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June 02, 2005

Housing Affordability Rashomon

In two recent posts, I argued that urban high-rise apartments--as are being proposed for downtown Seattle--can be good for housing affordability.   But in a thoughtful comment on one of my posts, Sheldon Cooper from Homestead Community Land Trust argues out that high-density urban redevelopment can crowd out affordable housing, not increase its supply. 

Now, who's right? 

I actually think we both are, since we were talking about slightly different things -- both of which are important, and which (sadly) can be at odds with one another.

Obviously enough, affordability is in the eye of the beholder.  What's affordable for one group -- say, middle-income households -- may be completely out of reach for those at a lower income ladder.  Which leads to a potential problem:  a trend that can make housing more affordable for middle-income earners can, in theory at least, make housing less affordable for the poor.

At the risk of putting words in Sheldon's mouth, I think that he's concerned that high-rise development proposed in Seattle will physically displace some low-income housing close to downtown, while the accompanying gentrification will increase rental costs; and that the market simply won't magically provide decent housing for people who don't have enough money to pay for it.

Those seem like reasonable things to worry about. 

Now, while the broad, structural problems with low-income housing affordability appear to be very real (pdf link), there are some researchers who believe that the problems of gentrification per se are generally overblown.  But in the case of the South Lake Union development in Seattle, I don't know what to think.  I certainly believe that increasing the supply of housing in any city tends to reduce the pressure on housing prices and rents overall.  But for the poor--those whose incomes are so low that what they can afford to pay won't even cover the construction costs for decent housing, particularly in high-rises--the issues may be less cut-and-dry. 

Which leads to the obvious question:  what's the right thing to do to help make housing affordable for those at the bottom rungs of the income ladder?

I just read through this book on the subject -- it's a compilation of papers on smart growth and housing affordability, edited by Brookings Institution scholar Anthony Downs.  Firm conclusions are scarce in the volume.  For example, Sheldon's preferred solution -- which is for city governments to allow developers to build more units than zoning codes would otherwise allow, provided that the developers set aside a certain share of affordable units in their developments -- has been implemented in one form or another in some 600 jurisdictions across the US, but with surprisingly few tangible successes.  The practice seems to have worked fairly well in one jurisdiction (Montgomery County, Maryland), but results elsewhere have been poor, perhaps because of a lack of political will.  That doesn't mean that these kinds of steps are misguided, just that they may not be sufficient to address the problems.

Which is really the point -- while the clearest way to make housing more affordable for the middle class is to create more housing, you need a bunch of different strategies to "fix" housing affordability for those whose incomes are much lower. 

Downs makes some good points in his closing chapter.  First, much of the denser development touted by "new urbanists" and "smart growth" advocates really is affordable to working class and moderate-income households -- those with incomes at least 50 percent of the area's median.  But it's usually unaffordable for those at or near the poverty line.  For those folks, there are two basic strategies that can work to make housing more affordable:  increase incomes (as with tax credits, housing subsidies, and the like) and reduce housing costs.  And you can reduce costs by...

  1. making financing cheaper or more available;
  2. reducing the costs of producing housing units by, for example, modifying building codes, speeding up the development process, or raising residential densities
  3. reducing the size and quality standards for new housing
  4. expanding the total supply of housing through new construction.

A combination of strategies might work pretty well -- a city that really wanted to produce housing that's affordable to the poor might take some or all of them.

But the kicker is that there's very little economic motivation to do any of these things.  People who already own homes generally want housing costs to go up, not down; and since homeowners tend to dominate local politics, the goal of most local governments is to keep housing costs high.  Which means, among other things, that governments often create obstacles to creating new housing, whether for middle-income or lower-income residents.

So in that context, Mayor Nickels' support for increasing the housing supply within city limits is a victory of sorts.  An even greater victory, though, would be a public commitment to improving housing affordability not just for the middle class, but also for the city's neediest residents.

Posted by ClarkWD | Permalink

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Comments

In a city like Seattle I'm doubtful that much can really be done to create or preserve affordable housing UNITS for low income residents. Not without hugely costly market interventions such as rent control or rent subsidies.

But that doesn't mean lower income residents don't have options. The most obvious one is sharing. During the low income phase of my life in Seattle when I was a grad student and marginally employed in the early 90s I never actually dreamed of renting my own space. To the contrary, I rented a series of rooms in shared houses and from homeowners with spare bedrooms for rent.

Frankly I'm much more concerned about housing for the middle and working class as they are the heart and soul of the city. Without them, Seattle becomes another version of Aspen.

Posted by: Kent | Jun 2, 2005 10:10:07 PM

You are exactly right about the following:

"Which is really the point -- while the clearest way to make housing more affordable for the middle class is to create more housing, you need a bunch of different strategies to "fix" housing affordability for those whose incomes are much lower. "

Housing for people at 30% of AMI and below is really a poverty issue, not a housing issue. They simply do not make enough money to amortize (pay for) the current costs of construction. 30% of AMI is not defined as the bottom 30% of the income distribution. Roughly speaking, its the bottom 30% of the bottom half. For Pierce County, its currently $18,650/yr for a family of 4 and for Snohomish its $23,350/yr for 4. Those are really poverty wages.

Posted by: Steve Price | Jun 3, 2005 12:41:27 PM

Then there is the demand side. Reduce the population by deporting illegal aliens. This would directly help the lower class by opening more vacancies in the cheapest housing. It would also reduce the cost of middle class housing by reducing the perceived need for white flight to expensive suburbs.

Posted by: sf | Jun 4, 2005 8:50:44 PM

It would be interesting to know if, within that group of 600 jurisdictions, developments tend to build up to their density limits. In sprawling regions, permitting higher densities is doomed to failure. In those areas, avoidance of density is the rule.

For example, in the Spokane area, permission to build at higher densities is often disregarded. Zoning codes may permit incompatible housing stock to exist side by side, such as single family homes on large lots within purportedly high density housing zones. The housing types are not incompatible per se. However, the common experience is that it results in an area with single family homes occupied by residents who resist the construction of the higher density housing, quickly followed by downzoning.

With the large lots, affordable housing for those with low incomes becomes less available, and comprehensive planning efforts are thwarted.

Posted by: Brian A.Sayrs | Jun 6, 2005 9:46:21 AM

Purchasing an affordable home for the incomes such as what Steve above points out means that the house has to be small and sit on a small piece of affordable dirt.

I'm way out at the end of the developable world in Pierce Co. Our dirt out here is not affordable. And the folk out here don't want small houses all over the place.

As pointed out in the blog post, costs have to go down. Manufactured/modular homes can bring costs down, but they are usu. built elsewhere and don't bring jobs to an area.

There are powerful vested interests at work here, as the mid-hi end homebuilding industry creates a lot of the debt our public is saddled with. Without debt, where does our economy go?

D

Posted by: Dano | Jun 6, 2005 1:27:03 PM

While I tend to generally agree with the points Clark attributed to me in this post, they were not the points that I was making in my comments on his “I must be dense” post.

The contribution I intended to make to this discussion is as follows:

1. The market should not be the mechanism that sets the price of all housing in Seattle because it does not deliver pricing that works for a large segment of our population. It does not deliver affordable housing those with lower incomes, and increasingly it does not deliver affordable housing for the middle class. For example, the middle class (those making between 80% and 120% of Area Median Income) can no longer afford the median priced home in Seattle. The reality today is that to afford the median priced home in Seattle ($350,000), a family needs an annual income of over $90,000, putting them at 125% of AMI.

2. So as not to distract from my fundamental point, I’ll concede your assertion that increasing allowable density in Seattle will result in increased supply of housing, lowering median housing prices, resulting in greater affordability for the middle class. Even if this rosy scenario takes place, it will only provide a fleeting benefit from the perspective of affordability. As long as we remain an attractive region, we will exhaust the one time supply advantage the higher density gave us and prices will shoot up again. This is a structural problem of market priced housing in an attractive place.

3. The good news is that we can decide that the market does not have to dictate the pricing of all our housing. We can, and should, take advantage of the opportunity presented here to build up a stock of homes whose prices are set according to community values, to complement the vast majority of housing priced by market values. By raising zoning density, the community is handing over new rights to the market place. There is no reason why we should hand over these new rights without requiring some tangible, sustainable public benefit in terms of community control of affordability. The social technology is up and running to do this in the form of community land trusts, which are organizations specifically designed to steward the affordability of homes as a community asset for generations. Seattle has its own CLT www.homesteadclt.org that could steward the affordability of these units, or new organizations could be created.

If we are to have everything we want in our City (vibrant, attractive communities, sustainable economy, inclusive policies that support diversity and justice) then we will need to create a segment of our housing stock whose value is stewarded by and for the community. Otherwise, we will always be stuck trading one aspect for another. We may get more affordable housing, but only when we are no longer an attractive region. Or we may build a wonderful, walkable, Seattle that turns into a homogonous gated playground for the rich by excluding diversity supported by housing at a range of affordability levels. These and other unacceptable tradeoffs are required by the logic of the market. Fortunately we do not have to let this logic dictate all the choices we make as a City.

Posted by: Sheldon Cooper | Jun 6, 2005 2:21:35 PM

Thank you to everyone who has commented on this issue. As I do not study planning, it is difficult for me to find time to learn about what is going on in the housing arena. But reading through these comments has helped. And I'll be checking out the book "Growth Management and Affordable housing" as soon as finals are over.

Posted by: Meadow | Jun 7, 2005 10:55:40 AM

I'm not against requiring low-income housing, but it can't possibly do as much to redress economic unfairness as it's said to. Because, basically, it has the same problem that the increased stock of middle-class housing does: while the city is desirable - while economic integration is actively making the city more desirable - poor people will be just as eager to move in as rich ones, and now the problem is how to distribute the subsidized housing. Many of the common solutions to that problem are as nasty as the market (kickbacks, connections, exclusion of an increasing class of 'undeserving poor').

It's not like the US poor are peasants who never move, and we just need to make sure that the tied cottages have good drains.

Anyway. Since the solution can't fix the problem, there needs to be a meta decision about how much of it we need/can afford, and a (at least regional, ideally national, but logically global) commitment to making cheap places good enough to live. There are probably greater payoffs - meaning, greater reductions of misery and improvements in life opportunities - in investing in poverty in the desperate rural regions of the state. That makes subsidized urban housing partly a subsidy to house-owning urbanites who want to live in a rich urban tapestry with low wages. Mm. I'd benefit from that, because I am a house-owning urbanite, but it's moving down my moral priority list.

I'd attack the problem by giving the poor money, and letting them move where they want; and by requiring more *small* dwellings, prices set by the market, until the small ones and the large ones have about the same vacancy rate. (AFAIK small places in Seattle now turn over like Betty Boop's hotcakes.)

That won't fix everything either, but I think it would fix more more cheaply.

Posted by: clew | Jun 8, 2005 10:19:23 AM