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Mumbai upzoning
A 2017 increase in allowed floor area ratio in Mumbai had a tremendous impact on affordability by accidentally improving the economics of smaller apartments.
Liberalizing Cities
From The Ground Up
Tag affordability
Market Affordable
Check out my new post at Metropolitan Abundance Project: How “inclusionary” are market-rate rentals? In metropolitan Baltimore, a family of four making $73,000 in 2024 qualifies for 60% AMI affordable housing, where it would pay $1,825 per month for rent, utilities included. A third of new market-rate three-bedroom units in Baltimore are rented at around that level.Baltimore is typical, as it turns out. In most U.S. metro areas, a substantial share of rentals constructed since 2010 were, in 2021 and 2022, affordable at 60% of AMI… You can also check out maps showing rentals affordable at 80% and 120% of AMI. The ACS data don’t let me distinguish market-rate from subsidized rentals, so these include LIHTC and other subsidized rentals. Those, however, can’t explain away the core result, and the data don’t show the bifurcated market that some people imagine, with a huge gap between market and deed-restricted rents.
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 […]
The Low-Key Housing Politics of Spider-Man
With Spider-Man: Far From Home hitting theaters earlier this month, the Marvel Cinematic Universe has taken one of the series’ biggest risks yet: pulling Spider-Man out of New York City. The gravity of this decision is baked into the film’s title — with good reason. More than any other Marvel superhero, Spider-Man is a uniquely urban superhero. Of course, his iconic powers — web-slinging and wall-crawling — depend on a forest of skyscrapers. But on a deeper level, Parker’s problems are quintessentially urban. Repeatedly, Peter encounters the issue of housing affordability, a recurring challenge for him and Aunt May in the comics and a key issue in the Sam Rami films from 2002 to 2007. In the Rami trilogy, Uncle Ben’s death pushes the family’s already-precarious financial situation into a monetary melee. We witness Aunt May desperately attempt to refinance, though she ultimately faces foreclosure and eviction. Rami’s Spider-Man (2002) stays true to the comics in putting Peter Parker’s family in Forest Hills — a well-heeled Queens neighborhood, depicted in the films as lower-middle class. Their home was assessed this year at approximately $850,000, which would entail a monthly mortgage payment of roughly $3,700 after a hefty downpayment. To make this affordable, Uncle Ben and Aunt May need to somehow make $135,000, a year before property taxes and upkeep. If that’s a stretch for a professional electrician, it’s impossible for a retired homemaker. The frustrations surrounding Aunt May’s eviction are an important part of Parker’s decision to give up being Spider-Man in the second film, and it’s easy to see why: May’s options post-eviction aren’t pretty. Assuming a standard Social Security check and a payout from Uncle Ben’s death, Aunt May really only has about $1,000 to spend on rent. Rising rents will make it tough to find a decent […]
Why No Micro-Apartments in Chicago?
Several cities have jumped on the bandwagon of building Micro-apartments, a hot trend in apartment development. San Francisco and Seattle already have them. New York outlawed them, but is testing them on one project, and may legalize them again. Even developers in smaller cities like Denver and Grand Rapids are taking a shot at micro-apartments. At the same time, Chicago is building lots of apartments, and is known for having low barriers to entry for downtown development. Yet we aren’t hearing of much new construction of micro-apartments here. Premier studios are fetching as much as $2,000 a month. Certainly there must be demand for something more approachable to young professionals. In theory, we should expect to see Chicago leading the way in innovative small spaces. Chicago doesn’t have an outright ban on small apartments like New York, but there are four regulatory obstacles in the Chicago zoning code. These are outdated remnants from eras where excluding undesirable people were main objectives of zoning, and combined to effectively prohibit small apartments: 1. Minimum Average Size: Interestingly, there is no explicit prohibition of small units. This is unlike New York City’s zoning, which prohibits units smaller than 400sf. There is, however, a stipulation that the average gross size of apartments constructed within a development be greater that 500sf. Assuming 15% of your floor-plate is taken by hallways, lobbies, stairs, etc; this means for every 300sf unit, you need one 550sf unit to balance it out. Source: 17-2-0312 for residential; 17-4-0408 for downtown 2. Limits on “Efficiency Units”: Zoning stipulates a minimum percentage of “efficiency units” within a development. The highest density areas downtown allow as much as 50%, but these are the most expensive areas where land is most expensive. In areas traditionally more affordable, the ratio is as low as 20% to discourage studios, and encourage […]
Rothbard the Urbanist Part 1: Public Education’s Role in Sprawl and Exclusion
I’ve been meaning to address the public education system’s complex role in land use patterns, and found that Murray Rothbard does a better job in his 1973 manifesto, For a New Liberty than I ever could. In summary, locally-funded public education is an engine of geographical segregation, which encourages flight from urban areas, and was a driving motivation for the popular acceptance of exclusionary zoning in newer suburbs. As a result, wealth is consistently concentrated geographically, and housing affordability is at odds with these restrictions of supply intended to exclude poorer people from draining the property tax base. Here’s a paragraph from the chapter on education: The geographical nature of the public school system has also led to a coerced pattern of residential segregation, in income and consequently in race, throughout the country and particularly in the suburbs. As everyone knows, the United States since World War II has seen an expansion of population, not in the inner central cities, but in the surrounding suburban areas. As new and younger families have moved to the suburbs, by far the largest and growing burden of local budgets has been to pay for the public schools, which have to accommodate a young population with a relatively high proportion of children per capita. These schools invariably have been financed from growing property taxation, which largely falls on the suburban residences. This means that the wealthier the suburban family, and the more expensive its home, the greater will be its tax contribution for the local school. Hence, as [p. 133] the burden of school taxes increases steadily, the suburbanites try desperately to encourage an inflow of wealthy residents and expensive homes, and to discourage an inflow of poorer citizens. There is, in short, a breakeven point of the price of a house beyond which a […]
Glaeser: Let Housing Prices Fall
Ed Glaeser gives three compelling reasons why the government should end their infatuation with high housing prices. (Nonetheless, some of the same politicians speak through the other side of their mouths about promoting housing affordability): Why We Should Let Housing Prices Keep Falling There is a superficial attractiveness to policies that seem to promise an end to falling housing prices, but there are three reasons why these proposals don’t make much sense to me. First, the government has no business trying to make housing less affordable to ordinary Americans. There is no reason to hope that middle-class Americans should pay more for any basic commodity, whether that commodity is coffee or oil or housing. Government should be fighting to reduce supply-side barriers and make housing cheaper, not trying to inflate prices artificially. Second, most of these proposals seem likely to be expensive failures. The government just doesn’t have the tools to rewrite the laws of supply and demand. If the cost of building a home in Las Vegas is $150,000, and there are no restrictions on building, then all the credit policies or bailouts in the world aren’t going to permanently keep prices above $150,000. Finally, these policies all have the common feature of getting the government further entrenched in the operation of the housing market, and this creates all sorts of long-term market problems. I would have thought that recent events at Fannie Mae and Freddie Mac, for example, would have made Americans recognize the costs of having government-sponsored enterprises play mortgage lender to the nation. I would have hoped that the history of public housing would have made us wary about spending huge amounts of tax dollars to get into the business of public property management. The current crisis may imply a need for more federal regulation of […]
Housing + Transportation Affordability Index
affordability in New York City Play with the HUD-Brookings Institution’s new index maps here: The Housing + Transportation Affordability Index, developed by CNT and its collaborative partners, the Center for Transit Oriented Development (CTOD), is an innovative tool that measures the true affordability of housing. Planners, lenders, and most consumers traditionally measure housing affordability as 30 percent or less of income. The Housing + Transportation Affordability Index, in contrast, takes into account not just the cost of housing, but also the intrinsic value of place, as quantified through transportation costs. I enjoyed playing with the maps to see the interplay of accessibility and affordability. In New York, some very accessible places are not-so affordable, such as many areas of Manhattan. Same goes for upscale parts of Chicago. At the same time, very affordable housing locations in exurbs become less affordable when considering transportation costs. I plan to spend more time investigating how they produce the index. [tip of the hat to Peter Gordon]
Glaeser on Affordability of NY vs Houston
Harvard Economist Ed Glaeser wrote an opinion piece in the New York Sun about the differences in housing affordability and other costs of living between Houston and New York. New York is naturally more expensive than Houston because the geographical constraints force higher density development, which is more expensive to build. New York’s highly regulated land use and zoning process adds more constraints that exacerbate this problem. On the flip side, Houston has few geographical constraints and relatively loose regulation, allowing the market to allocate housing more efficiently. In conclusion, Glaeser recommends that New York could do much to improve affordability by loosening it’s many regulations. NY Sun – Houston, New York Has a Problem Why is it so much more expensive in New York? For one, supplying housing in New York City costs much, much more — for a 1,500-square-foot apartment, the construction cost alone is more than $500,000. Also, part of the reason is geographic: an old port on a narrow island can’t grow outward, as Houston has, and the costs of building up — New York’s fate, especially in Manhattan — will always be higher than those of building out. And the unavoidable fact is that New York makes it harder to build housing than Chicago does — and a lot harder than Houston does. The permitting process in Manhattan is an arduous, unpredictable, multiyear odyssey involving a dizzying array of regulations, environmental, and other hosts of agencies. A further obstacle: rent control. When other municipalities dropped rent control after World War II, New York clung to it, despite the fact that artificially reduced rents discourage people from building new housing. Houston, by contrast, has always been gung ho about development. Houston’s builders have managed — better than in any other American city — to make the […]
Rent Control Part 4: Conclusion and Solutions
Welcome to the final post in the series discussing the consequences of rent control. Thank you to the subscribers who have patiently awaited each new post. I hope everyone found it enlightening. If you haven’t read the entire series, you can catch up with these links: Rent Control Part One: Microeconomics Lesson and Hording Rent Control Part Two: Black Market, Deterioration, and Discrimination Rent Control Part Three: Mobility, Regional Growth, Development, and Class Conflict Conclusion Rent control is not just a simple price control setting the price at which willing renters and landlords are permitted to do business, it is much worse. It is a coercive act that gives landlords no legal option, but to rent to a tenant against his will, often at a financial loss. Rent control adds a non-voluntary burden to landlords which deepens over time because landlords do not have the option to rent to a tenant at below market rates. Not only does rent control cause huge distortions in the housing market, but the burdens fall disproportionately on the poor and underprivileged people it was intended to benefit. Although particular people are able to live with the comfort of low rent payments, even those renters will see their living conditions deteriorate as landlords neglect repairs and maintenance. As the situation gets worse, middle class residents are able to move away, leaving behind the poorest residents who have become reliant on the reduced rent. In effect, rent control grants property rights to renters, that originally belonged to the original property owners. Rent control becomes a redistribution of wealth to rent control tenants away from apartment owners, market apartment renters, and newcomers to the area. Nonetheless, over time the quality of life decreases for all residents of a city where rent control is imposed. Solutions So, it […]
