How to Make Housing Affordable

We need to build housing in Taos yet thanks to the cost of land, infrastructure, labor, and materials, new housing is too expensive for most Taos families to afford! How do we move forward with this conundrum?  In last month’s Housing Matters column, we painted a somewhat dispiriting picture of the significant cost barriers to developing affordable housing by examining a real life case study. Check out March’s column for a refresher.  

However, there still are plenty of pathways to build affordable housing both at scale and also in smaller, flexible infill projects.  Some of these pathways involve new partnerships and some policy change, but all are feasible with the community will & passion we know we have in spades in Taos.

Land 
In order to pencil, affordable housing projects require discounted or free land. There are a couple ways forward here: via public-private partnerships or philanthropy.  Private developers can partner with local government to capitalize on underutilized and other public land. These public-private partnerships can also help mitigate risk and unlock funding, as will be discussed in greater detail below.  Philanthropic land donations can also help bring down costs. New Mexico state law helps by providing a 50% tax credit for land that is donated for affordable housing. 

Risk & upfront capital costs 
Taos has many small-scale and visionary builders who have the desire to improve our community but are locked out from contributing due to the high capital costs and risk involved with developing in Taos. High upfront costs of developing housing can be prohibitive for Taos’ actually existing builder/developer ecosystem. Upfront costs include items like infrastructure, which banks usually find too risky an investment, so if a developer doesn’t have a million or two sitting around, financing becomes impossible. 

Again, partnering with the local government can help here. Local governments can secure sources of capital that private developers cannot access, can help coordinate infrastructure investment, and can help mitigate some of the risk around land use regulations and approvals.  

New state housing funding sources would also be extremely impactful. There are no significant, reliable State funding sources available for affordable housing development.  If the State could create more flexible, predictable subsidies available at the development stage, smaller developers could more easily access the significant capital needed to get a project off the ground. Right now most subsidies for affordable homeownership in New Mexico are provided to homeowners at the time of purchase, which does not help actually build homes.  

Additionally, supporting and empowering small-scale scattered site development, instead of a large subdivision, can mitigate some of the risk and capital requirements.  Taos Housing Partnership is currently working with local builder ECOHAB on an affordable project of this nature.  ECOHAB is building 4 affordable homes on a donated property in Taos County.  The project is smaller than a subdivision, so infrastructure is less expensive and upfront risk is less significant.  Since ECOHAB is a known player in the community, they are also able to access loans from local lending institutions. 

Construction
Construction, the cost of labor and materials, remains the most expensive and intractable part of the equation.  As discussed, using modular at scale can bring costs down by almost $100,000 per home compared to site-built, however it’s still not cheap, and further, paying for modular requires the up-front capital that smaller scale developers lack.  

ECOHAB along with Habitat for Humanity Taos are able to bring down costs significantly through volunteer labor and in-kind material donations.  Wonderful as that is, this model is not replicable for most builders!  

Though certainly you can make construction more expensive through using higher-end materials and finishes, construction costs are in many ways fixed due to Taos’ remote location and limited labor pool, and further exacerbated by the volatility in the international market for materials.  The State Legislature just passed a Gross Receipts Tax exemption for construction materials for affordable housing, which helps bring down construction related costs in the State a bit, but we need more legislative change like this! 

Land use regulations 
Local land use regulations are easier to change than the labor market! Our local governments should continue doing whatever they can to make land use policy as conducive as possible for affordable housing development.  This can involve allowing multi-family housing, making this housing buildable by-right, and removing design requirements which make housing more expensive or difficult to build.  Town, County, & Village of Questa are currently updating their land use codes and have the opportunity right now to really move the needle here. 

It’s not just one factor that makes affordable housing difficult to build, it’s death by a thousand cuts.  So moving forward, there are many pieces that need to come together to make affordable housing possible.  Thankfully, we know this is a priority for our community, and we already have builders and local governments working steadily towards making affordable housing a possibility.