Tyranny is alive and well in America. And it’s preventing us from solving a growing rental housing affordability crisis in this country.

The tyranny of small decisions (generally well-meaning, one-off policies that can create real costs and limitations when taken together) and the tyranny of local government (in the form of neighborhood NIMBYism) are combining to limit and add expense to affordable rental development, according to participants in a recent Zillow roundtable discussion.

I was honored to host around two dozen planners, developers and city officials from Seattle, Denver and San Francisco recently for a discussion on the challenges, issues and opportunities surrounding the creation and maintenance of affordable rental housing in our cities. The discussion was the latest in our Housing Roadmap to 2016 series, meant to address local housing issues in the cities where they matter most.

While the specific local issues surrounding rental housing varied from city-to-city, a few common themes emerged.

Subsidizing Supply vs. Subsidizing Demand

There was much debate centered around how to get the best bang for our housing buck with government subsidies: By subsidizing the creation of more affordable housing through creative tax schemes and less-restrictive zoning? Or by subsidizing demand, by making rental assistance vouchers more flexible, more accessible and more useful at a wider variety of properties?

On the supply side, questions arose over the cost of development in general. Land, labor and materials costs being what they are, a 10-story, 100-unit building full of “affordable” units is going to cost the same to construct as an equivalent market-rate development on the same lot. Ismael Guerrero, executive director of the Denver Housing Authority, noted that while the cost of development is the same for affordable and market-rate projects, their financing structures are very different.

Market-rate projects are, in many ways, more straightforward, with usually only a couple main financiers typically expecting a 20 percent to 25 percent ROI. Affordable developments often have seven or eight layers of financing among state, local and federal funds as well as tax incentives.

But that complexity can also make affordable projects more attractive to investors, since often much of the risk is borne by public entities. Guerrero asked if one approach to spurring more privately-funded development would be to find those investors willing to take only a 5 percent to 10 percent return in exchange for less risk.

From the demand side, increasing the number of subsidized housing vouchers available is not a solution, since that would likely exacerbate an already tight supply situation, said Margaret Salazar from the Department of Housing and Urban Development. Likewise, increasing the amount of said vouchers isn’t feasible either, since there simply isn’t enough cash to go around to support vouchers that would cover asking rents in many cities.

In reality, there is no universal, right or wrong answer to this question. For different groups, different approaches may be more feasible. But all too often, any proposed solution runs headlong into the next main issue.

NIMBYs: No Will, No Way?

Rampant NIMBYism – opposition from neighborhood residents chanting “Not in My Backyard” in the face of new proposals that may change the shape or fabric of their neighborhood – is not a new problem for developers and city leaders. And in many respects, these voices represent the best of American democracy, giving residents a chance to protect their interests and have a say in the future of their communities.

But it’s a given of American political life that you can’t accomplish anything if people won’t vote for you. As a result, even officials with the loftiest development goals must answer to a constituency who simply won’t vote for them if they propose certain measures or back certain projects. This leads to a lack of political will to disagree with the most vocal NIMBY opponents. Squeaky wheels get the grease, and NIMBYs know how to squeak.

What’s worse, NIMBYism – generally under the guise of “preserving community character” – is often a cover for elitist, exclusionary or outright racist policies. A-P Hurd, vice president for corporate and project strategy at Seattle-based development firm Touchstone Corp., said that the kinds of racially, socially and economically integrated neighborhoods created by more dense housing developments are “not always popular” with people already living in those areas. But the most vital and vibrant communities constantly change and evolve, and existing residents can benefit from these changes.

Hurd said when the first micro-housing units opened in Seattle, they often were off the market in 48 hours or less, indicating a large demand for what could have been a successful product in the city. Micro-housing enables developers to squeeze more units into a given footprint, lowering bottom-line costs for renters, but often keeping per-square-foot costs similar or even higher than less dense developments. But after neighbors began complaining about the types of people choosing to live in micro-units – largely students, artists and the working poor – Seattle effectively banned that kind of housing, stifling its potential.

“Micro-housing probably didn’t get the kind of fair play it deserved in Seattle,” acknowledged Steve Walker, director of the Seattle office of housing. “There was a lot of fear that more density was being built-in under-the-radar in the design review process, and a lot of people were unhappy with that.”

NIMBYism also seemingly has the power to demoralize even by the threat of its mere existence. Maria Barrientos, principal of Seattle-based development firm Barrientos LLC, sits on Seattle Mayor Ed Murray’s Housing Affordability and Livability Agenda (HALA) committee. She said that the committee has brainstormed a number of creative ideas to help create and maintain more affordable housing, but doubts their ability to find any real traction.

“The HALA committee has all these ideas on the table, and we’ll recommend them to the mayor,” Barrientos said. “But what happens after that? What we need is support. We’ve created these ideas, but I think very few will get through. Nobody has the political will to take on the NIMBYs.”

And even in cities that have succeeded in enacting larger, cohesive development plans, NIMBYs refuse to go down. Guerrero said that Denver voters approved a comprehensive city plan that designates certain neighborhoods for certain types of development. But even after the comprehensive plan won at the ballot box, residents of impacted communities continue to sue the city to block the very same policies their neighbors approved by referendum.

In other words, Denver voters seemed to approve changing the dynamics in someone else’s backyard – but are fighting tooth and nail to preserve their own.

Paved Over by Good Intentions

It’s said the road to ruin is paved with good intentions. And when it comes to the construction and maintenance of affordable rental housing, those same good intentions are steamrolling progress.

I call it the tyranny of small decisions. Others call it death by a thousand cuts. However it’s labeled, it works like this: A well-meaning city agency or neighborhood group champions a small policy change meant to fix a narrow problem or ease a small burden. On their own, these small choices are largely immaterial, adding negligible cost or only small administrative burdens to massive, multi-million dollar projects. But taken together, these small costs and minor burdens add up to real expenses and huge inconveniences.

“While the city of Seattle is generally brilliant, a lot of policies we’ve enacted over the past five to ten years have added a lot of costs – costs for utilities, infrastructure, energy codes and green factors,” Barrientos said. “This is not a complaint that any one of them is a bad idea, but there’s definitely a cumulative effect.”

Barrientos said that her costs for utilities infrastructure alone in new development have quadrupled in the past four years, largely because the perpetually cash-strapped city has consistently decided to push costs onto developers. But those costs don’t end with developers – more often than not, they end with consumers.

In San Francisco, city policies are a double-edged sword, said Yusef Freeman, vice president of project management in the San Francisco office of St. Louis-based developer McCormack Baron Salazar. On the one hand, San Francisco has a tremendous amount of political will and city resources to put behind a project when it deems that project a priority, including grants, subsidies, gap funds and tax credits. But while there are resources available, the costs of development are still “astronomical,” Freeman said, particularly for affordable projects that have strings attached to those very same resources.

“There are standard development costs, and also state regulations for redevelopment,” Freeman said, which can make building an affordable development more expensive than building a market-rate project. Additionally, the law stipulates that redevelopment or rehabbing of affordable units must have a 1:1 replacement for bedrooms. So, for example, a pre-war four bedroom unit that is torn down must be replaced by a new four bedroom unit – even though demand for units of that type may not be what it was decades ago, and the community and developer alike may be better served building two, two-bedroom units instead.

Finally, even today’s successes can be tomorrow’s issues. Andrew Lofton, executive director of the Seattle Housing Authority and a key figure in the ongoing development of Seattle’s 30-acre mixed-income Yesler Terrace project, said that development needs to take a wider view. Not only is it critical to provide for housing needs, a successful community must also provide for the education, employment and healthcare needs of its residents as well. And once that community has established itself, it needs to be wary of how its own success may impact surrounding neighborhoods as increased demand creates gentrification and spillover impacts in adjacent neighborhoods.

Today’s small decisions have big impacts on tomorrow’s developments. Expanding our view of the development process and understanding the cumulative effects of our policies rather than trying to address small problems with single-minded laws will go a long way toward easing the tyranny of small decisions.

Housing Crisis, or Growth Crisis?

It’s clear after speaking with officials from this collection of great American cities that the problems we face, while difficult, are born out of a good problem to have: Growth. I’m sure none of the developers or policymakers in the room would trade their problems for the problems of a city in decline.

But it’s also undeniable that growing cities have growing pains. To paraphrase a post-roundtable tweet from Seattle Times Columnist Blanca Torres, we may not be facing a housing crisis so much as we’re facing a growth crisis. Ultimately, the policies we enact and the decisions we make on which projects to greenlight and how to fund them are about managing this growth for the best possible outcomes.

And managing that growth means acknowledging that we’re in fact facing two distinct issues: We need more housing, period. And we also need more affordable housing. In addressing the former, it’s critical to identify where the demand lies – both for types of housing and location – and then take steps to ensure adequate supply. Many participants asked if we could simply build our way out of the crisis and let the market sort itself out, and wondered if creating more supply in general – not just of “affordable” units, but of units of all size and price – might go a long way to address rental affordability.

To the latter issue, we need to identify the obstacles preventing developers from building affordable housing, and find creative ways to incentivize them to build more.

These issues aren’t just limited to these Western cities, either. Rental affordability is fast becoming a national issue. At the outset of our discussion, Brad Weinig, senior program director at Denver-based Enterprise Community Partners, lamented that Denver even made the list of cities facing a rental affordability crisis. An issue that has historically impacted larger, coastal metros, is quickly spreading inland to cities like Denver, Kansas City and St. Louis.

In the end, success will be found by finding a balance between policies that offer great assistance to a select few – like rent control and vouchers – versus policies focused on combating the wider supply and demand-based housing issues faced by the larger whole.