The “Housing Affordability Crisis”
blog.kwelia.com
blog.kwelia.com
It's fascinating to read about the Next City study that "concludes that poor housing affordability in Philadelphia is a symptom of low income rather than of insufficient rental supply."
Having studied this in depth, specifically in regards to China's Ghost Town problems where they increased housing supply by many folds - Here's the current VICE documentary on it.
http://www.youtube.com/watch?v=trs_udhjWqc
The problem is not one of supply divorced from affordability. There needs to be both sufficient supply (ie. Not SF / LA) and there needs to be sufficient affordability (ie. Not China). Yet with these two constraints people seem to sit around wringing their hands unable to do anything. It's almost as if, politically, people are incapacitated by this problem. To which I always respond - look at Ford. The Pre-Ford cars had the same problem, lack of supply and lack of affordability. And Ford changed the equation with the Model T, by making an affordable, readily available car - thereby jump-starting the car economy worldwide.
We CAN do the same thing with housing. By eliminating the speculative incentives on housing (as is done in Germany) through capital gains taxation, and through multiple non-residence ownership taxation, we can address some of the market structures that diminish affordability. And on the other side we can create growth opportunities, through zoning primarily - such as a reduction in the required number of parking spaces per residence unit - and through a reduction in average square footage (which has been growing in America over the last 30 years) --
http://www.census.gov/const/C25Ann/sftotalmedavgsqft.pdf
And while this is just a start. This can be done. We don't even need the 'political will' to do it. We just need to do it. With just a few slight changes in the way we manage our housing inventory, both financially, and with regards to zoning and planning, we could radically alter the availability of affordable (NOT low income! or qualified housing) Over night.
Can you clarify what you mean by this? It sounds like basically a "landlord tax."
>>reduction in the required number of parking spaces per residence unit
Certainly that would reduce costs in some cases, though it could be problematic in others. eg, many neighborhoods near me already have a shortage of parking (street parking is constantly full), and the zoning only calls for 1 spot per unit. Reducing that would just lead to more problems, and probably parking tickets for residents.
>>reduction in average square footage
That would certainly help, particularly in areas where the land is expensive.
I met a fellow back around 2002 who owned twenty houses out in Arizona. He had never actually seen any of them - he just owned them as an investment. Also, since being a landlord was too much hassle and legal liability, he wasn't renting them out. The houses just sat vacant and he intended to make his money on housing prices outpacing inflation.
The theory behind the tax is that having large numbers of houses sitting around empty is a poor use of resources. By increasing the property tax on unoccupied houses, the owner is encouraged to rent out the units, increasing the overall housing supply and thereby decreasing rents.
edit: Occurs to me that this would help deal with bank-owned properties that can sometimes sit vacant for quite a while. OTOH, that very thing might make it harder to get a mortgage - lenders would be scared they'd end up owning some unsaleable property in downtown Detroit, and paying elevated taxes on it to boot.
It also doesn't help that the city is derelict in its duty to collect existing property taxes, and has been entirely incompetent when it comes to claiming those properties and reselling them.
End free long-term street parking. You don't have a right to a parking space that the everyone without a car has to pay for in taxes.
You have to get to work, and you want to do it quickly. The train is not going to do that unless you have a lot more of them going everywhere. People commute a long ways in LA and there is no thing as 'counter-commute.' LA has no central place. There is a downtown, but its just a place like any other.
LA is the very definition of a poorly planned city. But trying to horn it into a planned city will take many many years. You have tons of issues to deal with. You might be able to encourage a planned city, ala this metro line seeding growth in the right places. However, it is just going to take a long time.
The idea around reducing zoning requirements for parking is to allow a core to emerge. And everyone's agreed that it will take a long time. But it has to start somewhere, and it's more difficult if zoning requires (say) 1.5 parking spaces per 1-bdr apartment, even when in an area well served by mass transit.
You mentioned Santa Monica. Here's their planning commission report on parking for the city - http://www.smgov.net/departments/pcd/agendas/Planning-Commis... .
It includes: Reduce residential off-street parking requirements for some housing types in the Transit-Oriented and Mixed Use area to reflect actual Census data for household vehicle ownership and eliminate the visitor space requirement in all areas. Reduce off-street parking requirements for certain types of commercial uses (general office, hotels, restaurants, markets) in the Transit-Oriented and Mixed Use areas.
It also points out that while there is a "Perception of parking scarcity", that scarcity doesn't really exist. Indeed, "Santa Monica, like many other cities state and nationwide, has a parking supply that exceeds parking demand." Instead, "drivers will almost always choose an on-street space over an off-street space and indicates that the management of parking resources, not the supply, is the underlying issue."
Also... there's nothing that Eminent Domain can't fix. Ask the people whose homes were demolished to build the supergiant highways that LA is so fond of.
... but maybe not. Maybe if it weren't the demand of car-centric transportation systems, and thus car-centric city planning, perhaps the housing we would have otherwise built would have avoided the housing crisis we're sweating over now. Or would have at least mitigated the crazy supply and demand problems we're facing.
People who ride the bus have to pay for how much they use it. If you don't have to pay for the amount of city property you use to keep your car, why should we expect people to pay to ride the bus?
Of course it's not as simple as putting in 24 hour parking meters. Residents should be able to buy a parking pass, but with caution - surely the 3rd parking pass for a one person household should be much closer to market rate than the first parking pass.
It may also mean adjustments in how the city works, which might include more bike lanes and mass transit.
There isn't a simple answer, but zoning law prohibit some alternatives.
Here's an example of how zoning parking requirements can be a problem: http://chi.streetsblog.org/2013/08/06/how-parking-requiremen... .
I daresay that all 3 passes ought to be bought at market rate. That's sort of the point of eliminating free street parking.
"already have a shortage of parking (street parking is
constantly full)"
Such as:
-compliance with the 891-page residential building code
-that making one change to an existing, out of compliance dwelling means that the whole building must then be brought up to the latest building code in all respects (which means that tearing it down and building a newer, more expensive structure which sells for more makes more sense in financial terms)
-expensive and onerous licensing of tradesmen leads to more expensive maintenance construction
-ridiculous levels of code enforcement
-corruption and collusion of developers and local politicians
Nice verbiage, though ... makes it sound like you know what you are talking about.
What exactly do you find onerous in this 891 page residential code? Which country, state, municipality is it from? Could you provide a link? Who on the city council have you talked to about it?
If a foundation is cracked and unsound the landlord should be able to slap a new coat of paint on it and then flip it?
Licensing of tradesman is critical because it saves lives and mitigates losses from negligence. If you don't think it is, come to California and ask a Sheriff how swell of a job those pot farmers did wiring up their latest grow up in a house they rented from somebody else.
Code enforcement is like doing the dishes. If you don't do them every once and a while they start to pile up. It is also unfortunately necessary because people have shown time and again they WILL prioritize their income over the lives and well being of others. Given your condescending attitude I wouldn't be surprised if you were just such a person, hence the idle complaining.
The IRC is a building code that is incorporated by reference into almost all building ordinances across the USA. https://archive.org/details/gov.law.icc.irc.2012
Your foundation example is a strawman argument.
I said "expensive and onerous licensing" - if there are 3 towns in close geographic proximity, should a tradesman have to pay $500 or more, to each of those 3, in order to be licensed in each town - and have to file more tax forms for each jurisdiction, even if he did not work in that town during the year?
Who ultimately will pay the necessarily higher rates that will be charged? (Unfortunately the SF government website either gives me broken links or requires all kinds of online forms to fill out to determine what the cost is for contractors, so I can't easily give you an example.)
The collusion and corruption of local pols is well known - it even reached the Supreme Court in the form of the Kelo case regarding eminent domain.
As to compliance changes. I've never seen a building torn down because it's out of compliance. Most buildings get grandfathered as the code changes. Perhaps you can show me an example.
I think you can argue that the artificial control of labor by unions in some areas (NYC) leads to an increased price of construction, but the response might be that those labor costs are necessary to avoid exploiting the local workers where living costs are higher too. But licensing alone? I doubt it. Certainly some licensing is overdone, but generally I'm extremely glad to have licensing standards for the trades - see the changes in structural steel in the trades because of the LA earthquake. Only licensing gets that information out there fast.
I've never seen code over enforced.
However, I certainly have seen my share of corruption and collusion between developers and politicians. It means that bad projects get built, but I'm not sure how much it impacts affordable housing per se. It something that we need to be vigilant about though. I agree.
Still, we ought to be aiming a lot higher in real estate development and planning.
In planning: General Planning and the zoning code should be open-sourced. If you think watching a stardard's body change a programming language takes too long, a city can go a half century or more before making trivial improvements to zoning code. Look at the zoning maps for even the most tech-centric cities (Oakland, for example) and they could have been written in 1945 or earlier because they probably were.
In development: One word - Finance. Even before you address tax policy, planning policy, incentives, or even change the way we construct buildings,... the way real estate projects are financed through banks with heavy fees and large equity requirements means nothing is built unless the motivation is sufficiently high and, therefore, we experience constant boom and bust.
To meet the housing needs of the future we need to build units everyday -- all the time -- in places of high demand like the Bay Area cities. And we need to do so in a way that we treat them are geographically special, because they are. For there to be new home construction in places like Dublin while lots sit empty in a city as naturally beautiful as Oakland's means we are doing it wrong.
And, clearly, we are doing it wrong if an apartment in a CRUD low-rise complex in Dublin (granite or not) is $2/SF. If you are wondering, $2/SF could land you in some of the best neighborhoods in Atlanta -- the most affordable, large city in the country.
One thing Copenhagen has done (in a not entirely coordinated way, with some messy parts) is to have large amounts of the housing stock just not permit non-resident ownership at all. A very common organizational structure is the resident-owned cooperative apartment building, and the bylaws usually require that you live there as your main residence as a condition of ownership: if you move, you sell. (Some exceptions for limited-time absences, e.g. if you take a sabbatical abroad, you can rent it in your absence without selling, usually for up to two years.) Another common organizational structure is buildings owned by nonprofit associations dedicated to building and maintaining good-quality housing. They rent but don't sell apartments; they do allow subletting but again with time limits. This particular class of buildings arose initially as "improve the housing of workers" type charitable initiatives (some funded by philanthropists, and some by labor unions), but the organizations have persisted to the modern era, and have continued to construct new buildings (partly through state support for construction costs).
The market is being liberalized a bit lately, with many new buildings being sold as private condominium ownership. But there are some worries that if non-resident ownership is completely liberalized, the city will become like Paris, with a large proportion of apartments in the city center being pieds-à-terre owned by people who live elsewhere, which sit empty most of the year except when the owner wants to fly in to eat at Noma or something.
This isn't a terribly good idea because for a lot of people owning real estate in general isn't a great idea: it inhibits mobility and ties up huge amounts of money in a single asset (see Edward Glaeser's The Triumph of the City for more research and detail about why this is a bad idea). Owning real estate also leads to financial fragility and problems like the ones discussed here: https://news.ycombinator.com/item?id=7449797 .
In the U.S. (and perhaps Denmark?) there is a cult of property ownership, but that cult is based a lot of not-very-good ideas that have a lot of drawbacks in actuality.
30-70% of residents are homeowners and therefore real estate speculators with a vested interest in prices going up. See this comment from a homeowner in my town of Dublin, CA: http://www.arounddublinblog.com/2014/03/dublin-ca-positano-h...
There is a strong, universal, and intentionally designed political will against housing affordability.
"multiple non-residence ownership taxation"
Can you elaborate on how this helps people? It was my thinking that requiring a minimum of 1 space per bedroom would help things. Parking is already burdensome and very costly.
See Shoup, The High Cost of Free Parking: http://www.amazon.com/High-Cost-Parking-Updated-Edition/dp/1... .
Parking is already very expensive in many urban areas and it's implicitly subsidized by zoning requirements. The true cost of parking is even higher.
Places built explicitly around parking (like Atlanta or Phoenix) end up paying high time costs in the form of driving.
There is no free lunch (or in this case, parking spot).
To look at it another way... Plot the price of every rental, sorted by price, X axis is percentile, Y axis is price. ELI is defined as the Xth percentile price times 3.
You want more cheap housing? State it another way, you want to encourage investment in cheap housing. Land is scarce, housing has lots of fixed costs, renting is a massive risk to the landlord.
One interesting catch-22 is the stronger the renter protection laws, the more risk to investors who would build and rent these units.
There are a lot of ways to make this area less risky for investment. Better legal frameworks to deal with problem renters. Better tools to select reliable ELI renters. Better legal framework for using these tools to screen renters. Better tax incentives for renting to ELI tenants (subsidies).
Compare to Japan, Tokyo in particular, with tiny homes and tiny apartments pushed into every nook and cranny.
Why do our costs keep rising? Because we have structured it that way, for the apartment owner and for uniform suburban living.
That's part of what makes the game rigged against common people.
In econ this reasoning is related to the diamond-water paradox: http://en.wikipedia.org/wiki/Paradox_of_value
The gist of it is that it's only accurate to assume so when supply is very low. But like water, despite being crucial if housing supply is high enough it should decrease in price until it approaches the marginal cost of production. In this case, it's almost always laws and regulation that prevent he supply from increasing; this in part because (a) most voters (in the US) are home owners who have a vested interest in increasing home value, and (b) people are resistant to change and don't want new housing developments in their towns.
It's sort of interesting to see the historical consumer spending breakdowns: http://www.bls.gov/opub/uscs/home.htm