Using Public Land to Create Equitable Communities: Financial Best Practices

Using Public Land to Create Equitable Communities: Financial Best Practices

By financially supporting affordable housing for low- and moderate-income families near transit, public agencies can be key agents in developing strong projects for the benefit of the public good.

*The Low Income Investment Fund (LIIF), Enterprise Community Partners (Enterprise), and Living Cities are working together through the Connect Initiative to promote equitable Transit Oriented Development (eTOD) as one of the most effective place-based solutions to increase social equity. This is the second in a series of three posts about best practices for joint-development strategies in creating equitable communities. *

Financing eTOD is one of several important components in crafting a strategic approach for community development, and it has enjoyed some recent successes. In the Bay Area, the Great Communities Collaborative (GCC) – a consortium of national and local partners who are advocating regionally for equitable TOD – and the Metropolitan Transportation Commission (MTC) cooperated to create several significant programs, including the Bay Area Transit Oriented Affordable Housing (TOAH) Fund. The $50 million TOAH Fund’s purpose is to provide innovative financing products to developers seeking to build equitable TOD projects in the nine-county region, and has already helped fund numerous projects throughout the Bay Area.

As discussed in our first post, it is beneficial for public agencies and community development practitioners to work together in supporting Transit Oriented Development to create equitable communities and promote affordable housing. The Lindbergh station area in Atlanta is a successful example of a transit agency-led joint development that is complex, integrated, and mixed-use with a modest level of affordability. The success of this station and its ability to overcome size and scale obstacles were dependent upon a high level of coordination by MARTA (the Metropolitan Atlanta Rapid Transit Authority) and major tenants in the area. The project required many years of phased development, proactive infrastructure planning and implementation, and patient land owners committed to equitable development outcomes and the ability to recapture their investment over time through long-term land lease payments. This project is a model of the return on investment in station area infrastructure. For its $120 million investment, MARTA initially recaptured over $48 million through land sales. Today, MARTA is gradually recapturing the remainder of its investment with annual lease revenues totaling $2.7 million from tenants such as AT&T and other retail providers, parking, and a land lease for one of the residential properties. Lindbergh is now an important example of the potential for eTOD and joint development processes in the Atlanta region and beyond.

The clearest way that public agencies can support affordable housing on publicly-owned land is by offsetting the development costs to build a project. Below are a few additional, specific techniques to help public agencies increase the economic viability of public-private partnerships:

  • Discount publicly-owned land in accessible, high-value areas. Leasing or selling publicly-owned land to developers below fair market value in return for long-term affordability restrictions significantly reduces a project’s total development costs and the need for additional subsidy, ultimately encouraging financial return and public benefit. In LA for example, Metro’s Joint Development Program is encouraging comprehensive planning and development around station sites and along corridors, and also allowing a proportional land discount up to 30% for affordable units to ensure that neighborhoods stay affordable. Under this model, 33% of new units will be designated for affordable housing. In Redmond, Washington, state law authorizes the creation of Community Facilities Districts (CFD), a special purpose district that allows landowners to finance investments in community facilities and infrastructure projects. The ability to finance the project costs can be critical to moving forward with a funding commitment.
  • Reduce costs while a project is securing financing and entitlements. Securing financing for affordable housing can be a difficult and timely process. Jurisdictions can reduce this cost by delaying the sale of public land until a project is ready to start construction, expediting permit review and/or providing a liaison within the permitting department to ensure a quick and efficient permitting process.
  • Consider and capture additional future revenue streams. Public agencies should be mindful of future revenue streams that could be created or accelerated through the new developments, including sales taxes and fare box revenues, and be prepared to capture these in budget projections. Organizations such as the Portland Development Commission have used tools such as tax increment financing to offer a structured mechanism by which to evaluate and leverage anticipated revenue.
  • Help mitigate key financial risks that come with certain project uses. Local governments should consider taking on a role as a financial investor if their vision for a site includes riskier project uses such as ground-floor commercial or market-rate housing in unproven locations. Commercial spaces are often slow to lease and, in transitional locations, these smaller spaces are occupied by fledgling businesses that may struggle in the early years.
  • Invest public resources in preparing public sites for development to decrease a project’s total development costs. These investments decrease the risk and time involved in preparing the site for development, which reduces the need for direct public subsidy during risky and lengthy acquisition periods. In Beaverton, Oregon, for example, the City purchased a block of property in 2011 and formed a public-private partnership with Community Partners for Affordable Housing and Roy Kim Development, Inc. to do two developments on the site. Mayor Denny Doyle called this project “especially exciting” because it “serve[s] as a catalytic redevelopment opportunity… increases [the] housing density in downtown Beaverton… and address[es] [the] community’s need for affordable housing.”
  • Invest in infrastructure. Investing in infrastructure is another good way to facilitate eTOD. Stormwater facilities, for example, have historically been a barrier for developers because they are expensive and difficult to maintain. Mountlake Terrace (MLT) in Washington State overcame that barrier by instituting a cost-sharing mechanism that allowed developers in the area to use the Regional Stormwater Facility. The policy not only stimulated the local economy by providing incentives to locate new businesses in the MLT area, but also encouraged good stewardship of the environment.

By financially supporting affordable housing for low- and moderate-income families near transit, public agencies can be key agents in developing strong projects for the benefit of the public good. Follow along in the coming days to learn about best policy practices for effective public-private partnerships.

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