent or more of income on housing is considered a “cost burden,” according to the U.S. Department of Housing and Urban Development.

“There’s still a NIMBY mentality, communities where there’s a backlash to more affordable housing,” Reece says. “We have a history of discriminatory housing policies that date back a century or more.”

And then there are the regulations imposed by local municipalities that jack up the cost of the finished product. “The biggest challenges are the cost of buying the land and getting through the zoning process,” says Jon Melchi, executive director of the Building Industry Association of Central Ohio. “If you can only build 100 homes on 400 acres, the price is going to be a lot different than if you could build 300 or 400 units.” There are also restrictions on the height of buildings. “We see projects now that should be 15 stories and are six or eight,” Melchi says, adding that some suburban municipalities discourage lower-cost housing options in favor of more upscale and expensive developments.

Those factors make the M/I project unique. Once construction began at the former site of the Minerva Lake Golf Club, Heather and Clifton Chapman wandered over from their nearby home, liked what they saw and eventually bought a new house. “The price was $259,000 before the [add-ons], and we closed out at $326,000 with all the upgrades to the house,” Heather Chapman says. The couple looked at a few other places, including homes in M/I’s Bigham Ridge in Westerville, where Chapman says homes began in the high $300,000s, with most costing $500,000.

Greater density—unusual in a suburban setting—is why the Minerva Park homes are less. “This was a former golf course with a number of ravines that were undevelopable,” Schottenstein says, “and we were able to secure smaller lot sizes on a significant portion of the [remaining] site.” Without the greater density, he estimates the cost per home would be at least 20 percent higher.

The Columbus Metropolitan Housing Authority, the city’s public housing agency, and nonprofit builders such as Homeport help lower-income families find affordable housing, but the groups have limited resources. “Homeport has been very successful at low-income housing tax-credit development, but we’re not able to put out the volume we need to keep up with the demand for affordable housing,” says Michael Kelley, a principal of Kelley Cos., a local developer and a Homeport board member. “We’re talking to stakeholders and partners to come up with creative ways to get more affordable units on the market.”

Schottenstein fears the lack of affordable housing could curtail the city’s ability to grow, a problem that could be worsened by the economic fallout from the COVID-19 pandemic. “The inability of so many people to afford any kind of housing is a serious and growing problem in our country,” Schottenstein says.

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