Tag Archives: affordable housing

Housing policy that encourages both affordable housing and rising home values

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This article points out a contradiction in housing policy: can we promote affordable housing while at the same time suggesting housing should be a good investment?

So how are these two conflicting ideas to be reconciled? Well, that’s the basic challenge of housing policy. Perhaps a start would be to acknowledge that there is, in fact, a tension here—that “protecting” or “promoting” property values is the same thing as “making housing more expensive.” It’s somewhat discouraging, for example, when community organizations claim that “affordability doesn’t mean housing values have to remain stagnant,” without acknowledging that if housing values aren’t stagnant—i.e., they’re growing—that means they’re also becoming less affordable.

But there is some hope. One thing that could help is robust production of housing that isn’t priced by the market, and therefore isn’t affected by rising market prices. That can be accomplished through public housing, privately-developed affordable housing with programs such as the low-income housing tax credit and housing vouchers. At the moment, few places produce non-market housing at anything close to a scale that would provide broad affordability, but there are encouraging examples: Portland, for instance, has created 2,300 units of affordable housing in its redeveloping Pearl District, adjacent to downtown, financed largely by taxes.

In many places, having a wide variety of housing types and sizes can also make room for people with a wide variety of incomes. My street in the Edgewater neighborhood of Chicago, for example, contains a handful of single-family homes, whose value at this point probably reaches into the six figures; expensive newer condo buildings; older multifamily buildings, some of which have large, luxuriously updated units, and others whose apartments are somewhat smaller, or have less up-to-date finishes; and a few single room occupancy buildings, with minimal accommodations. As a result, there is market-rate housing for everyone from upper-middle-class professionals to working-class immigrant families to low-income elderly adults. Of course, that sort of diversity is typical of a pre-zoning “illegal neighborhood”: A vanishingly small proportion of American neighborhoods allow that sort of mix to be created today, which is a large part of the problem. Making these kinds of neighborhoods more common might make America’s housing policy a little more cohesive and less contradictory.

In the explanation of why we have two contradictory positions, I think two key pieces are missed. One is the political dimension of these two goals for housing. Both have broad appeal – people want to be able to move to better neighborhoods even as they want higher housing values – and politicians continually push homeownership for the average American.  This has been a common theme going back to the 1920s (see an example from 1931). To put it bluntly, it helps secure votes. Second is the role of residents themselves who continue to want both outcomes. Policy, particularly at the federal level, is important here and a number of scholars have noted how decisions about mortgages and urban renewal privileged homeownership in the suburbs. Still, numerous residents practice NIMBY behavior, resisting change once they have their secure position within the home and neighborhood they want. Given the amount of money required to buy a home – it is the biggest single investment many people will make – this is understandable but it certainly doesn’t help others.

Both of the proposed solutions above are difficult to pull off. Using public money for public housing or affordable housing has been opposed since the early 1900s. Having mixed use and mixed income neighborhoods may be popular with some (New Urbanists, young people moving to the city) but it doesn’t get the same level of support from the broader public. To have housing for all or many would mean giving up some on the idea of housing as investment but those with more means – from the middle class on up – will not like this idea one bit.

State of emergency over increasing homeless population in LA

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The city of Los Angeles is trying to respond to a rise in homelessness:

Los Angeles recently declared a state of emergency over the city’s growing homeless population – up 12% in two years. Residents of the city’s main homeless encampment say a mix of drugs and rising rents are driving the problem…

At the last count there were 44,359 homeless people in Los Angeles County and 25,686 in the city itself, according to the Los Angeles Homeless Services Authority (LAHSA), an agency set up in 1993 to find a solution to the problem…

“Affordable housing in LA is almost non-existent,” says Mr Smith who points to recent data that suggests that the average two-bedroom unit in the city now costs more than $2,600 (£1,700) per month to rent…

“We have become a city of shanties,” says Mr Bonin, noting that homelessness has not only increased by “a whopping 12%” over the past two years but is now spreading out across the city…

Declaring a state of emergency could make it easier to find homes for residents by easing some housing restrictions and fast-tracking permits for more affordable housing.

This is a consistent issue in many American cities though few present the contrast of a glittering city – skyline, money, Hollywood, attractive weather, beaches – quite like Los Angeles. Imagine the view from afar: the same place that is home to Hollywood can be so close to skid row?

The issues here seem to be one that tend to come up in discussions of homelessness: a lack of positive ways to deal with drug use and a lack of transitional or permanent housing. It is interesting to think how the particular issue of homelessness intersects with these two other issues. Does it take an increase in homelessness for people to seriously think about affordable housing in the Los Angeles region? And what exactly does it take for a city to declare a state of emergency in this area (a certain percent increase, a total number of homeless, a certain number of other residents irritated or inconvenienced)?

My prediction: courts and SCOTUS would rule in favor of inclusionary zoning

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Opponents to inclusionary zoning laws are hoping their case makes it to the Supreme Court:

Developers in California are taking their fight against the state’s inclusionary zoning laws to the U.S. Supreme Court, just as cities across the nation are increasingly committing to similar laws to address affordable housing shortages. The California Building Association opposes the soon-to-kick-in law mandating that developers discount a percentage of units in new housing projects for low-income families. They claim it constitutes an illegal “taking” of private property by the government and hope that SCOTUS justices will agree with them

California’s Supreme Court rejected this argument in June, pointing to an affordable housing crunch of “epic proportions” as the compelling reason for the law. The supply of housing that families of modest income can actually afford is so low that advocates in San Francisco are considering suing the suburbs to intensify density.

But the California developers say that forcing them to build below-market-rate units as a condition of obtaining building permits amounts to extortion. Developers in Chicago are also making this argument, and have similarly filed a lawsuit against the city’s inclusionary zoning laws. In California, the homebuilders are also challenging the idea that there is a connection between new housing construction and affordability. In an interview with CityLab earlier this month, Steve Joung, CEO of Pangea Properties, a company that rehabs old buildings into new moderately priced housing, said there is a connection—but not the one that inclusionary zoning proponents would favor…

If SCOTUS agrees to review the California case, however, it could slow momentum around such plans. And if SCOTUS ends up agreeing with the developers, it could drastically change the current calculus around how to increase the supply of affordable housing.

Though it is hard to know whether this would actually reach the Supreme Court, I predict the developers will lose in court. I anticipate this result due to two reasons:

  1. The United States has few other mechanisms for addressing affordable housing even as it is a pressing issue. The free market clearly does not work. The federal government doesn’t want to provide much housing. Non-profits or community groups can only provide so many units. For decades, there has been little incentive for developers or communities to provide cheaper housing. In contrast, they can make more money with more expensive housing units and promote and/or protect a higher social status.
  2. Prior court cases have determined that developers can be made to provide other things to local governments in order to be able to build. For example, Naperville was a pioneer in the 1950s in having developers pay for some infrastructure (sewers, roads, etc.) and then several decades later asking for donations of land or cash to help build schools. Both decisions were fought in court by developers and the courts ruled in favor of the municipality. Additionally, other decisions have gone against exclusionary zoning practices that try to promote bigger lots and more expensive housing units.

This will be interesting to watch.

Suing Bay Area suburbs to provide denser housing

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Changed plans for a new development in Lafayette, California have housing advocates looking to sue the suburb:

The California Renters Legal Advocacy & Education Fund has launched the website Sue the Suburbs to bring attention to the situation in Lafayette. The site is also set up to find people who could have rented one of the 315 apartments from the original housing plan, had it been approved. If the group can successfully find plaintiffs, this could be the opening salvo for potential legal action against other Bay Area cities to force them to kick in to help house the region’s explosive population growth…

Lafayette is a “semi-rural” town looking to stay that way. It actually lost 15 residents between 2000 and 2010. During that period, the number of renter-occupied housing units dropped significantly from 2,128 to 1,186 units. Meanwhile, Lafayette’s white population also dropped, from 86.8 percent to 84.7 percent, while its Latino population rose from 4 percent to 5.8 percent. The black population was mostly static at less than 1 percent over the 10-year period.

In 2013, the city outlined a number of reasons for its opposition to the apartments based on its general plan for land use. One of those: “The character and pattern of the proposed development is unprecedented in Lafayette and not compatible with the residential neighborhoods in the vicinity of the project, which are characterized by one-and-two story residences fronting on a network of residential streets.”…

Those amenities will fulfill Lafayette’s needs, but they leave the Bay and San Francisco hanging. The Association of Bay Area Governments set goals for new housing production for each municipality in the region, called the Regional Housing Needs Allocation, to accomodate population growth. Lafayette built just 65 percent of its goal between 2007 and 2014. Actually, none of the Bay Area counties are pulling their weight in the housing plan.

This highlights how affordable housing is an issue for all of metropolitan regions to address. Many wealthier areas, whether neighborhoods in large cities or suburban communities, are unlikely to promote affordable housing on their own. Even when studies suggest affordable housing won’t lower property values, these communities are worried about their quality of life – which also can be seen as code for not wanting certain racial/ethnic groups or poorer residents to move in.

Yet, most regions do not have effective mechanisms for compelling metropolitan wide action. Lawsuits are one route to go with a long history: see the Gautreaux case in Chicago or the Mount Laurel case in New Jersey as notable examples. Other options including combining city and county governments and developing metropolitan wide bodies with the ability to enforce regulations. None of these routes are particularly easy as many residents of wealthier areas did so in order to retain local control.

And if all the Bay Area counties are behind in promoting affordable housing, perhaps this lawsuit is only the beginning…

How to get wealthier communities to accept affordable housing

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This article discusses two tools to promote affordable housing in wealthier communities: regulations and lawsuits.

But Massachusetts has a work-around: A state statute, called 40B, allows developers to get around exclusionary zoning and build affordable housing in communities where only a small percentage of units are considered affordable. (A few other states have similar policies.) The statute, passed in 1969 and upheld by the state’s Supreme Judicial Court in 1973, has led to the construction of 1,300 developments throughout the state, containing a total of 34,000 units of affordable housing, according to Citizens’ Housing and Planning Association, or CHAPA.Projects built under 40B are almost always controversial: The statute was enacted in the first place because most communities outside of big cities didn’t permit multi-family housing, said Ann Verrilli, the director of research at CHAPA. Even with the statute, communities often spend millions of dollars in legal fees to try and stop the projects, Verrilli told me…

The experience of developers trying to build affordable housing in Massachusetts takes on added significance now, as housing advocates wait for a decision on a landmark case in front of the Supreme Court that concerns where low-income housing projects are placed. The case, Texas Department of Housing and Community Affairs v. The Inclusive Communities Project, arose when a nonprofit housing group sued Texas, arguing that the state primarily distributed tax credits for low-income housing projects in minority-dominated areas. Inclusive Communities argued that doing so perpetuated segregation and violated the Fair Housing Act, which was passed in 1968 to prevent landlords, municipalities, banks and other housing providers from discriminating on the basis of race. The Supreme Court case centers on whether this discrimination has to be intentional in order to be illegal, or whether the Fair Housing Act also seeks to prevent policies that may not be intentionally discriminatory, but that have a “disparate impact” on minorities…

Many affordable housing units in the suburbs are a direct result of court cases, and even enforcement of those programs are lax. In 2009, Westchester County in New York signed a desegregation agreement and agreed to build and market hundreds of apartments for moderate-income minorities after a court found it had misled HUD by applying for funds that it said it would use to integrate housing, and then did the opposite. Four years later, the county had not complied with the provisions.

The shift from discriminatory race-based housing policies to economic ones in the 1960s and 1970s was an important one. I suggest reading David Freund’s Colored Property: State Policy and White Racial Politics in Suburban America. This is the logic still used today: better off residents argue that they worked hard to get to their higher quality of life and that others should have to do the same. But, since race/ethnicity and social class are inextricably linked, keeping out the lower classes through big lots, expensive properties, a lack of apartments, and other methods leads perpetuates residential segregation.

Two other relevant points from this article. First, affordable housing in the suburbs can be done well through good design and not high levels of concentration. Second, given the resistance to such projects as well as design guidelines that are helpful, still nowhere near enough affordable housing has been constructed. In one sense, the foot draggers of wealthy communities are winning because they have slowed down a process started by the courts in the late 1960s (the Gautreaux case) and 1970s (the Mount Laurel case). Plus, the wealthy can move easily if their properties are threatened.

New York City’s public housing bind

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While many cities like Chicago demolished public housing high-rises with federal money, New York City did not do so to the same degree. That means there are public housing issues lurking in the near future:

But now New York City is in a bind. It didn’t have to tear down its high-rises under HOPE VI. But it also didn’t receive federal funding to improve its public housing, as HOPE VI recipients did (in the first decade of the program, the government dispersed $5 billion through HOPE VI). Now, NYCHA is left trying to figure out how to maintain decades-old buildings and reduce the number of people on the waiting list for public housing, all as federal funding for public housing continues to drop.

Popkin, with the Urban Institute, worries that this means that certain high rises in New York’s public-housing system are becoming as bad as the worst projects initially targeted in HOPE VI. Brownsville, in Brooklyn, is now the largest concentration of public housing in the country, for example. Brownsville also has the lowest median household income in New York City. In many other areas of the country, an area of one square mile of public housing would not be allowed to exist anymore. In New York, it still does, even as violence worsens and gangs take over. And the city doesn’t have the funds to change that, let alone improve other public housing buildings.

Public housing in New York City hasn’t received as much attention from scholars and the press as it has in other cities – particularly compared to Chicago. Perhaps this is because the situation was never quite as bad, whether due to lower levels of isolation (as noted in the article) or because the NYCHA was better managed than the chronically mismanaged Chicago Housing Authority. Or perhaps the urban sociologists in NYC focused on other topics. Or maybe the glittering portions of New York City are overwhelming – don’t forget the current luxury construction boom in the city.

In the long run, New York City is not immune to the same issues of inequality and a lack of affordable housing that many major cities face. If the city wants to avoid facing bigger problems down the road, it would be prudent to take action on housing now.

How big investors buying up properties may be limiting cheaper housing

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The economic crisis opened up space for bigger housing investors yet here is one argument about how their actions may be limiting the supply of cheaper housing:

A recent article in the Wall Street Journal highlighted how some investors are using algorithms to quickly parse housing data and formulate bids on undervalued properties, site unseen. While doing so is a cool technological feat, it can spell trouble for normal people trying to navigate the often complex home-buying process in order to make offers on similar homes. And algorithms aren’t the only benefit that more sophisticated investors have. “Investors are winning over the first-time buyers in some bidding processes because investors are all cash,” says Lawrence Yun, a chief economist at the National Association of Realtors. For a seller that means a smoother deal: no waiting around on financing, loan approvals or other inconveniences that traditional buyers bring to the table.

For their part, some investors contend that the homes they purchase don’t put them in direct competition with first-time buyers. Invitation Homes, an investing and leasing company owned by Blackstone says that they typically funnel another 10 to 12 percent of the purchase price into renovations in order to make a property market-ready—an investment that most first-time home buyers wouldn’t be able to afford. Many investors also contend that compared to the number of homes that are bought and sold nationwide, their activity is just a drop in the bucket.

When looking at the big picture, that’s true. Nationwide, large institutional investors made up only 4.3 percent of the single-family home purchases in the market during 2014, according to RealtyTrac a real-estate data firm. And overall investment activity is dwindling as home values return to normal and there are fewer deals to be had. Dallas Tanner, the chief investment officer at Invitation Homes says that the group currently buys about $25 to $30 million a week of single-family properties, that’s down from their 2012-2013 peak when the group spent upward of $160 million each week.

But like all things in real estate, it’s also a matter of location. Lots of investor activity is concentrated in markets where homes are still available at reasonable enough prices that purchasers can turn a profit. According to a February 2015 report from RealtyTrac, “There were 35 zip codes nationwide where at least 50 single-family homes were purchased by institutional investors in the fourth quarter, with institutional investor purchases representing from 17 percent to 74 percent of all single-family home sales in those zip codes.” Places like: Atlanta, Phoenix, Las Vegas, and Memphis. Those are also places that first-time buyers have the best bet of stretching their dollar far enough to purchase a home. Herbert, of the JCHS, says that that in some places, developers may in fact be pushing out normal home buyers, “For certain property segments, they may be creating competition.”

Even as the higher end of the housing market does well (see recent evidence here, here, and here), any impediment on the lower end of the market isn’t helping these days. With developers not showing much interest in building starter homes, these institutional investors may be grabbing up homes that those who want to join the housing market – whether recent college graduates or those working lower-income jobs – would need to get their foot in the door.

So if Americans – from politicians to average citizens – want to push homeownership, are these institutional investors good for this in the long run?

What is the goal of Naperville’s first housing expo?

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Naperville will host its first housing expo this Saturday:

The new event is an effort to provide answers for people with all types of housing needs, said city spokeswoman Linda LaCloche. Help for buyers, renters and seniors usually is spread out among several agencies…

The DuPage Homeownership Center, BMO Harris Bank, Naperville Bank & Trust and the Main Street Organization of Realtors are the city’s main partners in the event, which will present resources from 19 agencies or businesses including banks, real estate agents, lawyers, home remodelers, title companies and insurance agents…

The 9:15 a.m. session will cover the money side of buying a house including topics such as financing, credit, grants, incentives, homebuyer assistance, budgeting and avoiding foreclosure…

A panel at 10:15 a.m. will cover home maintenance and tips for seniors to stay in their homes. How to choose a contractor, how to avoid scams, how to use programs that help pay maintenance costs and which types of repairs require city permits all will be discussed.

A final session at 11:15 a.m. will discuss the rental responsibilities of landlords and tenants. Members of the city’s housing commission, who helped plan the new event, will lead the session and share information about Naperville’s crime-free housing program. The city council could extend the voluntary program or make it mandatory.

It is not immediately clear the purposes of this event. The city suggests this is about providing information regarding housing needs. But, only certain groups are targeted – those who want to buy homes, seniors, renters and landlords – as I don’t see much information about affordable housing or dealing with teardowns or having good interactions with neighbors (as possible examples). If I had to guess, this sounds like more of an event promoting homeownership. This makes sense in a community like Naperville that is relatively wealthy but it doesn’t exactly promote a full range of housing issues.

Scatter-site public housing also won’t work in providing affordable housing?

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Megan McArdle argues neither concentrated public housing or scatter-site public housing can effectively address the issues of affordable housing:

And so here we are: The government simply has relatively little power to create more affordable housing in the face of massively increasing demand for homes in desirable cities like Washington, New York and San Francisco. It can create some units that will benefit a few people. It can slow the process of gentrification a bit. But the dream of adding all those new, affordable-housing-advocating, affluent young people to the city, while allowing the former residents to stay in place, seems to me to be just that: a dream. A nice dream. But still a dream, which like all dreams will eventually evaporate as reality overtakes it.

McArdle suggests the economic and political realities are too tough for affordable housing to do well and to limit gentrification. I would also suggest that this hints at the ongoing influence of race and class. While this could be spun as the result of economic laws (supply and demand) and politics (certain urban residents have more of a political voice and ability to influence decision-making), race and class underlie much of this. Who are the people who live in affordable or subsidized housing? Who are the people who tend to live in more exclusive communities or who are doing the gentrifying? These patterns of race and class are much broader than just the hot neighborhoods in major cities; they influence many of the settlement patterns across the United States.

Despite the pessimism here, this also means there is a big opportunity to figure this out. Are there contexts where affordable housing on a big enough scale works? Places where race and class matter less? Methods where both protecting property rights and providing for those with resources can coexist?

Suburbanites who don’t like proposals for affordable housing in the Twin Cities region

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The Metropolitan Council for the Minneapolis-St. Paul region is working on plans for affordable housing but a number of suburbanites are not pleased with where the affordable housing might go:

The Met Council sees a growing problem. Its own newly available data suggest that annual production of affordable housing has dropped by hundreds of units since 2010, even as market-rate housing has rebounded.

An advance peek at the Met Council’s proposed goals, to be released late Monday, shows that communities considered to be prime locations for adding affordable units include upper income suburbs, such as North Oaks and Eden Prairie, and cornfield’s-edge fringe communities such as Minnetrista and Lake Elmo…

The target numbers — released this week for public comment, with adjustments possible from now to July — are part of a once-per-decade planning process that will begin in every city this fall. Each must start to figure out how to accommodate the additional units.

The Met Council is under heavy fire for allegedly pushing too much affordable housing into areas with plenty of it already, intensifying concentrations of poverty and perpetuating racial segregation in the Twin Cities.

It will be interesting to see how this plays out. The region has a history of metropolitanization, a rare occurrence in American cities, as well as an openness to immigrants, yet advancing affordable housing units in middle- to upper-end suburbs may be going too far. As some of the suburbanites in the article note, they moved to these communities to escape issues like this. But, the quality of life concerns they tend to express (good school, low crime, sense of community) seem to be inextricably linked with race/ethnicity and social class. Just a reminder that part of the benefits of having money in the United States is that one can move to such a place that insulates you against interacting with others.