The other side of Buffalo's rental boom? Not enough low-income apartments
June 19--When a nonprofit housing agency recently built a low-income apartment complex on Jefferson Avenue, the 30 apartments were rented -- sight unseen -- before the building was completed.
"They were rented up before I could show an apartment, before there was a certificate of occupancy," said Michael Riegel, president of Belmont Shelter, the city's premier low-income housing assistance agency.
That was the first time in his 30 years in the nonprofit housing business that he's experienced such a demand, Riegel said.
But then it happened again, this time at a lower-income apartment building that opened this month on Best Street near Martin Luther King Jr. Park.
"It's fully leased," said David Alexander, a principal with SA+A Development, one of the project developers.
"The market has changed here," he added. "We have over 500 units in Buffalo, and we are 100 percent occupied. We didn't have waiting lists before. Now we do."
They are witnesses to what some see as the other side of Buffalo's rental housing boom.
While $2,000-a-month apartments with granite countertops, high ceilings and in-building gymnasiums attract millennials to downtown Buffalo, demand for government-subsidized, low-income rental housing also seems to be growing.
One reason is that Buffalo's low-income population has inched up in recent years, census data shows. Plus rents are increasing, often beyond inflation, sometimes reflecting rising real estate values when buildings are sold, housing experts say. And sometimes, landlords increase rents simply "because they can," Riegel said.
The result is that more lower-income people in Buffalo -- which has a $31,918 median household income -- are being priced out of market-rate housing, increasing demand for government-subsidized, low-income housing, housing advocates say.
"There is a huge demand for affordable housing not being met," said developer Nick Sinatra, president of Sinatra Co.
"There are a lot of poor people," Riegel added. "Incomes don't seem to be rising very much, but market-rate rents are going up. It's been really noticeable the last two years."
Adding to the problem, advocates say, are the financial troubles at the Buffalo Municipal Housing Authority, which is struggling to maintain all its units and shuttered more apartments than it built over the past decade.
"The pressure is coming from both ends," said Bob Richardson, president of the Upstate New York chapter of the Commercial Real Estate Association. "There is pressure from people who can no longer afford market rent. There is pressure coming from people who qualify for public housing but don't want to live there."
This squeeze on lower-income residents is the basis for debate over housing policy: Should the city insist that developers of higher-end market-rate apartment buildings include some units that low-income people can afford?
Community activists are urging Buffalo to adopt this policy -- called inclusionary zoning. It will address racial and economic segregation of city neighborhoods as well as affordable housing needs, they say.
Developers argue it would stifle market rate development while doing little to create new low-income housing or more integrated neighborhoods.
The Buffalo Common Council seems eager to enact such a law, while Mayor Byron W. Brown appears to be seeking middle ground.
Research raises questions about the effectiveness of inclusionary policy in communities like Buffalo, where no population growth is evident and where rents and land values, while rising, remain relatively low.
Nonetheless, with urban areas nationally seeing a resurgence, some Rust Belt cities are examining the idea.
Detroit is considering a pilot program in its healthier neighborhoods. And Pittsburgh is considering inclusionary housing as a way to ward off gentrification in neighborhoods where real estate values spiked in recent years. Neither city has yet adopted an inclusionary program.
"We are trying to harness the benefit, but come out having neighborhoods for people of different income levels," said Pittsburgh Planning Director Raymond W. Gastil.
Low income renter
Carmen Brooker is 62 and has been out of work since triple bypass heart surgery in 2007. She moved into the government subsidized Shoreline Apartments 18 years ago.
Her monthly rent there is just over $500, she says, but she pays less than $300 a month when her federal Section 8 rent voucher gets factored in.
Like other Shoreline residents, Brooker has to move because the Niagara Street complex is being torn down and then rebuilt. Residents were given until September to leave.
Brooker, who lives alone, says she started looking for an apartment about a year ago. It hasn't been easy, she said.
She's made lots of calls and checked out plenty of apartments, she said. Many she can afford have waiting lists of one or two years, she said. Others, like an apartment on Amherst Street, are out of her price range.
Another on Genesee Street was affordable, but the rooms were very small.
"You couldn't get a full-size bed in," she said.
Brooker said in May she was told an apartment was available in SA+A Development's Best Street building, on the bus line -- an important factor because she doesn't have a car.
"It came through last week," Brooker recently said. She's planning to move later this month.
One of her Shoreline neighbors tried to rent there too after learning Brooker was offered an apartment. He was too late.
"They put me on a waiting list," said James Graham, 58.
Advocates for low-income housing see people like Brooker and Graham facing higher rents and limited options and believe inclusionary zoning is part of the answer.
Fair market rent for a two-bedroom apartment in the Buffalo Niagara region in 2017 hit $810 a month, compared with $736 four years earlier, according to the U.S. Department of Housing and Urban Development. That's a 10 percent increase when inflation was 6 percent.
One bedroom units increased by 13 percent to $666 during that time.
Citywide, apartments leased to tenants receiving Section 8 federal rental assistance vouchers went from $525 for a two-bedroom apartment in 2010 to $650 today, said Riegel, the Belmont Shelter president. That's twice the rate of inflation.
Aaron Bartley, founder of People United for Sustainable Housing, and Sam Magavern, executive director of Partnership for the Public Good, are among housing activists pushing Buffalo to adopt an inclusionary zoning policy requiring developers -- particularly those receiving tax breaks or other government subsidies -- to set aside 10 to 30 percent of apartments in multi-unit, market-rate buildings as housing low-income renters can afford.
Buffalo has produced an average of 500 or so market-rate units annually since 2010, so 50 to 150 affordable units could be created under these plans.
In return, developers could build one additional market-rate unit for every low-income unit that is created, under a proposal submitted by Housing Opportunities Made Equal, a fair housing organization also calling for the city to adopt inclusionary zoning.
Inclusionary zoning won't solve the affordable housing shortage, but will help, advocates say. It won't end racial and economic segregation in Buffalo, but they say it will help address it.
"This is not the only solution, but this is a crucial tool," Bartley said.
"This is important," added HOME Executive Director DeAnne Eason. "We are already known as the sixth most segregated region. If we continue the way we are going, it will result in Buffalo being synonymous with lack of affordable housing and gentrification. I don't think that is what we want."
Many developers of high-end apartments in Buffalo are getting tax breaks, Magavern noted.
"If the public is investing in projects, we want to make sure the projects serve the public good," he said.
Buffalo rents are still so low -- and construction costs so high -- that inclusionary zoning will snuff Buffalo's residential revival, developers say.
Developers and the Buffalo Niagara Partnership, the region's largest business organization, say Buffalo rents remain well below the national average. But Buffalo construction costs are among the highest in the country.
To close the gap between low rents and high costs, developers say they rely on historic tax credits and other government incentives -- and even then, many deals don't work. Adding a requirement that some units be rented at an even lower rate, they say, will stall Buffalo's residential redevelopment.
"What is being talked about today has the potential of stopping residential development," says Dottie Gallagher-Cohen, president and CEO of the Buffalo Niagara Partnership.
"We stand behind the notion that a diverse neighborhood is a better neighborhood," Gallagher-Cohen says, "but inclusionary zoning is not a terribly effective way of doing that."
The policy wouldn't create enough affordable units in Buffalo to significantly affect the need for affordable housing, nor the racial and economic diversity, added Richardson, president of the local chapter of the Commercial Real Estate Association.
For inclusionary zoning to work in Buffalo, additional government subsidies would be needed, Richardson said.
"The city is not in the fiscal condition to provide the kinds of finances to make this feasible, and to the extent that money is available, even that isn't going to create the number of units to make a difference," he said.
There are better ways to meet the demand for low income housing, added Sinatra, whose development firm builds market-rate and subsidized housing in Buffalo.
"Let's look at ways to allow for more public funding to build new units and renovate underutilized projects," Sinatra said. "Let's do five or 10 or 15 100-unit plus projects in coming years. That would make an impact. It would take 5,000 units plus of private developments to achieve the same results with the current proposed inclusionary zoning. Not happening."
What studies say
Inclusionary zoning has traditionally been most effective in strong housing markets with high rents and land values, and where high-density building is permitted, according to studies by New York University's Furman Center.
"In neighborhoods with high rents," a 2015 NYU study says, "mandatory inclusionary zoning with an increase in density can encourage the development of more affordable housing without any additional subsidy. In many neighborhoods with lower rents, however, adding zoning density will be unlikely to produce new affordable housing, at least not without additional subsidy."
The inclusionary zoning concept started in the mid-1970s as a suburban tool, but has spread to roughly 500 communities -- towns, cities and counties. Some inclusionary policies -- such as one in Baltimore -- produced few if any affordable housing, partly, some city leaders said, because the city didn't have enough money to support the program it created.
Others -- including in the San Francisco region and Montgomery County, Md., which have some of the highest rents in the country -- produced thousands of units, studies found.
And some programs that didn't do as well in past years, like Boston and Denver, are now reporting more successful programs as their housing markets heat up.
In New York State, inclusionary zoning exists in New York City and some Hudson Valley communities. The only Western New York community with inclusionary zoning is Hamburg, which enacted a law last July.
Hamburg's law requires 10 percent of units in market-rate developments of eight units or more be set aside as lower-income housing.
In return, the town gives developers a "density bonus," permitting one additional market-rate unit to be built for every affordable one.
The law is relatively new, so no projects have yet been built under the program. But there are several projects now going through the process, said Christopher Hull, the town's community development director.
"We have three projects in the works. No complaints per se," Hull said. "It's not stopping anything as far as I know."
Rental housing in Buffalo
Some 6,000 new housing units have gone on the books in Buffalo since 2010, with some still in the development phase, according to city officials.
About 4,000 of those units are market rate while the other 2,000 are subsidized affordable units, according to Brendan Mehaffy, who heads the city's Office of Strategic Planning.
Buffalo invested $34.8 million over the past 11 years on subsidized affordable housing, leveraging over $333 million in residential development, city officials said.
There is no single repository for information about subsidized housing in Buffalo, but by collecting city, state and federal housing data, The Buffalo News identified some 13,000 low-to-moderate-income subsidized housing units in the city.
In addition, there are some 8,500 federal Section 8 vouchers used to subsidize rents in Buffalo. Section 8 tenants pay no more than one-third of their incomes as rent, with the government picking up the remainder up to a set amount.
An estimated 20 percent of these subsidies are held by tenants living in subsidized housing, and others by tenants living in private housing, officials said.
More than 10,000 Buffalo families currently are on waiting lists for rental vouchers.
The total subsidized units and vouchers represent as many as 18 to 20 percent of all occupied housing units in Buffalo, a city where almost a third of all residents live in poverty, census estimates show.
That's not to say there's no available housing in Buffalo for low-income families.
"If you just said 'I have to find a place to live,' you can," said Richardson. "It might not be the quality you expect for the price you are being asked."
Where policy stands
Inclusionary zoning is on Brown's agenda as well as the Common Council's.
The mayor and his staff say they are developing a plan that covers market-rate projects receiving city funds as well as projects that involve the sale of city-owned land or buildings. Details are still being worked out, but the plan is likely to offer some level of flexibility, addressing Brown's concern that poorly designed inclusionary policy runs the risk of stopping market-rate development or sending it to other communities.
"Buffalo does not want to choke off development with overregulation," Brown said. "We don't want to be locked into percentages. We want to continue the momentum."
Nonetheless, Brown said his administration has long supported inclusionary policy, which, he said, is one component of a larger residential and economic growth plan the city is developing.
"We want to attract more middle and upper income people to live in the city, while maintaining affordability and not displacing current residents," Brown said. "We want to create diverse mixed-income communities, and to provide access to jobs and services."
Buffalo is having some success creating mixed-income neighborhoods, he said.
A high-end apartment building recently went up on lower Niagara Street across from low-income housing, and a building with affordable units is opening on Seneca Street, sandwiched between two higher-income, market-rate buildings.
"That makes a mixed-income neighborhood," Brown said. "You don't have to live in the same building to be in close proximity."
The Common Council, while waiting to hear details of Brown's plan, has begun its own research.
"There is a mass amount of interest from the Council to move forward with some type of inclusionary zoning," Council President Darius G. Pridgen said. "I want to make sure we work closely with developers, residents and the administration."