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Resilient Affordable Housing Strategies: A methodological approach to analyzing the impacts of Barcelona’s inclusionary housing policy on affordability in gentrifying neighborhoods

Authors:
Conference Proceedings – Long Paper
Resilient Affordable Housing Strategies: A methodological
approach to analyzing the impacts of Barcelona’s inclusionary
housing policy on affordability in gentrifying neighborhoods
Walker Toma 1,*
1 Univsersitat Internacional de Catalunya / Carrer de la Immaculada, 22, 08017 Barcelona, Spain
E-Mail: walkertoma@gmail.com
Tel.: +34 653 788 727
Abstract: Housing unaffordability, gentrification and related residential displacement and
exclusion are well-documented stresses that limit the resilience of a given urban place. The
Barcelona City Council is dedicated to alleviating these stresses through a comprehensive
strategy comprised of a variety of policy initiatives addressing housing affordability. As part
of this broader strategy, the City Council has proposed a citywide inclusionary housing
measure requiring 30 percent of all newly developed or significantly rehabilitated housing
units to be dedicated as protected public housing. This paper fits within a larger research
effort seeking to better understand the proposed initiative’s impacts related to its purported
goal of public housing production as well as broader implications on the housing market. To
do so, this paper provides a methodological framework for assessing these policy
implications using neighborhood-specific economic feasibility modelling. Through the
examination of inclusionary policies in comparable cities in the U.S. and Western Europe,
this paper will form a basis from which to critique the proposed policy due to its inflexibility
and lack of neighborhood-specific adaptability while maintaining that a well-designed
inclusionary policy can generate significant public benefits to the City of Barcelona.
Keywords: Inclusionary housing, economic feasibility, Barcelona, affordable housing,
urban resilience.
1. Introduction
The City of Barcelona has embraced an approach to improving housing affordability driven by a
firm belief in the ‘right to the city’ while maintaining an engagement with the realities imposed by
existing economic and policy structures. One example of this approach is the expected adoption of a
citywide inclusionary housing policy (30% of all units in new development or significant rehabilitation
is to be dedicated at social rent)(Ajuntamiento de Barcelona 2018), which seeks to leverage private
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sector investment as a vehicle for generating affordable housing units in communities particularly
affected by gentrification and displacement pressures.
While there exists a limited body of research on the impacts of inclusionary policies on housing
markets, a review of available literature suggest that the efficacy of such policies is closely related to
their flexibility (i.e. contextual adaptability by neighborhood, development type or market activity)
(Schuetz et al. 2009), (Non-Profit Housing Association of Northern California 2007) and regional
scope (i.e. should similar policies be enacted in neighboring cities, local impacts on the real estate
market are expected to be less severe as developers would face similar policy environments in nearby
municipalities) (Hughen and Read 2013). The current measure, that is expected to gain full approval
by the end of 2018, is not anticipated to include significant implementation flexibility, though a
number of cities within the region, along with the Generalitat de Catalunya (Catalonia provincial
government), have expressed interest in implementing a more far-reaching inclusionary policy (Nadeu
2018).
This paper provides a methodological framework for assessing the efficacy of Barcelona’s proposed
citywide inclusionary housing policy from an economic feasibility perspective to evaluate whether the
policy will generate intended outcomes at the urban scale. Intended outcomes are understood in the
context of this research as increasing the affordable housing stock without indirectly increasing
housing prices in the private market through limiting supply. As part of this effort, this paper first
provides a justification for the creation of an inclusionary policy in Barcelona through a documentation
of the stresses affecting affordability and a demonstration that such a policy may help alleviate these
stresses and in turn build resilience.
Secondly, this paper provides a brief contextual examination of Barcelona Mayor, Ada Colau’s,
current housing affordability initiatives, how the inclusionary policy fits within its greater strategy, and
the potential public benefits a well-designed inclusionary policy could generate, furthering efforts to
create a more resilient Barcelona. Thirdly, through a review of existing inclusionary policies in other
major cities in Western Europe and the United States, this paper seeks to both further justify the
pursuit of inclusionary policies in Barcelona and provide a basis for critiquing the process through
which the Ajuntament (City Council) developed the initiative and the contents of the initiative itself. In
particular, this paper seeks to provide a basis for critiquing the policy as initially designed due to its
inflexibility, lack of neighborhood-specific adaptability, and questioning its expected adoption with
limited in-depth analysis on its potential economic impacts.
Once a basis has been established both to support the implementation of a well-crafted inclusionary
policy in Barcelona and yet critique the composition of the currently proposed policy, I will then argue
for the need to both evaluate the proposed policy at the neighborhood scale and to ensure it is properly
and consistently calibrated to effectively address the affordability issues for which it is designed. As
part of this effort, this paper will present a methodology for evaluating the proposed inclusionary
policy in Barcelona at the neighborhood scale through the selection of specific areas on which
additional research will focus.
Lastly, this paper illustrates how economic feasibility analyses can inform projections of
development activity (and therefore the generation of affordable units), outlines how further research
will be conducted in this regard, and demonstrates ways in which the proposed policy may be
calibrated to better achieve its intended goals at both the neighborhood and urban scales. Therefore, an
overview of the methodological approach for developing economic feasibility modeling will be
provided herein.
2. Housing affordability stresses in Barcelona limit urban resilience
Housing affordability remains a pressing priority in Barcelona. The discussion of how housing
policy can better serve the City’s inhabitants was the central campaign theme of the current Mayor and
continues to drive major policy initiatives impacting spatial, social, economic and political dynamics in
Barcelona. Current Housing Manager, Javier Burrón, describes the state of housing in Barcelona as a
“housing emergency… [comprised of] evictions, [the] inability of broad layers of society to pay rent
based on their salaries, displacement of low- and middle-income long-term residents from
neighbourhoods by higher-income outsiders… [along with the] growth of social housing
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exclusion…[and] the lack of a diversified and sustainable housing model for a society of pensioners.”
Due to this state of housing emergency, Mr. Burrón has helped develop the formation and
implementation of new public housing policies at the local level (Montaner et al. 2016). Existing and
proposed policy initiatives are diverse in approach, robust in scope, and largely focused on directly or
indirectly increasing the available number of affordable units in the city, be it through the private
market or through increasing the public housing stock.
Yet despite the prioritization and concerted efforts, the City Council faces an uphill battle in
delivering on its housing policy goals. Although Article 73 of Act 18/2007, or the Right to Housing
Law of 2007, committed to a increasing the affordable housing stock to 15 percent of total housing by
2027, as of 2014, this figure remained below 1.5 percent. The Right to Housing Plan (2016-2025),
which was approved in 2017, acknowledges this insufficiency yet restates a commitment to meet the
2027 goal and refers readers to the 77 percent yearly increase in public spending on housing between
2014 and 2015. However, based on current projections, and even greater funding commitment will be
required to meet the 2027 goal (Right to Housing Plan 2017).
The Right to Housing Plan (2016-2025), along with a number of official documents, studies, and
press releases, discuses some of the leading characteristics affecting the current state of housing
Barcelona including pressures affecting affordability, trends indicating the continued gentrification of
specific areas of the city and the exacerbation of certain factors generating displacement and housing
exclusion, as well as efforts the current administration has undertaken to address housing affordability
in Barcelona.
This research positions itself to assess a specific policy initiative (inclusionary housing) based on a
belief, which is shared by the current city government (Gabàs 2018), (Pagani 2018), that an alleviation
of key stresses negatively impacting the affordability of, and access to, housing for all city inhabitants,
will help to create a more resilient city. Through an ongoing partnership between the City Council of
Barcelona, and in particular the Resilience Department, and UN-Habitat’s City Resilience Profiling
Programme (CRPP), a series of key stresses have been studied to varying degrees in an effort to better
prioritize and refine policy initiatives addressing housing affordability in the future.
Identified stresses affecting housing affordability and therefore resilience in the City of Barcelona
include, but are not limited to, relocation and displacement pressures generated by economic
insecurity, displacement pressures stemming from conversion of residential units to touristic
apartments, foreign investment in the housing market increasing real estate demand and therefore
housing prices, stagnation of real wages relative to the growth in housing costs, spatial and policy
context limiting new production of housing in the city and therefore limiting new supply, continued
speculation within the real estate industry that serves both to artificially constrain supply and increase
land values, among others.
While an inclusionary policy does not possess the ability to mitigate all of these key stresses, a well-
designed policy can provide a mechanism for effectively mitigating gentrification-inducing residential
displacement and exclusion in a targeted manner. Such mitigation occurs as inclusionary policies
harness gentrification pressures (or investment in areas where developers have identified profit
potential) to finance the creation of new affordable units in sitio. In doing so, a well-designed
inclusionary policy should be understood as both generating public benefits and building resilience for
the City of Barcelona.
3. Overview of current administrative initiatives in Barcelona addressing housing affordability
As noted in the previous chapter, housing affordability remains a priority for the current Barcelona
City Council. The inclusionary housing policy central to this research fits within a broad strategic
effort at the city scale to enable a ‘right to the city’ for inhabitants, or more precisely a ‘right to
housing’. One of the strategic lines identified in the Right to Housing Plan (2016-2025)
is increasing the stock of affordable housing. The four pillars that comprise this effort are 1) to
increasing the current public housing stock, 2) extending the coverage of, and improve access to, rent
subsidies, 3) the conversion of private housing units into affordable housing, and 4) boosting the social
market, which refers to community-based efforts that go beyond housing itself to ensure socio-
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economic support is provided more broadly to the citizenry. Research efforts addressed in this report
focusing on the potential adoption of an inclusionary housing policy primarily falls within the first of
these four pillars: the expansion of public housing.
The context within which the City Council’s strategy for expanding public housing stocks includes
a history of very limited investment by the public sector and a focus on using public housing as a
wealth building mechanism over the past few decades (Montaner et al. 2016). The combination of
housing policies prioritizing private ownership (e.g. subsidizing mortgages) and the creation of public
housing that was not intended to be permanent (i.e. after a predetermined period, the public housing
occupants could often sell units on the private market) has meant that Barcelona, and Spain more
broadly, have some of the lowest levels of public housing in the European Union (Ponce 2004).
Given the existing deficit of public housing in Barcelona, which has been shown to be directly
related to housing unaffordability in recent research (Angel and Kallergis 2016), the City Council has
initiated, expanded upon, strengthened, and altered a variety of approaches to both expanding the
physical stock of public units as well as increasing access to affordable housing more generally. The
current approach includes, but is not limited to, efforts to acquire new housing units directly from the
private market; regulate pricing of existing rental units (i.e. ‘rent control’); the development of new
affordable properties through public-private entities; cohousing initiatives; direct rent subsidies (i.e.
public assistance in the private market); adaptive reuse of existing public facilities into housing;
adaptive reuse of vacant, bank-owned homes for public housing; and a citywide inclusionary housing
policy (Ajuntament de Barcelona 2017), (Montaner et al. 2016).
Furthermore, prioritization of housing affordability has not been limited to political rhetoric. The
overall budget to support the housing affordability goals identified in the Right to Housing Plan (2016-
2025) was increased by 64 million euros in a joint session of the Consorci de l’Habitatge de Barcelona
(Barcelona Housing Consortium), raising the financial contributions allocated to housing policies to
approximately 647 million euros. The distribution of these funds, the sources of which are derived
from both the Ajuntament (City Council) (81 percent of the total) and the Generalitat de Catalunya
(provincial government of Catalonia) (19 percent), is as follows (Ajuntament 2018):
Figure 1. (a) Distribution of funds allocated towards Barcelona housing policies 2018-2023
Housing Approach
Budget (millions
of euros)
Estimated units /
users*
Promotion of new construction
337
4,644
Direct acquisition of housing
105
1,064
Conversion of private flats into public housing
25
505
Direct rent subsidies
79
40,000*
Renovation subsidies
101
40,000*
(b) Barcelona City Council
Inclusionary housing is an attractive policy option for local governments as it does not require direct
public spending, but rather leverages private sector development activity to increase public housing
stock. As illustrated in Figure 1, the Barcelona City Council estimates that 337 million euros will be
used to produce 4,644 new public housing units and 105 million euros to acquire 1,064 units, resulting
in a per unit costs of 72,000 euros and 99,000 euros, respectively. For comparison, if we assume the
300 to 400 annual unit production projections concluded by the City Council stemming from the
proposed inclusionary program (Jorro 2018), over an equivalent period of five years (based on the
2018-2023 funding allocation shown in Figure 1), we should expect the generation of between 1,500
and 2,000 public housing units. Applying per unit costs for direct development and acquisition, the
estimated cost of these units would be between 108 and 198 million euros.
Therefore, an inclusionary policy has the potential of delivering enormous public benefits without
requiring direct public expenditures. The policy in Barcelona should thus be understood as a
Calculation provides a range assuming 1,500 units would be produced at 72,000 euros per unit and 2,000 units at 99,000
euros per unit.
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complimentary approach to other efforts at increasing affordability within the city and one that, if
calibrated effectively, can provide the City Council with a fiscally efficient tool for increasing housing
affordability and therefore resilience at both the neighborhood and urban scale.
4. Comparison of existing inclusionary housing policies in the United States and Western Europe
Inclusionary zoning can be defined as a form of land-use policy that enables some lower- and
moderate-income households to live in middle-and upper-income communities either by mandating or
encouraging real estate developers to incorporate a proportion of units that are sold or rented at below-
market prices in exchange for development rights or zoning variances (Schwartz et al. 2012).
While inclusionary housing policies have garnered limited academic analysis regarding effects on
housing prices, existing literature, which primarily refers to cases in the United States, largely indicates
that the impacts of inclusionary policies on housing prices are relatively limited (California Coalition
for Rural Housing 2003). This limited pricing impact is due to housing developers’ unwillingness to
pass along increased development costs to consumers for fear of a competitive disadvantage in the
market (i.e. consumers in competitive development markets force developers to accept lower profit
margins, therefore maintaining prices at pre-policy levels) (Schuetz et al. 2009). However, in areas
with heightened demand (i.e. low vacancy, rapidly escalating land costs, etc.), higher housing prices
may occur following the adoption of inclusionary policies as consumers are willing to ‘absorb’ the
higher costs, therefore paying a premium to live in a specific location (Padilla 1995), (Knaap, Bento
and Lowe 2008).
This chapter presents a brief overview of established inclusionary housing policies in selected major
cities in Western Europe and the United States. The four cities included in this brief analysis possess
economic similarities to Barcelona such as being competitive housing markets with relatively high
land values, low vacancies, and persistent development activity, both from new development and
rehabilitation projects. While it should be noted that all urban environments feature unique dynamics
within the housing sector, the presentation of these selected cases is intended to illustrate some of the
existing policy initiatives and, if available, synopses of these policies quantitative impacts on the
housing market.
4.1. San Francisco, California, United States
Initially established in 1992, San Francisco’s Inclusionary Housing Ordinance requires that all
market-rate projects of 10 units or more contribute to the City’s affordable housing stock. There are
three ways for a project to do this: 1) build Below-Market-Rate (BMR) units on-site equal to 12
percent of the total project units, 2) build 20 percent of the total project units as BMR off-site on a
separate parcel of land or, 3) pay a fee to the City equivalent to 20 percent BMR (calculated based on a
set fee that is updated every year intended to estimate the cost of constructing a BMR unit) to the
Mayor’s Office of Housing (MOH).
The majority of developers in recent years have opted to provide off-site BMR units or pay the fee
to the City (options 2 and 3 defined above), the result of which is that either the responsibility of
additional BMR unit development is shifted to the City
or the BMR units are not necessarily located
in the same neighborhood as the associated market-rate development, therefore limited the policy’s
efficacy of mitigating residential exclusion. One rationale for this trend is the rate with which land
values change in a city like San Francisco, wherein fee levels that are determined on an annual basis
may be significantly outdated (i.e. too low) and therefore a far more attractive economically.
No definitive study has been completed illustrating whether or not the inclusionary policy has had
observable impacts on housing prices or overall supply in San Francisco, though a literature review
Note that these percentages are slightly higher in certain parts of the Eastern Neighborhoods Plan (ENP), which is a
special planning area with a zoning ordinance that supersedes the citywide policy.
Fees collected as a part of the described mechanism flow to the Housing Trust Fund, which then funds affordable housing
development projects pursued by the City and County of San Francisco.
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finds a greater proportion of academic discourse finding little to no effect (Schuetz et al. 2009),
(Hollingshead 2015).
4.2. Boston, Massachusetts, United States
Originally established in 2000, and significantly revised in 2015, Boston’s Inclusionary
Development Policy (“IDP”) applies to all residential projects of 10 or more units that meet certain
criteria. Projects exempt from the policy include those which include affordable housing exceeding a
certain threshold, are characterized as dormitory housing (e.g. housing for university students), those
projects which were approved prior to official establishment of the policy, and projects that are exempt
due to other specified sections of the Zoning Code. Projects that do not qualify for an exemption are
required to dedicate 13 percent of the total number of units on-site or 18 percent off-site. The IDP is
enforced differently across three established “zones” in the city in an attempt to reflect varying
economic realities. Projects may also contribute per-unit fees, which vary depending on the Zone
wherein the project is located (e.g. in Zone A, projects are required to contribute payments for 18
percent of total project units at a fee of $380,000 per unit. In Zone C, a payment of $200,000 per unit is
levied on 15 percent of total units) (BPDA 2015).
In 2016, the IDP was revised further to allow more flexibility for developers in an effort to produce
more affordable units in more neighborhoods throughout the city (BPDA 2015). Key revisions
included the adoption of density bonuses, which allows developers to build at greater densities than
allowed under the existing zoning in return for providing a greater number of affordable units than
would otherwise be required under the IDP.
The effects on housing prices in Boston due to the IDP is, similar to San Francisco, a debatable
issue, though most comprehensive reviews have not found significant impacts on supply, rental rates,
or land values (Schuetz et al. 2009).
4.3. Paris, Ille de France, France
In France, a national policy called the Solidarity and Urban Renewal Law (SRU) establishes that
every municipality with more than 3,500 inhabitants (or more than 1,500 in municipalities located in
Ille de France, or the province surrounding Paris) must have a social housing share of at least 20
percent. In addition to the national policy (Pittini and Laino 2011). For the national policy,
municipalities that do not fulfill their obligation of providing 20 percent social housing are subject to a
tax. However, many wealthier municipalities choose to pay the annual tax as opposed to meeting the
requirement fearing negative reputational impacts stemming from the arrival of a lower income
population (Republique Francaise 2014), (Lazarovic 2010).
In 2004, Paris adopted a provision which required a 25 percent social housing set aside in all new
development located in arrondissements (neighborhoods) where the current percentage of social
housing was less than 20 percent (Calavita and Mallach 2010), (Rose et al. 2012). The policy was
designed in direct response to the perception of the effects of affordable housing efforts in the City of
London, which we viewed by Paris housing advocates at the time as perpetuating segregation. In
practice, the policy has been challenging in its implementation due to the complex and cumbersome
housing regulatory system (Calavita and Mallach 2010), leading to a far more politicized, ad-hoc
process for securing development approvals and thus often circumventing the original intention of the
policy.
The effects of the Parisian inclusionary requirements have generally been well-received in that the
policy has generated significant new social housing, much of which has been located in higher income
areas (Lazarovic 2010). Limited study or data on the impacts of the inclusionary policy in Paris on
housing prices overall is available.
4.4. London, Greater London, England
The 1990 Town and Country Planning Act, and specifically Section 106 (S106) of the Act (known
as S106 agreements), allows local authorities the power to require new development to contribute
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affordable housing units or fees in return for development rights (Monk 2010). On the national level,
S106 agreements have contributed to the vast majority of all affordable housing development since
2000 (Morrison and Burgess 2013), with the greater London area and southern England involved in far
more agreements than northern counties. Therefore, inclusionary policies vary between municipalities
and are subject, in certain circumstances, to ad hoc negotiations on a case-by-case basis.
In 2017, London Mayor Sadiq Khan proposed to streamline the development process by allowing
any new residential project to bypass the, often cumbersome, application process if developers meet a
strict 35 percent minimum affordable housing inclusion and do not require any public funding. For
projects requiring public funding, a 50 percent minimum is imposed for the fast-track process. The
new provision was designed to address the increasingly expensive housing market in London, while
median incomes remain relatively flat post-financial crises. The new streamline application process,
which forms a central characteristic of Khan’s Homes for Londoners policy initiative, forms part of a
larger strategy to address housing affordability in the city (London City Hall 2017).
Existing off-site and cash in lieu agreements remain viable with the adopted of the new policy,
though no equivalent fast-track option is available in an attempt to disincentivize such options. Also
maintained is a provision wherein income limits for affordable housing is determined by each
neighborhood to ensure affordability levels remain sensitive to income levels and real estate valuation
differences around the city.
Research has shown that inclusionary policies in England have not deterred development activity
due to the institutionalized nature of the policies in the real estate community (Monk 2010). However,
there is general agreement that the imposition of a 35 or 50 percent inclusionary requirement likely
does increase housing prices in London (Morrison and Burgess 2013), although academic quantitative
analysis of recent policy changes is not currently available.
4.5. Barcelona, Catalonia, Spain
The City Council of Barcelona has proposed a citywide inclusionary housing policy, which if
adopted in its current incarnation, would mandate all new housing development or significant
rehabilitation (defined as if construction costs exceed 50 percent of the value of the building) to
provide 30 percent of the total units as officially protected units (viviendas de protección official
(VPO)). The proposed policy would require two modifications of the Plan General Metropolitano
(PGM) and apply to every district in Barcelona. The proposal appears to have sufficient support to pass
unamended by the end of 2018 (Romano Córdoba 2018).
The Generalitat de Catalunya, in addition to numerous nearby cities, have expressed interest in
adopted similar measures in order to both present a consistent policy framework in the metropolitan
area as well as increase the development of affordable housing units (Romano Córdoba 2018), (Jorro
2018).
The reaction from the development community to the proposal has been claims that the measure
will stop housing development, limit rehabilitation work on older buildings, and increase prices
citywide due to constrained supply and the increased cost of development (Nadeu 2018), (Jorro 2018).
While such reactions are commonplace in discussions of inclusionary housing, the level of outrage of
cited reactions from the building community may stem from a feeling of exclusion from the
development of policy which will affect them significantly (Romano Córdoba 2018).
The City Council maintains that the policy will effectively achieve its desired results and has citied
projections that the policy will produce between 300 and 400 public housing units per year (Jorro
2018). While the basis for this calculation have not yet been made public on accessible forums such as
BCNROC (Repositori Obert de Coneixement de lÁjuntament de Barcelona), given development
activity over the past three years, which is presented in greater detail in Chapter 6, the 300 to 400-unit
figure would align with an assumption of a continuation of current development trends. In other words,
it appears the City Council has assumed the policy will have little discernable impact on the level of
development activity in the city.
4.6. Case Study Comparison
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While further analysis is required to understand the nuances of how the selected inclusionary
policies were initially developed and, in certain cases, subsequently revised, general takeaways include
1) the policies have become more flexible and neighborhood-specific over time; 2) the policies are
intended to provide a fiscally unencumbering development mechanism that generates affordable
housing in higher income areas where housing is not easily accessible; 3) in the U.S. cases, incentives
such as density bonuses were implemented to encourage development in areas of the city deemed
priorities; and 4) significant increases in housing prices as a direct result of inclusionary policies were
not identified.
In comparison to these selected cases, the proposed Barcelona policy is more ambitious in its
proportion of affordable units mandated (aside from London) and, in its current incarnation, does not
provide incentives to try and offset the increased development costs. Lastly, the Barcelona policy does
not attempt to calibrate the inclusionary obligation based on location, opting instead to apply a blanket
policy at the city scale.
5. Research Methods and Design
The methods that will be utilized in this research include a review of quantitative and qualitative
data derived from previously developed research conducted by the City Resilience Profiling
Programme (CRPP), public sources, and through interviews with policymakers and the development
community. The data stemming from previous CRPP analysis has allowed for a justification of
neighborhood selection for which further analysis and development permitting projections will be
conducted. The criteria for neighborhood selection are discussed in the following chapter (6).
Additional data will form the basis of the economic feasibility models, which will be provide an
assessment of the impacts of the adopted inclusionary policy on both new construction and
rehabilitation projects in the selected neighborhoods. These impacts can then inform projections of
development activity and help determine the efficacy of the inclusionary policy in achieving its desired
outcomes (i.e. producing affordable housing units without negatively impacting affordability in the
housing market overall). An overview of how the economic feasibility models will be constructed and
utilized is presented in chapter 7.
6. Neighborhood-scale approach to inclusionary housing and selection methodology and results
In order to effectively calibrate an inclusionary housing policy in a dynamic urban housing market,
such as Barcelona, it is necessary to recognize the variances within neighborhoods and understand the
context-specific policy impacts. This is because current development activity is not evenly distributed
throughout Barcelona neighborhoods but rather is determined by a number of economic considerations
including land values, construction costs, spatial and planning considerations including zoning
restrictions, location of key infrastructure and amenities (e.g. parks, transit, cultural and commercial
amenities), and available development sites, among a myriad of additional contextual factors that
influence the feasibility of a given project. As has been documented through research of existing
inclusionary policies and demonstrated in revisions of existing policies in direct recognition of unequal
development environments
, an inclusionary policy calibrated to respond to structural economic
variation between neighborhoods is likely better equipped to achieve its stated policy goals of
improving affordability in the city (Calavita and Mallach 2010).
Additionally, with recognition of the importance of assessing inclusionary policy impacts at the
neighborhood level but given the scale of development activity in Barcelona and the complexity
required to construct neighborhood-specific feasibility models, the scope envisioned as a part of this
initial research is restricted to two neighborhoods or Districts (out of a total of 10). Perhaps future
research will attempt a more ambitious research scope so that coverage of all 10 official Barcelona
Districts could be conducted.
This chapter presents criteria for neighborhood selection in which to measure the anticipated
impacts of the adopted inclusionary measure. These criteria were selected in order to 1) focus on
See revisions and current characteristics of inclusionary policies in both Boston and Paris.
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neighborhoods with significant gentrification and related displacement pressures and 2) ensure there is
currently sufficient development activity to adequately project effects on permitting and/or unit
development and evaluate whether the adopted inclusionary policy will have negative impacts on new
housing delivery (i.e. supply).
The first goal of the criteria will be met using neighborhood measures of rent-to-income ratios. This
indicator provides a simplistic evaluation of housing cost burden, a measure shown in repeated studies
to predict displacement (Hodge 1981) and provides insight into other fundamental drivers of
displacement and housing exclusion for vulnerable groups (Schill and Nathan 1983), (Atkinson 2004).
Rental increases, income decreases, or a combination of these two trends which increases the rental
burden of household budgets, is a strong indicator of displacement pressures and housing vulnerability
(Ellen and O’Regan, 2010), (Walks and Maaranean 2008), (Mallach 2008).
This research recognizes the charged meaning associated with gentrification as well as the word’s
varied definitions. For the purposes of this paper and this line of research, gentrification is understood
as a process wherein increased investment trends in the housing sector in a specific area result in
increased property values and rents, which in turn displaces existing residents and excludes lower
income inhabitants from housing in that area. This general definition is well aligned with the way in
which housing affordability priorities are discussed in Barcelona’s political discourse and publications
outlining policy goals.
6.1. Rent to Income Ratio by District
As shown in Figure 2, rent to income ratios in Barcelona vary significantly by District from a low
of 20 percent in Sarrià-Sant Gervasi to a high of 35 percent in Nou Barris. Six of the ten districts which
exhibit above average rent-to-income ratios are highlighted in the table, indicating a heightened
pressure for displacement, and therefore increased vulnerability to housing exclusion. These six
districts include Ciutat Vella, Sants-Montjuïc, Horta-Guimardó, Nou Barris, Sant Andreu and Sant
Martí.
Figure 2. (a) Rent to Income Ratio by District, City of Barcelona
Household Income Variation by District
Average Rent per District
District
HH Income
(Euros)
% City Avg.
Average Rent
(Annual)
Rent to Income
Ratio
Barcelona
32,138
100.0
8,258
26%
Ciutat Vella
27,478
85.5
7,669
28%
Eixample
37,215
115.8
9,323
25%
Sants-Montjuïc
24,360
75.8
7,181
29%
Les Corts
44,896
139.7
10,236
23%
Sarrià-Sant Gervasi
59,230
184.3
11,736
20%
Gràcia
34,869
108.5
8,087
23%
Horta-Guinardó
24,971
77.7
6,766
27%
Nou Barris
17,258
53.7
5,992
35%
Sant Andreu
23,460
73
6,902
29%
Sant Martí
27,510
85.6
7,690
28%
(b) Data publicly available courtesy of the City of Barcelona; data synthesis courtesy of UN-
Habitat’s City Resilience Profiling Programme (Pagani 2018)
6.2. Development Activity Citywide and by District
While a rent-to-income ratio may be well-suited to provide an indication of areas vulnerable to
exclusion and other affordability-related issues, given the market-derived mechanism required from an
inclusionary housing policy, in order to effectively evaluate the proposed measure, neighborhood
selection must also take into account development activity. Figure 3 shows citywide development
activity in Barcelona over the past seven years. After exhibiting very limited new housing starts in the
10
years immediately following the global financial crises, development activity has increased to an
average of over 1,300 units in recent years.
Figure 3. (a) Housing Units Constructed per Year, City of Barcelona
Year
Housing Starts
Completed Units
Total Units
2011
1,073
1,839
Not Available
2012
493
1,077
Not Available
2013
697
666
Not Available
2014
752
555
831,748
2015
1,408
836
832,584
2016
1,233
1,291
Not Available
2017
1,373
1,039
Not Available
(b) Data publicly available courtesy of the Barcelona City Council; data synthesis courtesy of
UN-Habitat’s City Resilience Profiling Programme (Pagani 2018)
In order to understand how development activity is distributed across districts, the three most recent
years of data showing housing starts per 1,000 inhabitants was collected. A simple average was then
calculated to provide a proxy for district-level development activity relative to population. Finally, as
this research is concerned with development trends both relative to population as well as in an absolute
sense, an estimated average number of housing starts per district per year was extrapolated using 2016
district level population data.
Figure 4. (a) Estimated Average Housing Starts per District5
District
Housing Starts per 1,000 Inhabitants
Est. Avg. Housing
Starts 2015-
2017(c)
2015
2016
2017
Avg. 2015-
2017
Barcelona
.88
.77
.84
.83
1335
Ciutat Vella
.04
.47
.10
.20
21
Eixample
1.06
.69
.67
.81
215
Sants-
Montjuïc
1.09
1.23
2.11
1.48
269
Les Corts
.27
1.34
1.74
1.12
92
Sarrià-Sant
Gervasi
.54
.57
.31
.47
71
Gràcia
.57
.25
.58
.47
57
Horta-
Guinardó
.43
.46
.60
.50
84
Nou Barris
.76
.48
.22
.49
81
Note that housing start estimates are calculated using a simple average across three years of extracted data and applied to
2016 population figures by District. Therefore, discrepancy with official citywide housing start data from Figure 2 exist.
This table is intended not to provide definitive statistics but rather illustrate trends from which neighborhood selection can
be based.
11
Sant Andreu
1.94
.70
.49
1.04
154
Sant Martí
1.17
1.28
2.62
1.69
398
(b) Data publicly available courtesy of the Barcelona City Council and the L’Observatori Metropolità
de l’Habitatge de Barcelona
As Figure 4 demonstrates, four of the ten districts have experienced above average development
activity as measured by exhibiting a housing starts per 1,000 inhabitants ratio higher than the citywide
figure (.83). These four districts include Sants-Montjuïc, Les Corts, Sant Andreu, and Sant Martí.
However, regarding absolute development activity figures, Les Corts is replaced by Eixample. The
three districts which exhibit both high relative and absolute development activity statistics include:
Sants-Montjuïc, Sant Andreu, and Sant Martí, with Sants-Montjuïc and Sant Martí demonstrating
higher metrics in both measures.
If we combine these findings from the rent-to-income indicator of Figure 2, we find that Sants-
Montjuïc and Sant Martí also meet the criteria of exhibiting higher rent-to-income ratios than the city
average. Therefore, these two districts meet the developed selection criteria and will be used to analyze
the proposed inclusionary housing measure using financial feasibility modelling. The following
chapter provides an overview of the methodology that will be used to complete this assessment.
7. Methodological overview of feasibility analysis structure and description of expected outcomes
Financial feasibility analyses are often used to test proposed policy changes affecting the housing
market to better understand how the private market may respond to newly imposed incentives or
deterrents. In the case of inclusionary housing policies, and the Barcelona proposal in particular, by
requiring new development and significant rehabilitation projects to set aside 30 percent of housing
units at protected social rents, the development economics of projects will be altered considerably. In
other words, this set aside can be understood as an added development cost, not unlike construction
costs.
Through financial feasibility modelling, the policy’s potential impacts on development can be
measured through an understanding of whether current development economics can absorb this added
cost. If a generic neighborhood-specific development model demonstrates that even with this added
cost, acceptable profit margins or “hurdle rates” can be achieved, then we can expect a continuation of
similar development patterns in the neighborhoods assessed and therefore generation of public housing
units in line with the City Council projections as a part of the inclusionary mechanism. Conversely, if
modelling indicates projects are unable to absorb this added cost without becoming uneconomic (i.e.
acceptable ‘hurdle rates’ are unlikely to be achieved), we can expect a reduction of development
activity in selected neighborhoods.
Feasibility modelling for the Sants-Montjuïc and Sant Martí neighborhoods
will seek to capture
contextual developmental variations such as achievable rents, land costs, labor costs, among a range of
other variables. Modelling efforts will also include a range of common typologies (i.e. development
size, scale, unit mix, construction type, market positioning, etc.), which will be based on historical
development trends and common typologies pursued by local developers. Modeling will include
hypothetical rehabilitation and ground-up development projects. Key inputs will be provided by local
developers, other built environment professionals (i.e. architects, engineers, contractors, etc.), city
officials and technicians, as well as available market data (market data will be particularly important in
setting revenue estimates). Lastly, the feasibility analyses will be tested under a range of market
scenarios, illustrating the policy’s potential impact on development economics under varying
conditions.
In addition to testing the hypothetical projects under a range of market scenarios, the analysis will
also test the feasibility impacts of specific policy alterations including:
See the previous chapter for the neighborhood selection methodology and results.
12
Density bonuses
Tax incentives
Waiver of certain development requirements (e.g. open space set-asides)
Changes in affordability levels
Evaluation of the impacts will be conducted both quantitatively, using feasibility models, as well as
qualitatively through interviews with the local development community and city officials. The goal of
the qualitative approach is to help determine the policy impacts that are unrelated to economics (i.e.
political, social, environmental).
7.1. Projected Housing Unit Production
Once the modelling has been completed, using historical development trends (which is briefly
illustrated in the previous chapter), unit production projections for each neighborhood or district will
be calculated to help 1) determine the efficacy of the proposed inclusionary policy in generating public
housing in each neighborhood and 2) predict whether overall supply will be affected to the extent that
housing prices are impacted. Such an understanding will allow insight into the extent to which the
policy can achieve its intended goals.
6. Discussion
The intent of this research is firstly to understand the potential impacts of the proposed inclusionary
policy in Barcelona at both the city and neighborhood scale. If the research and modelling envisioned
herein reveal that the impacts of the policy appear not to effectively meet the stated policy goals of the
City Council, recommended policy changes will be developed and tested.
An effective review of the policy will require an understanding of its potential implications on the
Barcelona housing market and the production of public housing, in-depth analyses of both the City
Council’s economic evaluation of the policy, which is required under Catalan law, and an October 10th,
2018 review of the proposed policy by the Col·legi d'Economistes de Catalunya (Romano Córdoba
2018)
. A thorough comparison of these economic studies will allow for a far more informed
feasibility analyses to be conducted.
7. Conclusions
Anticipated conclusions of this broader research effort are quantitatively-derived policy
recommendations related to the proposed inclusionary housing policy measure. These
recommendations will likely relate to how best to calibrate the policy to take into account
neighborhood-level market variances, and to better incentivize development activity in order to
mitigate any unintended impacts on the broader housing market, such as increasing housing prices due
to restricted supply.
Acknowledgments
I would like to thank my advisor, Dr. Carmen Mendoza Arroyo, for her consistent and thoughtful
guidance and support in developing this line of research. I would also like to thank UN-Habitat’s City
Resilience Profiling Programme for allowing collaboration in pursuing this important topic of housing
affordability in Barcelona.
Conflict of Interest
The author declares no conflict of interest.
Documentation of the discussion can be found here:
http://www.coleconomistes.cat/Eventos/wf_curso.aspx?IdMenu=a2ef68da-9e11-4618-b4cc-
30e817f701cd&Cod=11869&Idioma=ca-ES
13
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15
© 2018 by Walker Toma; licensee MDPI and IFoU, This article is an open access article distributed
under the terms and conditions of the Creative Commons Attribution license.
... In this study we included an indicator for the average price of rent, which is not sufficient to guarantee housing access. Nou Barris, despite being one of the most lowpriced districts of the City of Barcelona in terms of housing, does not ensure affordable housing, as it is also one the areas with major vulnerability related to housing exclusion (Toma, 2018), being affected by evictions (Gutiérrez & Domènech, 2018) and a precarious physical state of the buildings (Cornado et al., 2017). ...
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Global Housing Affordability: What do we know
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  • Achilles Kallergis
Angel, Shlomo and Kallergis, Achilles. 2016. "Global Housing Affordability: What do we know?" Global Housing Watch Newsletter, September 2016. Available online: http://unassumingeconomist.com/wp-content/uploads/2016/09/Global-Housing-Watch-Newsletter_09_16.pdf (accessed on 18 November 2018).
Inclusionary Housing in the International Perspective: Affordable Housing, Social Inclusion, and Land Value Recapture
  • N Calavita
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Calavita, N. & Mallach, A. 2010. "Inclusionary Housing in the International Perspective: Affordable Housing, Social Inclusion, and Land Value Recapture." Lincoln Institute of Land Policy. Washington, D.C. -California Coalition for Rural Housing. 2003."Inclusionary Housing in California: 30 Years of Innovation." Publication. California Coalition for Rural Housing and Non-Profit Housing Association of Northern California.