Why are Chicago families fleeing for cheaper homes in the suburbs?

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The Chicago Tribune leads with the story of a Chicago family who left the city for a townhouse in River Forest:

Megan Keskitalo and her husband, Glenn Eckstein, were enthusiastic city dwellers until the suburbs began calling. First it was Chicago’s crime, then it was worry about school districts, and in the end, it was money that pushed them past the city’s edge.

After a long search, the parents of two young daughters packed up their $1,300-a-month three-bedroom Lincoln Square apartment and in September paid $286,000 for a three-bedroom town house in River Forest.

“We were looking (in the city), but we couldn’t find anything in our price range, which was under $350,000,” Keskitalo said.

But, just how many Chicago families are doing this? The story sticks to general trends without any numbers:

They aren’t the only ones. While experts say Chicago’s housing market is sizzling — home sales were up about 8.1 percent in Chicago through November of this year, says the Illinois Association of Realtors — not everyone can afford to buy in the city. That’s because home prices are up too…

It’s not unusual for millennials and Generation Xers with children to flee to what real estate experts call “surbans” — walkable, amenity-rich suburbs — once they get married, have kids and are looking for less party and more quiet.

The implication of this article is that families like this are being priced out of Chicago: they might stay if they could find housing in their price range in attractive neighborhoods. Yet, there is a lot more going on here:

  1. The article also says real estate prices are on the rise in Chicago. This is generally seen as a good thing – unless it pushes desirable people, like young white families (or recent college graduates or older long-time city residents) out.
  2. There are real issues of affordable housing in Chicago and the whole region. However, there is often disagreement about who such housing should serve. Should it help keep wealthier residents in a community or serve those with much lower levels of income? Chicago is building plenty of high-end condos but there is not much action on the lower end of the market with affordable units in decent neighborhoods.
  3. This family had particular conditions for where they were willing to live: less crime, good schools, cheaper housing. Overall, they wanted a particular quality of life. They could have found cheaper housing in Chicago but without being willing to compromise on these particular issues, they left for the suburbs.
  4. How much of this is tied to the ongoing process of white flight? This family left a trendy Chicago neighborhood for an established wealthy and white suburb: River Forest is roughly 85% white and the median household income is over $113,000. Again, they could have found cheaper housing in the city (#3 above) if they were willing to live in more places that might not have been as white.

Hoping to retire the myth of widening roads to reduce traffic

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Eric Jaffe provides a reminder that traffic is not lessened if there were just wider roads:

“Wider Roads = Less Traffic”—The most enduring popular traffic myth holds that building more roads always leads to less congestion. This belief is a perfectly logical one: if there are 100 cars packed into one highway lane, then building a second should mean there’s 50 cars in each. The problem, as transportation researchers have found again and again, is that when this new lane gets added the number of cars doesn’t stay the same. On the contrary, people who stopped driving out of frustration with traffic now attack the road with an enthusiasm unknown to mankind.

While residents of heavily congested metro areas have a suite of four-letter words to describe this effect, experts call it “induced demand.” What this means, simply put, is that building more road eventually (if not always immediately) leads to more traffic, not less. Fortunately, local leaders are starting to distinguish reality from myth when it comes to induced demand. Unfortunately, the best way to address it—congestion pricing—remains all-but politically impossible in the U.S. That pretty much leaves one thing to do: deal with it.

A congestion tax is one way to deal with the issue: make people think twice about driving into heavily trafficked areas. At the same time, broader solutions could be employed: planning communities and regions that don’t rely so much on solo driver trips (such as through denser development); increasing funding to mass transit and providing more regular service and/or more options; and finding other ways to cut incentives on driving such as increasing gasoline taxes or paying per mile for driving. Of course, these broader approaches may be asking too much as Americans still like the option of driving. But, it may take some bold politicians and municipalities to try congestion pricing and show that it can work before it is widely adopted.

In other words, you may be able to show studies that demonstrate how this myth isn’t true but perhaps Americans dislike the truth – and the solutions that go with – even more.

Winfield, major hospital reach agreement for $900k annual grant

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Winfield is a small suburb with money problems; the hospital in town is expanding and has money. Solution? A sizable annual grant from the hospital to the village:

Winfield will receive a $900,000 annual grant over each of the next five years from Northwestern Medicine Central DuPage Hospital as part of an agreement finalized Monday, officials said…

“We recognize the unique economic challenges facing Winfield,” CDH President Brian Lemon said in a statement released Monday afternoon. The hospital, he said, “is committed to working with the village to ensure Winfield remains a great place to live, raise families and receive high-quality health care. Our collaboration with the village of Winfield is designed to encourage economic development while stimulating the village’s economy.”…

CDH made the new offer after Winfield trustees rejected the hospital’s first proposal to give the village an annual $500,000 grant. The board was seeking roughly $1.4 million a year from CDH to help pay for the services Winfield provides to the hospital…

Winfield trustees even voted to put an advisory question on the March 15 primary election ballot that would ask voters if the village board should begin taxing CDH’s operations. The village clerk would have submitted that ballot question to DuPage County election officials had an agreement not been finalized Monday, but officials said it’s no longer necessary.

I wonder how common such agreements are. The hospital provides jobs and status yet is quite the growing facility exempt from the local property tax rolls. Here is how the Village of Winfield described the issue in October 2015:

CDH was established approximately 50 years ago as a small hospital in Winfield’s town center. In the 1990’s, the hospital began a series of major expansions of its campus through numerous property acquisitions. The majority of the purchases were commercial properties located in the town center.
The hospital now controls nearly 60% of the property in the Village ’s town center and has expanded its footprint across both of the downtown’s major arteries – Winfield and High Lake Roads.
CDH has benefited from the expansions. It is now a nationally-ranked hospital and by far the most profitable hospital in Illinois according to tax filings compiled by Crain’s Magazine. CDH has averaged a yearly profit of $160 million over the past five years with growing reserves of approximately $2 billion in cash and investments. Meanwhile the Village has continued cutting staff and services to cope with lean budgets and leaner forecasts.

Is this solely the case of the big non-profit hospital dwarfing the small village? However, Winfield has its own issues including very rancorous infighting among local political officials and candidates (I have not seen many suburb with such regular negative interactions) and a limited tax base (as the community debates whether to expand it).

Maybe this annual grant is a decent solution to the issue: the hospital is unlikely to move and the village needs money. I imagine hospital officials appreciate the village threatening to put something on the ballots unless money is provided and the village is probably not entirely happy with the amount of money. In the end, this seems like a payoff. Do these two parties really need each other and how much is this worth annually?

Planning for more micro-apartments in NYC

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New York City may change its regulations to allow more micro-apartments:

Planning officials are proposing to end a limit on how small apartments can be, opening the door for more “micro-apartments” that advocates see as affordable adaptations to a growing population of single people. Critics fear a turn back toward the city’s tenement past and question whether less space will really mean less expensive…

As an experimental project, Carmel Place got city land and a waiver from New York’s 400-square-foot minimum on new apartments, set in 1987. A proposed elimination of that minimum would allow smaller studios in buildings with a mix of apartment sizes, but entire micro-unit buildings would continue to need waivers...

Forty percent of the units have rents set by affordable-housing programs topping out at around $1,500 a month, but market-rate ones rent for $2,650 to $3,150, roughly on par with many studios in the nearby Murray Hill neighborhood. About 20 people have applied and hundreds requested information for eight market-rate units so far, while over 60,000 have entered a lottery for the affordable ones…

But critics see micro-units as a step backward in the city’s affordable housing crunch – still pricey, just smaller.

The demand for any new housing is high in New York City and a number of other major cities like San Francisco. It seems like the trick with the micro-apartments is that there needs to be thousands of them available in a relatively short amount of time to really address affordable housing otherwise. In contrast, if the units just trickle out (whether from regulatory issues or opposition from nearby residents or apathy from developers), the smaller units will barely make a dent and the prices will stay sky high. It is either all in for micro-apartments or they simply become a unique housing option in one of the world’s most expensive cities.

Shadowy McMansion owners

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A letter to the editor in the New York Times suggests McMansions owned by shell companies are a big problem:

Your article on shell companies and real estate highlights a phenomenon not unique to ultra-wealthy areas of Los Angeles. Real estate purchases using the cover of limited liability companies are a significant issue in the San Gabriel Valley in eastern Los Angeles County, where McMansions owned by L.L.C.s sit empty as middle-class home buyers are priced out, unable to compete against those flush with foreign money from unknown and undisclosed sources.

New York, San Francisco, London and Vancouver are also experiencing this influx. In the United States, real estate brokers and agents are not required to comply with customer due diligence and know your customer mandates that banks and many non-bank institutions must follow.

This kind of argument makes McMansions seem even worse then they are typically depicted: they are owned by shadowy wealthy people who don’t care about the normal resident who just needs somewhere to live. The problem with this letter is that it doesn’t provide good data on how many homes actually fall into this category. Wealthy, culturally significant cities like the ones listed above – LA, NYC, San Francisco, London, Vancouver – do attract foreign investors (particularly Chinese investors recently in Vancouver and the LA area) but major cities tend to like this: it keeps new capital flowing into local coffers and it fuels the high-end construction industry (see Miami or London or New York).

In contrast, it is pretty clear that most major American cities don’t really want to talk about affordable housing and/or aren’t willing to do much about it. Affordable housing is needed in many major cities, particularly those along the coasts. Part of the reason McMansions exist in the first place is that Americans were willing to move further out from the city to buy a bigger house (and this has to with state policies and residential preferences to avoid urban life and non-whites). The resources that it takes to construct McMansions in the suburbs could be harnessed to build smaller urban units or at least denser suburban units (see these recent ideas to use the materials from McMansions or to subdivide McMansions into multiple units) but few governments want to mess with the single-family home market and few builders or developers want to limit their profits.

Postwar suburban houses reviewed

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A review of two new books on postwar suburban homes points out some of the idiosyncrasies of the houses:

The one-story ranch loosened its belt and spread out, and the Split Level, that most American hippogriff of house hybrids, took flight. The origins of the split level are murky: it originally offered a small footprint and a means to make better use of sloped northeastern sites. But it soon spread to locations where neither item was a real concern. It was an easy means to reintroduce functional separations that residents soon realized were valuable: locating bedrooms a stairway away from living rooms wasn’t merely Victorian prudishness—it made good sense. Split levels also fueled the rise of that most suburban setting, the rec room, which was usually located in basements or lower levels and almost invariably a more informal children-oriented social space, frequently enabling the relative re-formalization of the main living room.That suburban building sited homes on big lots is not news, but what is worth noting, as Lane points out, is how the houses were designed in relation to those lots. The formal and inward-oriented facades of pre-war homes gave way to houses whose facades were dominated by the living room picture window, affording a glimpse not merely of one’s own yard but those of your neighbors. As Lane comments, “The windows looked out on the new landscapes that formed around them and also enhanced the perception of spaciousness so much desired by this generation.” The scenography was often repetitive, but it was open: As John Updike commented in Rabbit Redux, “now the view from any window is as into a fragmented mirror, of houses like this, telephone wires and television aerials showing where the glass cracked.”…

Distinctive design was rarest from the larger builders, but similar trends characterized a very wide swath of construction, despite an often complicated level of agency. Jacobs cites a National Association of Home Builders study in 1959 indicating that 38.3 percent of builders designed their own homes, 34 percent used a contract or in-house architect, 12 percent hired a designer of some sort, and 6 percent purchased blueprints through a commercial service. Countless independent and uncoordinated actors who end up producing a similar monotony is unfortunately often the story of America.

And my favorite part of this review:

Suburban building has long been reviled by sociologists and ignored by architects. As Lane comments, “scholarship has been delayed and disturbed by decades of neglect and dislike.” Some of that neglect and dislike is warranted: it’s hard to find all that much architectural distinction in the vast majority of suburban homes. Their general interchangeability discourages the kind of design interest that has given us many monographs on vernacular rowhouses and bungalows and only a handful on the ranch home. There are countless books on a dozen homes in New Canaan, Connecticut, but almost no books on the remaining thousands of homes there; that balance is mainly right—and yet.

Simply the sheer number of homes built in the decades after World War II meant that these design choices would be influential. With a massive housing shortage building up through the Great Depression and World War II, homes were needed quickly and the existing economic, political, social, and design forces led to these particular kinds of homes.

But, as a suburban scholar I agree that such homes have either gotten little attention or have been reviled. These homes were incredibly influential, even if they weren’t true Modernist structures or deviated too much from existing vernacular designs or weren’t designed by architects but rather were mass-produced. Much of the scholarship and commentary on these postwar homes is done from a critical, after-the-fact angle and with an implicit alternative vision of how an urbanized America might have turned out. There is some truth in all of these critiques: these suburban communities were racist (in that non-whites were typically not welcome), initially had particular visions of gender roles and family life, promoted consumerism and driving, and took up a lot of land without much thought of the consequences. At the same time, millions of Americans enjoyed their new homes and the opportunities that came with them.

When you spend $2 million to block a nearby McMansion

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The Washington Post profiles several neighbors who saved their neighborhood from a McMansion – but now may be on the hook for a big amount of money.

They had seen home after home in Bethesda, Md., torn down, replaced by behemoths boasting high ceilings, multiple gables and soaring porticoes. So when a small 1940s Cape Colonial on Oldchester Road was about to go on the market last year — and already attracting the attention of a well-known McMansion developer — three neighbors designed a custom-built approach to save it.

They pooled $2 million to buy, modernize and resell the old house. They hope the updated brick Colonial, which they expanded from three to six bedrooms, will preserve the charm of their neighborhood and maybe even make them a modest profit.

But the group’s attempt to flip the house — on a street where a 1999 Harrison Ford movie was filmed — has yet to pay off. The now-renovated home at 7812 Oldchester Road in the Bradley Woods neighborhood of Bethesda has been on the market since late August, its price having dropped from nearly $2.4 million to $2.175 million…

But the Bradley Woods triumvirate — a senior Justice Department official, a real estate lawyer and a high-end home designer — remain confident they made the right decision, despite the property lingering on the market for 3 1/2  months, longer than the two-month average for a Bethesda home.

What is missing in this story is the amount of money and wealth that is needed to even make this move: most Americans opposed to McMansions or other changes to their neighborhood or community could not simply buy the property and then try to make some money off of it. Instead, they have to either convince their neighbors that this isn’t in their best interest (and this is a tough case to make when so much money is on the line on what typically is most people’s biggest single investment in life) or go through the regulatory and legal process to attempt to block the teardown. All of this might lead to negative interactions as it pits property rights versus what the neighbors or community feel might be in their own best interests (and it often is about collective property values). But, if you have resources, you can just take care of the problem yourself.

Xmas gifts: America has socialized mortgages, free market health care

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The preface to Shaky Ground: The Strange Saga of the U.S. Mortgage Giants includes this fascinating section:

The big banks have at least superficially paid back the money the government gave them; General Motors and Chrysler are out of bankruptcy; but Fannie and Freddie are still in conservatorship. Even more significant, most of the mortgage market in this country is now supported by government agencies, more so that it was before the financial crisis. The former governor of the Bank of England, Mervyn King, told me this: “Most countries have socialized health care and a free market for mortgages. You in the United States do exactly the opposite.”

Americans of all political stripes have long supported the idea that residents deserve to own a home. This is reflected in government policy, as Bethany McLean argues, where politicians suggest they want Fannie Mae and Freddie Mac out of the mortgage business yet let them become a more and more integral part of the process.

It would be interesting to know how the money poured into the GSEs might be used elsewhere to support other things Americans like to have.

One wish: “Tiny House Trend Booming — McMansions Now Storage Units”

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One Oregon newspaper asked readers to submit headlines they would like to see come true in 2016. One involved McMansions:

“Tiny House Trend Booming — McMansions Now Storage Units”

The headline tries to juxtapose two very different sized houses and two unique visions. The first suggests people need less space and such homes can be more sustainable. The second suggests outrageous consumerism and living beyond your means. Yet, this headline/far-fetched prediction may just hint at how these two trends are linked: what would Americans do with all their stuff if a large number wanted to move to tiny houses? Americans may have bigger houses than they need – whether measured by the people in each household (which is declining) or the amount of space and energy they should take up (this would really help lower energy use) – but they do like their stuff. Here is a quote from an HGTV participant:

We have a very American problem. We have too much stuff. And we’re going to do the very American solution. Instead of getting rid of some of our stuff, we’re going to just get a bigger house.

And Americans are already using seven square feet per person of storage space. Perhaps all of those McMansions could simply become storage facilities? Think how much that 20 foot tall great room or that oversized three car garage might hold. Imagine a future where Americans live in 400 square feet or less units most of the time but have a 3,000 square foot storage facility several miles away.

Books that influenced sociologists to pursue sociology

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Sociologist and psychologist Sherry Turkle discusses some of the books that most influenced her:

BOOKS: Which books had the biggest effect on you?

TURKLE: Jean Piaget’s “The Child’s Conception of the World,” Freud’s “The Uncanny,” Claude Levi-Strauss’s “The Savage Mind.” Getting into those books got me into this notion that we love the objects we think with, and we think with the objects we love. That became my life’s work.

BOOKS: Any other pivotal book?

TURKLE: I think the most influential book for me was “The Lonely Crowd” by David Riesman. I read that in high school. I said to myself I want to be the sort of person who could write a book like that. So I decided to study sociology and psychology. In fact, he became my mentor.

Given that Turkle was trained as a sociologist and psychologist (she did both together: “Professor Turkle received a joint doctorate in sociology and personality psychology from Harvard University and is a licensed clinical psychologist.”), these books don’t look so surprising. But, would we have known this when Turkle was in college or younger? Or were these the books that she found at an academic level that then influenced her later research and writing? It would be interesting to see: (1) what books a number of other sociologists would cite as influential and (2) whether these texts line up with the books and articles cited the most in the discipline.

Additionally, The Lonely Crowd has had an outsized effect on studying the American suburbs. I admit that I have not read the whole thing though it sits on the shelf in my office. Its claims about conformity have been widely echoed by critics of the suburbs – while cities are often presented as the bastions of individuality and authenticity – even as the data behind the claims was somewhat thin.