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Category housing

what about singles?

Both smart growth supporters and sprawl apologists focus on the needs of families with children: sprawl defenders argue that only suburbia can accommodate the desires of parents, while some smart growth types argue that cities should require lots of two- and three-bedroom units downtown because families need a lot of space. But a current exhibit at the National Building Museum in Washington suggests that this focus is a bit misguided.  The exhibit points out that nearly 30 percent of U.S. households are singles living alone.  Judging from all the planning-media blather about families, one might think that the housing market is focused on their needs, and that 30 percent or even more of the housing stock consisted of single-sized units. But the exhibit points out that in fact, less than 1 percent of housing units are studios, and about 12 percent are one-bedrooms.  So family-oriented units are in fact overrepresented in the housing stock. Larger units may  not dominate downtown, but they start to dominate pretty close to downtown.  For example, when I looked at zillow.com I discovered that downtown Pittsburgh is dominated by one-bedroom units, but in zip code 15203 just south of downtown, 3/4 of housing units available for rent or sale have two or more bedrooms, including 80 out of 115 rental apartment listings.    In zip code 15202 just northeast of downtown, 34 of 60 rental apartment listings, and 71 percent of all rental listings have two or more bedrooms. Of course, Pittsburgh is a pretty family-oriented city.  But even in Washington’s 20036 zip code (a wealthy downtown neighborhood) 1/3 of all listings are for two or more bedrooms.  And if you go just two subway stops north to Cleveland Park (zip code 20008) 108 out of 174 listings have two or more bedrooms. What about […]

new report on SROs

Once upon a time, New York City’s poor single people were usually not homeless because they lived in little apartments with shared bathrooms and kitchens.  These units are called “single room occupancy” (SRO) units in plannerese. (When I was young, people used less flattering terms such as “fleabag” and “flophouse” to describe the nastier SRO buildings). What happened?  Why are so many people sleeping on the streets of Midtown?  A recent paper by NYU’s Furman Center partially answers the question, by discussing the obstacles to SRO construction.  For decades, New York’s housing law has made SROs almost impossible to build, in a variety of ways:  By flatly outlawing SROs, unless they are built with government or nonprofit involvement Through anti-density regulations that limit the number of dwelling units in a building; Minimum parking requirements (though these are an issue primarily in the outer boroughs). The paper recommends allowing market-rate SROs, limited density deregulation, counting SRO units as affordable housing for purposes of the city’s inclusionary zoning ordinance, exempting SROs from minimum parking requirements, and government subsidies for SROs.  

Density Is How the Working Poor Outbid the Rich for Urban Land

multifamily housing

The great failing of modern land-use regulation is the failure to allow densities to naturally change over time. Let me explain. Imagine you are trying to sell a property you own in a desirable inner suburban neighborhood in your town. The lot is 4,000 square feet and hosts an old 4,000 square-foot home. There is incredible demand for housing in this area; perhaps the schools are good, or the amenities are nice, or the neighborhood sits adjacent to a major jobs center, meaning that residents can walk to work. I’ll leave the reasons to you. Who do you sell it to? You have at least two options: First, you could sell it to a wealthy individual, who would use the entire property as his home. He is willing to pay the market rate for single-family homes like this, which in this case is $300,000. Under current financing, he would likely have a monthly mortgage payment in the ballpark of $1,300. Second, you could sell it to a developer who intends to subdivide the house into four 1,000 square foot one-bedroom apartments, renting each of them at a market rate of $500 to service workers who commute to downtown. After factoring in expenses, her annual net operating income would be around $20,160. Assuming a multifamily cap rate of 6.0.%, this means that she could pay up to $336,000 for your property. Based on this analysis, who do you sell it to? The answer is obvious: you will sell it to the multifamily developer who will subdivide and rent out the house, not necessarily because you’re a bleeding heart urbanist, but in order to maximize your earnings. As rents in the area rise, the pressure to sell to a buyer who would densify the property will only grow. The prospective mansion buyer […]

The Rent is Too High and the Commute is Too Long: We Need Market Urbanism

Why is the rent so damn high? And why does it take hours to commute from cheap, plentiful housing to modern economy jobs? If you are living in a big city in America, you likely face this problem. And it isn’t just an American problem: From Ireland to New Zealand to The Philippines, the rent/commuting crisis is hitting the 21st century hard, right in the big cities where most of the economic growth is coming from, and where most of the jobs are. Meanwhile, in the economically blighted regions of America, everything seems to be falling apart, with lead in the tap water, crumbling roads, and municipal bankruptcy for thousands of towns and cities a very real possibility. But it doesn’t have to be this way. There are a few cities that seem to have figured out how to match a futuristic tech economy with futuristic transit and housing for the masses. And there are many small towns around the world that don’t face insurmountable backlogs of infrastructure repairs. What are they doing different? Why is the price per square foot for living space in Tokyo a third of what it is in Boston or San Francisco?  Both cities have similar incomes and geographic constraints. Why is it an enormous scandal in Japan when trains leave a few seconds off schedule, while in America it is normal for your bus or train to be an hour late or never show up at all? Chalking this up to cultural differences is an easy explanation, and may have some weight, but I submit that the underlying laws of human economics do not vary based on culture, and there is much that we can learn from looking abroad. For Americans, the story begins in the nineteenth century when most of the country’s infrastructure […]

High Rents: Are Construction Costs the Culprit?

(cross-posted from planetizen.com) I have argued numerous times on Planetizen that increased housing supply would reduce rents. I recently read one counterargument that I had not fully addressed before: the claim that no amount of new housing will ever bring down urban rents because housing in high-cost, high-wage cities is expensive to build.* This argument rests on two assumptions: (1) that construction costs are the primary reason some cities are more expensive than others, and (2) if new housing is expensive, the median citywide rent will be equally expensive. I find neither assumption to be persuasive. Admittedly, expensive cities do tend to have higher construction costs than more affordable costs—but this gap is far more modest than the gap in housing costs between high-cost and low-cost cities. For example, a study by the design firm EVStudio showed that the construction costs for a small apartment building in New York City were only about 30 percent higher than the costs of a similar building in Kansas City ($232 per square feet in New York, $181 in Kansas City). But rents in New York are far more than 30 percent higher; I pay about $5 per square foot for my Manhattan apartment, but paid just over $1 per square foot for a roughly comparable apartment in Kansas City (i.e., a doorman building in a fashionable intown neighborhood). Similarly, the Lincoln Institute’s land price database reveals that regional differences in construction costs lag behind differences in land costs: for example, construction costs in San Francisco are only about 60 percent higher than construction costs in Kansas City, but the median San Francisco-area house costs seven times as much due to differences in land costs. Thus, construction costs are not the main reason some cities are more expensive than others.** Moreover, the suggestion that high construction costs for new buildings mean high […]

Does Density Raise Housing Prices?

My last post, on urban geographic constraints and housing prices, led to an interesting discussion thread.  The most common counter argument was that because dense cities are usually more expensive, density must cause high cost.  But if this was true, cities would become cheaper as they became less dense. Most American urbanized areas have become less dense, not more, over time due to suburban sprawl.  Even where city populations have grown, much of that growth has been in areas that where undeveloped a century ago.  Thus, the developed part of even growing cities were, I suspect, more dense in 1917 than than they are today: for example, Manhattan’s population peaked at 2.3 million in 1910, about 40 percent more than its current population.   So rents should have come down.  Did they? Apparently not.  The Census date has statewide data showing that rents rose pretty much everywhere in real terms over the late 20th century.  In the District of Columbia, real rents increased from $346 to $612 in real dollars between 1950 and 1990, even as the city was losing population and the region was de-densifying.  If Washington is typical, it appears that lower density and higher rent went hand-in-hand.

Urban[ism] Legend: The “Geographically Constrained Cities” Fantasy

geographic constraints

One common argument against building new urban housing is that cities are geographically constrained by their natural and political boundaries, and thus can never build enough housing to bring prices down.  This claim rests on a variety of false assumptions. The first false assumption is that the amount of land in a city limits the amount of housing in that city.  If you assume that every bit of residential land must be occupied by single-family houses on 1/5 of an acre on land, I suppose this assumption makes sense.  But in reality, you can always put more people on a block of land.  Where today you have big houses, tomorrow you could have small houses.  Where today you have small houses, tomorrow you could have small apartment buildings.  Where today you have small apartment buildings, tomorrow you could have large apartment buildings.  Even in midtown Manhattan, where I live, there are lots to two-to-four story buildings that could be knocked down and replaced with larger buildings.     If Manhattan had the density of Mongkok (a popular Hong Kong neighborhood with 340,000 people per square mile), it could accommodate almost 7 million people- about 80 percent of the city of New York’s population.*  And if Manhattan had enough housing to accommodate Mongkok-type densities, a whole lot of housing units (either outer borough units or older Manhattan units) would become vacant, causing rents to plunge. The second assumption is that a city’s built-up core is its entire housing market.  But this is wrong, because Manhattan landlords compete not just with each other, but with landlords in the outer boroughs and the suburbs.  So if enough housing units were, for example, built in New Jersey, demand for housing in Manhattan would eventually decrease.   *A common counteragument is that demolishing and rebuilding housing […]

Exempting Suburbia: How suburban sprawl gets special treatment in our tax code

Our tax code favors suburbia. Homeownership, greenfield development, and sprawl receive preferential tax treatment, and the market responds to incentives built into the code. As a result, a disproportionate amount of capital flows to those investments. In many cases, it has been an unintentional side effect of pursuing other goals. The combined effect is that our tax system plays a huge role in shaping our communities. Its influence is an important factor to understanding how residential design in the US became what it is today.

Financing Suburbia: How government mortgage policy determined where you live

The government exercises tremendous power over residential design in the US. Its influence is nearly invisible, because it works through complex financing programs, insurance incentives, and secondary markets. These mechanisms go unnoticed, but their effect is hard to miss—they remade the United States into a nation of sprawling suburbs. This is the second post in a series about government policies that encouraged suburban growth in the US. You can find the first post here. What image springs to mind when you picture “federally subsidized housing”? Most people imagine a low-income public housing tower, a homeless shelter, or a shoddy apartment building. Nope—suburban homeowners are the single biggest recipient of housing subsidies. As a result, suburbs dominate housing in the United States. For decades, federal finance regulations incentivized single-family homes through three key mechanisms: Insurance, National mortgage markets, and New standards for debt structuring The housing market hides these details from the typical home buyer. As a result, most people are unaware of these subsidies. But their effects are striking—they determined the location and shape of development across America for generations. A New Deal to restore the housing industry Debt has a negative connotation these days. Credit cards, student loans, and auto loans are the anchors that keep many Americans in debt for most of their life. Meanwhile, we view mortgages very differently—they are seen as an investment, a symbol of adulthood, and a sign of financial stability. This was not always the case. In the early 1900s, mortgages were just like any other kind of debt. Nowadays payments are spread out over decades, but back then they came due all at once after a few years. Most people didn’t have enough cash at the end of the term. It was standard to pay back some and negotiate a new loan for […]

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