One possible housing crisis solution? A new kind of public housing for all income levels

A few miles outside Washington, D.C., a large dirt and gravel lot dotted with construction equipment was the site of a recent celebration. Local housing officials lined up in hardhats, each holding a shovel decorated with a brightly colored bow.

“Beautiful, beautiful,” a photographer said as he clicked away. It marked the kickoff for construction of Hillandale Gateway: 463 new mixed-income apartments that will be majority owned by Maryland's Montgomery County.

It’s public housing. Although this is a far different model than traditional, federally funded housing for only the very poor. And as the U.S. grapples with a massive housing shortage and sky-highprices, other states and cities are picking up on this idea, hoping to create more places where people can afford to live.

Montgomery County is a wealthy community, and it’s long focused on housing for lower-earning families. Still, it hasn't built nearly enough to keep up with demand, and the gap is growing. So a few years ago, it took an unusual step: It created a $100 million revolving fund to dramatically ramp up construction.

That means it can develop and finance its own projects “instead of waiting for Congress to give us a whole bunch more money,” says Zachary Marks, the senior vice president for real estate with the county’s Housing Opportunities Commission. The public agency owns the controlling stake in these apartments.

Congress has moved away from funding public housing for decades. And while there are federal incentives to help the private market build lower-cost apartments, “we're using them all up every year and it's not enough,” Marks says.

Now, by financing its own construction, the county doesn’t have to rely on private investors, either. Marks and others say that’s a major advantage in a boom-and-bust industry where volatility can stall financing for new projects. With the new housing production fund, he says, the amount of local money needed for a project is pretty small. And the county offers cheaper financing with a lower rate of return than private investors would demand.

But the mixed-income model is what makes this all work in the long run. The market rate rents “come to us instead of flowing out to the private sector,” says Marks, allowing other tenants to pay less.

This project is also the largest investment in this eastern part of the county in decades.

“The people who will be living here are my seniors, my kids, my middle-aged adults, the workforce,” says Chelsea Andrews, HOC’s president and executive director. “This is a community that will be inclusive on all economic levels but also in terms of our diverse communities. So this is going to be a wonderful place to call home.”

Publicly owned housing with private market amenities

Hillandale is the second project financed by the county’s fund. The first apartments, The Laureate, opened last year about a half hour’s drive away.

On a recent afternoon, Christina Cooley played ping pong in the Laureate courtyard, next to chairs arranged around fire pits. The building looks nothing like the image of U.S. public housing, most of which is generations old and severely underfunded. Among other amenities, there’s a full gym with yoga studio, a pet washing room and a courtyard pool.

Cooley says she immediately noticed the pool has a lift at one corner, to lower people with a disability safely into the water. “When I saw that, I was like, ‘What? It was made for me!’ ” she laughs.

She says she has a traumatic brain injury and one side of her body is partially paralyzed.

“Living here has changed my life,” she says.

Cooley is 43 and works part time as a teacher’s aide, but her main income is from disability. Her one-bedroom apartment has a gleaming white kitchen and small sitting area, and she says she’d like to stay here “forever.”

“It's definitely a better quality of people, and for me, it makes a big difference. Everybody here has been nice,” she says.

Rents at The Laureate range from about $1,335 for a smaller one-bedroom — far below the county median — to $3,885 for a larger two-bedroom.

A quarter of the units are for people making up to 50% of the area median income. In Montgomery County, that’s $77,350 for a family of four. An additional 5% of the units are called “workforce” housing, for those who make up to 120% of area median income.

Importantly, says Marks at the housing commission, these apartments will be affordable permanently. By contrast, federal tax credits expire and lower-rent housing built with them can revert to market rate after 15 or 30 years.

Interest is growing in locally financed public housing

“There's been a lot of uptake and interest for this model from jurisdictions of all shapes and sizes around the country,” says Paul Williams, who heads the Center for Public Enterprise. He founded the group to push for more public development generally, including mixed-income housing financed at the local level. These projects are profitable, he says, and don’t use up other, scarce federal funding.

“It's [like] an entire conventional, affordable housing project without a dollar of any of those conventional sources,” he says.

Atlanta just closed the first deal with its new housing production fund; it’s actually a private project, though a local official says they hope to eventually finance publicly owned housing.

Other places that have considered or taken up the idea — sometimes called social housing, as it’s referred to in Europe — include New York and Massachusetts, as well as Chicago and Chattanooga, Tenn.

But Jenny Schuetz, a housing policy analyst at The Brookings Institution, says not every place can take on this kind of financing.

“Montgomery County is big. It's wealthy. They have phenomenally competent and experienced staff,” she says. “These are all really unusual characteristics for most local governments across the U.S.”

Public development advocate Williams sees an answer for that. Maryland just created a state housing fund to help other places that couldn’t do this on their own. A new bill in Congress would do the same, offering federal money to help communities create more publicly owned affordable housing.