Panelists at housing hearing call for public funding, regulatory reform

One way or another, Pennsylvania must figure out how to build its way out of its housing crisis, state Rep. Mike Sturla said.

“I’m looking for any solutions,” he told developers, nonprofit leaders and other lawmakers Monday afternoon at the Lancaster Chamber.

Sturla, D-Lancaster, co-chairs the state House’s Housing & Community Affairs Committee. Monday’s gathering was an informational hearing on housing development in Lancaster County. A dozen invited panelists filled in committee members on the barriers they face in bringing housing online, and their suggestions to improve matters.

The housing shortage is being recognized as a crisis locally, regionally and nationally. Pennsylvania has an estimated shortfall of 235,000 housing units in the $300,000 to $350,000 price range, Sturla said, or about $80 billion dollars worth, the result of chronic underinvestment in the years following the Great Recession.

Developers are responding, but rising costs and interest rates are impeding their catch-up efforts.

The panelists spanned the gamut from small nonprofits to large for-profit companies. They agreed unanimously that under current economic and regulatory conditions, projects serving the very upper end of the market are the only ones that can be built without subsidies.

To be sure, high-end units still expand the total stock of housing. Willow Valley Communities’ planned Mosaic project is a luxury development, but hopefully its presence will alleviate some mid-market price pressure, spokesman Chris Ballentine said.

For anything else, there’s a “value gap” between the cost of construction and the returns a property can generate, said David Martens, president of development firm Zamagias Properties. Dana Hanchin, president of the nonprofit HDC MidAtlantic, characterized the situation as a “market failure.”

While subsidies are available, the funding is far too little, the panelists said. Moreover, subsidies targeted at projects that serve lower income households, which leaves a vast unserved class in the middle to struggle with market-priced housing they can’t afford.

The panelists unanimously recommended regulatory reform: streamlined approval processes, less burdensome building codes, reduced lot size and parking minimums.

Seemingly little things have big consequences, said Rob Bowman, president of Charter Homes & Neighborhoods: When regulators began requiring stair treads to be 1 inch wider, they effectively added 4 feet to the minimum length of a multi-story house. With all of the requirements, and the lengthy review process, “it’s literally death by a thousand cuts,” he said.

“Affordable housing needs its own lane,” he said, because the standard rules make it impossible to build.

Lisa Greener, executive director of housing nonprofit Community Basics called for the maze of individual municipal zoning and land development rules to be harmonized at a regional or state level. The variation can be dramatic: It took HDC 14 months to secure approval for The Apartments at College Avenue in Lancaster, versus four months for a project in Allentown, Hanchin said.

Entrepreneur John Dantinne said he’s working to convert part of a warehouse in southwest Lancaster into housing for refugees, but is running into regulatory issues, such as mandatory parking requirements, even though his tenants won’t have cars.

Matthew Richards, principal with Bowery Development Co., recommended paring incentive programs down to their essentials. If your main objective is encouraging development, but you also require prevailing wage, that raises costs 20% to 30%, creating a countervailing deterrent, he said.

On the other hand, the state and municipalities should stop granting tax incentives for business expansions unless housing for the added employees is factored into the equation, Greener said.

Sturla asked if the issue with prevailing wage is the reporting requirements, rather than the wage cost itself. That’s part of it, said Ben Lesher, president of Parcel B Development Co.: prevailing wage limits the pool of subcontractors to those who are willing to deal with that level of regulatory intrusiveness. Similarly, he said, mandatory bidding can be a deal-breaker for developers who already have established relationships with contractors they know and trust.

Brad Mowbray, senior vice president of High Real Estate Group, recommended creating a subsidy program for housing targeted at average households. Richards suggested a law providing for long-term tax exemptions to offset high redevelopment costs.

Barb Wilson, executive director of the Lancaster Housing Redevelopment Authority, said entities like hers need more money to preserve their existing stock and better access to tax credits and public private partnerships.

The panelists endorsed increasing existing subsidies for affordable housing development as well as funding for housing stability for lower-income households. Communities are stronger when they support the diversity of their population with a diversity of housing choices, they said.

“If we can create an affordable housing continuum,” said Shelby Nauman, CEO of housing nonprofit Tenfold, we know that we can revive opportunity for working families.”