Tag Archives: housing

702,445 – DC’s population reaches heights not seen since 1975

In case you were wondering what the hex code color is for 702,445, here it is.

While the pace of DC’s population growth has slowed a bit in the last year, the city nonetheless officially surpassed a big milestone this week. According to the state-level estimates from the US Census Bureau, DC topped 700,000 residents for the first time since 1975.

Last year’s estimates meant the city was close to this mark; the city even celebrated the (estimated) birth of the 700,000th resident back in February 2018.

Milestones like this are a good time to step back and look at the broader context:

  • 700,000 is still 200,000 below DC’s all time peak population
  • The current level is more like 100,000 below DC’s sustained peak population level (absent war-time restrictions)
  • The pace of growth is impressive, but still slower than historic rates when DC had greenfield growth opportunities within the District limits
  • Population growth will continue due to the number of units already under construction, with approximately 15,600 units under construction right now.

On the other hand, it’s worth remembering how small DC remains. Brooklyn alone has a similar land area to the District (71 square miles to DC’s 61 square miles) housing nearly 4x as many people:

https://twitter.com/profschleich/status/1075504407431798786?s=21

Likewise, the new estimates put DC’s population density at approximately 11,500 per sq mile, still less than Chicago, Boston, Philadelphia, and any number of other cities.

Even DC’s peak population of 900,000 would only yield a population density of 14,750/sq mile – less than San Francisco, Cambridge, Jersey City, Somerville, and others.

In other words, there’s lots of room to grow.

The challenges of adding housing in single family neighborhoods

Too often, news articles on housing prices fall into easy traps and cliché, whether in discussing gentrification or city vs. suburb tropes. But Conor Daugherty’s piece in the New York Times (The Great American Single Family Home Problem) hits all the right notes.

In it, he tells the tale of a modest redevelopment proposal to redevelop a single family home into three units on the same lot. The political opposition is fierce, leading to years of delay and legal proceedings. And this is for a parcel already zoned for additional density; this particular saga doesn’t even touch on the challenges of rezoning an area currently occupied by single-family homes.

A couple of things stand out to me:

The missing middle: The author frames the cost trade offs well. Lots of cities allow downtown and highrise development, but this requires expensive construction techniques, and thus requires pricey rents to pencil out. Smaller-scale development (low-rise apartments, duplexes, townhomes, etc) can pencil at much lower prices – the thorny issue is the politics of building in existing single-family neighborhoods.

The problem is that smaller and generally more affordable quarters like duplexes and small apartment buildings, where young families get their start, are being built at a slower rate. Such projects hold vast potential to provide lots of housing — and reduce sprawl — by adding density to the rings of neighborhoods that sit close to job centers but remain dominated by larger lots and single-family homes.

Neighborhoods in which single-family homes make up 90 percent of the housing stock account for a little over half the land mass in both the Bay Area and Los Angeles metropolitan areas, according to Issi Romem, BuildZoom’s chief economist. There are similar or higher percentages in virtually every American city, making these neighborhoods an obvious place to tackle the affordable-housing problem.

“Single-family neighborhoods are where the opportunity is, but building there is taboo,” Mr. Romem said. As long as single-family-homeowners are loath to add more housing on their blocks, he said, the economic logic will always be undone by local politics.

Capital-A Affordable, vs. affordable: The three units proposed for the lot wouldn’t be cheap, but (crucially) they’d be cheaper than a re-habbed SFH on the same lot – and there’d be more of them.

They are estimated to sell for around $1 million. But this is an illustration of the economist’s argument that more housing will lower prices. The cost of a rehabilitated single-family home in the area — which is what many of the neighbors preferred to see on the lot — runs to $1.4 million or more.

The “economist’s argument” might be sound, but it’s a hard sell for the neighbors.

This kind of evolutionary redevelopment would’ve been completely natural and non controversial before the advent of zoning.

It’s always worth remembering how different the Bay Area’s housing market dynamics are. Daniel Kay Hertz notes that many of the same issues are in play in weaker regional markets, though the way things play out is quite different:

Aaron Renn doesn’t think much of the Bay Area’s strategy of generating affordability through redevelopment of single-family housing:

https://twitter.com/urbanophile/status/937159416847175680

First, it’s hard to say this is a cogent strategy; the vast majority of single family homes aren’t going to be rezoned anytime soon.

Second, Renn is correct, historically – at least since the advent of zoning. This was true for the Bay Area, too – suburban development offered a then-cheap and cost-effective way to add housing to the region’s supply. But that was decades ago (the NYT article includes maps showing the expansion of the suburbs over the recent decades), and the region has run out of room for new/expanded suburbs within a reasonable commuting distance.

Renn’s implied regional strategy isn’t going to work well in the Bay Area, either. Consider the recent articles on Bay Area super commuters. Relying on Stockton to be San Franscisco’s bedroom community has severe costs, after all.

Housing prices vs. land prices – Vancouver, BC

One chart to note in discussions of urban housing affordability, from Vancouver, BC.

vancouver housing prices

The chart is from The Globe and Mail, looking at the changes in housing prices by the type of unit in Greater Vancouver. While condo prices have increased substantially, that increase is nothing compared to the boom in single-family detached house values.

“It’s really the value of the land that is driving prices higher for detached properties and widening that gap,” said Darcy McLeod, president of the Real Estate Board of Greater Vancouver.

Emphasis is mine. This demonstrates a few things:

  • In high-demand areas, new dense construction can and does improve affordability by making more productive use of expensive land. As the adage goes, a skyscraper is a machine to make the land pay.
  • Defining affordability in big cities solely in terms of single family home prices is misleading. Focusing on those prices also might skew potential policy solutions, which could focus on making housing units more affordable instead of making scarce land more affordable.
  • Given the scarcity of land, it’s hard to imagine a set of policies (barring a regional economic decline) that would ever make single-family detached homes affordable. Most developable land would be a candidate for denser development.
  • Skyrocketing values for single-family detached homes in Vancouver’s core indicates they would be good candidates for more intense development; if such evolution were allowed by zoning.

Pop-ups – what counts as ‘reasonable?’

Beware the imperative that we have to do something.

Despite protestations from DC’s former planning director Harriet Tregoning, the preliminary vote count on the plan to limit rowhouse pop-ups in DC is poised to pass, 3-2 (note that two of the zoning commissioners tentatively in favor are the federal representatives to the commission; see this Washington City Paper profile of commissioner Peter May for more about the federal role in local decisions in DC).

Among the local media, the Washington Post editorial board came out against the proposed regulations. Other local papers, such as the Northwest Current, are in favor. The single biggest reason for supporting the proposed changes is that they seem ‘reasonable.’

IMAG2257

It’s not hard to see why many DC residents are eager for ‘reasonable’ restrictions on pop-ups. There are quite a few ugly ones out there; some include suspect construction. However, the proposed changes in the zoning code won’t outlaw ugly additions and the zoning code doesn’t regulate construction methods or enforce the building code.

Part of the challenge with ‘reasonable’ restrictions on new development is that many of the impacts aren’t intuitive. Consider the aesthetics of pop-ups: Just as zoning code parking requirements won’t solve on-street parking hassles (you must manage those parking hassles directly), a small reduction in the allowable height and shifting certain elements away from by-right construction towards requiring a special exception won’t address concerns about design. Implement these changes to DC’s zoning code and many will still complain about pop-up development.

Pop-ups need not be ugly. Nor are they a new phenomenon.

Part of the concern about overly restrictive regulations is that limiting small-scale development is a serious constraint on the market’s ability to provide housing that is affordable to a wide range of incomes (here’s a perfect place to shift the narrative away from the nebulous ‘affordable housing’ and instead focus on providing abundant housing instead).

Still, without that background knowledge, it’s not hard to think that these restrictions won’t harm the District’s progress towards abundant housing. Proponents of allowing more growth argue pop-ups provide an opportunity for families and individuals to live in desirable neighborhoods at a lower price point. Meanwhile, the Northwest Current editorial board isn’t convinced that allowing additional housing supply helps ease the supply crunch. Instead, they would wish housing prices would drop naturally:

IMAG2256

However, the flip side of the “we’d rather just see the existing houses priced more affordably” coin is essentially an argument to lower property values. I don’t think we’ll see such an editorial from the Northwest Current anytime soon. Why? Because I doubt neither the editorial board nor the paper’s readership would consider advocacy to lower property values to be ‘reasonable.’

So, what are options to regulate pop-ups? A few ideas, keeping in mind the differing perspectives and scales)

  • Recognize the value of by-right development and the path of least resistance. Similarly, the idea of negotiating every single building project on a case-by-case basis might also seem reasonable, beware the unintended consequences of this approach.
  • Consider a form-based approach. The Coalition for Smarter Growth suggested an approach that mandates a setback for true pop-ups (those that retain the existing facade) or some other design treatment to minimize the visual impact. The challenge for this approach would be in enforcement. The advantage is that the regulatory authorities can offer clear guidance for this form of ‘lite’ administrative design review. It also avoids the perils of full-scale design review; a process that doesn’t keep the desired outcomes on the path of least resistance.
  • Remember: one of the goals of DC’s pending zoning code re-write was to reduce the burden on the BZA’s case load. Simply adding more cases to the pool of potential special exceptions is a step in the opposite direction.
  • Build more rowhouses. Part of the rationale for regulating pop-ups is a desire not just to preserve the urban design of DC’s rowhouse neighborhoods, but also to preserve larger housing units for families. If this is indeed a goal for the city’s housing strategy (and consistent with the desires for abundant housing), then the goal shouldn’t just be about preserving rowhouses, but encouraging the construction of more of them in existing single-family detached areas. This is also consistent with the city’s goals for accessory dwelling units as a part of the zoning re-write.
  • Build more multi-family housing. Work to relieve development pressure from the other end by allowing the construction of more small-scale apartment and condo buildings. DC has many of these grandfathered into existing R-4 (rowhouse) zones. While the Comprehensive Plan does prioritize the preservation of rowhouse areas, the existing zoning clearly allows multi-unit buildings. While much of the commentary focuses on micro effects and ugly additions, lurking beneath the surface is a clear bias against additional dwelling units. This backlash mirrors other DC planning debates about accessory dwelling units and growth in general.
  • Develop a market-based housing plan for the city as a whole. Collect and distribute data on the overall housing market to better inform decisions on demand as well as new supply.
  • Shift the narrative around housing discussions away from ‘affordable housing’ and towards ‘abundant housing.’ Hopefully this shift can help avoid the counterfactual trap of new supply that is still expensive, yet cheaper than it would’ve been. Consider this: if car manufacturers could only build a limited number of cars, they would likely focus on higher-margin luxury models. The same is true of housing; yet this doesn’t disprove the impact of supply.  Just because new condos in popped-up buildings aren’t always cheap, that doesn’t mean the impact on the overall market isn’t real.

Any other ideas?

Seeing the forest for the trees, and vice versa

CC image from Vincent Ferron

CC image from Vincent Ferron

As the saying goes, sometimes you can’t see the forest for the trees. You can’t focus too hard on the details of each individual tree and still get the bigger picture – all of those trees form a larger ecosystem – a forest.

The expression (almost always used negatively) only speaks to one’s perspective, however. No matter that perspective, there is a forest comprised of many individual trees. The phrase is targeted at a person’s perspective, but it does speak to the differences in both scale and perspective about any given issue.

Let’s Go LA used this formulation to discuss the division between two broad schools of thought on urban housing, particularly in constrained markets with rising housing prices: those that focus on supply restrictions and those that focus on community integrity and preventing displacement.

The difference in tactics between these two groups often leaves them at odds with each other. However, these schools of thought are two sides of the same coin, with similar goals but approaching the problem from opposite ends. Call the land use liberalization advocates the “macro” view, focusing on overall regional housing supply, and the anti-displacement advocates the “micro” view, focusing on the stories of individuals affected by rapid neighborhood change.

The challenge in crafting policy is that both schools of thought have a claim to the truth. Crafting policy for a city isn’t a choice between the forest or the trees, as there isn’t a difference between the two approaches.

This isn’t the only dichotomy you’ll find in a city. I’ve written previously about the tensions that rise out of the different views of real estate in cities – it is both a financial investment and a component of a city’s urban design. Tensions between these schools of thought can be exacerbated by policies that conflate the two – is the mortgage interest deduction a policy focused on housing or on real estate investment?

  • Trees v. forest
  • Micro v. macro
  • Neighborhood v. region
  • Building v. neighborhood

DC’s debate about pop-up development similarly pits two competing views about the same city against one another: is the city an urban design forest being altered by the trees of the individual property rights of owners? Are those pop-ups representing a healthy regional housing market responding to demand, a forest ecosystem regenerating itself; or a metastastizing growth that threatens ‘neighborhood character?‘

Both are lenses we can use to look at the city. The challenge is finding a policy that can thread the needle without ignoring the bigger picture goals that can be more abstract: not the forest or trees, but a desire for a healthy environment (as an example). Let’s Go LA makes the case that finding that common ground and realizing that the trees make the forest while the forest comprised of the trees is critical in moving forward:

See the forest for the trees, or see the trees for the forest.

The key is to realize that we all share a common goal – a city that is affordable and accessible to all those who want it. When land use liberalization advocates and anti-displacement advocates argue with each other, we let the truly responsible parties – wealthy neighborhoods that stifle any and all development – off the hook.

Too often, the conversation turns into a debate about which perspective is ‘right.’ The reality is that both (all?) perspectives have value. The debate can obscure areas of agreement; it can also foster a misunderstanding of how cities evolve. The only constant is change.

Decreasing opportunities for incremental development in American neighborhoods

Several months ago, Charlie Gardner had an excellent, thought-provoking post asking why have American cities seen the demise of the duplex? In a time when growing cities are bursting at the seams and facing severe affordability challenges, an incremental kind of development might be welcome in many cities, offering new housing while allowing an evolutionary pace of change to a neighborhood’s physical fabric, instead of the abrupt transition of large-scale redevelopment. So why don’t we see more of it?

Consider international comparisons of small-scale incremental development: Charlie Gardner compares the built form on both sides of the US-Mexico border, noting how on the Mexican side houses grow incrementally over time, often adding new uses along the street. The net result is a slow transformation of the entire neighborhood, evolving towards denser development patterns. Gardner speculates on reasons for the difference with standard American development patterns (including finance and regulation), noting that the small-scale development open the door to homeownership at a much lower price threshold.

Conversely, there are examples of American neighborhoods adding units on a relatively small scale. Let’s Go LA has been tweeting highlights from Wallace Frances Smith’s “The Low-Rise Speculative Apartment,” published in 1964. The book documents the replacement of single-family homes with low-rise speculative apartments (often in the form of dingbats), concluding that this small-scale, relatively low-cost form of construction plays an important role in adding housing supply to the market. Without requiring challenging lot consolidation or more-expensive construction methods, this kind of incremental, small-scale development allowed neighborhoods of single-family homes to evolve into denser places – even without large incomes in the neighborhoods to afford expensive new construction.

Despite the small scale of each individual building, the net result was a substantial increase in housing production overall.

So, why don’t we see more of this today? While various New Urbanists might not like the specific dingbat product, the idea of small-scale urban density is still appealing. The so-called ‘missing middle’ forms, such as townhouses, flats, and small apartment buildings are all lauded as contextually-friendly ways to add housing and increase density in already developed areas. So, why are these housing types missing?

As Let’s Go LA points out, much of this kind of development has been regulated out of existence. In LA, large portions of the city have been downzoned; the newer zoning no longer allows for by-right development of dingbats and other small-scale apartment buildings. In aggregate, the result is a huge decrease in the potential development allowed in LA.

Much of that LA zoning potential would’ve been in the hands of small-scale landowners rather than large real estate development firms. One consequence of removing that development potential is to erode the ‘franchise’ for incremental development. Let’s Go LA notes that “by zoning small developments out of existence, we’ve made land development a much less democratic process, in the sense that far fewer individuals in the community are able to participate economically.” Instead, 20% of LA’s recent growth has been absorbed in the relatively small confines of downtown. While this is good for downtown (thanks to regulatory changes such as LA’s adaptive re-use ordinance and relaxation of off-street parking requirements – discussed previously here), limiting growth to such a small area of the city has consequences: “when growth is restricted across so much of the rest of the city, there will still be pressure on regional housing prices, and gentrification will continue.”

The phenomenon isn’t limited to LA or to dingbats. Stephen Smith, writing at New York YIMBY, looks at the demise of small-scale development (buildings smaller than five units) in New York: “Put simply: New York City’s small builders have been nearly eradicated. The segment of the market that normally produces about half the city’s new building stock has all but vanished.”

New York City building permits, by number of units. Chart from New York YIMBY, data from the US Census Bureau.

New York City building permits, by number of units. Chart from New York YIMBY, data from the US Census Bureau.

Smith considers several hypotheses for this decline in small-scale development, including the end of some tax abatement programs and weak markets in some parts of the city. Smith also hypothesizes that New York’s recent ‘contextual rezonings’ removed development potential from areas ripe for small-scale development:

The result is that many neighborhoods that were once full of redevelopment opportunities are now closed off to anything but the smallest of one- or two-family projects on vacant lots. This sort of redevelopment was largely banned after the implementation of the 1961 zoning code, but throughout her tenure Amanda Burden closed off the last few areas where it was still allowed.

DC is seeing similar conversations. Demand for additional housing often leads to ‘pop-up’ development, often in the form of vertical additions to existing rowhouses. The term even gets used as a catch-all for any kind of smaller scale infill development. Many existing residents are concerned about the changes (though others are supportive).

Responding to political pressure and resident requests, the Office of Planning proposed their own version of a contextual rezoning.However, during a hearing on the measure, one of the zoning commissioners expressed deep concern about the overall impact of reducing this development potential in a city with a growing population and decreasing housing affordability. Greater Greater Washington’s summary of the exchange captures the concern: “I just don’t think we have a comprehensive housing policy in this city and I’m worried about all the unintended consequences of [this proposal].”

While Charlie Gardner contrasted American urbanism to Mexico, there are other options as well. This paper from Sonia Hirt looks at German land use regulations. German zoning is guided by federal standards, localities have some flexibility within those standards but cannot add restrictions to the basic zoning classifications. One end result is that there is no such thing as a residential zone devoted solely to single-family homes. Likewise, even residential zones must accommodate commerce to meet the “daily needs” of the neighborhood.

In outlining potential routes for zoning reform in the United States building off of lessons learned from Germany, Hirt suggests that instead of relatively small areas of mixed-use zoning, planners could focus on a wider area of limited flexibility for residential development – something that might not look that different from the small, speculative apartment developments of the 50s and 60s; or of duplex development.

Challenges to affordable housing in growing cities and regions

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

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.

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.

Housing demand and the regulatory path of least resistance: Seattle and microapartments

Seattle Space Needle. Photo by author.

The feature piece in The Stranger last month delved deeply into Seattle’s trend of micro-apartments. Dominic Holden offers an in-depth look at not just the development trends, but the politics of the policy and planning conversation around development in an expanding city.

A few things popped out:

Room for rent: The article describes Seattle’s micro-apartments like this:

But inside each town house, the developer was building up to eight tiny units (about 150 to 250 square feet each, roughly the size of a carport) to be rented out separately. The tenants would each have a private bathroom and kitchenette, with a sink and microwave, but they would share one full kitchen for every eight residents. The rent would be cheap—starting at $500 a month, including all utilities and Wi-Fi—making this essentially affordable housing in the heart of the city.

If that sounds familiar, it should – it’s a situation similar to what already happens in big cities – renting a room in a group house. For a fraction of cost of a studio or 1-bedroom apartment, you can instead rent a room in a shared house. Considering that comparison, there is clearly a market for these kinds of spaces, and it’s not exactly new.

It ain’t much, but it’s home: While the rise of micro apartments is in the news in Seattle, it’s not a new thing for cities. Single-room occupancy (SRO) apartments have a long history in cities. The Blues Brothers highlighted this housing typology in their 1980 homage to the city of Chicago (“how often does the train go by?” – “so often you won’t even notice it.”).

Chicago’s WBEZ documented the dwindling numbers of SROs in the city, noting how this particular form of affordable housing has served a different market of individuals than the kinds of tenants mentioned in Seattle:

The Chateau is among the city’s shrinking pool of single-room occupancy hotels (map below), which offer an important housing option for people with low- and fixed-incomes. SROs also serve clients with troubled credit or criminal histories. The North Side has long been an SRO hub, but in recent years many such buildings have been purchased by developers and closed, only to reopen as more expensive housing — often beyond the means of prior tenants. Some SRO residents and community organizers worry the Chateau Hotel might be the next building in this trend.

The key difference is in the level of maintenance, and thus the target market. Nonetheless, it’s not hard to see how micro-apartments like likes in Chicago or the new construction in Seattle would appeal to a number of potential markets. None other than The Stranger’s own Dan Savage makes note that he lived in an SRO when first moving to Seattle, and “I wasn’t sketchy then, I’m not sketchy now.”

As a part of re-evaluating the SRO’s sketchy reputation, Next City focused on the role this type of housing can have in the future of our cities.

Meeting housing demand: As Holden notes, a dynamic and expanding city like Seattle needs room to grow, and needs opportunities for a wide range of incomes. He also makes note of the only sure-fire way American cities have to meet growing demand post-WWII – sprawl. “Accommodating our growing population by shipping workers into the low-density sprawl of the exurbs is not the way a city should operate.”

This isn’t unique to Seattle. Other cities (including New York and DC) are struggling to meet the demand for housing, and are considering micro apartments as one potential solution.

The politics of neighborhood opposition: Holden’s Stranger article offers a fascinating dive into the politics of those opposed to these projects. Holden examines the stated objections to these projects (which include everything but the kitchen sink – or, in the case of complaints about shared kitchens, why not bring it up?) and finds most opponents to be “dramatically exaggerating”  the impacts. “Tick through the neighborhood groups’ complaints,” he writes, “and they don’t add up to a logical argument.”

The two issues in opposition that Holden deems to have legs deal with a tax break loophole for these developments and an exemption from the city’s normal design review process (more on this later). The principal objection is that the apartments count as many units for the purposes of a tax break, but few units to avoid the threshold for additional design review scrutiny.

Holden’s article goes into substantial detail about his interactions with some of the individuals and groups in opposition, highlighting a kind of fanaticism. Even without the crazy elements, the strength of the opposition and relative lack of proponents involved in the discussion shows the kind of game theory challenge for urban development regulations – opposition is strong, but only in a narrow segment of the population; support is broad, but few individuals feel the need to organize in favor of developments like micro apartments. The existing legal procedures favor the organized, and therefore give organized groups leverage in discussions.

The limits of design review: While a procedural loophole exempts micro-apartments in Seattle from design review (and Holden flags this as a legitimate complaint from opponents), there are limits to what such reviews can accomplish. Holden notes that such reviews in Seattle are largely administrative. He also ferrets out the intentions of those pushing for design review: “What public reviews will do is give activists a chance to obstruct microhousing by quibbling with the appearance.”

Holden understands the importance of process, and the cost it can impose on any new development. Since developers must (at a minimum) cover their costs to even entertain a proposed project, any increase in procedural time and costs means those costs must eventually be baked into the cost of the final product.

If the city pursues design and environmental reviews—which could improve the aesthetics and aren’t inherently flawed processes—they should be administrative reviews. They should be conducted by city staff who notify the public but limit input to letters in writing. They shouldn’t involve neighborhood meetings that are easily sidetracked, shouldn’t require multiple revisions to the architecture, and shouldn’t allow appeals.

If the public is allowed to obstruct these projects—and their arguments thus far have been specious—the results will be predictable: Every time developers must redesign the buildings to satisfy the neighbors, every time the project is delayed for further review, every time a spurious appeal is filed, the more it costs to build that project. And that has one predictable outcome: It will make them more expensive to rent, i.e., fewer people will be able to afford them. In other words, whether deliberate or not, the effect of neighborhood advocacy and its input on development projects will make living in these places more expensive and push out workers with less money. That would seem like a terrible mistake—unless pushing out poor people is the actual goal.

Development following the path of least resistance: Given the increasing costs of compliance with the regulations and procedures, it’s not hard to understand why so much real estate development seeks to follow the path of least resistance.

Leaving aside the question of whether micro-apartments are a worthy policy for cities to pursue (as opposed to other expansions of zoning allowances), it does show the catch-22 inherent in things like design review: the additional regulatory review is required because the outcome those reviews shape is a desirable policy goal – but the very cost of the review makes achieving those desired outcomes less likely.

The ideal would be a case where the desired outcome is prioritized, given the path of least resistance. Holden’s discussion of keeping reviews administrative and not subject to lengthy public hearings and appeals is an example. I suspect that (with the exception of some special cases), changing the outcomes from the path of least resistance cannot be accomplished through de-regulation alone.

However, the larger question looms in the background: what agreement is there about the most desired outcomes?

 

Prescriptive urbanism vs. market urbanism – the tension between demand for more housing and the desire to curate great cities

San Francisco skyline w/ crane. CC image from Omar Omar

Tales from two cities:

San Francisco: From Ilan Greenberg in The New Republic – San Francisco’s Gentrification Problem isn’t Gentrification. Greenberg compares the public debate (often writen, and discussed previously here) in San Francisco compared to more the more familiar narrative in other cities.

Here, the debate is dominated by fierce new champions of the anti-gentrification cause who aren’t concerned so much about the truly poor being forced from—or tempted out of—their neighborhoods. In their view, the victims of gentrification are also affluent, just less so than the people moving in. And the consequences are supposedly catastrophic not only to these relatively well-off people who are living amidst people even more well-off, but a mortal threat to nothing less than the rebel soul of San Francisco.

While the conversation may not fall into the same narrative as other cities, that doesn’t make it more useful. Greenberg notes that the San Francisco conversation can “suck the air out of a reality-based conversation” about affordability.

Greenberg spoke with Peter Cohen, a San Francisco housing advocate:

Sitting in the worn lobby of a hotel patrolled by security guards near Twitter’s new corporate headquarters, and armed with documents showing statistics on skyrocketing rents and rising tenant evictions, Cohen came to talk about disenfranchised people struggling to keep financially afloat and about the legal intricacies of deed-restricted affordable housing. He said he expects to have an uphill climb to reach new residents obsessed with buzzy restaurants and city officials in thrall to new tech business interests, but now also struggles to be heard over the din of middle-class residents moaning about the “gentrification” of their neighborhoods—residents who themselves may have been gentrifiers, or more likely followed in gentrifiers’ footsteps.

Greenberg writes of this narrative as if it were inevitable: “The compact city has a long history of clubby NIMBYism and knee-jerk preservationist politics that torpedoes even the most sensible development projects.” In addition to the outright opposition, fees and a long approvals process increases barriers to new housing supply in the city.

Some opposition to new development is that it makes the city dull. This isn’t the first time such arugments have come up. Inga Saffron, also writing in The New Republic made the same case that gentrifcation brings monotony. Writing specifically of San Francisco, Charles Hubert decries the “homogenization” of the city.

Part of the challenge is that rebuffing that monotony probably requires more development to meet the demand, not less. It’s a somewhat counter-intuitive proposition. Another challenge is the notion that cities do not (or should not) change, when history says otherwise.

Brooklyn: San Francisco’s experience is not to say that fears of monotonous development aren’t somewhat warranted. Unleashing the market alone won’t solve all urban ills. The Wall Street Journal looks at the results of one of New York City’s rezonings, ten years later, with some detrimental effects on 4th Avenue in Brooklyn:

But the Planning Department lacked such foresight in 2003 when it rezoned the noisy avenue to take advantage of the demand for apartments spilling over Park Slope to the east and Boerum Hill and Gowanus to the west. Focused primarily on residential development, it didn’t require developers to incorporate ground-level commercial businesses into their plans, and allowed them to cut sidewalks along Fourth Avenue for entrances to ground-level garages.

Developers got the message. With the re-zoning coinciding with the real-estate boom, they put up more than a dozen apartment towers, many of them cheap looking and with no retail at the street level, effectively killing off the avenue’s vibrancy for blocks at a time.

The city finally got wise and passed another zoning change last year, correcting some of these mistakes.

The shortcomings on 4th Avenue show the tension between market urbanism and proscriptive/prescriptive urbanism (and both words probably apply) but it also shows the power of incentives and how development tends to follow the path of least resistance. But it’s not like this outcome is solely a product of the market.

Some of the architects responsible for middle-brow architecture along Fourth Avenue are surprisingly candid about the other cause: They pass the buck to the developers who hired them and the pressure they faced to cut costs at the expense of aesthetics.

“I try to do my best for my clients and try to get them as big a building as possible,” says Henry Radusky, a partner with Bricolage Architecture and Designs LLC, which has built nine buildings along Fourth Avenue in the last decade.

One of Mr. Radusky’s buildings was 586 President St., one of three buildings on the same two-block stretch of the avenue that contribute to its canyon of mediocrity look. Another is the Novo Park Slope, at Fourth Avenue and 5th Street, a pallid, prison-like structure with parking and a medical facility at ground level that towers menacingly over its next-door neighbors.

That parking, of course, is the product of prescriptive regulation. Market pressures might impact some design choices, but the relative impact of those decisions (compared against higher quality materials or prioritizing retail uses on the ground floor) likely pales in comparison to the cost and spatial needs of parking.

Back in San Francisco, Peter Cohen is looking for ways to mesh the market and prescriptive elements together:

Even housing advocates like Cohen concede a hard ideological approach loses hearts and minds. “I also understand that we have a changed disposition toward cities. How can you find a sweet spot between these two forces—how do you bring in this creative class, but also make sure that people who toiled in the weeds are not simply squeezed out? How can you sort it without just saying that the market will take care of everyone, when obviously it won’t?”