Calculating Social Return on Investment (SROI): A Look Into Affordable Housing in DC
Cityfi partnered with the University of Maryland Social Innovation Fellows to perform an SROI analysis of three different affordable housing solutions in Washington DC. We hope that both the findings and analysis process can help inform policy decisions in wider areas. This post was written by the research cohort: Asjed Tufail, Michael Weisenstein, Cindy Vo, Sandra Pattammady, and Kyle Chiu.
Process
The relationship between housing markets and college students is more direct than one might first think. One of the first important decisions we make before stepping foot on campus is deciding where to dorm, whether that be on-campus housing, off-campus housing, finding a co-op, etc. In the midst of the pandemic, several students found themselves unable to exit their subleases despite not being on campus. This led many to search for alternative housing solutions, which is where the idea to evaluate SROI for affordable housing came from.
For our analysis, we chose to focus on Washington D.C. as it has one of the worst housing markets (meaning there is plenty of room for improvement) and because many UMD graduates start their careers in the District.
The first step in our process was to research the history of the housing market in the District. This allowed us to understand where the disconnect between the housing market and demand arose. We found two culprits that were responsible for the shape of the housing market. The first was a lack of supply for affordable housing units, and the second was barriers to entry for homeowners. Despite making up the majority of the population, Black households in the District have a net worth that is 81 times lesser than White households.
To address this divide, we have focused on three different affordable housing solutions: accessory dwelling units (ADUs), new developments, and housing grants. ADUs are small housing developments created on a budget to provide affordable housing in typically single-family zoned areas. They can either be detached from the main building (think petite guest house) or can be a refurbished basement or garage. New housing developments are the traditional method of increasing the supply of safe and stable housing, but are often the most costliest and require the most commitment. Whereas grants provide the most flexibility. There are a slew of grants available and eligibility can cover criteria like home-buying status, salary, career, etc. Grants come from both the public and private sector which increases accessibility and helps renters to become homeowners.
After collecting data on costs and benefits, we then used Cityfi’s Social Return on Investment tool to evaluate the three interventions.
Findings
The greatest ROI occurred with grants (262% ROI), then new developments (91% ROI), with ADUs on the lower end of our scale (44% ROI). We expected grants to have the highest social utility and ROI as the cost of implementing this intervention is significantly lower than developing new housing and ADUs. But grants target a specific issue in the realm of affordable housing. Instead of providing more supply, grants lower the barriers that some face when acquiring housing. On the other side, we initially hypothesized that ADUs would provide more value (and therefore higher returns) than new developments because of how much more scalable and accessible they are. That being said, each of these interventions are useful tools that can help improve the supply of affordable housing within the District.
Looking at this data should not provide expectations of which single intervention would be the best. Rather, the data suggests a multi-pronged approach can be used as each intervention provides a sufficient amount of return.
Conclusion
We recommend using all three solutions in tandem to address the lack of affordable housing in the District. Each solution offers a unique approach to providing residents with access to low-cost, reliable housing. As such, we also recommend using a phased approach with these three solutions. Expanding the grant programs through private-public partnerships and providing tax incentives to private institutions would be phase one. With phase two, we recommend improving the communities of low-income housing neighborhoods by bringing in more jobs and implementing more Urban infrastructure, having more public investment in the schools there, and finally, bringing in programs that have been proven to be effective like Head Start. While the same solution will not be applicable everywhere, we also believe these findings may be helpful to other locations in urban settings with affordable housing shortages.
We would like to take this opportunity to thank our friends over at Cityfi, especially Gabe Klein, Chelsea Lawson, and Ahmed Darrat, for partnering with us throughout this process and for providing us with constructive feedback. We would also like to thank Matt Hoffman at HousingTech Ventures, Bill Milko at the DC Housing Finance Agency, and Doni Crawford at the DC Fiscal Policy Institute for their valuable insight about the DC housing market and innovation space.
