Tag Archives: affordability

A country of hyperdense cities

“How to build good cities,” from Vishaan Chakrabarti’s ‘A Country of Cities.’

Well, that was fast.

Based on the heft of my gift, I expected to take more time to read through Vishaan Chakrabarti’s A Country of Cities. The book, however, is wonderfully illustrated and laid out, thanks to Chakrabarti’s firm, SHoP (for a sampling of the illustrations and an essay adapted from the book, see Chakrabarti’s piece in Design Observer). All those illustrations make a hefty book into a rather quick read.

Chakrabarti paints a wonderful picture of the virtues of dense, urban places. Hyperdensity isn’t so hyper anything, merely the kind of density sufficient to support subway transit. While his vision of and advocacy for dense cities is persuasive, Chakrabarti’s specific policy recommendations are not new: massive investments in urban-focused infrastructure (subways, transit, high speed rail) as well as a more broadly defined “infrastructure of opportunity” of schools and parks. This would be financed by eliminating subsidies for oil, utilizing revenue from cap and trade of carbon emissions, and eliminating the mortgage interest deduction. He proposes to allow the market to provide additional housing and density that can support expensive transit infrastructure via the implementation of “cap and trade zoning.”

After reading the book, however, the original criticism remains: feasibility. I find Chakrabarti’s call for density persuasive, but I wouldn’t shape the message with terms like ‘hyperdensity.’ His ideas on reforming the zoning process are interesting, yet the basic mechanisms for reform are difficult to execute. DC is closing in on year seven of a zoning regulations review – and the proposed revisions focus mostly on structural changes and do not take on the task of upzoning. In the meantime, the unintended consequences of existing planning and zoning procedure are adding up.

Any conversations about re-shaping the city (and removing certain legal constraints such as DC’s federal law against tall buildings) aren’t focused on the benefits of hyperdensity, but on the required procedural changes and need to amend DC’s comprehensive plan for future upzoning to take effect. At the same time, WMATA is pushing a concept for additional subway capacity at the core of the system. Their efforts are constrained by regulations that link land use plans to transportation investments, thus Metro can only plan new subway lines in the limited areas already designated for what Chakrabarti would call hyperdensity.

Linking land use intensity and transportation investment is a good idea, but codifying the concept into regulations opens the door for unintended consequences. The chicken can’t happen without the egg, the transit agency can’t plan subways without supportive land use, the planners need infrastructure before they can add density. The idea of connecting transit to land use isn’t the problem. The challenge is in implementing the concept, adjusting the regulations, and amending the procedures that shape how we build cities.

More federal funding for infrastructure isn’t a novel idea, either – but the prospect for action from Congress seems unlikely at best. Similarly, phasing out the mortgage interest deduction isn’t a new idea, either – but it seems to hold sacred status on Capitol Hill.

This isn’t to discount Chakrabarti’s ideas. His argument for urbanism is persuasive, the broad brushstrokes of his policy agenda are fine. However, the procedural, legal, and political changes required to implement the agenda are missing. Consider the comparison of affordable housing and rental apartments in suburban New Jersey to suburban Long Island: it’s hardly an embrace of hyperdensity, nor is it an unvarnished success, but the limited improvements in adding density and fighting against exclusionairy zoning in New Jersey are the product of legal battles, not a comprehensive plan or master design. The same argument can apply to city building in general, where the future may lie in selling people on the need for more permissive rules/regulations and letting cities evolve, rather than simply selling them on the benefits of hyperdensity.

The real question, however, is if we’d ever see such legal and regulatory battles without this kind of manifesto to rally around.

(note: the book has been added to the reading list)

Challenges to affordable housing in growing cities and regions

Suburban Apartments and Estates – Now Renting. CC image from moominsean.

Call it gentrification, call it renewal, call it anything you like. Intense demand for city living is putting tremendous pressure on urban housing markets. Meeting that demand with new development reshapes the physical fabric of the city, but preserving the physical status quo in the face of that demand leads to rising prices in the existing housing stock.

David Byrne issued an ultimatum to New York: if gentrification from the 1% stifles the city’s creativity, he’s “out of here.” At the same time, Ed Glaeser remarks that New York should celebrate it’s ability to attract the rich – this kind of agglomeration of skills and talent is what makes cities special places. It’s not the fact that the rich are coming back to the city that’s problematic, but that the city isn’t still able to provide opportunities at all price points. David Madden notes that gentrification’s current pace is not trickling down to the middle and lower classes.

All the demand for urban living presents the ‘good problem to have.’ But good problems still represent problems.

Gabriel Metcalf, executive director of San Francisco based non-profit SPUR, stepped into the fray with an essay for Atlantic Cities on the failure to relieve the demand-side pressure and the resulting consequences: his friends keep moving to Oakland because they can no longer afford San Francisco:

A great quality of life and a lot of high-paying professional jobs meant that a lot of people wanted to live here. And they still do.

But the city did not allow its housing supply to keep up with demand. San Francisco was down-zoned (that is, the density of housing or permitted expansion of construction was reduced) to protect the “character” that people loved…

Whatever the merits of this strategy might be in terms of preserving the historic fabric of the city, it very clearly accelerated the rise in housing prices. As more people move to the Bay Area, the demand for housing continues to increase far faster than supply.

Metcalf expanded on the idea in an interview with SFGate.com:

Now, should there be places for middle-income folks to live? Absolutely. But it can’t be done with the existing housing stock. Smart new places will have to be built.

That includes high-density buildings, micro-units and new construction. It also means getting a grip on the incredibly complex and restricting planning process that stalls every development. The whoa-on-growth movement began in the early ’70s, and there’s a direct corelation between that and higher prices.

“Up until the mid-’70s,” Metcalf says, “our housing prices tracked right at the national average.”

Over the past 20 years, Metcalf says San Francisco has produced an average of 1,500 new housing units a year. Compare that with Seattle, which is averaging 3,000 units a year with a smaller population. And even that wouldn’t be enough.

Increasing density and allowing the market to meet the demand for new space is part of the solution. In a high-demand place like San Francisco, it’s probably best characterized as a necessary-but-not-sufficient condition. Part of the challenge is that center cities can liberalize their zoning regulations a great deal and still not seem to make much headway in affordability. The regional nature of housing markets, spanning across multiple jurisdictions with multiple regulatory structures, makes it difficult for any one jurisdiction alone to make a dent in the supply.

Consider the case of Long Island: a September New York Times article on Long Island’s lack of available apartments looks to a recent report from the Regional Plan Association to underscore the challenge:

According to a new report from the Regional Plan Association, an urban research and policy group, 55 percent of all 20- to 34-year-olds on Long Island still live with their parents, which is up 11 percent in a decade and appears to be one of the highest rates in the country.

But while some may actively choose to sleep in full view of their teenage posters and trophies, most are there because there are few other places they can go.

The article closes with an anecdote that illustrates the assymetry of demand in the housing market and the regional impacts it can have:

Peter Ottaviano, 24, who graduated from college two years ago, has been living at his parents’ home in Cold Spring Harbor and working for a public relations firm in Great Neck. He looked at some Long Island apartments, but said he wasn’t impressed by the offerings. He signed a lease this month on a two-bedroom in Bedford-Stuyvesant, Brooklyn, where he and a friend will live for about $2,000 a month, and reverse-commute.

For Mr. Ottaviano, it came down to a paradox: young people aren’t likely to put down roots on Long Island until there are more young people on Long Island. “I want to be where my friends are, where there’s a lot going on, in the middle of everything,” he said. “That’s why I’m moving to New York.”

Long Island – home to the kind of mass produced suburban housing that provided the market-rate affordability for American cities in their suburban booms is now facing the same kinds of challenges that older places encounter.

As the 24-year-old Ottaviano’s housing decision shows, part of the question is if the suburbs can develop the kind of quality places that will attract a broader demographic, rather than just a release valve for housing demand. Outside of DC, Montogmery County is explicity looking to attract younger residents – and while reform of the county’s liquor laws alone won’t likely do it (or help the County chase the nebulous “hip” demographics), it can’t hurt.

But still need to build the additional density. Proposals for efficiency apartments in Fairfax County face strong opposition (including an elected official insinuating that affordable housing will bring gang violence and sexual predators); a transit-oriented, mixed-use apartment project was recommended for rejection by staff due to (among other things) having too little parking (a still-generous 161 spaces for 141 units) for the County’s taste – despite sitting a stone’s throw away from the Huntington station.

At the same time, we have substantial evidence of the benefits that affordable suburban apartments can bring. David Kirp in the New York Times celebrates the ten year anniversary of suburban New Jersey apartments built under the Mount Laurel doctrine:

“I wish other places could learn from our example,” says Mr. McCaffrey, the former mayor, but that hasn’t happened. Affordable housing is still too rare in suburbia, as zoning laws continue to segregate poor and working-class families. Despite the track record in Mount Laurel and the promise it holds for neighborhoods around the country, it’s hard to imagine that the suburban drawbridge will be lowered anytime soon.

Link dump – all things ‘affordable housing’

DC Construction that comes up on a Flickr search for Inclusionary Zoning – CC image from Adam Fagen.

I’ve got far too many tabs sitting open in my browser, awaiting some form of linkage in the blog (the dates of publication might show how long they’ve been sitting). But, I want to put some of these out there rather than hog my browser’s memory.

I’ve attempted to cluster them together topically – a whole host on affordable housing policies and market-rate development.

“Winning upzoning in the bay” – from PriceRoads.com. The paralysis of urban development is part of a procedural tragedy of the commons, a side-effect of the decision-making architecture that we’ve adopted over time.

I now believe that California is not especially resistant to change, but rather that we’re seeing the tragedy of the commons that results when unified housing market is divided into dozens of cities. In short: when each city constitutes a tiny fraction of the habitable part of the metro area, no city can individually change housing prices much by allowing more development, but it can control the crowding within its borders.

So, what’s a potential solution to this impasse? Just buy people off.

Maybe the best dollar-for-dollar policy initiative of our time was Race to the Top. For $5 billion, the Obama administration bribed hundreds of thousands of charter-school students into existence. Race to the Top gave a lot of firepower to charter school proponents, allowing them to accuse teachers of turning down money for students…reversing the normal debate in which charter schools are accused of sapping money from traditional public schools.

The best way to deregulate cities would be to bribe key constituencies in a way that gives easy fodder for debate. I propose the following: California should triple the solar tax credit for seniors in communities that substantially ease zoning regulations. Any deregulation policy has to neutralize the most ardent opponents of development: seniors and environmentalists. This one would not funnel money through bureaucrats and would show up in anyone’s pocketbook as soon as they asked for the solar panels.

“NIMBYism will lead to economic stagnation” – an Op-Ed in the SF Examiner

Instead of fostering policies that discourage job formation, real estate development and economic growth, policymakers should be encouraging greater densities, and greater heights for new housing, especially along BART and Muni lines. If we are to get more people to live and work in San Francisco, then we must reject NIMBYism as a selfish luxury we cannot afford. The City badly needs an expanding tax base to fund financial promises it has made to public employees and to pay for its essential municipal services. New developments add mightily to the public’s well-being through contributions to The City’s funds for affordable housing, parks, transportation and the like. All of this comes from economic growth and a sensible balance between what we are now and what we need to be moving forward.

“Report finds a city incentive is not producing enough affordable housing” – New York Times

The report… found that the optional program known as inclusionary zoning had generated about 2,700 permanently affordable units since 2005, or less than 2 percent of all apartments developed in the city during the same period.

Under the program, the city allows developers of market-rate housing to build more units than would normally be allowed when neighborhoods are rezoned for new development, as long as they make 20 percent of the new homes affordable.

But Bill de Blasio, the city’s public advocate, argues in his housing platform for “converting incentives to hard-and-fast rules,” saying that 50,000 additional affordable units could be built over 10 years with a mandatory program.

Mandatory IZ might not be the fix New York is looking for. DC has it, yet we’re still looking elsewhere for inspiration.

“In New York, the rent doesn’t have to be ‘too damn high’ “ – Reihan Salam in Reuters

A century later, neighborhoods like the one I grew up in seem frozen in amber. The faces are different, to be sure, and so are the languages spoken by the locals. Crime has gone down and property values have gone up, and New York City is as desirable as it’s ever been. Yet we’ve had nothing like the building boom of the 1910s and 1920s that transformed the face of the city. Millions of low- and middle-income New Yorkers thus find themselves squeezed by skyrocketing rents, and hundreds of thousands of others who want to make their home in New York can’t afford to do so.

…

The first and most obvious thing to do is to broaden area in which housing can be built. For example, Schleicher and Roderick Hills Jr. of New York University Law School observe that cities like New York use “non-cumulative zoning” to dedicate desirable locations to low-value industrial uses. They propose allowing developers to replace empty warehouses, barely-used shipping facilities, and heavily subsidized factories with housing. Historical preservation districts severely restrict new housing development in many of New York City’s most desirable residential neighborhoods, which has contributed to rising housing prices. Though hardly anyone proposes getting rid of historical preservation districts entirely, the Harvard economist Edward Glaeser has made a strong case for limiting their growth.

Is NYC “Landmarking Away” Its Future? – ArchDaily

A recent study by the Real Estate Board of New York (REBNY) concluded that by preserving 27.7% of buildings in Manhattan, “the city is landmarking away its economic future.” REBNY is challenging the Landmarks Preservation Commission, arguing it has too much power when it comes to planning decisions, and that by making business so difficult for developers it is stifling the growth of the city.

…

Preservation, on the other hand, limits new supply and also creates a ‘cultural commodity’ of preserved buildings, both of which would increase the cost of living. How is it, then, that Francis Morrone cites new development as part of the problem, rather than the solution to rising costs?

Quite simply, the members of REBNY are building the wrong type of development: where developers do get the opportunity to build without restriction, they are too often building luxury apartments that are only an option for the super-rich. This may be good for their short-term profit margins, but it is bad for the long-term vitality of the city, as those who are not astoundingly wealthy are forced to leave – and the city becomes less diverse and less productive as a result.

Both sides overplay their hand a bit here. Landmarking alone isn’t what constrains New York real estate development (nor is it the case in other cities), and other constraints are also what push market-clearing prices so high (hence why all new apartments seem to be luxury ones). Affordability over time also involves filtering – yesterday’s luxury apartments have filtered down to more affordable price points. If you don’t build enough housing, you’ll see those older buildings filter up.

“In Defense Of The ‘Poor Door’: Why It’s Fine For A Luxury Condo Developer To Keep Its Low-Income Units Separate” – from Josh Barro at Business Insider, where he goes through a thought experiment about applying the same logic of IZ to that of SNAP benefits.

We require and incent developers who build market-rate housing to also sell or rent some units in the same developments at cut-rate prices. The idea is that affordable housing shouldn’t just be affordable and livable; it should be substantially similar in location and character to new luxury housing. If rich people are getting brand new apartments overlooking the Hudson River, so should some lucky winners of affordable housing lotteries.

Hence the outrage over the “poor door” at a planned luxury condo project that Extell will build on Manhattan’s Upper West Side: market-rate buyers will use one entrance, while tenants in the project’s affordable housing component will use another. Affordable apartments will also be on low floors and, unlike many of the market-rate units, they won’t face the Hudson River.

Getting mad about the “poor door” is absurd. The only real outrage is that Extell had to build affordable units at all.

New York’s housing advocates are right about one very important thing: upzonings are a windfall for landowners and the city should be asking for something in exchange for allowing more development. But what it should be asking for isn’t luxury apartments with river views to give out by lottery. It should be asking for cash.

Now, the reason for IZ isn’t solely about affordable housing, but about preserving and providing for mixed-income communities and for permanently affordable housing. All worthy goals, but the can come with a great deal of procedural headaches.

Crowdfunding and cooperatives – more thoughts on Fundrise and alternative models for urban development and finance

CC image from harrypope

Following up on the previous post on the limits and potential benefits of Fundrise:

First, from Payton Chung, an excellent breakdown of the limits and potential benefits of the crowdfunding platform. Payton identifies three general benefits to a Fundrise-like system: ‘slower’ and cheaper money; participation and trust of the investors; and as an opening for even better investment vehicles.

The idea of ‘slower’ money refers to the more patient investment from Class C shareholders who cannot realistically expect a quick flip or immediate return. Such patient capital is particularly useful when navigating projects that do not follow the path of least regulatory resistance – as Payton notes, slower money “eases longer-term thinking about the investment.”

Participation and trust speak to the idea of channeling broad-but-shallow support for development from a mostly silent pool of the community (potentially representing a silent majority). Payton notes that some local control helps gain support, but that support is not limitless. I would liken it to the disparate treatment of chain stores and restaurants compared to locally owned ones. The local retailers might gain more support than a chain, but that support is far from universal or far from guaranteed.

Transitioning to better investment vehicles requires more than just what Fundrise is offering – not just for development, but for long–term ownership and stewardship. Payton cites co-ops as an example:

Fundrise is certainly a great idea, but the lack of community control limits its ability to establish trust in the community development enterprise. Yet it’s an important part of a broader conversation that’s just beginning around using crowdfunding innovations to improve communities. We can try many other tools — some new, some tried-and-true — to give communities greater control and input over their character and future. Cooperative businesses, like the one I founded, are growing all across America, and they play a key role in affordably housing thousands of Washingtonians (including myself).

Second, the idea of an increasing role for cooperatives is linked to the second article: an update on the status of DC’s mandatory inclusionary zoning statute from Aaron Wiener at the City Paper.

The code requires the provision of subsidized housing units for all developments above a certain size. However, in for-sale properties, the requirement to preserve long-term affordability in the units requires some sort of deed restriction to prevent the later sale of a unit at market rates. This both limits the long-term appreciation of the property, but also makes traditional mortgage-based finance difficult. Such a program for preserving long-term affordability might be at odds with the traditional model of housing finance and home ownership. Wiener writes:

The central difficulty in selling the units has been that lenders were unwilling to provide loans for IZ units because those units would remain affordable in the event of foreclosure, limiting the bank’s ability to recoup its money. But recently, the rules changed to allow the units to return to market prices.

Purchasers of affordable units have issues with the system, as well. Cooperative ownership (both market-rate and limited equity) might present a better way to manage permanently affordable units.

Development costs and housing affordability

Vancouver towers along False Creek. Photo by author.

Two competing narratives often emerge when talking about policy responses to housing costs. One asserts that lowering the costs of construction and development will allow those savings to be passed on to eventual users of the real estate; the other asserts that markets set prices, and lowering the cost of development would yield pure profit to developers who will charge what the market will bear. So, which is it? The Vancouver Sun has a series of articles on housing affordability in Vancouver, BC. One of these articles focuses on development impact fees(among other causes) and their role in affordability. The two basic narratives are on display:

“The significant cost premiums of building new homes in Vancouver, compared to Surrey, leads to two observable results,” said Anne McMullin, president and CEO of the Urban Development Institute. “Either the increased costs will inevitably be passed on to homebuyers or the viability of building new market housing will be suppressed. Regardless, the end game is a more unaffordable and less socially sustainable city.”

She says the most obvious way to address affordability is to look at the costs and supply of housing.

“Costs affect supply — if it’s too expensive to build, you’re going to limit the supply. But we still have the demand. There’s always going to be a demand — there are buyers who can afford it.”

But Brian Jackson, the City of Vancouver’s general manager of planning, says market demand drives the price of housing much more than the costs of development.

“If we took $1,000 off the cost of the CACs or we took $1,000 off the cost of the DCLs,” Jackson said, referring to two types of city development fees, “is the developer going to take $1,000 off the cost of selling the house? I don’t think they would – they’re going to get the highest price that they could.”

These two narratives aren’t necessarily at odds with one another. In the short run, a small decrease in development fees (thereby lowering the cost of development) wouldn’t likely lower costs. However, the total fee amounts per unit in Vancouver are substantial – on the order of $76,000 per unit, according to the Sun’s figures. That’s roughly equivalent to the cost of an underground parking space. If you were to remove the fees, would developers merely pocket the difference as extra profit? Recall research on the liberalization of parking space requirements in Los Angeles: removal of these requirements lowered the cost of development in Downtown LA, but the results were not merely additional profit for developers. Instead, the lower development costs allowed developers the flexibility to build for a wider variety of sub-markets and price points.

Instead of the high-cost regulations forcing them to build Cadillacs, lower costs allow them to build a wider variety of products to meet a wider range of price points. If the costs are too high, developers have little choice but to aim for the luxury submarkets.

Markets do indeed set prices; and in the short term, developers won’t necessarily lower their prices. However, the markets are deeper and more complex in the longer run and allowing flexibility to build to those submarkets will produce a wider range of products, not just catering to the luxury set. As that housing ages, it can filter to lower-priced submarkets. Filtering isn’t a set policy so much as it is a description of how housing markets work.

Note that some of these Vancouver fees might only apply to units in re-zoned developments. However, that raises the question of if there is enough by-right development capacity not just within a city or political jurisdiction, but in areas with demand for market-rate development. Also note that in many places, by-right development is increasingly rare, subject to negotiation and incentives as a part of the approvals process. A profile of New York’s Amanda Burden in last year’s New York Times noted that “there really doesn’t seem to be any true as-of-right development anymore.”

Those development fees aren’t just collected for fun, however. They’re paying for something. However, as is the case with parking, is collecting these fees the best way to accomplish the goals? Over at Human Transit, Jarrett Walker notes some of the perverse incentives baked into development fees, and the unintended consequences therein. Jarrett cites this post from the Pembina Institute, looking at the often-perverse incentives packaged into these fees:

Developers continue to build in sprawling greenfields because it is often cheaper and easier than building developments in walkable, transit-oriented neighbourhoods. Lack of supply means homebuyers are priced out of these locations and are literally “driven” to the urban and suburban fringes, where long and stressful auto commutes are required — and this only leads to more congestion.

Building transit is only one half of the solution. Toronto also needs to make sure we get the right mix of development in the right places to support and use transit infrastructure. Perhaps this current process of examining revenue tools will create an opportunity to do so.

As noted previously, a great deal of development will follow the path of least resistance. These kinds of fees might provide an easy way to fund new infrastructure, but they also add to the overall cost of development. Other tools for capturing that value and channeling it to the needed projects might offer fewer unintended consequences. One such unintended consequence is to push development into outlying areas, or force development to only serve the luxury submarket.

Middle class in Manhattan?

Manhattan. CC image from sakeeb.

Breaking news! Last week, the New York Times reported that it is expensive to live in Manhattan. The Times frames the question through the lens of the middle class, asking what the definition means in the context of they city’s densest borough.

In a city like New York, where everything is superlative, who exactly is middle class? What kind of salary are we talking about? Where does a middle-class person live? And could the relentless rise in real estate prices push the middle class to extinction?

There’s lots of discussion in the article about incomes in New York, as well as the high cost of living – particularly for housing. The article notes that the New York, urban context makes the traditional symbols of the American Dream (e.g. home ownership) less applicable, and most of the text is spent searching for some other indicator of middle-class-ness. Matt Yglesias notes that such a search for a single metric isn’t always useful. Likewise, it’s not as if this is a new topic in New York, or even for the Times.

There’s lots of discussion about housing costs and the demand for living in a place like Manhattan, but not a single word about housing supply. I understand the author is looking to explore the perception of what constitutes the middle class, but a word about the supply of housing is warranted. Even a short mention of the constraints to supply would be a worthwhile addition to these kinds of articles.

David Schleicher’s twitter response asked that same question, and provided a link to Glaeser, Gyourko, and Saks’ work on regulatory constraints to housing supply in New York. From the paper’s abstract:

Home building is a highly competitive industry with almost no natural barriers to entry, yet prices in Manhattan currently appear to be more than twice their supply costs. We argue that land use restrictions are the natural explanation of this gap. We also present evidence consistent with our hypothesis that regulation is constraining the supply of housing so that increased demand leads to much higher prices, not many more units, in a number of other high price housing markets across the country.

As noted, Manhattan certainly isn’t the only place with these kinds of constraints. Another recent article focuses on San Francisco, this one from tech writer Farhad Manjoo. Manjoo makes the case that San Francisco needs to grow in the face of tremendous demand for urban living. More importantly, he argues that opponents to growth, those who fear how growth might change the things they love about San Francisco, need to get over themselves.

Don’t look good fortune in the mouth. Yes, growth will bring some problems. But they’re not nearly as bad as the problems you’ll find in decline (ask Detroit). Instead of complaining or blocking growth, San Francisco’s old-guard would do better to propose ways to ease the city’s transition into its digital future. This doesn’t mean opposing newcomers. It means recognizing a new reality, that San Francisco needs to become much larger and more accommodating place than it is. And it means adopting polices that will make that reality a pretty good one.

In particular, for San Francisco, adopting that reality means one thing above all: It needs to build more buildings.

As an example of the fear of change, Manjoo links to this article by David Talbot, blaming the influx of tech workers to the city for forcing things to change – forcing the city to battle for its own soul.

One point that Talbot ignores is that obstructing the physical change in the city (e.g. blocking development) will not save the idealized city he loves. In fact, it might even accelerate the process of gentrification. Some level of change is inevitable. Fighting any kind of change to the physical environment might even accelerate changes to the city’s socioeconomic environment.

While the overall thrust of Manjoo’s policiy is correct, it’s not hard to see why many fear for the loss of San Francisco’s soul. Manjoo laments that the city has not built more densely, and implies that old Victorian houses are the culprit: “this city is defined by, and reveres, its famous Victorian houses” he writes. “Those houses are very pretty. They’re also very inefficient. Collectively, they take up a lot of space, but don’t house very many people.”

The truth is that San Francisco could add a great deal of new housing supply without touching those houses that are worthy of preservation. Consider this thought experiment from Keep Houston Houston for transit improvements and upzoning in the Sunset District:

All of this in one neighborhood, and without straying from the basic SF vernacular architecture of low/mid-rise, wood-framed buildings. Apply this same rubric to the rest of the city, allow towers in a few places, you could easily accommodate 200,000 more people.

Likewise, Stephen Smith makes the case for dramatic upzoning in large parts of Brooklyn, but not on the borough’s brownstone blocks:

In some neighborhoods, this sort of conservative zoning makes sense. The tree-lined blocks of Brooklyn Heights and Park Slope, for example, thick with brownstones and pre-war apartment houses, are urban treasures worth preserving.

But northern Brooklyn is not brownstone Brooklyn.

We’ve seen the same thing in DC (and seen the impacts of zoning). And we’ve also seen anecdotes of what adding new supply can do to downmarket properties, thanks to the process of filtering.

Each of these strategies at least hold the promise of keeping the market rate housing prices within reach for the middle class. Obviously, the dynamics of these markets are quite complex, and the nature of neighborhood change is not well-understood (not in a way we can forecast, anyway) and the housing market for a given metro area is larger than any one jurisdiction, but the macro signs are quite clear. Given the constraints to supply in the Zoned Zone, removing these regulatory constraints on the market’s ability to add supply seems like an obvious prerequisite to a change in policy.

To Charles Marohn’s concerns about density, and those that fear for San Francisco’s soul: will this new development ensure a quality place? No, probably not. But allowing this kind of growth is a necessary-but-not-sufficient condition.

Parking tradeoffs – on-street and off-street

Requiring developers to build off-street parking is expensive. That’s the key takeaway from a City of Portland study on the impacts of parking requirements on housing affordability. (This study was linked to in a previous post) To illustrate the point, the city looks at a hypothetical development and considers a number of different scenarios for providing parking to the building. The results show the trade-offs involved. The method of providing parking not only adds to the cost, but also limits the ability of a building to fully utilize a site.

For example, providing parking via an off-street surface lot is rather cheap to build, but has a high opportunity cost – that land used for parking cannot also be used for housing. The study keeps the land area and the zoning envelope constant: that is, the off-street parking must be provided on-site, and you can’t get a variance for extra building height. The trade-offs for this hypothetical development, then, are between cost (and the rent you’d have to charge to get a return on your investment) and in utilization of the site.

Assumed cost per parking spaces are as follows:

Surface $3,000
Podium/Structured (above ground) $20,000
Underground $55,000
Internal (Tuck Under or Sandwich) $20,000
Mechanical $45,000

Apply those options to a hypothetical development site, and you can see the trade-offs emerge. In every case, requiring parking means fewer units can be developed, and each of those units is more expensive to provide.

Requiring parking makes all of the apartments more expensive, but for different reasons. The surface parking is cheap, but the real reason the rent is high is due to the opportunity cost – the surface parking option only allows for the development of 30 units instead of a hypothetical max of 50.

Underground parking is also substantially more expensive in terms of rent, but also in terms of construction costs – the rent increase isn’t that much higher than the surface option (in spite of the $50k per space cost differential) due to the fact that underground parking allows for substantial utilization of the site. Even underground parking does not allow for full utilization, as the ramps to the garage take up space that could be used for housing in the no-parking scenario.

Requiring developers to add parking in all of these cases jacks up the rent they must charge to make these developments pencil out. The underground parking example is a 60-plus percent increase in the monthly rent – and it’s a dollar figure that probably ensures that a developer couldn’t just rent out unused parking spaces and break-even on the proposition. Instead, that cost gets passed through to the renter – both the cost of the space, as well as the opportunity cost of not building more housing.

The other thing to remember from this is that all of those options for how to park a building might not be allowed. Tuck-under parking might make sense (get a few spaces at a reasonable cost), but if the zoning code requires more than 0.25 spaces per unit (as it does in Downtown Brooklyn), that method would not be allowed by the zoning code. Podium parking is also reasonable, but that means you’re devoting the entire first floor to parking – meaning you can’t use it for housing units or retail or any of the other ground-floor uses that make for vibrant streetscapes.

Framing the issue. One other page on Portland’s website does a nice job of framing the issue of zoning code reform for on-site parking requirements. Instead of talk about reducing on-site parking requirements, we’re talking about places where parking is allowed, but not required. Soldiers on the automotive side of the “war on cars” (a phrase worthy of the scare quotes) will frequently frame this as removing parking. This kind of language is both more accurate about potential changes and less inflammatory in skirmishes of this “war.”

More on-street parking isn’t always a problem. One of the fears of these parking-free developments is that not all of those residents will be car-free. The Portland study shows this to be true – but it also shows that this isn’t really a problem. Even at the peak utilization of on-street spaces surrounding these new parking-free buildings, 25% of the spaces are still available (page 2 of this document), meaning that there shouldn’t be a problem for residents in finding an on-street space.

Even if on-street parking isn’t actually a problem yet in Portland (no matter how it is perceived), that can always change. When demand for that parking exceeds the supply, then you turn to parking management.

Managing on-street parking. If we’ve established that off-street parking requirements increase the cost of housing, and we know that not all residents of a parking-less building will also be car-less, then management of scarce on-street parking will be critical. The Portland Transport blog points to a proposal in Portland that has a nice structure.

The proposal would divide part of the city into essentially three kinds of areas:

Commercial areas: all on-street parking is metered. Anyone may park, but all must pay.
Residential areas: residents (with permits) are prioritized, non-residents can park for free, but must obey time limits (similar to DC”s current RPP framework).
Bordering areas: on streets adjacent to commercial areas, all spaces are metered but those with residential permits do not need to pay the meters.

Now, the devil is always in the details for things like permit zone sizes, cost of the permits, meter rates, etc. However, the basic structure does a nice job of shifting the emphasis on what kind of parking should be prioritized in certain areas.

Beyond management. One benefit of allowing more parking-free development would be to increase density in the area, thereby supporting more transit service and key destinations within walking distance. The more parking-free units there are, the easier it gets for residents to live car-free. Each of these represents a bit of the virtuous cycle.

The most affordable city in America!

Why didn’t anyone tell me that DC is the most affordable city in America?

Such was one of the headlines of a summary article about a new report from the Center for Housing Policy and the Center for Neighborhood Technology. The report’s title (Losing Ground: The Struggle Of Moderate-Income Households To Afford The Rising Costs Of Housing And Transportation) might not square with the idea of making places like DC and San Francisco the most affordable city in the nation. Indeed, the headlines popping up in my Google Reader window show the range of interpretation:

Now, granted, that middle Planetizen link wasn’t referring to this study, but to a GGW piece from the GMU Center for Regional Analysis. Still, the divergence among the headlines is interesting. CNT published studies in recent years aimed to demolish the idea of ‘drive ’til you qualify’, noting that the transportation costs embedded in those housing choices are large and do not favor autocentric suburbs. Since the gist of those studies were that the seemingly more expensive cities were actually more affordable, I guess the snap conclusion about affordability here makes sense.

But in reading the report itself, it’s clear that DC’s affordability is not the key finding here. The report’s title should be an indicator of that (again, the title is “Losing Ground”).

That said, the critique of the report stems from the practice of defining each area’s affordability in relative terms to the area’s median income. While this might make sense if looking at any one metro area in isolation (as in the previous studies on combined housing and transportation costs within metro areas), I’m not sure that it is the best way to compare different metro areas to one another. Matt Yglesias made this point:

By the same token, measuring affordability in H+T terms is a great idea, but presenting it in income share terms is misleading. In general, a person can increase his earnings power by leaving a poorer place for a richer one. […] But it turns out that for many Americans the productivity and wage gains involved in moving to a rich city end up being clawed back by a lack of affordable housing. So the tendency is only for the most educated people—the ones with the least objective need—to be able to take advantage of the migration possibilities. This is a huge social problem that contributes to stagnating living standards, and it’s totally obscured by saying that the DC area is affordable because it’s full of rich people.

In short: the fact that DC, SF, et al are ‘affordable’ because they are rich is not exactly a good thing. For one case, see Ryan Avent’s 2011 NYT piece (preivewing The Gated City) on the impact of high housing costs on GDP; for another, see Binyamin Appelbaum in the NYT Economix blog on the impact of high housing costs on income inequality, and therefore on the overall economy:

A recent paper by researchers at Harvard University argues that the prohibitive cost of living in the areas with the greatest economic opportunities has forced low-wage workers to migrate instead to areas with inferior opportunities.

…

And here’s the crucial point: It doesn’t have to be this way. High housing prices are the result of public policies that discourage new development. Those policies are generally embraced by the residents of wealthy areas, who benefit, at least in the short term, from restrictions on the supply of new housing. But this paper is one more reason to worry about the long-term economic consequences.

The three animated charts accompanying the Harvard paper are illustrative. Meanwhile, the broad policy implications for the region can be summarized in the concluding paragraph of the GGW piece from George Mason’s CRA (linked above):

Most local governments are not planning enough housing for their future workers, and may hinder new housing with regulations on new development. Meanwhile, builders need to recognize the need for more multi-family housing and smaller, more affordable owner and renter homes in the region.

Parking requirements and unintended consequences

Surface parking in Minneapolis. CC image from Zach K.

Writing in MinnPost, Marlys Harris asks why (seemingly) nothing is getting done in Minneapolis. She comes up with three broad reasons: a negative attitude towards new development, economic justifications that don’t pencil out for new projects, and the impact of zoning and land use regulations – often unintended impacts or perverse outcomes. While all three are certainly factors, the real interesting implication is the interplay between them: as an example, regulations that dictate long and uncertain processes, enabling those opposed to new development to organize in opposition, thereby adding time and cost to a building project to the point where it’s no longer feasible.

In the comments, Max Musicant offers an example of these chain reactions on the regulatory side:

[T]he zoning code is very often in conflict with how multi-story buildings are actually built – which also drives the almost constant demand for variances. If one wants to build a multi-story building, you are required to provide an elevator. If you need an elevator, you need to build 4-6 stories to spread out the cost. If you are building that high, you will likely be required to build parking on-site. If you have to build parking on-site in an urban location, it will have to be underground – which is very expensive. All of this can be avoided only if 1) you build one story suburban style or 2) your price points are affordable only to the wealthy.

The parking requirements are particularly onerous. Oregon Public Broadcasting took note of parking-less apartment building projects in Portland back in August. New buildings are going up without off-street parking, taking advantage of a change in the zoning code that allows exemptions from parking requirements under certain conditions. While the article’s narrative focuses on the kinds of people who would live without a car or without a designated parking space, this cultural focus is misplaced – as Max Musicant noted later in his comment, these kind of walk-up apartment buildings without off-street parking were commonly constructed in American cities in the not-so-distant past.

The real takeaway from the OPB piece isn’t about the behavior of the tenants, but of the impact on the bottom line of the builders:

One of those developers is Dave Mullens with the Urban Development Group. He opened the Irvington Garden in a close-in Northeast Portland neighborhood last year. It’s 50 units with no parking places.

“The cost of parking would make building this type of project on this location unaffordable,” Mullens says.

Mullens calls the difference “tremendous.”

“Parking a site is the difference between a $750 apartment and a $1,200 apartment. Or, the difference between apartments and condos,” he says.

In other words, these kinds of regulations have severe costs. Taking Mullens’s price figure at face value, it’s not hard to see how removing a requirement like this would help market rate development target demand at lower price points. Likewise, it’s not hard to see how seemingly narrowly-focused and well-intentioned regulations can have much broader consequences when layered with other constraints.

Of course, these points are all on the micro scale of an individual project, but the macro scale also matters. The regulations have to allow the market to increase supply in order to meet demand – otherwise bad things happen. In the Washington Business Journal, Montgomery and Fairfax counties in metropolitan DC are concerned about housing becoming unaffordable even for those with six figure incomes.

It’s not until the end that simply relaxing zoning requirements to a) increase supply, or b) lower the cost of development (see the parking requirement discussion) is mentioned. The article does not mention option c), all of the above. Since there would still be a need for deeply affordable dwelling units, relaxing or eliminating parking requirements would be a good place to start in striking the balance between good, well-intentioned, and effective regulations and an efficient marketplace for new development.

Constraints to affordability

'Truth' - CC image from Kellan

A few items on affordability and development:

Short term vs. long term: Matt Yglesias asks why we’re not building more multi-unit buildings in the face of tremendous demand, and the answer is (broadly speaking) financing:

Karl Smith, citing me, blames anti-density land use rules. Naturally I would like everyone to buy my book and it would certainly be convenient if my pet long-term issue were also the solution to our short-term problems. But I’m actually not sure it’s true. My reason for doubting it is that the construction undershooting doesn’t seem notably concentrated in the supply-constrained markets. What’s more, every time I speak to people who are involved in the development game, they assure me that the short-term constraint on big developments is financing. People have more or less shovel-ready infill projects and they need a loan. Some evidence for this is provided by the fact that there’ve been a curious volume of large 100% equity projects undertaken recently. What people say is that there’s too much liquidity risk to go into big things.

Financing is indeed a critical element. Many of those shovel-ready projects are good ones, but the bar is much higher now than it was. This represents a short-term constraint. Another factor is the considerable lag time involved in putting together complex development projects. That said, this doesn’t mean the long-term regulatory constraints aren’t a factor – particularly procedural ones.

Supplying affordability: Lydia DePillis takes a look at DCFPI’s most recent report, and asks why housing affordability advocates don’t do more to expand the supply of housing overall?

The DCFPI report makes mention of the fact that housing in Washington is constrained by our height limits. It doesn’t take that logic one step further to point out that there are lots of areas where D.C. limits its own capacity to build through low-density zoning.

It’s true, affordable housing people were the driving force behind inclusionary zoning, and smart growth advocates are getting to agitate more forcefully for the city to require developers who want public land to incorporate affordable housing into their proposals. But many developers avoid the public land process altogether, preferring not to deal with all the delays and frustrations. And affordable housing shouldn’t be all about setting prices artificially low—it’s also about letting builders build the amount of housing this city needs.

One option would be to look at the missing middle of density. Regardless, the overall supply needs to expand in the face of DC’s growing population and intense demand.

Demand and that other thing I can’t remember: Chuch Thies doesn’t seem to think there’s actually a housing price problem in DC:

The District of Columbia, for example, is a desirable place to live. Unlike in many parts of the country, there are job opportunities in our region. Many of the positions pay a good wage. A robust job market attracts new residents. In turn, the demand for housing increases. Prices go up.

Simple economics.

Perhaps a little too simple. Simple economics would also allow for an increase in supply in the face of such demand.

But taxpayers should not be asked to spend a dime on affordable housing for young, single residents without children. There are plenty of market rate solutions to their housing concerns. They come in the form of suburbs, group homes, roommates and sacrifices.

Or, you know, we could build more housing.

Affordable for whom? RU Seriousing Me is making more maps – this one focusing on affordability, noting that affordability is relative to one’s income:

I’ll echo Lydia DePillis‘ call to affordable housing advocates to pay attention to the effect that excessive land use regulations have on housing costs. Relaxing building height restrictions and eliminating barriers to the construction of housing is a good way to make housing more affordable across the board, even though chances are, the free market will never produce housing in DC that its many impoverished residents can afford, which is why DCFPI’s recommendations to increase subsidies for low-income housing production and homeownership are also valid.

Squeezing out the entry-level middle: The Post gets in on the action, too:

Many of the outer suburbs still have plenty of houses in the lower price ranges. But less-expensive homes are very hard to find closer to central D.C.: 68 percent of homes offered for less than $350,000 are located in the outer suburbs beyond Montgomery County, Arlington and Alexandria. In the District, Redfin counts only 862 listings for less than $350,000.

Don’t forget bad regulations that drive up costs: Such as those that demand the provision of parking on-site, like this development in Brooklyn. The cost aspect is bad enough, but the impact on urban design is truly awful.

City Block

a work in progress…