County Needs $100 Million to Preserve Housing Along the Purple Line Corridor, Report Says

New action plan calls for greater investment in affordable housing

By Kate Masters

A figure from the Purple Line Corridor Coalition's Housing Action Plan shows the route of the new light-rail line. Photo courtesy of the Purple Line Corridor Coalition

To preserve affordable housing along the Purple Line Corridor, a new report recommends that Montgomery County invest $100 million in its Housing Initiative Fund — a reserve dedicated to below-market housing projects.

The new plan, released Thursday by the Purple Line Corridor Coalition, underscores the difficulties of preserving affordable housing along the light-rail route. Even Montgomery County, where officials have implemented more affordable housing initiatives than many neighboring jurisdictions, faces an uphill climb to avoid displacing residents in the one-mile corridor on either side of the transit line.

“It’s a very daunting task to look at the potential impact,” said Maryann Dillon, executive director of the Housing Initiative Partnership, a regional affordable housing developer. “The county has protections — and it’s been strategic about how it’s used those protections — and even that’s not quite enough.”

The 16-mile Purple Line, which extends from the Bethesda Metro to New Carrollton in Prince George’s County — has been an economic driver for both counties. But as the project brings hope of new development, it also presents a threat to the largely low-income communities along much of the route.

Several studies have found that closer access to transit can significantly increase home and rental prices. In San Francisco, for example, one-bedroom apartments within a quarter-mile of certain stations on the Bay Area Rapid Transit (BART) system rented for 10% more per square foot than distant units.

A recent study in Los Angeles, where investment in public transportation is growing, showed that homes closer to city transit commanded an average 4.2% premium. In Washington, D.C., rents near some Metro stations increased between 6.8% and 10.9% in 2019.

Many areas along the Purple Line corridor, including Silver Spring and Takoma Park, have a majority non-white population making a median income between $62,220 and $92,194 — far less than Montgomery County’s median income of roughly $103,000.

Forty-eight percent of Purple Line households earn less than 60% of the area median income, according to the report. Those residents are particularly vulnerable to increases in property values, which risk pricing them out of the market entirely.

“We’re already seeing very strong investor interest along the Purple Line,” Dillon said. “It’s anecdotal, but we’re seeing an increasing number of multi-family properties changing hands. I’m assuming that a lot of it is speculative, and that’s going to lead to a net loss in affordable housing if we don’t have some kind of strategy.”

The Housing Initiative Partnership is one of several stakeholder groups to form the Purple Line Corridor Coalition, a nonprofit started in 2014 when plans for the project were first introduced. The coalition’s new Housing Action Plan sets out a 12-point strategy to avoid displacing residents along the corridor, especially in areas that are currently among the most affordable in the region.

In Montgomery County, most of the opportunities to preserve and build affordable housing come down to funding, Dillon said. Some of the plan’s top priorities include expanding the affordable housing stock and accelerating land acquisition opportunities for developers to build below-market-rate units.

Montgomery County is already significantly ahead of Prince George’s, Dillon said. Local policies already require 12.5% to 15% of new units in developments of 20 units or more to be moderately-priced dwelling units, or MPDUs.

And unlike Prince George’s County, Montgomery has a right of first refusal program, giving the county government and Housing Opportunities Commission the first chance to buy rental buildings as they come up for sale.

But median income in Montgomery County is so high that even MPDUs — defined as housing affordable to people making between 65% to 70% of the area’s median income — aren’t always accessible to the lowest-earning residents, Dillon said.

To comfortably afford an MPDU in Montgomery County, a renter needs to make roughly $67,000 before taxes.

That’s where the county’s Housing Initiative Fund comes in, Dillon said. Increasing subsidies for affordable housing developers can help them compete with for-profit companies to acquire land along the corridor.

Building housing for lower-income residents — especially those making below 60% of the area’s median income — also requires greater government subsidies to close the gap between the costs of building new housing and what low-earning residents can realistically pay for rent.

“This stuff is not cheap,” Dillon said. But adding money to the Housing Initiative Fund is a significant challenge in a county already facing another year of projected budget shortfalls.

“Montgomery County residents — of which I am one — complain about high taxes as it is,” she added. “It’s a tough sell to try and promote affordable housing.”

But it’s also become a political issue as residents grow more aware of an affordable housing shortage, Dillon pointed out. Washington, D.C. recently committed $100 million to its affordable housing fund under Mayor Muriel Bowser.

The Montgomery County Council has adopted regional housing targets from the Metropolitan Washington Council of Governments and added housing as a platform of its economic development strategy. Council Member Evan Glass recently introduced a bill to raise money for affordable housing by taxing teardown homes — dwellings that replace existing housing on single-family lots — but its ability to substantially increase the county’s Housing Initiative Fund has been contested by some residents and builders.

The report offers other strategies for the county to preserve affordability along the corridor. One suggestion is to expand waivers to affordable housing developers in two Purple Line school districts where there’s currently a development moratorium.

Another is to extend property tax exemptions to affordable developers, which allows them to borrow more from conventional lenders and reduce the amount of subsidies needed for a project, Dillon said.

Montgomery County currently offers property tax exemptions to affordable developments for 10 years, according to the report. That’s a change from previous county policy, which provided exemptions for the lifetime of the project.

Private investors don’t generally consider property tax exemptions of less than 15 years when they’re issuing a loan, Dillon said. Banks use a set formula to calculate a development’s projected income by subtracting its operating expenses from its expected revenues.

“So, if your net operating income is less because you’re paying more property taxes, you get a smaller loan from the bank,” she said. “Then you have to go back to the county to make up the difference.”