Sustainable, inclusive housing growth: A case study on Columbus, Ohio

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Over the past two decades, the Columbus region has enjoyed outsize population and economic growth compared with leading peer cities and the US average.1 Yet growth has come at a cost—specifically by outpacing the region’s supply of available housing. Home and rental prices have soared as stock has been depleted, making homeownership—and sometimes even having a roof over one’s head—increasingly out of reach for many people, particularly those from historically marginalized communities.

In just this past decade, the increase in housing prices and rents has dramatically outpaced household income. Additionally, the region’s population of people experiencing homelessness (PEH) has grown faster than those of its US peers in recent years. The region’s challenges have a disproportionate impact on historically marginalized populations (such as Black and Hispanic residents), who have a dramatically lower likelihood of being a homeowner and a much higher likelihood of experiencing homelessness. Amid ongoing rapid growth, the need for affordable housing and support services for PEH will only continue to increase unless significant action is taken.2

Columbus is a microcosm of the United States’ housing insecurity plight. While many major cities are receiving national press coverage for this issue, housing insecurity is a humanitarian challenge facing communities of all sizes across the country. The National Association for Home Builders estimates that about 70 percent of US households cannot afford a new home at the national median price.3 In 2022, US home vacancy rates were at their lowest levels since 1987,4 and the country is estimated to have a shortage of 6.5 million housing units.5 Renters are also facing increased pressure nationally: 23 percent spend at least half of their income on housing costs,6 rendering them “severely rent burdened” as defined by the US Department of Housing and Urban Development (HUD).7

As in many regions in the United States, the primary contributors to the housing shortage in Columbus are embedded within deeply vexing economic and social issues, including stagnating incomes, racial gaps in homeownership, and access to financing and services.

As Columbus charts a growth strategy for the decades ahead, addressing housing and homelessness will be an essential component in realizing the goal of prosperity for all. Today, Columbus is projected to have a shortage of as much as 110,000 housing units by 2032.8 Without an increase in the supply of housing, Columbus may struggle to continue on a growth trajectory. Specifically, we have identified four priority interventions designed to work in concert to increase housing stock, keep rents affordable, and help more people, including historically marginalized populations, access the housing market:

  1. Tap into existing housing capacity potential. Public–private collaboration on policies can identify land available for housing either as underused property or as part of broader rezoning efforts to increase the supply of homes, which is a requirement for sustained economic growth.
  2. Reduce the cost of new construction. Promising cost-reduction opportunities include simplifying the permit process and engaging builders with expertise in cost-effective construction methods.
  3. Support homebuyers and renters. Local government and policy makers can expand resources and consider policies that support public- and private-sector initiatives to improve homeownership rates, assist with rental affordability, and reduce the risk of homelessness.
  4. Prioritize tackling homelessness. Alleviating homelessness requires increasing awareness of currently available resources for PEH and expanding relief funds to assist residents with affordable housing, healthcare support, training for employment, and other resources critical to reducing homelessness.

Many local leaders are well aware of the challenges that can result from booming growth. The policy-neutral research presented in this article is intended to complement the work already under way by leaders in the city of Columbus and surrounding areas to inform decision making about the housing shortage, affordable housing, and homelessness.9 In the process, we believe the Columbus region’s approach to housing could both build on and inform the economic development strategies of other regions across the country—with successes offering a potential blueprint for progress.

The fastest-growing region in the Midwest

From 2000 to 2021, the Columbus Region’s population increased by a third, adding more than 500,000 people and becoming the fastest-growing metropolitan statistical area (MSA) in the Midwest.10 In September 2022, Columbus was named the fifth-hottest housing market in the United States, driven by the speed of home sales and demand.11

This growth was precipitated by, and continues to benefit from, the region’s mounting economic strength: from 2008 through 2021, Columbus outpaced national GDP growth by almost ten percentage points.12 Growth has also been bolstered by more-recent major commercial investments from a range of industries, including semiconductors, financial services, and biopharmaceuticals.13

Growing pains: Coping with rapid growth

The population influx has measurably strained Columbus’s residential real estate and rental markets, particularly for people of color. Increasing housing supply is a critical enabler for the region’s continued growth trajectory.

Increasing housing supply is a critical enabler for the region’s continued growth trajectory.

Rapidly rising home prices. Although the region remains relatively affordable compared with leading peers, home prices have skyrocketed in relation to incomes. Data from Zillow reveal that roughly a decade ago, the growth of median household incomes in Columbus and the value of the city’s “lower tier” housing stock began to diverge (Exhibit 1). In the ten years since then, lower-tier housing prices within the city’s boundaries increased at 1.9 times the growth of median household income—an unsustainable divergence.14 A cavalry in the form of new-housing construction may be slow to arrive: from 2004 to 2022, annual construction of new single-family homes in Columbus fell by 34 percent, and it has yet to return to pre-2004 levels.15 In fact, for every 100 net new jobs in the region, only 65 new housing permits were issued.16

Columbus’s median household income is not keeping pace with the cost of even lower-priced homes.

Rent increases outpacing wage increases. Renters in Columbus have also seen a price surge.

Rent prices in Columbus increased by about 35 percent between December 2016 and December 2021, exceeding median household income growth in that period by 11 percentage points (Exhibit 2). As a result, by 2021, approximately 40 percent of renters in Columbus were spending more than 30 percent of their income on rent, meeting HUD’s definition of “rent burdened.”17 And renters account for a significant percentage of residents: as of 2021, nearly 40 percent of total households in the metro area were rentals, which is comparable to other fast-growing US regions such as Austin (around 41 percent) and Miami (about 40 percent) but much higher than similar sized regions such as Pittsburgh (around 29 percent) and Indianapolis (about 32 percent).18

Rental costs in Columbus have grown faster than the median household income since 2016.

More people experiencing homelessness.

Columbus outpaced its US peers in the growth of its PEH population from 2008 through 2022 (Exhibit 3), and early reports indicate homelessness was up 22 percent in January 2023 compared with January 2022.19 McKinsey research on homelessness in the Bay Area indicates that homelessness is a result of a range of disparate triggers, including economic issues (such as job loss, raised rent, or foreclosure), health factors (such as substance abuse or mental illness), and social factors (for example, incarceration or domestic violence).20The ongoing crisis of homelessness in the Bay Area: What’s working, what’s not,” McKinsey, March 23, 2023. A brief but significant drop in the number of PEH in Columbus in 2021 is likely attributable to additional support during the pandemic (for example, eviction moratoriums and stimulus payments). Still, as of 2022, Columbus had the fastest-growing PEH population among its peers.

Columbus outpaced its US peers in the growth of its PEH population from 2008 through 2022, and early reports indicate homelessness was up 22 percent in January 2023 compared with January 2022.

From 2008 to 2022, Columbus experienced the largest rise in homelessness among comparable cities.

Disproportionate effect on historically marginalized communities. The racial disparities that plague many leading US regions are also starkly apparent in Columbus. Some historically marginalized groups are less likely to be homeowners: one-third of the region’s Black households own their homes, compared with more than two-thirds of White households (Exhibit 4). Black household incomes in the region are also about 42 percent lower than those of White households.21

Columbus homeownership rates fell short of Midwest averages in 2021, and members of historically marginalized groups are least likely to be homeowners.

In addition, Black residents account for 16 percent of Columbus’s general population but 60 percent of the homeless population.22 And even when people in these communities have housing, Black households are almost five times more likely to be overcrowded (more than one occupant per room) than White households.23 These disparate experiences in different communities are reflected in other metrics of financial and housing stability, including income and the ability to pass on generational wealth.24

These disproportionate effects have wide-ranging impact, including on overall economic growth. PolicyLink and the USC Equity Research Institute estimate that the racial gap in Columbus is costing the region’s economy $10 billion annually.25

Four interventions to address Columbus’s housing challenges

Housing is a critical enabler for economic growth—and Columbus’s housing challenges are no secret. Local leaders, organizations, and partnerships have long worked to improve housing security directly. Advocates and organizations have all published research on housing and homelessness, including the Mid-Ohio Regional Planning Commission, the Coalition on Housing and Homelessness in Ohio, the Affordable Housing Trust for Columbus & Franklin County, the Center for Social Innovation, and the Community Shelter Board of Columbus.26 Yet the latest estimates show that the region could need as many as 110,000 housing units beyond the current run rate by 2032 to cover expected job growth. This would require more than doubling the construction rate, from around 8,300 units per year to as many as 19,300 per year.27

After reviewing the available research, examining the actions taken by other local governments, and drawing on our experience in the real estate and public sectors, we have identified four key interventions that can augment existing efforts to address Columbus’s housing challenge: tap into existing housing capacity potential, reduce the cost of new construction, support homebuyers and renters, and prioritize tackling homelessness.

Tap into existing housing capacity potential

Zoning regulates how land is used, where residential or commercial buildings may be constructed, and the density of new developments, making it a key lever in changing a city’s residential landscape. The city of Columbus spans 220 square miles of central Ohio, and it has 50 more square miles of single-family zoning than multifamily zoning.28 Increasing density and creating housing “hot spots” are both potential options for Columbus to address current housing supply challenges.

Increased housing density. Zoning has a direct impact on housing density. In Washington, DC, for example, areas zoned for detached single-family units typically consist of up to 1,200 units per square mile,29 compared with up to 40,000 units per square mile in large multifamily buildings. But zoning in most US cities largely restricts higher-density homes. Three-quarters of the land in US cities is barred from development for anything other than detached single-family homes—and where multifamily buildings are allowed, height and lot size requirements hurt the economic calculus for development.30 Specific zoning adjustments could contribute directly to closing the housing gap, not just in the city limits but also in the surrounding suburbs. For example, a recent analysis by the Columbus Dispatch found that zoning contributed to the lack of affordable housing options in Upper Arlington, New Albany, and suburbs in Delaware County.31 High-density zoning can be a meaningful part of a community’s housing ecosystem to enable future growth.

‘Housing hot spots’ created by reusing and rezoning underused property. To help alleviate the shortage of homes in the near term, municipalities can also identify potentially high-impact housing areas by reviewing the zoning of properties that meet criteria for vacant or underutilized land, homes with room for more units, and more. This approach has been used elsewhere to great effect. An analysis of three counties in California found room for more than five million new units,32Closing California’s housing gap,” McKinsey Global Institute, October 24, 2016. and separate efforts are under way in New York City and Los Angeles to rezone underused commercial zones for residential or mixed use—making more space available for housing construction without needing to expand a city’s footprint.33

Reduce the cost of new construction

A priority for the Columbus region will be reducing the cost of new construction to accelerate the pace of development. Programs that accelerate construction, reduce permit fees, or otherwise defray development costs are common levers to help reduce the cost of affordable housing. Several approaches can be prioritized to address the challenges facing Columbus and other US regions.

Innovative, cost-saving construction techniques and builders. As in many areas of the United States, inflation drove up the cost of building materials, labor, and financing in Columbus by as much as 18 percent between 2021 and 2022.34 Innovative, low-cost approaches such as modular and prefabricated construction can help; in our experience, when applied at large scale, these techniques can reduce the cost of construction materials by up to 20 percent and decrease build time by 20 to 50 percent without sacrificing build quality.35Modular construction: From projects to products, McKinsey, June 18, 2019. This is especially true with projects featuring repeatable elements, such as schools and affordable housing.

Columbus, specifically, can establish itself as a center of excellence for modular and prefabricated construction by leveraging the region’s transportation network (such as railroads and highways) to efficiently transport modular units into the region. The region can further attract builders that use these construction techniques by offering tax incentives, investing in land and modular units at scale, reskilling the labor force, and streamlining the approval process to help drive affordable housing growth. These and other approaches could improve the economics for these kinds of construction projects almost immediately once implemented. For example, Portland, Oregon, made changes to its design review process to allow mixed-use and multifamily projects to go directly to the permit process, saving developers time and money by decreasing their financing costs. Local governments in the Columbus region can further improve the economics of housing development by producing and holding off-the-shelf design schematics that can easily be used by prospective housing-unit developers.

Reduced development costs. Identifying parcels of public land for housing development could defray the overall cost of new projects in addition to rezoning efforts. Some cities, including Copenhagen, London, New York City, and Stockholm, have established professional management of their publicly owned land, allowing them to identify suitable city-owned sites for affordable developments.36Affordable housing in Los Angeles: Delivering more—and doing it faster”, McKinsey Global Institute, November 21, 2019.

Accelerating the construction permit process could help reduce lengthy permit timelines that both create delays and increase developers’ costs. Under Columbus’s permit approval system, new-construction permits can take six to nine months. In fast-growing metro areas elsewhere in the United States, permits can take as little as a few weeks—a disparity that the City of Columbus is reviewing as part of its longer-term affordable-housing initiatives.37 The Affordable Housing Trust in Columbus has launched the Emerging Developers Accelerator Program to provide education and funding for minority developers.38 Yet the holding costs due to the lengthy time horizon between initial plans and selling the first house keep many potential developers out of the business.

Reduced development finance costs and fees. Financing costs and government taxes tend to be a heavy burden on housing developers. Legal agreements and public financing tools, such as joint powers authorities (JPAs) and tax increment financing (TIF) programs, provide incentives for public and private partners to collaborate in the development of affordable housing. In instances where traditional incentives and subsidies are unable to produce the desired outcomes, JPAs enable the city, partnered with a developer, to issue bonds and use its property tax exemption to purchase a property or finance the creation of a new development process. As part of the acquisition process, the JPA agrees to restrict the rent of a set number of units in line with affordable-housing standards. This approach is unlike traditional affordable-housing projects in that long-term ownership rests with the city, with an option to purchase the property back from the JPA after a set period.

JPAs are eligible for significant tax exemptions on their properties, with the added benefit that these savings are passed on to renters. Bond financing can also be tax-exempt given that governmental bodies have the authority to issue tax-exempt bonds for facilities that provide a public benefit.39 In California, the Burbank-Glendale-Pasadena Regional Housing Trust is leveraging these benefits to address barriers to building nearly 3,000 affordable-housing units in the region.40 The JPA will be allowed to request and receive private and state funding allocations, as well as authorize and issue bonds, to help finance affordable-housing projects.

As another option, TIF districts enable cities to freeze property tax revenue at current levels and use incremental tax revenue generated from a development to reimburse the developer’s costs over time. In 2018, for example, the City of Chicago approved TIF measures for The 78, a $7 billion mixed-use project to transform a former railroad property into 13 million square feet of residential, commercial, and institutional construction with a 20 percent commitment for affordable-housing units. According to plans, this TIF district will reimburse around $551 million in future increments for the construction of new infrastructure related to this project, including a new subway station, street improvements and extensions, and riverfront renovations.41

Support homebuyers and renters

In conjunction with initiatives that improve the supply of affordable housing, Columbus can explore approaches that improve an individual’s ability to pay for housing. The region can take these approaches in tandem to reduce the risk that demand will outpace supply and drive up prices on housing, making it even more unaffordable.

Homebuyer assistance from the public sector. Increasing investment in housing programs could help broaden the range of homes applicants can consider purchasing. For example, the City of Columbus’s Housing Division currently offers homebuyer assistance under its American Dream Downpayment Initiative (ADDI), which provides eligible first-time homebuyers with a loan of up to 6 percent of the purchase price (or up to $7,500) to put toward their down payment.42 This loan is forgiven after five years if the resident meets certain requirements, including maintaining residency and not selling the property.

In Cleveland, Cuyahoga County’s Down Payment Assistance Program covers up to 10 percent of a home’s purchase price (or up to $16,600).43 This higher amount is especially significant given that the median sale price for a home in Columbus was $250,000 in December 2022, compared with $175,000 in Cuyahoga County and $115,000 in Cleveland itself.44 The down payment program available in Cleveland provides greater assistance in real dollars in an area where those dollars can go further than in Columbus. Beyond affordable housing, assistance in the form of microloans and flexible funding programs have been shown to enable this transition.45

Increasing the amount of assistance available could help broaden the options available to prospective homebuyers who could benefit from programs such as these, especially for historically marginalized communities that tend to have much lower rates of homeownership.

Rental assistance from the public sector. Some 54,000 households in the Columbus region are spending more than half their monthly incomes on rent, making rental assistance a cornerstone of the effort to improve housing affordability in the region.46 Today, the State of Ohio and Franklin County have a number of rental assistance programs, including specific funds to help families, seniors, and veterans.47 Alternative programs, including flexible funding that allows for short-term, flexible financial assistance, could help stabilize individuals’ housing needs.48

Additionally, HUD subsidizes rent for low-income families.49 For fiscal year 2023, Columbus is allocated to receive approximately $12.7 million dollars in HUD funding for housing programs—approximately 16 percent more than Austin and 35 percent more than Denver50—but the need for housing support exceeds the availability of funding. Columbus and Franklin County have also received more than $120 million combined due to the reallocation of unused federal COVID-19 relief funds to fight evictions, a majority of which is expected to go toward rent and utility assistance for low-income residents.51

In addition, the Columbus City Council has made it illegal to deny a lease based on the source of a potential tenant’s rental payment—an effort to prevent landlords from denying leases to tenants using Section 8 subsidies.52 The Columbus Metropolitan Housing Department has even offered cash incentives to landlords, and nonprofits have offered home upgrades in attempts to persuade more landlords to accept vouchers.53 However, while these vouchers can effectively keep people housed, wait times to obtain them can be as long as 12 months. And about 30 percent of vouchers have expired over the past three years because participants could not find landlords in time.54 Streamlining the process from application to placement in subsidized housing could increase the impact of housing choice vouchers.

Housing assistance from the private sector. Private-sector employers in Columbus and across the United States play a crucial role in helping employees maintain stable housing by providing appropriate compensation. However, simply paying employees a living wage may not be enough to ensure stable housing in the face of unexpected expenses or other financial difficulties. A recent Harvard Business Review article suggests that any investment in housing assistance can both attract new workers (a growing challenge for companies across the United States, with ten million unfilled jobs55) and increase the productivity of existing workers (for example, by creating a shorter commute or reducing stresses related to housing affordability).56 Other housing-security interventions—such as housing search and placement services, access to shower facilities, or even temporary hotel rooms—can support employees more quickly than local social services and also reduce employee turnover. Some corporate programs can provide immediate relief to recipients, while others can provide long-term benefits to at-risk individuals over the course of several years (see sidebar, “Potential interventions from the private sector”).

Any investment in housing assistance can both attract new workers and increase the productivity of existing workers.

Employers also can collaborate to provide a broader set of resources to employees. In Cleveland, for example, the Greater Living Circle offers financial assistance for home purchase, rent, and renovation projects for employees of nonprofit institutions in the Greater University Circle area, including in low-income neighborhoods. Such collaboration is also the goal of the Columbus Regional Housing Coalition, a task force focused on convening leaders across the region to address the region’s housing and homelessness challenges.

Prioritize tackling homelessness

Homelessness across the region served by the Columbus and Franklin County, Ohio Continuum of Care has increased by 33 percent in the past decade57; in January 2023, more than 2,300 people in the region were experiencing homelessness.58

Improving awareness of available resources and expanding access to essential resources—such as healthcare, transitional housing, and training programs—can help alleviate challenges for PEH and reduce the homelessness rate across the region.

Improve awareness of existing resources. A recurring problem in approaches to homelessness is a lack of public awareness of resources available to PEH. This is especially a concern among people who have recently lost their source of housing, including young people (aged 18–24). Partnering with other organizations to increase awareness of and augment available resources can equip individuals with the means to self-resolve or seek help earlier. Even initiatives that partner with existing organizations can provide immediate relief. For example, in December 2022, the City of Columbus partnered with Columbus Coalition for the Homeless to launch an interactive map showing the locations of warming centers and homeless shelters to help individuals find places to keep warm in the winter months.

Expand essential resources to alleviate homelessness. Expanding access to essential resources will be necessary to combat the increase in homelessness. Health resources make it much more likely that PEH will remain housed after securing a more permanent living situation. For PEH who have health issues such as substance abuse or severe mental health disorders, long-term health-focused housing should be considered. Efforts that expand housing with easily available healthcare resources could provide both immediate and gradually increasing support in reducing chronic homelessness. These resources can be combined with existing techniques for ensuring PEH have the resources they need to secure permanent housing. Other innovative solutions such as alternatives to traditional security deposits and credit scores can support PEH who may not have enough savings for a security deposit or the credit history to be approved for a loan.

One emerging strategy is providing training to PEH by placing them in some form of transitional housing and helping them find employment so that they can remain housed. Portland, Oregon, and other cities have also amended zoning to allow for more homeless shelters and more flexible group living, while increasing access to resources PEH may need.59 In Columbus, the Community Shelter Board (CSB) serves thousands of people through programs to prevent and respond to homelessness, including partnering with landlords to create additional housing capacity for PEH and with the Homelessness Prevention Network to coordinate social services in the community for PEH.60

As Columbus’s population continues to grow, stressors that come from growth need to be understood and mitigated head-on through innovative approaches. Through a focus on housing development, the region’s public, private, and civic leaders are seeking to improve housing security while supporting economic development. By setting clear goals to increase the overall housing supply, reduce the cost of new construction, provide support to improve housing affordability, and assist those who are currently experiencing homelessness,61 Columbus could make significant strides toward sustainable and inclusive growth, set an example for other regions, and ensure that all who wish to reside here can find a place of their own to call home.

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