OPINION

Saving Nashville's mixed-income community

James C. Fraser, Jonathan Diskin and Thomas A. Dutton
  • Value capture, voluntary inclusionary zoning would let all people benefit from Nashville's boom.
  • The authors are professors or directors at Vanderbilt, Earlham College and Miami University.

Urban neighborhoods across the country are being remade through the “root shock” of gentrification.

In much of Nashville, an historical reversal is unfolding as a more diverse community has given way to massive low-income housing loss and skyrocketing property values and rents. Far from being the result of the free market, the massive property wealth that has been created is the intended result of public policy and public investments that include direct, substantial subsidies for construction of market-rate units and major investments in public amenities.

Affordable housing

In short, the public has underwritten massive private gains in the name of urban redevelopment while resources and housing for the poor who used to call such neighborhoods home have been dispersed and reduced.

Ironically, the very success of Nashville’s redevelopment has now created the urgent need for dedicated funding for inclusive low-income housing.

Fortunately there is a just and practical way to ensure that the widely-shared goal of a diverse, mixed-income urban neighborhood is supported: recapturing some of the private gain that public investments have fostered in order to underwrite serious efforts of inclusion.

Value recapture, as it is known in the urban development literature, is a fair and direct way to ensure that some of the new wealth that results from public policy and investments serves broader public purposes.

Recapturing such "gift-value" is normal policy in other settings. When a freeway off-ramp is built, for example, it is not unusual to levy a "betterment fee" or other exactions to reclaim some of the increased property and rental value of nearby land that follows.

The typical means of recapturing some of the value that has been gifted to private property owners is through a "betterment fee or tax" on the incremental gain due to public improvements. Such a tax could either be paid for over time as an assessment fee paid annually or as a one-time payment of a portion of the location specific capital gain at the time of sale.

Related links: 

The costs of growth and change in Nashville

A dilemma for renters in Nashville

This incremental value could be estimated as the gain in property value in certain neighborhoods compared to a broader measure of property value changes in the region, such as city or countywide. A complementary policy is to ask new developments to contribute some of their property, and therefore their prospective gift, in the form of land or units set aside at affordable rents through voluntary inclusionary zoning.

It is the case that Nashville does have small pilot programs, but these are not funded at the level necessary to create the amount of accessible housing that much of our workforce needs. As important, there has been little discussion of the fact that it is common sense that the public should benefit from their deep investment in private development in the city’s redevelopment districts.

Such a policy ties private gains to public ends by insisting that those who have been given a gift by the public, including the very taxpayers who are increasingly displaced, share their gain in ways that serve the public good of a mixed-income community.

Enacting such a policy would provide the hundreds of millions of dollars needed to capitalize the Barnes Housing Trust Fund, which could then fund, build, preserve and retain housing affordability by the creation of a community land trust. Such an entity would acquire property to create a permanently affordable portfolio of housing, both rental and homeownership, throughout the city.

Reclaiming some of the private property wealth to fund low-income housing preservation and development is a tool whose time has come. It would provide the resources needed to create a community-based housing market, and is urgently needed if we are to marshal the resources to make good on the oft-stated value of mixed-income neighborhoods.

James C. Fraser is associate professor of human and organizational development at Vanderbilt University. Jonathan Diskin is professor of economics at Earlham College. Thomas A. Dutton is director of the Miami University Center for Community Engagement in Over-the-Rhine.

Coming Sunday, March 26

Part III of the Costs of Growth and Change in Nashville series:

Will the end of public housing as we know it help solve the affordable housing crisis in Nashville?

Find in the print Insight section Sunday and on Tennessean.com.