Apartment construction increases in the Chicago suburbs

The construction of apartments in the Chicago suburbs reached some high marks in 2016:

Meanwhile, in the suburbs, more apartments were opened last year than in any time in the past 20 years and demand for those units meant suburban rents grew more than the increases downtown, according to research by Appraisal Research Counselors…

The rents in new or almost-new units in the suburbs increased 6.7 percent in 2016, while they increased just 2.85 percent downtown, according to Appraisal Research. The median rent was just $1.39 per square foot in the suburbs in 2016, while downtown it was $2.89 a square foot for space in a newer building. In other words, for 1,000 square feet a renter would pay on average $1,390 in the suburbs and $2,890 for one of the new downtown apartments. An older but well-kept Class B building downtown would be $2.52 a square foot, or $2,520 for 1,000 square feet…

The strongest occupancy in 2016 was in DuPage County, with 95.7 percent of the apartments full and the median price of a two-bedroom apartment at $1,315. Northwest Cook County was 95.4 percent full with a two-bedroom apartment averaging $1,390. The weakest area was the North Shore at 93.8 percent occupancy and a two-bedroom apartment at $2,446…

“From Schaumburg to Naperville, you are starting to see new construction,” said Stephen Rappin, president of the Chicagoland Apartment Association. It’s a trend that’s occurring nationally after the surge of construction in downtown areas.

This is where the debate between whether cities are growing or suburbs will win the day breaks down. What if the American future is denser suburban development and a shift away from single-family home ownership even as people stay in the suburbs? This would represent a change from “typical” suburban life – single-family home, lawn, lots of private space – while better mimicking some urban conditions such as denser housing, renting, and giving up a home to be near certain amenities.

As this article suggests, it is not surprising that the suburban apartment demand would be high in places with more economic and quality of life opportunities, places like Schaumburg and Naperville that have little greenfield space but where people would still want to live. Just like Chicago where apartment construction has boomed in the Loop but lagged elsewhere, a similar process will likely take place in the suburbs. This may be good for developers since there will be high demand for certain places but isn’t necessarily good for aiding issues of affordable housing.

The middle class finding it difficult to find city housing – what to do?

Some urban neighborhoods are hot but this can lead to housing prices that limit how many middle class residents can move in:

The casualties in this war are mostly the middle class. In 2016, rents continued their years-long rise, incomes stratified further, and the average price to buy a home in major US cities rose. The strain pushed the middle class out of cities like Boston, San Francisco, Los Angeles, New York, Austin—the so-called “hot cities.” Some families move to the suburbs. Others flee for less expensive cities. But across the US, the trend holds: cities are increasingly home to high-rollers who can pay the high rents or down payments and lower income people who qualify for subsidized housing.

Macroeconomists say this a good problem to have. These cities are growing. People want to live in them. Stagnating economies in the Rust Belt might envy this kind of trouble. From the perspective of the overall wealth of cities, the middle class being pushed out doesn’t matter. But it matters on the human level, the neighborhood level. In Fort Hill, it means that a teacher at the local elementary school cannot afford to live in the neighborhood where she works. The effects on inequality, mobility, and the demographic composition of cities are very real, their causes multifold, and the solutions difficult…

“It’s very hard to get people to understand that the affordable housing crisis is not for the very poor,” says lawyer Mechele Dickerson of the University of Texas, an expert in housing and the middle class. It’s for people with good jobs who are not poor enough to qualify for subsidized housing, nor rich enough to pay the rising housing prices. “A family that makes $100,000 can’t afford to buy a house in most US cities,” Dickerson says…

The incoming administration has given experts no reason to expect it will prioritize fixing the affordability crises for the middle class. “In terms of the federal government, I see no hope,” Dickerson says. But as with immigration reform and climate change, housing affordability is something that states and cities can tackle on their own. In 2017, this trend toward decentralized power will continue—that is, if cities make retaining middle class residents a priority. That means relaxing the zoning laws to permit more housing stock to enter the market. This is the single most helpful thing the city of San Francisco could do, for example, to counter the tech money forcing prices on the limited housing stock up, says Shulman.

Four quick thoughts:

  1. This article seems to suggest that the government should do something to help middle class residents live in cities and the Trump administration may not help much. So, we do still in America subscribe to the idea that the federal government should subsidize middle class housing (whether in suburbs or cities)?
  2. I’m a little skeptical that the real problem is middle class housing rather than housing for poorer residents. Either this is a very broad definition of the middle class – which is entirely possible since most Americans consider themselves to be middle class – or cities really don’t care about poor and working class residents. I know cities want to keep middle-class residents but about people with less education and job prospects with less pay?
  3. This is an area that could really use some innovation. Big government doesn’t seem to have all the answers (what is the long-term effect of HUD?) nor does the free market (which tends to lead to residential segregation by race/ethnicity and class). What could really work well here is for a number of cities to try new ideas and see what might work.
  4. As the article notes, one of the biggest barriers is existing residents who don’t want to be near “affordable housing.” I’m not sure how you can get around this though there have been some indications that well-designed affordable housing limits some of the stigma. How do you get Americans (urban or suburban) to get past the mentality of pulling up the drawbridge after they move into their desirable neighborhood?

Housing prices drive punk music to the suburbs

Punk music is associated with gritty urban life – until that urban life becomes too expensive:

Shows like that are increasingly common in Santa Rosa, and it has a lot to do with the prohibitive cost-of-living in nearby San Francisco. “I had every intention of moving down to the city,” said Ian O’Connor, 23, who organized the gig. “But when the time came, it was too expensive.” Instead, in the last three years, he has booked dozens of all-ages gigs in Santa Rosa, mostly at unofficial venues: detached garages, living rooms, lobbies of sympathetic businesses. The scene thrives on the participation of people like him, area natives in their early 20s who, not so many years ago, would’ve likely moved an hour south to Oakland or San Francisco…

One hallmark of punk’s inception in the Bay Area and throughout the Pacific north-west was the notion of cities as places of possibility, so hollowed out by eroding tax bases and selective civic neglect that they seemed “deserted and forgotten”, as music journalist Jon Savage wrote of his 1978 trip to report on San Francisco punk bands such as Crime and the Dead Kennedys. “It was there to be remapped.”

But with the same cities stricken by intensifying affordability crises – premiums on space that make somewhere to live, let alone rehearse and perform, available to a dwindling few – they don’t beckon young punks like they used to. And though reports of music scenes’ deaths tend to overstate, news of shuttering venues (see eulogies for The Smell, The Know, and LoBot) deters some of the intrepid transplants needed for invigoration. Dissipating metropolitan allure, however, helps account for the strength of scenes in outlying towns…

According to Samantha Gladu – bassist in the feminist, wrestling-themed hardcore band Macho Boys and chief advisor to state senator Chip Shields – recent revelations about what a state investigation found to be cripplingly over-burdensome nightclub regulations have done little to calm the Portland punk scene’s nerves: “Rising rents and recent reporting on the city government’s apparent selective regulation for venues leave punks with the impression that not only can they not afford Portland, they aren’t part of some officials’ vision for Portland.”

Given that more urban features – including denser housing, more non-white and less wealthy residents, and urban issues – have moved to the suburbs, it isn’t too surprising that artistic ventures could move there as well. Yet, I imagine this is not easy for many artists or others who dislike the suburbs and celebrate cities. Can places that are still criticized for conformity, whiteness, and materialism nourish new artistic ventures? Can suburban communities tolerate people who go against convention or who seek space to spread out and explore? If given the resources, I imagine that most bands would want to be in the big city where there is more energy, similar artists, and venues.

However, this represents an opportunity for suburbs to pursue a more creative vision. Many suburbs hold and promote festivals and fairs committed to the arts, both as a way to generate revenue as well as a way to signal openness and engagement. It is something different to have permanent venues devoted to some ventures; could a middle to upper-class suburb give its blessing to a punk music music site? Or a collaborative of experimental artists? In other words, if cities and/or certain neighborhoods are too expensive, numerous suburbs could join the competition to attract musicians and artists and possibly transform their own communities.

Small house movement spreads in ADUs

One way to encourage smaller homes and affordable housing is to allow Accessory Dwelling Units:

The cottage, which won a top design award last year from the American Institute of Architects, is technically called an “accessory dwelling unit,” or A.D.U. Portland has been ahead of the curve in allowing these smaller housing units, which are illegal in many cities and towns under current zoning rules…

In 2010, during the economic slump, when many building plans were being shelved, Portland presciently began to allow homeowners the right to develop accessory dwelling units on standard 5,000-square-foot residential lots for the first time. The city also eliminated development charges of up to $15,000 for new accessory dwelling units to spur homeowners to build.

More incentives followed: Homeowners could build and even rent out a unit that did not have off-street parking; any design not visible from the street could be built without input from neighbors; and new height limits — raised to 20 feet from 18 feet — encouraged two-story units, like Ms. Wilson’s…

Not surprisingly, the concentration of accessory dwelling units has been in central, higher-income areas close to amenities like transit and shops. “Part of this could be due to the fact that people with large amounts of equity can more easily secure financing,” Mr. Wood said. “The City of Portland and Portland State University will be working on a project to encourage and facilitate A.D.U. development in more diverse neighborhoods.”

It may be helpful to compare the ADUs to other alternatives for affordable, small housing.

  1. Would residents and communities prefer tiny houses on their own lots or in communities of tiny houses? The first could be expensive due to the cost of land, defeating the purpose of the smaller housing which is supposed to be cheaper. The second could be too much of a change for some places. ADUs make use of existing lots and aren’t necessarily grouped together.
  2. Would residents and communities prefer larger apartment buildings? On the plus side, you can build more units up and everyone knows that this is an apartment structure (with its higher densities and other unique features). On the negative side, apartment buildings can alter the character of a neighborhood, may require parking, and people often have stereotypes about who lives in apartments. The ADUs hide the higher densities better than apartments – back behind the main housing unit – but don’t provide as many units.

Given the resistance of many municipalities to denser housing, I imagine ADUs could be attractive as they don’t require the density or size of some alternatives. Additionally they can use existing land and generate income for local residents. Even given all that, I think it would take a lot for many cities to adopt this. There is a large need for affordable housing throughout the United States and many communities don’t seem to be moved to do anything; I’m not sure ADUs are attractive enough to tilt the scales.

 

High housing prices drive more people to live in vans

When housing prices are high, residents adapt in a variety of ways:

He’s not alone. Last year, 4,600 cars and RVs were used as homes, according to The Los Angeles Times…

“The main expenses are insurance for the van, which is like $60 a month,” said Hutchins. “Then, I have a storage unit for like $60.”

That puts his monthly rent at $120. The van cost him just $125 at an auction…

Hutchins works part-time at a Taco Bell to help pay the bills, and he says living in a van has slashed his cost of living by $800 a month.

He showers at the gym, cooks on a portable stove on a sidewalk (he stores his butane at his friends’ place nearby) and uses wifi at nearby coffeeshops.

Four quick thoughts:

  1. I assume this is more attractive for younger adults who are starting their careers. Even with all the buzz about tiny houses and having smaller and more sustainable settings, I can’t imagine too many people with more established careers choosing this.
  2. Traditionally, Americans like cars. This seems like a clever adaptation for people who can make it work (see #1): you have some people and it is mobile.
  3. How do municipalities view this? The article mentions that this is not against the law in Los Angeles though there may be issues with parking in different places. At the same time, how many communities would want to have significant numbers of people living in vehicles?
  4. It would be helpful to get more data on this: is this a viable option only when housing prices are really high or is this a choice made for additional reasons as well? Does the weather in LA make this easier?

Builders turning from McMansions to smaller housing units?

Alongside recent news of reduced price premium for McMansions, data from the second quarter suggests builders are constructing more townhouses and smaller units:

Reversing years of ballooning home sizes aimed at upper-bracket buyers, builders have begun refocusing their efforts on entry-level and more modest-sized homes. According to new data from the National Association of Home Builders, the median floor area in new-home starts dropped during the second quarter of this year by about 3 percent.

Meanwhile, townhouse construction has been increasing fast — up 25 percent over the past year as of the second quarter. New townhouses, which typically are smaller and cost less than detached single-family homes, now account for 13 percent of all single-family starts, the highest it’s been since 2008.

NAHB chief economist Rob Dietz told me the quarterly decline is no fluke and the trend is likely to persist. “What you’re seeing is the beginning of builders trying to expand the market” and pull in first-time and other buyers who are frustrated by the lack of affordable alternatives in the resale arena, he said. Many shoppers, especially those with or planning on children, now find growing opportunities in townhouse and entry-level detached-home communities in the suburbs and exurbs compared with closer-in, higher-cost homes.

Critics of McMansions as well as advocates for affordable housing have been asking for years why builders have been focusing so much of their efforts on larger homes. The short answer: such homes can generate a lot of profit while building smaller homes lead to less profit per unit. Yet, this article also suggests that demand has increased for smaller homes as entry-level buyers haven’t been able to find much thus far.

One point to note: even as builders and buyers are looking for smaller spaces, I suspect builders will do what they can to raise the values/prices of these units. Smaller doesn’t necessarily mean that much cheaper once numerous features are added and locations are considered. This doesn’t necessarily mean that builders are going to be constructing bare bones, cheap units – unless they are significantly farther away from city centers and job centers.

Bringing tiny houses to Chicago’s young homeless

A new plan involves housing homeless teenagers in Chicago in small units:

11,447 – Homeless unaccompanied youth, ages 14 to 21, according to an estimate by CCH

374 – Youth shelter beds across Chicago, according to CCH

The tiny homes, the way they are being planned by the working group, would cost $55,000 to $65,000, excluding the cost of the land or any site work like landscaping. Tenants would have yearlong leases, and the group is hoping that a local nonprofit would play the role of the landlord. Tenants would pay the utilities.

Next to funding, the biggest obstacle tiny homes advocates face is zoning. Chicago zoning attorney and Chicago Tiny Home Summit panelist Danielle Cassel said she ran out of sticky notes when logging inconsistencies between tiny home models and zoning code requirements.

Multiple communities have had discussions regarding plans to house the homeless in tiny houses – see earlier posts here and here. But, it seems that their smaller size and lower cost are not automatically enough to overcome the issues that affordable housing generally faces. Namely, there are three concerns: (1) who will finance these units? (2) who is willing to live next to them? and (3) will enough units be constructed to make a sizable dent in the populations that need such housing? Take Chicago: while it isn’t as expensive as New York City or San Francisco, the cheaper land is in less desirable areas, zoning guidelines will have to be altered, and there is a tremendous need for cheap, durable housing.

A cynical take is that several units or colonies will be constructed in a few Chicago neighborhoods and then touted as solutions. However, much would have to change for tiny houses to be a sizable solution for homelessness and affordable housing.