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What’s Wrong With Hong Kong?

One common argument against new housing is that the laws of supply and demand simply don’t apply to dense cities like New York, San Francisco ands Hong Kong, because new housing or upzoning might raise land prices.*  After all (some  people argue) Hong Kong is really dense and really expensive, so doesn’t that prove that dense places are always expensive? A recent paper by three Hong Kong scholars is quite relevant.  They point out that housing supply in Hong Kong has grown sluggishly in recent years.  They write that in the late 1980s, housing supply grew by 5 percent per year. But since 2009, housing supply has grown at a glacial pace.  Between 2009 and 2015, housing supply typically grew by around 0.5 percent per year;  in the past couple of years, it has grown by between 1 and 1.5 percent per year.   The authors note that these numbers actually overstate supply growth, because they do  not include housing that has been demolished. Not surprisingly, housing prices have grown more in recent years.  In the 1980s, housing costs increased by roughly 1 percent per year; in the past decade, costs have risen by as much as 3 percent per year. (Figure 4d).   Thus, Hong Kong data actually supports the view of many American scholars that housing prices tend to be highest in places where housing supply fails to grow.  Why is supply stagnant?  The authors point out that in Hong Kong, as in some U.S. cities, government limits housing density through floor area ratio regulations. And because Hong Kong land is government-owned, the local government can restrict housing supply by refusing to sell vacant land.  Because high land costs mean more revenue for the government, government has an incentive to sell land slowly in order to keep land prices high.  […]

Are increased levels of homeownership good for affordability? No… and yes.

For over a century, policymakers have argued that homeowners take better care of their neighborhood and are just generally more desirable in other ways.  As early as 1917, the federal Labor Department created a propaganda campaign to encourage home ownership.  And in 1925, Commerce Secretary Herbert Hoover wrote “Maintaining a high percentage of individual home owners is one of the searching tests that now challenge the people of the United States…The present large proportion of families that own their own homes is both the foundation of a sound economic and social system and a guarantee that our society will continue to develop rationally as changing conditions demand.”  In many ways, Hoover was successful.    In 1920, about 45 percent of households lived in owner-occupied housing; today, about 64 percent do. Mass homeownership might have had no negative side effects in a society in which most people live in the same house until they are dead, and as a result are not overly concerned with the house’s resale value.  But in modern America, people often hop from one house to the other, selling houses when they move, retire, or just add another child or two to their families.  And when people expect to sell their homes in a few years, they naturally want those homes to get more expensive (or to use a common euphemism, to “appreciate in value” so homeowners can “accumulate wealth”). To help achieve this goal, homeowners have a strong incentive to lobby government to use zoning codes and other regulations to limit housing supply, in order to help homes get more expensive (or in zoning-talk, “increase property values”).  And because government has been quite successful in doing exactly that, housing costs have exploded in many metro areas, which in turn means that more and more people cannot afford […]

Opening Arlington up to Housing

Arlington County policymakers have issued a call for ideas on improving housing availability and affordability. If you’d like to submit your own ideas, you can do so here through the rest of the day. The ideas that I submitted are below. Arlington County is a national model for transit-oriented development. Permitting dense, multifamily housing to be built on the County’s transit corridors has contributed to making the Washington, DC region more affordable compared to other high-income coastal regions. Nonetheless, housing prices in Arlington are high and rising due to increasing demand for access to the job market, schools, and other benefits that Arlington offers. County policymakers have opportunities to reform land use regulations to permit both dense multifamily housing and missing middle housing to improve access to Arlington’s opportunities. Zoning for Transit Oriented Development Ahead of Metro’s arrival in Arlington, county policymakers adopted the well-known “bulls eye approach” to planning, which calls for dense development surrounding the Rosslyn-Ballston corridor Metro stations. This plan calls for dense development to be permitted within one-quarter mile of these stations. Unfortunately, this plan has never been realized in the zoning ordinance. The County maintains single-family or townhouse zoning within one-quarter mile of four stations on this corridor and a relatively low-density multifamily zone within one-quarter mile of the Rosslyn station. The County needs more townhouses and low-rise multifamily housing, but it also needs more high-rise multifamily housing as the bulls eye plan recognized. Given the high and rising land values and house prices along this corridor, it’s past time to realize this decades-old planning objective. Further, planning for urban villages around Metro stations should be extended to the area around the East Falls Church station area, where residents of multifamily housing have to walk past land zoned exclusively for single-family houses to reach the […]

What’s a stickplex?

  A stickplex is a dense residential structure or group of structures built with inexpensive materials and techniques, most commonly wood. Stickplexes use 2,500 square feet of land per unit or less. Stickplexes have per-square-foot construction costs roughly in line with detached houses due to avoidance of costly features like elevators and more expensive construction methods. This type of housing includes features of both multifamily housing and single-family housing. They economize on land while avoiding the high construction costs of large multifamily buildings. Relative to high-rise housing, stickplexes can cost one-third less to build on a per-square-foot basis. And because they use a relatively small amount of land per unit, their land costs are lower than the typical detached house’s land costs.  Stickplexes versus missing middle Daniel Parolek coined the term “missing middle” and emphasizes that missing middle “is compatible in scale with single-family homes.” He advises caution about permitting three-story buildings, while a stickplex can be three stories or taller. A duplex on a 6,000 square foot lot would fit the definition of missing middle. But it would not be a stickplex since it would use more than 3,000 square feet of land per unit. Missing middle housing has found traction politically. Policymakers who have passed zoning reforms from Oregon to Nebraska to Durham have used the term to describe the type of construction they would like to see. Minneapolis Council Member Lisa Goodman described the city’s reform to permit triplexes in language similar to Parolek’s: “I like to refer to it as, ‘the box can’t change,” she said. “All that can change is how many families can live within the existing box.” However, in Minneapolis, questions remain about how feasible triplexes will be to build in permitted building envelopes. Zoning rules, including floor area ratio limits of less than one […]

Get the tuck out of here

In two previous posts, I’ve raised questions about the competitiveness of missing middle housing. This post is more petty: I want to challenge the design rigidities that Daniel Parolek promotes in Missing Middle Housing. Although petty, it’s not irrelevant, because Parolek recommends that cities regulate to match his design goals, and such regulations could stifle some of the most successful contemporary infill growth. Parolek’s book suffers from his demands that missing middle housing match his own tastes. For instance, he has a (Western?) bias against three-story buildings. Having grown up in the Northeast, I think of three stories as the normal and appropriate height for a house. To each his own – but Parolek’s constant insistence on this point offers aid to neighborhood defenders who will be happy to quote him to make sure three-story middle housing remains missing. The house in the doghouse No form is in Parolek’s doghouse as much as the “tuck-under” townhouse, an attached house with a garage on the first floor. This is clearly a building that builders and buyers love: “If your regulations do not explicitly prohibit it, it will be what most builders will build” (p. 140). In fact, tuck-under townhouses are probably the most successful middle housing type around. In lightly-regulated Houston, builders small and large have been building townhouses, sometimes on courtyards perpendicular to the road. Parking is tucked. Townhouses are usually three stories tall (bad!), sometimes four. A few are even five stories. Their courtyards are driveways (also bad!). In a very different context – Palisades Park, NJ – tuck-under duplexes are everywhere. Their garages are excessive thanks to high parking minimums, but the form has been very successful nonetheless. These examples are not to be dismissed lightly: these are some of the only cases where widespread middle housing is […]

In praise of fee simple ownership

In yesterday’s post, I showed that missing middle housing, as celebrated in Daniel Parolek’s new book, may be stuck in the middle, too balanced to compete with single family housing on the one hand and multifamily on the other. But what about all the disadvantages that middle housing faces? Aren’t those cost disadvantages just the result of unfair regulations and financing? Indeed, structures of three or more units are subject to a stricter fire code. It’s costly to set up a condo or homeowners’ association. Small-scale infill builders don’t have economies of scale. Those, and the other barriers to middle housing that Parolek lays out in Chapter 4, seem inherent or reasonable rather than unfair. In particular, most middle housing types cannot, if all units are owner-occupied, use a brilliant legal tradition known as “fee simple” ownership. Fee simple is the most common form of ownership in the Anglosphere and it facilitates clarity in transactions, chain of title, and maintenance. Urbanists should especially favor fee simple ownership of most city parcels because it facilitates redevelopment. Consider a six-plex condominium nearing the end of its useful life: to demolish and redevelop the site requires bringing six owners to agreement on the terms and timing of redevelopment. A single-owner building can be bought in a single arms-length transaction. It’s no coincidence that the type of middle housing with the greatest success in recent years – townhomes – can be occupied by fee-simple owners, combining the advantages of owner-occupancy with the advantages of the fee simple legal tradition. Many middle housing forms enjoy their own structural advantage: one unit is frequently the home of the (fee simple) owner. By occupying one unit, a purchaser can also access much lower interest rates than a non-resident landlord. (This is thanks to FHA insurance, as Parolek […]

Stuck in the (Missing) Middle

Everybody loves missing middle housing! What’s not to like? It consists of neighborly, often attractive homes that fit in equally well in Rumford, Maine, and Queens, New York. Missing middle housing types have character and personality. They’re often affordable and vintage. Daniel Parolek’s new book Missing Middle Housing expounds the concept (which he coined), collecting in one place the arguments for missing middle housing, many examples, and several emblematic case studies. The entire book is beautifully illustrated and enjoyable to read, despite its ample technical details. Missing Middle Housing is targeted to people who know how to read a pro forma and a zoning code. But there’s interest beyond the home-building industry. Several states and cities have rewritten codes to encourage middle housing. Portland’s RIP draws heavily on Parolek’s ideas. In Maryland, I testified warmly about the benefits of middle housing. I came to Missing Middle Housing with very favorable views of missing middle housing. Now I’m not so sure. Parolek’s case for middle housing relies so much on aesthetics and regulation that it makes me wonder whether middle housing deserves all the love it’s currently getting from the YIMBY movement. Can middle housing compete? Throughout the book, Parolek makes the case that missing middle construction cannot compete, financially, with either single-family or multifamily construction. That’s quite contrary to what I’ve read elsewhere. In a chapter called “The Missing Middle Housing Affordability Solution”, Daniel Parolek and chapter co-author Karen Parolek write: The economic benefits of Missing Middle Housing are only possible in areas where land is not already zoned for large, multiunit buildings, which will drive land prices up to the point that Missing Middle Housing will not be economically viable. (p. 56) On page 81, we learn, It’s a fact that building larger buildings, say a 125-150 unit apartment […]

Even NIMBYs should be YIMBYs

Jeremiah Moss, a New York blogger, just wrote a long article complaining about the bad habits of his new neighbors in the East Village. I suspect many, if not most readers, of his article would think: maybe we need to zone out new housing to keep out the yuppies! But it seems to me that this conclusion would be wrong. Here’s why: new buildings in the East Village are generally more expensive than old buildings.* So I suspect that if yuppies are moving into old buildings like Moss’s, it is probably because they cannot afford newer buildings, or more affluent neighborhoods like Tribeca. It logically follows that if more new buildings were allowed in Moss’s neighborhood, he would have less affluent neighbors, which presumably would make him happier. *I searched listings at streeteasy.com, and found that of about 170 pre-war one-bedrooms, 77 of them (or 45 percent) rented for less than $3000 per month. By contrast, of the 32 postwar one-bedrooms in the East Village, only 3 rent for under $3000.

For once I agree with the NIMBYs: please don’t turn my neighborhood into Dubai- because Dubai isn’t dense enough!

One common argument against new housing is that it will turn “[neighborhood at issue] into Dubai.” Evidently, some people think Dubai is a hellscape of super-dense skyscapers. In fact, Many Dubai neighborhoods aren’t very dense at all. There is one Dubai neighborhood that is more dense than most urban neighborhoods in North America: Ayal Nasir (which has about 200,000 people per square mile). But it looks far more like Paris than the popular stereotype of Dubai: streets are narrow, and most buildings are five or so stories high. The neighborhood next door, Al Murar, has 130,000 people per square mile and has a similarly human-scale urban fabric.

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