Mayors tap P3s and bonds for housing

Mayors and city leaders trying to solve housing shortages are forming creative public private partnerships backed up by public finance fundamentals.  

“The fuel was a $150 million housing bond that voters approved in May of 2022,” said Mark Carmona, chief housing officer, of San Antonio, Texas. 

“We’ve been able to push out about 85% to 90% of those housing bond dollars out into the community already. We’ve got over 5,000 units that have been produced.” 

The comments came from panel discussions held during a housing conference hosted by the National League of Cities in Washington, D.C. on Tuesday. 

San Antonio launched its Affordable Housing Bond program to fund “affordable housing for renters, homeowners and people exiting homelessness.” 

“If you consider housing as infrastructure like energy, transportation, and water, it’s an essential element in your community’s development,” said Carmona. “That message has been one way that I’ve been able to bring in other systems and partners to the housing work.”    

Private sector partners teaming up with municipalities to develop and build housing include Amazon. 

“We have exceeded our initial goals of $2.2 billion to fund more than 21,000 homes,” said Pearl Leung, senior manager of public policy for Amazon. “Over 80% of the housing that we fund are in partnership with state and local governments.”  

The approaches used to make P3s work vary due to the legal patchwork of zoning, tax laws, and varying needs across the country.

“The average home price in Redmond is $1.42 million,” said Angela Birney, mayor of Redmond, Washington. 

“Redmond does not create housing. I think some cities have housing authorities. We do not, but we create the opportunities for housing to be built. We have worked with Amazon and other large corporations in our region, who were very intentional about setting up a housing collaborative.” 

Birney taps philanthropy and leverages inclusionary zoning, which provides incentives for developers to include units for tenants with low to moderate income levels.   

Redmond is pushing transit-oriented development along its recently expanded light rail line and makes good use of Low-Income Housing Tax Credits.  

Tempe, Arizona is working with a different set of rules. “We are the only state in the country that doesn’t have access to tax increment financing,” said Corey Woods, mayor of Tempe.

“We also are one of seven states in the country where inclusionary zoning has been banned by previous state legislatures.” 

TIFs are typically set up to funnel sales tax revenue into servicing the debt floated by bond sales. Solving a housing shortage in Tempe sometimes requires the city to make the first move. 

“On Apache Boulevard, which is our light rail corridor, back in December of 2021 the city actually spent $10.7 million acquiring a 2.6-acre parcel because it was an old grocery store that was going away,” said Woods. 

“We had our second RFP request for proposals out and we now have a developer. They’re going to be building a five to six story project, 400 units of housing on the site, 90% affordable, 10% market rate, and a minimum 10,000 square foot grocery store option at the ground level.”

Tempe is funding affordable housing through an initiative that solicits voluntary contributions and charges developers, “an amount equivalent to 50% of certain permitting fees paid to the city’s General Fund,” to support affordable and workforce housing. 

According to Woods the strategy has an appeal for market rate developers not skilled at developing affordable units.

“They have a formula that they know how to abide by. They’ll say, ‘we’re going to be giving $250,000 based on the permitting fees.’ The city will turn around and create that affordable housing through a partnership with another private sector partner.” 

In Washington, D.C. setting up a successful P3 often starts with the real estate. “I think that P3s make sense when the jurisdiction owns land and can offer a discount on the land,” said Nina Albert, deputy mayor, planning and economic development for Washington. 

“It’s the public sector’s responsibility, particularly in a P3 to handle and de-risk the entitlement process. Those tend to garner a lot more attention, because now the public’s involved.” 

Getting the public involved can lead to a barrier to P3s expressed through local opposition known as nimbyism (not in my backyard) who are fixated on a community vision rooted in the past.  

“I’ve taken to calling that toxic nostalgia, because frankly, a lot of it isn’t real,” said Woods. It’s just what they perceive as being real from what happened 30 or 40 years ago.”