New Orleans city officials are working on advancing a new land use policy that would expand a signature piece of affordable housing legislation that was created and passed during Mayor LaToya Cantrell’s administration — which now only covers rental units — by adding a homeownership component.
Four years ago, the New Orleans City Council approved a zoning policy requiring developers to include affordable units when building rental properties in the city’s priciest neighborhoods. The 2019 “inclusionary zoning” policy, which Cantrell first proposed months into her first term, took effect in 2021. It was intended to help mitigate the shortage of affordable housing in quickly gentrifying neighborhoods in the city’s historic core by mandating that certain new developments include some units priced for low-income renters.
The regulations were also intended to eventually apply to developers building homes for sale, though those provisions weren’t implemented at the time.
Now, the council has directed the City Planning Commission to look at updating zoning regulations to make it easier for developers to put together projects that include permanently affordable houses for sale using a “community land trust” model, where homebuyers would be able to save money by purchasing a house, while only leasing the land it sits on from a local nonprofit.
In such a model, the locally -owned, nonprofit typically owns the land and leases it out to the homeowner, who owns the house on which the land sits. Because most of the value of the property is derived from the land, the house purchase price is typically much lower than market rate.
And when a buyer sells the house, they get a share of the property’s appreciation through a resale formula. Meanwhile, the land trust holds onto the land underneath, ensuring the house can be sold affordably to another buyer.
“It’s the land under the building that appreciates over time,” said Veronica Reed, executive director of Jane Place Neighborhood Sustainability Initiative, a community land trust that has focused on developing rental housing in Mid-City. “If you can take that cost out of the initial purchase price of the property, that’s a cost savings for the homeowner, savings they can invest. They can save for the future … they can make decisions.”
Councilmember Lesli Harris introduced the measure at a meeting last month.
“It’s critical to streamline this process on the city side so we don’t slow down any projects that would provide desperately needed affordable housing,” said.
Harris first raised the issue in response to a failed plan to construct affordable housing at the former Brown’s Dairy location in Central City, where developers are now building several townhomes intended to be used as short-term rentals.
Per the city’s current policy, developers building 10 or more rental units in neighborhoods in a group of neighborhoods — including Bywater, Faubourg Marigny, the French Quarter, Treme, the Central Business District and the Lower Garden District — must set aside up to 10% of those units to rent at a lower cost. Developments in other neighborhoods may participate voluntarily. Builders who follow the policy, whether they’re required to or not, are eligible for incentives like tax abatements and density bonuses, which allow developers to build more units than would typically be allowed on a lot.
Real estate developers criticized the 2019 policy, saying it would discourage development, while affordable housing advocates said at the time that the mandatory policy needed to be expanded to more neighborhoods. It’s not clear how many affordable units have been created under the inclusionary zoning policy since it went into effect in mid-2021. City officials did not respond to a request for the information.
But offering similar incentives for developers looking to build houses for sale would be a cost-effective way for the city to expand opportunities for affordable homeownership, said Vann Joines, a local affordable-housing developer.
Some projects seeking to build affordable homes for sale have been stalled partly because of difficulty accessing the incentives available on the rental side, said Andreanecia Morris, executive director of HousingNOLA.
“Developers need cleaner, unambiguous rules,” Morris said.
Joines and other developers worked with the Louisiana Fair Housing Action Center to craft a set of suggested changes to the zoning code that would allow developers of for-sale housing to take advantage of the incentives by setting aside a certain percentage of their units for households making slightly below to slightly above the area median income.
As of last month, the median sale price of a home in New Orleans was $347,000, according to the real estate brokerage Redfin. By contrast, the median household income in the city is less than $46,000. (The area median income for metropolitan New Orleans, as determined by the U.S. Department of Housing and Urban Development, is about $80,000 for a family of four.)
Rising home prices, decreased public funding for affordable homeownership programs, high interest rates and growing insurance costs have also pushed homeownership out of reach for many low- and moderate-income city residents, according to People’s Housing+, another affordable housing developer in New Orleans that also serves as a community land trust.
With fewer opportunities for blighted properties to be renovated and sold at lower costs in the city, allowing developers to build more units more densely makes sense, Joines added.
“It’s just as important, if not more important, to provide this for homeownership because this is a way that low-to-moderate income families can gain generational wealth and have an opportunity to own an asset for long-term that gains value over time,” Joines said.
The council also directed the planning commission “to consider the community land trust model to define and create standards for Affordable Homeownership Development.”
The community land trusts are crucial to ensuring that for-sale homes created through the proposed mechanism would remain permanently affordable, according to the Louisiana Fair Housing Action Center.
Last year, the planning commission also recommended the city conduct a new market feasibility study to see if the mandatory inclusionary zoning boundaries needed to be updated. Such a study should analyze the market feasibility and the incentives needed to expand affordable homeownership opportunities, according to the commission’s report.
Correction: A photo caption in an earlier version of this story misidentified the Crescent City Community Land Trust as the organization that built the pictured home. The house was built in 2012 by another organization, the Lower 9th Ward Neighborhood Empowerment Network, and was then acquired by CCLT in 2017.
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