Maryland Housing Package Combines Upzoning With Vienna-Style Social Housing

A Maryland lawmaker is trying to cobble together a coalition of tenant advocates, housing supply-siders, and left-wing public housing activists to pass an ambitious package of bills aimed at addressing the state’s housing affordability problems.

“People’s incomes have remained stagnant and the cost of housing has gone up,” says Del. Vaughn Stewart (D–Montgomery County). “Housing affordability problem has turned into a crisis, and affects people across the income spectrum. This is no longer just a problem of the poorest Marylanders being able to afford a roof over their heads.”

To that end, Stewart introduced three bills that expand current tenant protections, legalize the construction of “middle housing” in areas with lots of either jobs or transit, and impose new taxes on real estate transactions to fund “Vienna-style” government-owned housing developments.

Of the three, Stewart’s Modest Homes Choices Act is the one most likely to appeal to free marketers. According to summary language provided to Reason, the bill would require all local governments in the state to allow for the development of duplexes on residential parcels currently zoned for single-family dwellings in “qualifying census tracts.” Qualifying tracts would need to be within a mile of a major transit stop, have 5,000 jobs per square mile, or have a median household income twice that of a metro area’s median income.

The bill would also require local governments to allow the development of three- and four-unit homes, as well as townhomes and “cottage clusters” (small homes sharing a common courtyard) in these census tracts.

“In areas where you have the most opportunity, the best public amenities, the most jobs, the most access to transit, you can’t have the lowest density,” Stewart tells Reason, saying that restrictions on private, market-rate housing have played a critical roll in raising the state’s housing costs. “This is not the classic liberal story of market failure. Or somehow corporate greed.”

The legislation represents a hybrid approach from zoning reform bills that have been proposed in places like Virginia and California. In the former state, the legislature will consider a bill that would legalize duplexes on all residential land in the state. California’s major housing reform bill, SB 50, authorizes mid-rise apartments of up to five stories near transit stops and job centers, in addition to allowing four-unit homes statewide.

A more modest, targeted upzoning bill is politically practical in Maryland, says Stewart, where the state government has traditionally not played a major role in land-use decisions. It’s also only one leg of the housing supply stool.

The other leg is Stewart’s Social Housing Act. That bill would raise tax rates on real estate transfers and impose a $75 recording fee on some real estate documents. Most of the proceeds would then go to fund the state’s existing Partnership Rental Housing Program, which finances affordable housing projects.

The bill doubles the amount of funding the program can spend on these projects to $150,000 per-unit for large projects, and $4 million total for smaller projects. It would also create a new block grant “social housing” program with no per-project or per-unit funding caps.

These social housing projects would be publicly-owned, mixed-income developments. There would be three tiers of rent in these complexes, with some tenants paying slightly below-market-rate rents, others paying “cost rents” that cover a building’s operating expenses plus losses from vacant units, and a more heavily discounted tier for low-income renters.

While he supports more private housing supply, Stewart argues upzoning is not a sufficient response to housing affordability problems. “[I am] skeptical that would completely solve the problem,” he says. “I think that you would still have abusive landlords. You would likely have sky-high rents.”

The idea for social housing, he said, is inspired by the approach taken in Vienna, Austria, where a large portion of the housing stock is mixed-income units built and maintained by the government or semi-public entities. Funding these mixed-income developments in Maryland would keep housing affordable while avoiding many of the problems of past public housing efforts, says Stewart, which often had the effect of concentrating poverty in marginal locations far from jobs or transit.

There’s an inherent trade-off in this approach, however, says Michael Lewyn, a property law professor at Touro Law School. The more resources you devote toward helping median-income renters, the less money you have to spend on housing for low- and no-income folks.

“On the one hand, if you worry about concentrated poverty, the remedy for that is mixed-income housing,” he tells Reason. “[But] if you have a major-league housing shortage, then your goal is to build as many units as possible.”

In addition to devoting resources to building housing for folks who could likely afford private, market-rate alternatives, Stewart’s bill would raise development costs in other ways. For instance, his legislation would require that public housing developments use unionized labor and pay prevailing wage rates, which will raise labor costs. It also prioritizes funding for social housing developments in high-income, job- and transit-rich census tracts, where land costs are going to be higher.

Whatever the merits of those requirements, they will mean that any single sum of money will end up buying fewer units of housing.

Lewyn notes that while Vienna might be an example of successful public housing policies, it is also a great example of a well-functioning private housing market.

“Yes, you have a huge amount of new [public] housing coming online, you also have private housing coming online,” Lewyn says.

A February 2019 Huffington Post story on “Vienna’s affordable housing paradise” notes that two-thirds of the 13,000 new homes built in the city each year are produced by private developers. That is way more public housing than any U.S. city is building. But it also happens to be way more private housing than any U.S. city is building.

A blog post by Lewyn in response to the HuffPo article notes that Vienna, a city of 1.8 million people, managed to add more total units in a single year than the comparatively more populous Manhattan did in three years. Vienna is even outbuilding Houston, a larger city known for its high rates of housing construction.

A 2016 study put out by Harvard University’s Center for Joint Housing Studies comparing international rental markets found that in Austria as a whole, the median market-rate renter spent 20 percent of their income on housing. Not only is that lower than the 30 percent the median market-rate U.S. renter spends, it’s also within spitting distance of the 16.7 percent of income Austrian renters in public housing are paying for housing.

That, again, suggests that an expansive public housing system in Austria is complemented by a lot of affordable private housing.

Lewyn argues that even in a very deregulated market, there will still be very low-income people who will not be able to find adequate private housing, necessitating some form of government assistance.

(The most libertarian policy would be to eliminate all regulations of housing quality so that people with very low incomes, or even no source of formal income, could rent or build dirt-cheap slum housing. Whether one finds that radical solution palatable probably turns on just how morally offensive one finds the redistributive taxation needed to fund supportive housing.)

In addition to his upzoning and social housing bills, Stewart’s housing package also includes stepped-up tenant protections. Tenants who are stalking victims or have been harassed by their landlord on the basis of their sex, race, or gender identity would be allowed to terminate their leases early. Landlords would also have to return tenants’ security deposits within 30 days, as opposed to the current 45.

Stewart hopes that by introducing his bills as a package, he will be able to assemble a winning coalition of different interest groups who don’t normally pool their resources.

“Typically, how it works is the tenant activists testify in Annapolis on tenant bills, leftists go testify on public housing bills, and then your sort of YIMBY urbanist types come testify on your efforts to create more density of private-market housing,” he says. “I am trying to create a broad, durable coalition of people interested in housing justice who are often trapped in silos.”

He says that since announcing his housing package, he’s gotten messages of support from both socialists and hardcore free marketers.

Maryland’s legislative session started yesterday. Stewart says he is hoping to get a hearing on his bills within the next few weeks.