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Affordable Workforce Housing on Cape Cod

Published October 31, 2017 by Tarja L. McGrail, Ksenia Pryme

Housing Need

Workforce housing is generally understood to mean affordable housing for people who work in the “essential industries” - industries required for economic prosperity of a given community. These industries typically include public safety, healthcare, education, and skilled trades. Industries evolve over time. For example, on Cape Cod, commercial fishing has long been the dominant industry. Cape Cod has now evolved into a year-round, world-class travel destination, changing the workforce demographic to include hospitality and dining and the industries that support them, such as construction, landscaping, and other related trades. One of the greatest challenges facing the region is the ability to grow and sustain a vibrant economy along with a workforce to support our essential industries, whether that’s through retention of Cape-born workers or attracting workers from outside the region.

Cape’s higher-than-state-average housing costs and lower-than-state average wages are contributing to affordability gaps which occur when workers’ earned income is insufficient to secure quality housing within reasonable proximity to their workplace. As an example, according to 2014 Barnstable Housing Needs Assessment, in the Town of Barnstable the difference between the median sales price of a single‐family home and the sales price affordable to a household with the Town’s median income was $165,500. This data clearly identifies that in order for the Cape to be viewed as a desirable place to live, work, and raise families, there needs to be housing available that meets affordability criteria.

What is Affordable?

The US Department of Housing and Urban Development generally considers housing as affordable if gross rent, including cost of utilities, is not more than 30% of a household’s net adjusted income, or if the carrying cost of purchasing a home (mortgage, homeowner’s association fees, property taxes and insurance) is not more than 30% of net adjusted income. Affordable housing can also be defined according to percentages of area median income (AMI). Communities may offer subsidized housing for those who cannot afford to pay market cost for housing. Generally, housing subsidy programs are targeted to households with particular income ranges depending upon programmatic goals: from extremely low income households (30% AMI) to very low-income (50% AMI), and low- to moderate- income (51% to 80% AMI). Buyers meeting the affordable housing criteria are typically selected via housing lotteries which ensure fair distribution of affordable housing.  Lotteries are designated for individuals that meet financial criteria and, in some communities with affordable housing waitlists, applicants may also need to meet additional criteria such as first-time homebuyers, currently reside in the community, employee of a local business, municipal employee, a household with children attending local school system, and those over 55 who meet certain income/asset guidelines. 

How Do We Close the Gap?

Affordable workforce housing has been a buzzword with many community organizations concerned with housing policy across the spectrum, from town planners and housing advocacy groups to business owners and real estate developers. The need is also recognized at the government level. Under 1969 Massachusetts General Laws Chapter 40B Section 20-23, the Commonwealth’s goal for all Massachusetts municipalities is to have 10% of housing units affordable to low/moderate income households or affordable housing on at least 1.5% of total land area. It is a moving target and to date all Cape towns are below the minimum threshold. The Cape Cod Commission, a regional planning and regulatory agency, promotes efficient land use and provides review assistance to the local towns. Tools include:

  • Changing zoning bylaws to allow higher density in village centers and/or locations that are less environmentally sensitive and have greater infrastructure capacity - including less restrictive accessory dwelling bylwas
  • Preparing Housing Production Plans to serve as the basis for Local Comprehensive Plans that address each Town’s housing needs and unique character.

The middle class market, who sort of been lost in the housing programs, will certainly benefit from recent amendments to the Chapter 40R Smart Growth Housing Law, which is offered by the state to facilitate the production of “starter homes” – defined as smaller homes (maximum 1,850 sq.ft.) on smaller lots (maximum ¼ acre) that are affordable to young families and other entry-level buyers. Municipalities can take advantage of the zoning incentives ranging from $10,000 to $600,000, depending on the size of the starter home zoning district, as well as housing production payments of $3,000 for each unit of housing built. The law requires that 20% of the units be set aside for sale to persons and families earning no more than 100% of AMI. There is also an open space requirement.

Development Challenges

While the need and the benefits for buyers and local businesses are clear and towns are allocating land for future buildout, one of the challenges that Towns face when trying to increase housing diversity and affordability is attracting and retaining developers that are interested in supporting affordable housing. One of the following two types of business groups may act as developers under Chapter 40B: Non-Profits/Public Agencies and For-Profit Limited Dividend Organizations.

Non-profit organizations such as Housing Assistance Corporation, Community Development Partnership, and others are committed to leveraging various funding sources, such as low income housing tax credit equity, Department of Housing and Community Development funds, Community Preservation Act monies, and any other available sources to fund affordable housing projects. Typically, 100% of the units developed by non-profits are made affordable.

Chapter 40B provides incentives for a for-profit developer to add affordable units to their projects. Firstly, a developer can take advantage of a streamlined “one-stop shop” Comprehensive Permit process, saving time and resources by submitting just one application instead of multiple. Secondly, the developer can offset his cost by applying for waivers from prescriptive municipal zoning requirements if a municipality has less than 10% of its housing qualifying as affordable and the developer commits at least 25% (or 20% in certain cases) of the new units to have long-term affordability restrictions. As a matter of fact, a number of recent developments wouldn’t have been possible at all if it wasn’t for the Chapter 40B provisions. The challenge then becomes for the developers to plan a densely developed project that can comply with State building codes, health, and environmental regulations while still leaving enough profit for the project to be economically feasible, given that increased land costs on the Cape require higher rental and sale prices with typical zoning.

Friendly 40B

Many find a good process to follow is to initiate an informal preliminary project review with potential stakeholders to introduce the project and seek input on how to make it more appealing to the community prior to developing technical drawings. Once it is apparent that the project will be supported by the Town, it is important for the developer to work hand-in-hand with their consultants ̶ who include attorneys, architects, civil engineers, traffic and mechanical/electrical/plumbing engineers, and landscape architects ̶ to put together a thoroughly developed 40B application submission. Engineers and planners are involved in reviewing potential project sites to determine the buildout feasibility and regulatory hurdles involved with the proposed project. They also help the project fit the housing needs of the local communities while protecting valuable nearby environmental resources by implementing sustainable design practices. These include low impact development/green infrastructure strategies for stormwater management and Innovative/Alternative processes for wastewater treatment.

Done with proper planning and foresight, affordable developments are a sensible solution to meet the housing demands for Cape Cod’s workforce. Affordable housing not only creates homes, it creates jobs. According to the National Association of Home Builders, for every 100 affordable units that are built, 30 permanent jobs are created. Maintaining a diverse workforce on Cape Cod is a critical element to the growth and sustainability of local economy, and making the Cape an affordable choice will help encourage workers to put down roots in the community. Affordable housing is a basic tenet of a vibrant community. Providing housing opportunities for Cape Cod’s workforce not only makes good business sense as a jumpstart to the local economy; it’s the right thing to do for our community.