Micro-housing that is too expensive to solve the problems of affordable and sustainable housing

Micro-housing may lead to some cool design opportunities but it may not solve important problems: providing more affordable and sustainable housing.

Which is, of course, the problem with zeroHouse: Nobody needs micro-housing in places where plots of prairie, mountain, and sea (!) are available in plenty.

Now, the zeroHouse might not be designed for the urban dweller at all. Several of the home’s signature features seem as though they’re meant for another type of buyer altogether. The design specs note that the house is entirely secure, with tempered “Sentry-Glass” windows, Kevlar-reinforced doors, and fully mortised locking systems. (Shocking that a house that looks like a Transformer could double as a bunker!)

Given the design features, land-parcel requirements, and other aspects of the building’s design—it can go into an energy-conserving “hibernation” mode for extended period of times—zeroHouse sounds like it might be better suited for Cliven Bundy country than for downtown infill construction. But then, that Manhattan Micro-Loft isn’t a much better model for addressing the lack of affordable housing in major U.S. cities.

I don’t mean to pick on Specht Harpman Architects, a New York- and Austin-based firm that’s mostly in the business of designing interiors and elegant single-family homes. Tiny-house offenders are everywhere, from the pages of any shelter magazine to the real-estate section of the New York Times, where per-square-foot costs and land allotments are out of sync with what (say) most New Yorkers need from micro-housing.

From what I’ve seen, much of the interest in tiny houses is driven by two market segments: (1) architects, designers, and other creative types who relish a new puzzle (how do you fit a lot of desirable features into a smaller amount of space) and (2) “downshifters” (to borrow a term from sociologist Juliet Schor), people deliberately trying to limit their consumption by limiting their living space as well as how much stuff they can accumulate.

Of course, there are some interested in micro-housing for its ability to address affordable housing and sustainability issues but several things still hold the micro-housing market back: zoning issues, a lack of large-scale building of these units thus far which would make them appear more normal and more practical to build with economies of scale, and price points that may not be cheap enough for the affordable market.

Manhattan population increasing, affordable housing decreasing

One of the wealthiest areas of the world continues to see a decrease in affordable housing and the population keeps going up:

The latest estimates put the population at more than 1.6 million people, up slightly from the 2010 census.

According to NYU’s Furman Center, in the last year alone, Manhattan lost nearly 3,000 rent-regulated apartments…

In many cases, those stabilized, often affordable homes are being replaced by “market rate” units.

From 2002 to 2012, the number of stabilized or controlled apartments in the borough plunged more than 19 percent. The number of “market” rate and ultimately significantly more expensive apartments soared more than 19 percent…

Nearly 29 percent of the borough’s population is foreign born, but experts say the wave of change could drive that number down even in traditionally immigrant neighborhoods.

“It doesn’t happen all at once; what happens is that neighborhoods change in pieces,” says City College of New York Sociology Professor William Helmreich.

The wealth flowing through Manhattan is incredible so it is little surprise that real estate prices are going up. This isn’t a phenomenon limited to Manhattan: the ultra-wealthy are developing and buying real estate in numerous big cities like London and Miami. The bigger issue is what happens to these cities. Do they become primarily the province of the wealthy or is there still space for average residents and immigrants? This discussion or struggle has been illustrated in recent years in San Francisco where actions by tech companies to bus employees to Silicon Valley has been met with resistance. The answers are not easy as many politicians need to keep and attract the jobs and wealth that help keep the city coffers full as well as look attractive to other firms. In other words, it is hard to fight growth machines.

Sociologist suggests three strategies for combating rural decline

A sociologist suggests rural communities can pursue three strategies to help them thrive in future decades:

Winchester, a sociologist and analyst of demographic changes, for years has battled against the narrative of rural decline. He argues although the percentage of Americans living in rural areas has been declining, contrary to some notions, the number of rural Americans has been rising, at least until very recently…

One is immigration. Any number of communities have seen school enrollments grow and Main Streets prosper and parks fill again with kids with the arrival of immigrants.

A second is to hang on to new retirees, particularly by paying attention to their housing needs.

Rural boomers want townhomes and condos and apartments just like urban counterparts. If those desires aren’t satisfied, they’ll move and take their Social Security payments out of the community. Those federal transfer payments amount to a fifth of the income in many rural communities, Winchester said, far surpassing the importance of agriculture.

And related to the boomers’ housing needs is an opportunity to appeal to the millennial generation. Winchester thinks housing will become more available in rural areas as boomers move, providing in turn affordable housing for young people priced out of the urban market.

This would seem to capitalize on three potential areas of growth. However, I imagine these factors are related to other factors that might be more difficult to find in rural areas:

1. A broad range of good-paying jobs.

2. A broad range of amenities and businesses.

3. A relative lack of social services.

4. A relative lack of walkability or public transportation options.

Yet, rural communities have the potential to try some new strategies. As Robert Wuthnow noted, small towns are not dead just yet.

Those with above-average economic power can’t help but be gentrifiers?

One public policy student suggests it is really hard for those with economic advantages to avoid being gentrifiers, even when they don’t move into up-and-coming urban neighborhoods:

But it’s worse than that: it doesn’t even matter where you live. Moving to a higher-income neighborhood – one where market and regulatory forces have already pushed out the low-income – means you’re helping to sustain the high cost of living there, and therefore helping to keep the area segregated. You’re also forcing lower-income college graduates to move to more economically marginal areas, where they in turn will push out people with even less purchasing power. You can’t escape the role you play in displacement any more than a white person can escape their whiteness, because those are both subject to systemic processes that have created your relevant status and assigned its consequences. Among the classes, there is no division between “gentrifiers” and “non-gentrifiers.” If you live in a city, you don’t get to opt out.

The upshot here is not that we should all descend into nihilistic real estate hedonism. But we need to recognize what’s really going on: that what we call “gentrification” these days is only one facet of the much larger issue of economic segregation. That people get priced out of the places they already live in is only half of the problem. The other half, which affects an order of magnitude more people, is that people can’t move to the neighborhoods to which they’d like to move, and are stuck in places with worse schools, more crime, and inferior access to jobs and amenities like grocery stores. That problem is easier to ignore for a variety of reasons, but it’s no less of a disaster.

And all this, in turn, is the result of a curiously dysfunctional housing system – one that’s set up to allow market forces to push up prices without regard for people who might be excluded, and to prevent market forces from building more homes and mitigating that exclusion.

The emphasis here is on the system: people with more economic resources have more opportunities to move where they want and the capital tends to be or go where they go. A few other thoughts:

1. This reminds me of the book Colored Property which argues a key shift took place in the 1950s and 1960s as white homeowners started arguing for their economic, rather than race-based, rights. Thus, buying a nice home in a nice white neighborhood wasn’t about avoiding blacks or other minorities; it was about taking advantage of one’s own hard work and protecting one’s property values. These are the same justifications underlying the system today: people with more resources argue they should be able to move to nice places and have nice amenities. But, this comes at the expense of fewer resources in other places.

2. Students often ask me what they can do about issues of poverty and social injustice. I try to inform them about these systems as well as tell them that one of the bigger choices they will have to make after graduating is choosing where they live. Should they as relatively wealthy Americans with cultural capital simply chase nice amenities, high property values, and a secure and high-paying job overall? Or, could they choose to contribute to and learn from other kinds of places?

Rare: urban Millennial claims to miss the suburbs

This is not a piece from The Onion but rather a story at Atlantic Cities: a Millennial discusses why she thinks the grass may be greener in the suburbs.

I’m one of the thousands of Millennials who make up this new urban demographic. I left the comforts of Eden Prairie, Minnesota — a suburb of the Twin Cities and a community that has consistently been ranked one of the best small towns in America — for New York City. And while my move to New York was the right decision for a variety of reasons (or so I keep telling myself), I often wonder if the grass might indeed be greener—both literally and figuratively—had I stayed in the suburbs.While we’re on the subject, let’s talk about green space. Multiple studies have tracked the social, cultural, and emotional assets green spaces bring to a community, including mental health benefits and reduced rates of gun violence. While cities such as New York and Philadelphia have made tremendous gains in creating new and better public spaces in recent years — former New York City Mayor Michael Bloomberg presided over the biggest program of park building since the 1930s — too many urban communities are still “park deserts” compared to their suburban counterparts.

Another area where suburbs often trump cities is in the quality (or lack thereof) of their public schools. From the mass closing of public schools in Chicago to the “dizzying, byzantine system” eighth grade students and their parents go through to select a public high school in New York City, it is as hard as ever—if not harder—for parents to find quality public education for their children in large American cities. And this particular reality seems especially stubborn: students from suburban communities are more likely to graduate high school and go on to higher education than their urban counterparts, which of course in turn makes them more likely to get well-paying jobs as adults.

But the number one way the suburbs beat the city, especially for young people, is in affordability. After living in both Washington, D.C., and New York City, I can safely say that affording basic human necessities, such as shelter and sustenance—not to mention having a little fun here and there—is much cheaper outside of the city center. When paying $1,000 per month to share an apartment is a “good deal,” and when you don’t think twice about spending $14 for a single cocktail, what chance does a young city dweller have to actually save money? Not all cities are as insanely expensive as Washington and New York (Philly! Baltimore! Portland!), but when the mortgage on a spacious, four-bedroom home rivals the monthly rent of a cramped one-bedroom apartment, there really is no competition.

These are common arguments for the suburbs through American history back to the founding of some of the earliest suburbs in the mid-1800s: they provide green space and more nature, the ability to avoid “urban issues” like underperforming schools, and affordable housing compared to dense cities.

I have to wonder if her perspective is skewed just a little bit by growing up in Eden Prairie. As she notes, this is a community often marked as one of the nicer American suburbs. Not all suburbs are like this as they range from inner-ring suburbs adjacent to big cities to industrial suburbs to edge cities with lots of jobs to more exurban areas with bigger lots. Not all suburbs would have these three traits she claims are most important and others may offer features she does not discuss. On the whole, her arguments about the merits of the suburbs may be marked by a particular higher-end experience of American suburbs.

In first half of 2013, roughly 20% of Chicago area home purchases by institutional investors

A good portion of the homebuying activity in the Chicago region during the first half of 2013 was driven by institutional investors:

Chicago home prices climbed 11 percent in November from a year earlier, the biggest jump in almost a quarter century, according to S&P/Case-Shiller data. While gains are slowing across the country, the Windy City was one of nine areas in the group’s 20-city index to show a year-over-year increase in housing values…

Institutional investors, led by companies such as Blackstone’s Invitation Homes and American Homes 4 Rent (AMH), have bought as many as 200,000 U.S. properties in the last two years, taking advantage of real estate prices that fell as much as a third from the 2006 peak, and rising demand for rentals among Americans who lost their houses in the foreclosure crisis. Their reach has stretched from the hard-hit regions of California to small Ohio towns to the sprawling suburbs of Atlanta…

In Chicago, investors accounted for about 20 percent of purchases in the first half of last year, according to Geoff Smith, executive director of the Institute for Housing Studies at DePaul University in Chicago.

Like the portfolios of other investors, Invitation Homes’ Chicago-area holdings are mostly filled with properties in suburbs such as Barrington and Oak Park. The smattering of houses they own in the city itself is evidence that the rebound is starting to broaden. Even in some neighborhoods where prices fell more than the rest of Chicago during the foreclosure crisis, values are climbing.

The average homeowner may not pay much attention to this because at least their home values are increasing again. The Chicago area housing market has been sluggish and local media has made much of the uptick in home prices. Additionally, these investors are filling a void in the market.

But, this could lead to more questions in the long run.

1. What will these institutional investors do with these properties years down the road?

2. What happens when the Chicago market is no longer profitable for these institutional investors?

3. Does this mean that the average homebuyer has a better chance to buy a home or does this simply concentrate buying power in the hands of the already wealthy? In other words, this may not provide more affordable housing.

4. Since communities, particularly suburbs, tend to think homeowners are better community members than renters, is it a problem when so many homes are purchased with the intention of having more renters?

To improve health and cut costs, UnitedHealth spending $150 million on affordable housing

Having affordable housing is linked to better health outcomes so insurance company UnitedHealth is spending some money on affordable housing units:

The firm is taking an unusual step for an insurance company –investing $150 million to build low-income housing in a dozen states…

UnitedHealth’s big push into housing isn’t charity. The company derives benefits from it, too, including tax credits.

But Kate Rubin, vice president of social responsibility for UnitedHealth Group, says the real payoff is longer term.

“Studies show that without stable homes people are sick more often,” says Rubin. “There’s more undiagnosed illness and people are more likely to seek care in emergency rooms.”

That’s expensive for insurance companies, for patients and for the rest of us, who pay the price in higher premiums and taxes.

It will be interesting to see how many units UnitedHealth is able to construct for that kind of money. It seems like the biggest payoff would be if they are able to have sufficient economies of scale, enough units to see significant long-term returns.

This also hints at the need for affordable housing more broadly in the United States and the inability of others to construct it. Public housing in the United States is limited and has had a variety of issues for decades. Lower levels of government, whether states or metropolitan regions, or local government, have had either a hard time finding the right mix of regulation and incentives or haven’t paid any real attention to affordable housing. If few organizations are stepping up to provide or prompt public housing, perhaps insurance companies are a good bet.

Designing a McMansion that actually contains four townhouses

Check out a Fairfax County, Virginia McMansion that was intentionally built to contain four townhomes:

This is the Great House, a four-unit townhouse designed to look like a large, single-family home. Like DC and Montgomery County, Fairfax requires developers to build affordable units in new developments, but they often stick out like a sore thumb. When Carrington was being built in 2001, the county worked with builder Edgemoore Homes to help subsidized, $120,000 townhomes blend in with homes several times as expensive.

Each Great House is comparable in size to its neighbors and uses the same materials. But instead of one, 5,000 square-foot house, you have four, 1,200-square foot townhouses. Only one of the doors faces the street. A driveway runs around the back, where each townhouse has a two-car garage…

The Great House could be a particularly useful housing type as the region grows. A recent study from George Mason University’s Center for Regional Analysis estimates that the DC area will need 548,000 new homes over the next 20 years. About half of those units will need to go in the District, Montgomery, and Fairfax counties. And 60% of them will need to be townhouses or apartments…

Those things don’t really matter to neighbors who spend lots of time and effort to “maintain the integrity” of their single-family neighborhoods. But seeding their neighborhood with a few Great Houses that provide housing diversity while blending in could be a compelling alternative to building traditional apartments or townhouses there instead. Of course, they aren’t possible under most zoning laws, which only allow single-family homes in “single-family neighborhoods.”

This sounds like a fascinating compromise: help provide cheaper housing in a region that needs it while at the same time keeping the single-family home character of these neighborhoods. I wonder just how many “Great Houses” a typical suburban neighborhood could handle without social life changing or the McMansion owners complaining a lot.

I also suspect that some would argue building townhouses that look like this only perpetuates some of the problems of McMansions, including bad architecture and emphasis on sprawl and auto dependence. At the same time, a key factor in helping affordable housing succeed is that it needs to look like normal ousing so it doesn’t stand out and draw the attention of nearby residents.

Is there an invisible wall keeping $1 million homes east of Western Avenue in Chicago?

One person in Chicago real estate argues $1 million homes on Chicago’s North Side stay east of Western Avenue.

It’s as if there is an invisible wall running through the middle of Chicago, along Western Avenue all the way south of Montrose. When buyers of million dollar homes specify their search criteria they will often specify that they want to stay east of Western Avenue – or if they specify Ukrainian Village, Bucktown, Wicker Park, Roscoe Village, or St. Ben’s those neighborhoods technically stop at Western Avenue so again you are staying east of Western. And it almost doesn’t matter anyway because over the last 7 years there have been very few homes above $1 MM for sale west of Western anyway as you can see in the map below. It’s pretty dramatic isn’t it?

What could be behind this?

Well, for one you are typically getting further away from public transportation options as you move west. But then again public transportation isn’t really that much more accessible just east of Western than it is just west of Western. If you can’t walk to the el stop in 10 minutes in January you may not feel like you have good access to public transportation regardless of which side of Western you live on.

The other thing that happens as you cross Western Avenue is that you cross into a few lower income census tracts. For example if you look at the heat map from RichBlocksPoorBlocks.com you will see that there are are a few sections of Western Avenue where the median household income drops pretty dramatically as you cross the street. In the map below as the color transitions to darker green median household income goes up and as it transitions to darker red it goes down. From Fullerton to Armitage the median income is $66K on the east side of the street but $35K on the west side of the street. And from Armitage to Bloomingdale it’s $107K vs. $66K. And then from Division to Chicago it’s $67K vs. $42K.

Might this change in the future?

There is no question that eventually the area west of Western will become populated with million dollar plus homes but at that point the disparity between the east and west sides of the street may persist and the east side may just be populated with homes priced well above $1 MM. And, regardless, it looks like that day is still several years into the future. In the meantime, if you are willing to be a pioneer you can definitely find cheaper living just a couple of blocks further west.

My interpretation: neighborhoods west of Western Avenue aren’t trendy or gentrifying yet and have different demographics. In other words, there isn’t demand yet among the creative class or young professionals for nicer housing west of Western.

This could lead to some discussion about the limits of gentrification on Chicago’s north side. Just how much can it expand? What happens when it moves out of hipper neighborhoods and comes up against more lower-class or non-white neighborhoods? Right now, there are some gentrifiers who want to live on that edge between the expensive homes and poorer neighborhoods, places they might consider more gritty or authentic. But, would large numbers of people move further west? And are there enough of them? (This, of course, doesn’t even consider the negative effects of gentrification which include making housing more unaffordable, a problem in a region that needs much more affordable housing, and white residents pushing out non-white residents.)

As Chicago area home prices rise, housing affordability drops

Affordable housing is a persistent issue in the Chicago region – and the percent of affordable homes has dropped in the last four quarters:

Housing affordability in the Chicago area just took its biggest quarterly tumble since early 2005.

During the year’s third quarter, 63.7 percent of all new and existing homes sold in the area were affordable to families earning the area median income of $73,400, according to the most recent National Association of Home Builders/Wells Fargo home affordability index.

The index put the median home price in the Chicago area at $210,000.

That compares with the 70.6 percent of homes being considered affordable during the second quarter. It was the fourth consecutive quarterly slip in local affordability. This latest decline was the most dramatic since the change recorded from the first to second quarters of 2005.

While this is a shift as home prices rise, it is a reminder of the bigger issue: the Chicago area has a long-term problem with affordable housing. This is the case in the city of Chicago as well as suburban areas. This isn’t just an issue of people being able to find decent housing; it is related to businesses being able to find workers (who don’t have to travel ridiculous distances from housing they can afford), people being able to access good school districts (which are often related to higher housing values), and whether there is continued residential segregation where those of certain racial and ethnic groups can’t live in certain areas.