Deeds that keep houses affordable may keep neighborhoods poor

INTRO TEXT in a state short on affordable housing, it might seem odd that housing advocates are calling for policy changes that could eventually bring more market-rate units to poor neighborhoods. But some say that’s exactly what is needed to lift communities-and families-out of poverty.

Many affordable-homeownership programs attach long-term deed restrictions to properties, limiting the equity new homeowners can build up and requiring them to sell only to other low-income buyers. In heated housing markets, these limits may promote economic diversity and offer an effective way to preserve affordable units. But critics charge that when deed-restricted housing is developed in distressed areas, it just exacerbates the problem of concentrated poverty and hampers the ability of low-income families to build wealth through equity.

Part of what’s holding prices down in the state’s weak-market neighborhoods—in places like Fall River, Fitchburg, Holyoke, and Springfield—is the prevalence of vacant lots and buildings, along with high crime rates and low levels of owner-occupancy. Homeownership has long been seen as a key to stabilizing such areas, and many state and federal subsidies are used to build or rehabilitate units for owner occupants. The problem, says Peter Gagliardi, executive director of HAP Inc., a regional nonprofit housing partnership in western Massachusetts, is that the five- to 15-year deed restrictions that were once tied to such properties have been replaced, in recent years, with 30- to 50-year terms on properties subsidized by the state’s Affordable Housing Trust Fund and Housing Stabilization Fund. He says these limits discourage prospective buyers who are hoping a marginal neighborhood will turn around over time.

“There are many places in Massachusetts where the housing is affordable, but the conditions are such that people don’t want to live there now,” says Gagliardi. “We want to bring people to these neighborhoods. What we’re looking for is spin-off as the area improves.”

Gagliardi made the case for relaxing deed restrictions in a recent white paper for the Pioneer Institute, a Boston–based public policy organization. He says state and federal housing initiatives have historically had three main goals: providing families with the opportunity to build wealth through homeownership, revitalizing distressed neighborhoods, and creating affordable housing. Over time, says Gagliardi, the focus has shifted disproportionately to affordability. He recommends that the state offer shorter restriction terms for buyers in weak-market neighborhoods, with more flexibility on who they can sell to and how much equity they can accumulate. He also wants the administering state agency to set restriction terms that reflect local conditions and the recommendations of municipalities.

Gagliardi’s views seem to have a receptive audience in the new Patrick administration. Tina Brooks, undersecretary of the Department of Housing and Community Development, agrees that affordability isn’t the state’s only housing concern. “In places where the market itself is at or below what we’d classify as affordable,” she says, “I think the issue is more about what incentive the public sector can provide to attract families back.”

If a family that receives assistance to buy a home is afforded a decent place to live, and a once-blighted neighborhood improves as a result of that investment, then the state has met its goals, according to Brooks. “The families who return to neighborhoods that have suffered significant disinvestment are really pioneers,” she says. “They’re staking their family’s stability on this investment and betting that others like them will join them. If a family fitting that profile benefits from a down payment and stays there for a number of years, I believe the state should recover, at sale, the investment made. But I think the family should be allowed to capture the appreciation, because that appreciation has happened largely because of families like them.”

Not everyone thinks this is the way to go. Esther Schlorholtz, a senior vice president at Boston Private Bank & Trust Company, which has provided financing for a number of affordable housing projects in Roxbury, believes sellers should certainly realize some return on their investment. But she says major redevelopment efforts are meant to assist a series of residents in the community over time, and they shouldn’t enable any single family or resident to profit from a windfall.

“Because of the immense public investment that’s involved, we just don’t want [subsidized units] to go onto the speculative market, which would allow very few people to benefit,” says Schlorholtz. “Ultimately, people from the community could become excluded from the neighborhood.”

Building equity is just one way residents benefit from homeownership, says David Abromowitz, a Boston–based attorney who served as co-chair of the governor’s transition group on housing. “By owning your own home, you can stabilize your housing costs, making it easier to save and easier to stay put,” he says. While he’s open to some flexibility in the degree of appreciation that’s allowed, Abromowitz doesn’t think it’s wise to shorten the length of terms on affordability restrictions.

But many affordable housing leaders think it’s time to reassess deed restriction policies.

Marc Dohan, executive director of the Twin Cities Community Development Corp., which covers Fitchburg and Leominster, says he favors more flexibility because even within cities, policy needs can vary. “There are parts of Fitchburg and Leominster that have an affordability problem and parts that need revitalization,” says Dohan. “I want a deed restriction that’s going to reflect the needs of the community. That’s why I think it needs to be very targeted to specific neighborhoods.”

Gagliardi agrees, saying relaxed deed restrictions should be allowed only in neighborhoods that meet at least three of seven criteria that characterize a weak market, such as a high number of vacant parcels and a low median income. As the area improves and prices start to climb, he says, subsequent restrictions would become more stringent, reflecting a renewed focus on affordability. “The real issue is the flexibility to determine the policy goal that we’re trying to serve,” he says.

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Aaron Gornstein, executive director of the statewide Citizens’ Housing and Planning Association, also supports new leeway with deed restrictions. “But careful monitoring is so important, because neighborhoods can turn around fairly quickly,” he says. “No one ever expected the median price of a single-family home in Chelsea to be over $300K.”

Melissa DaPonte Katz is a freelance writer in Amherst.