As Detroit continues its economic turnaround, gradual rent increases are creating concerns about increasing renter displacement. To ensure the people of Detroit are able to continue to live in the neighborhoods they have always called home, the Detroit City Council recently passed an ordinance that provides two solutions—a local housing trust fund and a new inclusionary zoning requirement. Councilwoman Mary Sheffield (D) introduced the proposal as an effort to protect the residents of her mostly downtown district. She shepherded the legislation amidst strong opposition from developers until its passage on September 19.
The new inclusionary zoning requirement will not apply to most developments. Only projects that receive at least $500,000 in subsidy support or projects that involve city land that is sold at lower than true cash value are required to include affordable units, and even in those circumstances the requirement will apply only to developments of 20 or more rental homes. All such developments must make 20% of new rental homes affordable for households earning 80% of area median income (AMI). Many housing advocates in Detroit consider this affordability standard to be inadequate because 80% of AMI is considerably higher than the average renter can afford. All rental homes built as affordable through the new inclusionary requirement must remain affordable for at least 30 years.
The Detroit Affordable Housing Development and Preservation Fund created in the ordinance provides funding through an annual budget allocation that is expected to be 20% of net sales receipts of city-owned commercial property. The fund will also be capitalized through fees paid by developers who do not comply with the provisions of the inclusionary zoning ordinance. Fees are set to be the excess rent collected above the required affordability level as well as 25% of the total amount of the affordable rent level; fees will accrue on a monthly basis. Councilwoman Sheffield has claimed the trust fund will receive an initial influx of $2 million.
The Detroit Affordable Housing Development and Preservation Fund achieves much deeper affordability targeting than the inclusionary zoning program. The new ordinance states that at least 70% of trust fund dollars must benefit extremely low income households with incomes at or below 30% of AMI. Because the final draft of the ordinance requires this deep targeting only “to the extent possible,” the Detroit Housing Trust Fund Coalition seeks a tightening of the ordinance language to guarantee the 70% requirement. The remaining 30% of trust fund resources must benefit very low income households living at or below 50% of AMI. The new fund also specifically emphasizes supporting projects that will provide permanent affordability. The Trust Fund Coalition continues to advocate for $10 million annually from dedicated, sustainable, ongoing sources of revenue.
Critics of the new law argue that inclusionary zoning will reduce incentives to develop housing in Detroit and will further push development to the outlying suburbs, despite economic projections that show a continued growth in urban development. The original ordinance provided requirements for much deeper affordability for very low and extremely low income households, but those provisions were removed to ensure the law’s final passage.