What might be behind a debate over affordable housing in a new Naperville development

Naperville’s Housing Advisory Commission recommends 20% of the units should be affordable housing in a proposed new development of roughly 450 residential units. Let the debate commence:

“Here’s our chance,” said Becky Anderson, a city council member and liaison to the housing advisory commission. “We own this land, so let’s make the most of it and … make sure that we include some more affordable housing.”

The city is required to provide a report by the end of June 2020 to the Illinois Housing Development Authority listing the number of units needed to comply with the 10 percent minimum and identifying sites or incentives to help reach the goal. In a position paper, the housing advisory commission said the city failed to submit such a report by the last deadline in 2015.

Mayor Steve Chirico said it’s best to use multiple sites — not only 5th Avenue — to work toward the requirement…

Mayoral candidate Richard “Rocky” Caylor, however, said incorporating 20 percent affordable units into plans for 5th Avenue sites could help take a step toward 10 percent….

Dan Zeman, who lives in the Park Addition subdivision one block north of 5th Avenue, said he originally was skeptical of affordable housing on the sites slated for redevelopment. But once he researched the topic, he decided “maybe I was just being a NIMBY,” and thinking “not in my backyard.”

A few guesses about what might be lurking behind this affordable housing discussion in Naperville:

  1. As far as I know, the Illinois requirements have little teeth and operate more like recommendations. The repercussions for Naperville for not meeting the targets might be limited.
  2. This is a sizable project near the downtown train station and within walking distance of the downtown. Because of the size and location, this is an important project.
  3. What people actually mean by affordable could differ. The current mayor is quoted in this story saying it is about “entry-level workforce housing.” Does that mean young professionals or people who work in retail or service jobs? Naperville is a wealthy large suburb.
  4. This could be a proxy conversation about poorer residents in Naperville. The poverty rate in Naperville is only 4.4%. But, do Naperville residents and leaders want more poor residents? The status and image of the community is important to many.
  5. Deconcentrating affordable housing may seem like a reasonable idea but would the city follow up in other new projects? Are there other sizable projects in the works (such as a development on the southwest side of the suburb) that could also include affordable units?

Promote smaller, cheaper housing by calling it “missing middle housing”

Even if the median size of new American homes is smaller in recent years, this does not mean it is easy to construct smaller new homes in communities:

To propel the movement, he recommends using the term “missing middle housing,” rather than terms such as “upzoning,” “density” and “multifamily,” which he says have a negative connotation.

“I can’t imagine a single neighborhood in the country where people will get excited about the term ‘density,’ ” Parolek said. “Even things like ‘multifamily’ can be a scary term that’s past its life span.”

His larger recommendation is for cities to change their zoning ordinances. Parolek advocates for form-based zoning, which allows more flexibility for what can be built on a property…

“Zoning in and of itself is a system that encourages single-family home construction in cities,” Parolek said. “Most cities don’t have effective zoning for missing middle housing, so the easy thing to do is to build a single-family house. There’s no neighborhood pushback and less risk. There’s a reason it’s being done, but it’s not responding to what the market wants.”

Very few neighbors or communities would be excited to live next to or approve cheaper housing. The assumption is that more expensive housing is good: it will bring in more tax dollars, typically has fewer residents (so lower local costs), and connotes a higher status. In contrast, it is thought cheaper housing brings down surrounding property values and the kind of people who live in cheaper housing are not as desirable as higher income residents.

Would communities react better to “missing middle housing”? Perhaps. Many places talk about the need to have housing where hard working professionals with a stake in the community, like teachers and firefighters, can reside in the place where they work. Or, it is desirable to provide denser housing for young professionals and retirees to keep them in the community. Yet, as Parolek notes, the goal is still to move people toward a single-family home (with some flexibility for townhouses and condos) in the long run. Changing zoning is not easy because many people purchase a home and then work hard for years to protect the value of that home. Cheaper housing may be more acceptable if located away from existing larger and more expensive housing, if it is allowed in the community at all.

Missing from even this suggestion about “missing middle housing” is an acknowledgement of the necessity of housing for lower-class and poorer residents. True affordable housing needs to go beyond the middle-class and provide housing for those working in the retail and service industries. But, I don’t think most communities and America as a whole wants to talk about this kind of housing.

If a megaproject proposal doubles the number of onsite affordable housing units in a bid to get approval, doesn’t this mean the profits will be substantial?

The latest proposal for the Lincoln Yards project on Chicago’s north side will now include 600 on-site affordable housing units – 300 more than before:

It will be the largest on-site commitment in the 16-year history of Chicago’s affordable requirements ordinance, according to Ald. Brian Hopkins, 2nd. Hopkins will join the Chicago developer and affordable housing advocates to announce the revised plan in a news conference Tuesday morning at City Hall…

Sterling Bay wants to build about 15 million square feet of commercial and residential buildings on 54.5 acres of riverfront land along Lincoln Park and Bucktown. That includes 6,000 residential units on the sprawling site between North and Webster avenues…

Under the compromise unveiled Tuesday, Sterling Bay will provide 600 on-site affordable units, while the maximum number of off-site units it will provide within 3 miles decreases to 300, from a previous 600. The Affordable Housing Opportunity Fund payment remains unchanged.

Half of Sterling Bay’s $39 million fee will support construction of about 1,000 affordable units citywide, and the other half will support 15 years of rental subsidies for 130 very low-income families through the Chicago Low Income Housing Trust Fund, according to Hopkins.

Two quick responses:

1. If the developers can offer more onsite units, then Chicago should probably think hard about increasing its requirements. The developer is still very interested in the project even with providing more on-site units.

2. This project must really be projected to turn a nice profit if these last-minute adjustments can be made. Perhaps it is all about negotiating – offer a low figure and then it looks nice if you adjust up – but developers tend to want to get plenty of profit by the end.

On the whole, when these kinds of prime properties come up for development and/or a developer gets a big idea, there could be better ways to ensure there is more affordable housing included in what is eventually built rather than just settling for a relatively low figure. Even with more land devoted to affordable housing and parks, the plans still provides plenty of room for money to be made. Would Sterling Bay be scared off if the affordable housing requirements were higher and, if so, would other developers jump right in to develop such a property?

Linking Microsoft giving $500 million for Seattle area housing to tech companies and declining gov’t support for housing

Microsoft is pledging a substantial amount to address the important issue of housing in Seattle:

Microsoft plans to lend $225 million at subsidized rates to preserve and build middle-income housing in six cities near its Redmond headquarters. It will put an additional $250 million into low-income housing across the region. Some of those loans may be made through the federal programs that provide tax breaks for low-income housing.

The company plans to invest the money within three years, and expects most of it to go to Seattle’s suburbs.

The loans could go to private or nonprofit developers, or to governmental groups like the King County Housing Authority. As the loans are repaid, Mr. Smith said, Microsoft plans to lend the money out again to support additional projects.

This article frames the giving as part of the housing issues wrought by the actions of tech companies:

Microsoft’s money represents the most ambitious effort by a tech company to directly address the inequality that has spread in areas where the industry is concentrated, particularly on the West Coast. It will fund construction for homes affordable not only to the company’s own non-tech workers, but also for teachers, firefighters and other middle- and low-income residents.

From this point of view, the health of a region matters for companies. If workers, whether ones employed by a particular company or organization or others, cannot find affordable housing, it will be harder for the region to find and hold on to workers. Whereas businesses often focus on a good business climate (low taxes, tax breaks, business-friendly governments, etc.), housing is a big factor in finding a strong work force. Additionally, Microsoft can help show through these actions that they care about local conditions in ways that tech companies are often said to ignore because of their global status. Would Microsoft be the same if it were not in the Seattle region?

Another way to view this is that private companies are now taking on what the federal government should address:

The government spent about three times as much on housing programs in the 1970s as it does today, according to the National Low Income Housing Coalition. In the years since, the government has gotten out of the business of building public housing. And capital funds to repair the remaining public housing stock have been cut in half over the last 15 years.

Over this time, federal resources have increasingly shifted away from subsidizing the construction of affordable housing to subsidizing renters who find housing in the private market. And now most new below-market-rate housing is built not by public agencies, but by nonprofit developers leveraging tax credits. The value of those credits has declined recently as well, as a result of changes in the tax bill passed in 2017.

In a sense, Microsoft’s proposal is an extension of this story, as private actors continue to step in where the government once stood.

Ed Goetz, a professor at the University of Minnesota who has studied the history of public housing in America, said: “I don’t want to diminish the magnitude of what they’re doing. I think it’s important, and it will help. But it won’t solve Seattle’s problem.”

This argument suggests that private actors can only do so much to address housing issues. Because so much money is involved and the issue is so widespread, even $500 million may not do much in a single metropolitan region with high land and housing costs. Of course, the government is involved in the housing industry: the federal government for decades has supported single-family homes, primarily in the suburbs. At the same time, the government and the American people have always been more ambivalent about public housing. It is not as if  the housing market is a free market: the United States subsidizes mortgages.

At the least, this will be an interesting experiment: can Microsoft make even a small dent in the housing needs of the Seattle area? Will this help strengthen the metropolitan region or primarily serve as good publicity for the company?

ADUs and granny flats more popular in some parts of the country and not others

Cities like Portland and Los Angeles may be interested in promoting accessory dwelling units (ADUs) but there is less interest in other parts of the United States:

The future for ADUs on the East Coast and in the Sun Belt is less clear. In older cities such as Boston and New York, much of the housing stock was built before World War II and is more dense than postwar suburban neighborhoods. Sun Belt cities such as Atlanta, Dallas and Phoenix were developed more recently, but housing prices, for the most part, have not reached the peaks seen on the West Coast.

“If you grew up in New York City or Boston, you have a different acceptance for density, rather than in the West, where open space has always been prized,” Chapple said. “It has been really hard to retrofit these cities that were built at a later time.”

In the District of Columbia, it’s common to find ADUs in the form of finished basements under older townhouses. Suburbs such as Montgomery County, Maryland, offer a better opportunity for detached accessory dwellings. Before 2013, Montgomery homeowners had to endure a complex process of reviews that took several months. Five years ago, the rules were relaxed to allow for licensing in about 90 to 110 days. The measure drew controversy because of concerns about parking, trash and crowding of neighborhood schools.

Dan Reed, an urban planner and Montgomery resident since 1991, said that the measure has proved popular and that the county might be primed to ease regulation further.

The first factor for ADUs seems to be the price of housing. In areas where prices are relatively high, much of the West Coast, ADUs are viewed as good ways to promote cheaper housing.

The second factor seems to be density of properties. Smaller lots mean less space for ADUs as well as ADUs likely being closer to other housing.

A third factor is regulation. How easy is it for a homeowner or landowner to create an ADU on their property?

I wonder if there are some other possible factors at play that could help explain regional differences. Are all people everywhere willing to have others live on their property (or does financial need overrule this)? Could suburbanites view ADUs as a threat to property values? Are there certain architectural styles that lend themselves to ADUs? Does the presence of alleys help or hinder the development of ADUs? Do some places have a longer history of ADU use (such as through multiple generations living on a property or the presence of servants)?

Can proposed legislation on housing prompt a public discussion?

A new bill proposed in the Senate by Elizabeth Warren attempts to address housing issues:

It aims to lower the cost of developing housing so landlords don’t have to make rents so high, coming at the issue from two different angles. From one end, it tries to increase the supply of affordable housing by pouring billions of federal dollars into programs that subsidize developments in rural, low-income, and middle-income communities.

From the other end, the bill attempts to strip away the zoning laws that made developing housing so expensive in the first place. Many of these zoning laws limit low-income residents from moving to wealthier neighborhoods. In Tegeler’s opinion, the laws are one of the main drivers of housing unaffordability. Those laws typically exist at a local level, so in order to target them, Warren’s bill creates a competitive block grant program. The grant money could be spent flexibly—on schools or parks, for example—and is intended to appeal to suburban communities with stricter zoning laws.  Those communities can only access grants if they reexamine and redress their land restrictions.

The bill also focuses on the ways housing inequality falls along racial lines. Notably, it assists populations that federal housing policy has historically failed: formerly segregated African American populations and families whose housing wealth was destroyed in the financial crisis. Under the bill, black families long denied mortgages by the federal government qualify for down payment assistance, helping many in formerly segregated communities to become first-time home buyers. The bill also invests two billion dollars to support borrowers still recovering from the financial crisis with negative equity on their mortgages.

The bill also restructures the Community Reinvestment Act (CRA), a 1977 law proposed to monitor banks with discriminatory loan policies against communities of color. Warren’s bill gives the CRA more enforcement mechanisms and expands its policing power to include credit unions and nonbank mortgage companies, which were not as ubiquitous when the bill was passed. Lastly, the bill strengthens anti-discrimination laws by expanding Fair Housing Act protections to include gender identity, sexual orientation, marital status, and source of income, attempting to limit housing segregation in the future.

It sounds like the bill tries to strike a balance between incentives for communities and developers and strengthening enforcement of guidelines against housing discrimination.

It will be interesting to see what tone the public debate takes, if it even reaches the level of public discussion. Housing issues are not on the national political radar screen. Historically, many Americans are reluctant to address housing concerns through the federal government. They would rather leave these matters to local governments, if government should address the matter at all. Support for public housing has always been limited.

Similarly, even stating an intention of trying to encourage certain suburban communities to open up their doors to different kinds of residents is a hard sell. Minorities and immigrants are indeed moving to suburbia but where they locate or can live is not necessarily even. (See this recent example from the Chicago suburbs of high black homeownership in certain communities.) A good number of suburbanites would attribute the residential segregation patterns to economic options and/or the ability of local communities to draw up guidelines of what kind of community they want to be (such as one without certain kinds of housing).

I would not expect such a bill to be an easy sell or even one that can garner much attention, even if it addresses issues that affect millions of Americans.

Manufactured housing to be more popular with fancier features?

Those seeking cheaper housing options may like both the price of manufactured housing and the features they can purchase:

The hope is that more Americans will see the factory units not only as a more-affordable alternative to a traditional single-family house, but also an appealing one, without the old trailer-park stigma. It helps that they’ve been getting fancier.

Scott Richards, a salesman for Rona Homes in Pataskala, Ohio, said that when shoppers come to his lot, he can dazzle them with customization options like hickory cabinets, rainforest showers and built-in entertainment systems coupled with electric fireplaces.

“We’ve got linoleum floors that look just like hardwood floors,” said Richards, who got back into selling factory-made houses after leaving the industry in 2012. “You don’t think about solid granite being in a manufactured home, but we have that as well.”…

The company sells what most people probably picture when they think of manufactured homes — single- and double-wide houses wholly built on a chassis in a factory — as well as modular homes, which are factory-built in sections that are assembled on a lot. While a single- or double-wide is often much cheaper than a modular home, both offer cost advantages that come with putting construction on an assembly line.

The article goes on to talk about some regulations involving the federal government and lenders that could be altered to make manufactured housing more available to house buyers. Theoretically, these changes could open the floodgates to cheaper housing for many.

Yet, I would suggest there is then another hurdle to overcome that might prove even more difficult. This housing may be cheaper than other options and it could even be attractive inside and out. This does not mean that it will be easily accepted by numerous communities, particularly those with higher qualities of life. In many of those places, manufactured housing implies all sorts of things that those communities work hard to keep out through formal and informal means. It will take time to reverse the common image of such housing.

The same issue faces tiny houses. Even if they look nice and are attractive inside, they are not easily accepted in places with more expensive single-family homes. Tiny houses are affordable – though significantly smaller than the manufactured housing options discussed in this article – but not necessarily that popular, either to consumers or neighbors.