CityLab: upzoning doesn't lower hosing prices

I like the urban form enthusiasm that dominates this forum. Thus, this article really challenges some of my conceptions about hosing prices.

Richard Florida is not anyone’s NIMBY, and the research he quotes here sounds pretty robust.

Outside of the findings of this article, I am skeptical that Raleigh could ever do anything, through public housing or upzoning for private dev, that could make a big dent in housing prices. There’s too much latent demand.

Thoughts? I didn’t yet have time to read the linked research papers. Note the researchers still all support upzoning - but have not been able to show that it helps housing costs in the city core.

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It seems like a no-brainer that the mantra should be “build more affordable housing”.

I know that the Planning Commission pushes for it where they can, but all they can really do is ask people who are already submitting proposals to consider adding affordable housing.

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I think it’s important to also realize that a huge component of unaffordable housing is the location. To me there’s all this focus about putting affordable housing downtown, which seems difficult. Much easier (since downtown is tiny) to put affordable housing on affordable land outside downtown with a direct bus route to Moore Square.

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It’s difficult anywhere tbh. I remember maybe a year or so ago someone wanted to build “affordable” apartments to cater to teachers, lower wage workers etc somewhere in North Raleigh/Wake Forest and neighbors howled and got the developer to back down.
It’s a really sticky issue which is why things that are currently affordable housing end up staying affordable housing or the city ends up using land it already controls to provide new units.
The solutions are to either incentivize developers to include affordable units for the best of both worlds (or too much compromise that leaves with less ideal outcomes on both sides some may argue) or a major cultural shift where transit is built up and there is greater acceptance of affordable units being placed in more suburban areas.

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Transit could help if it helped eliminate some of the need for automobiles. You could live farther away from the core and still get to work quickly and affordably. I think we’re a long way from making a dent in it though.

Hopefully the BRT nodes will provide better access to affordable housing sites.

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Or both. The first is probably a shorter-term, legislative solution (see Chapel Hill’s initiatives and policies on this for an example), but we’d probably also need the second solution to stick the landing and make it last.

The problem is how to do this, keeping in mind that most current/future residents probably won’t even realize this is something that’s worth talking about… :confused:

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Is this a good place for general affordable housing questions?

Instead of trying to incentivize affordable housing percentages in new buildings why can’t the City just lease units in these new apartment buildings? In the 40 story Kane proposal, why doesn’t the City negotiate long term leases for 20 of the units at a set rate, then make them affordable by subleasing them to low income earners at whatever rate they think appropriate? If there are conflicts with the perception that a developer is buying a rezoning or site plan approval in return for 20 units, make a rule that the City can only negotiate those leases with apartment complexes/buildings that have been open for 5 years or more.

Is Raleigh doing that now, or is all affordable housing in City owned properties, RHA, or DHIC type developments? It seems that most of the affordable housing is in purpose built complexes or buildings where you have large concentrations of low income units or some run down houses. Why not scatter affordable housing in apartments throughout the City so that you have better income distribution in more neighborhoods? Increase developer fees and/or taxes, whatever they need to pay for it, but why develop a new project or buy places solely for affordable housing? Doesn’t that just create low income communities that eventually become run down and substandard, needing periodic City funded redevelopment when they could be letting the development community build and maintain these facilities.

Wouldn’t it stimulate the apartment housing market if the City was ready to sign 10 year leases for new units rather than having them as developers or co-developers of their own projects? New developments rarely seem to be focused specifically on meeting affordable housing needs, unless that’s all that particular developer does.

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I think that will become too cost prohibitive to the city quickly if done at a large scale. A 1 bedroom in these downtown apartments are going for $1,500 or more per months and 2 bedrooms over $2k per month. If we use the no more than 30% of gross income going to housing as the definition of affordability, and say the average income for someone looking for affordable housing is $40k (this may be high if someone can check my assumptions), the monthly affordable rent is about $1200. So you are subsidizing $300 per unit on average for a 1 bedroom and $800+ on a 2 bedroom. For simplicity sake let’s say each unit is $500 in subsidies per month on average, that’s $120k per year for only those 20 units. So if we are talking just a few hundred units for downtown overall, maybe it’s affordable to the city to do it this way?

I also can’t imagine any property management company would want to sign a lease and lock in rates for 10 years based on the way the market is moving, unless they don’t have a choice in the matter. Since rents are going up and demand is high, having a shorter lease rate allows them optionality of increasing prices to adjust for demand.

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Small but serious thought and question coming…
How about limiting this to only those homes/families that either lived or used to live in “those”neighborhoods? Wouldn’t that make it a limited “pool”?

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Good read on the multi faceted issue of affordability.

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If the units cost $250k each, which it seems like everything does these days, then 20 units is Is $5M. DHIC, RHA or someone is financing the new construction of their projects. I just wonder if affordable housing is something that’s better to lease than buy.

The inventory of rentable units is always changing, but it’s there. Planning approvals and construction of a new affordable development can take years. There are new units coming online all the time if you’re using the open market. The other thing I like is that it’s scaleable. If the number of units goes up or down you can adjust what you’re leasing more easily than dealing with a City owned property.

My thought with the long term lease, is that you could lock it in for a decade or more because the prices are always rising. That helps make the units more affordable because the City is getting them at a premium. If it was a new development it could be a major benefit to a developer’s financing to have signed leases for a certain percentage of their new apartment building.

I agree that it would be expensive, but it doesn’t have to be all or nothing. They could add this approach as an affordable housing plan and keep doing what they’re doing. Maybe a pilot program with one of the new buildings coming online. I think that developers might be more open to leasing units to the city for affordable housing than to have to administer the affordable rates themselves and try to get tax credits or eat the difference.

It’s kind of like Kane said, he didn’t know if the pro forma would work with a percentage of affordable housing. Let the City take the debt burden if they want affordable units in a building, and they can help fund it by an affordable housing development fee on the building they’re leasing the units from.

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Dumb real estate question: what’s an affordable housing development fee, and what are the pros and cons of it in terms of making affordable housing more self-sufficient?

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There are utility development fees, transportation development fees, recreation development fees, etc. In Cary for example if you put in an apartment community I believe you’re currently paying a $2000/unit “recreation development fee” that goes towards the Town’s park, greenway and recreation operations and infrastructure budget. For a 250 unit apartment complex that generates $500k for the town.
These are “permit fees” and you don’t get your building permit until you pay it.

If you had a “affordable housing” development fee it could be used to subsidize leased units in the apartment buildings that are paying the fees. That seems like a poetic way to handle it to me. You would also charge a fee on single family homes.

Keep in mind that these fees are all a part of the budget for the project and planned for. If the units are $200,000 each to build, then $2000/unit is 1% of the budget for that units. I know fairly new apartment complexes are selling for that per unit cost and in some cases, such as full service 55+ luxury complexes, the rents can be in the $5,000/month range.

I also remember several years ago Raleigh started charging a stormwater fee to existing houses. You could do something like that and generate a tremendous amount for affordable housing. I think it would be extremely unpopular if that money just went into low income neighborhoods, but if some of that money went to the private sector as City paid rent for affordable housing, that was dispersed in a really well managed way, you might get public acceptance and fewer legal challenges.

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The city doesn’t have to make a deal with developers/property management and they don’t have to lease units. The owners just have to accept vouchers. If these properties won’t accept the existing subsidized housing vouchers then why would they rent to the city for the purpose of subleasing to subsidized households? No, I don’t think the city getting involved in subsidized housing is the best solution. Developers need some encouragement to make micro units. That’s the only way you will see affordable housing downtown, where a developer doesn’t have to sacrifice $$/sqft.

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How much are the vouchers for? I would guess they’re not covering the price of the unit which is one of the reasons an owner won’t accept them. If the City was covering the market rate price of the unit then the owner might be more inclined to accept them. I don’t know everything they’ve tried or are doing to encourage affordable housing, or exactly how Section 8 works vs the type of subsidized housing that DHIC is providing. It doesn’t seem like there really is a solution without forcing the cost on the developers and residents of the City.

It’s hard to imagine a scenario where a developer would make low end micro-units, unless the City forced them to through a rezoning condition. I doubt that density increases would work. The initial premise of this thread was a report that upzoning doesn’t lower housing prices so I’m wondering about ways to get affordable housing included within projects that are currently existing or being proposed in our market.

The way section 8 works, the individual pays 30% of their monthly income, the state pays the difference. There are rules involved though such as rates must be fair market rate and there are limitations on locations. HUD designates certain areas and the individual can rent anything in those areas where the landlord accepts section 8 and it’s fair market rate. I don’t know where these areas are in Raleigh. At any rate, what is being described in this thread is essentially a city version of Section 8, just gone about it in a round about way.

I’m no academic researcher, but it seems that the reason targeted upzonings don’t affect prices much is that they are, in fact, “targeted”. If you upzone in an area where the demand is significantly outstripping supply, there wont be much movement in price because there is a line of buyers ready to absorb the new supply.

These buyers are moving from somewhere, so there should be some supply created elsewhere which would likely be inherently less expensive, but in an area where there is a lot of in-migration (like Raleigh), it probably ins’t local.

Ultimately, I think that upzoning can only address the problem of affordability if it is applied broadly. Essentially city-wide. This would allow affordable units to be created via a number of market driven means such as ADUs, duplex/quadplex, splitting of McMansion homes into multiple units, smaller scale apartment buildings, etc.

If the upzoning is universal, it wouldn’t increase any given property’s value more than any other property - so the land prices wouldn’t increase as much because it would be a less scarce resource than it would be otherwise.

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That’s a really terrific way of summarizing it, and I agree with you. Making more of something that’s really desirable isn’t going to make it cheaper. In the case of housing, adding more people to an already desirable place is also only going to add to the experiences, which are likely to make it more desirable.

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I thought this podcast had a good description of a lot of what is going on. There are essentially two housing problems with different solutions needed for each. https://www.vox.com/2019/5/17/18628267/jenny-schuetz-weeds-interview

I agree. We should build more affordable housing and protect the affordable housing we have. Affordability must be addressed across income bands and in all parts of the city/county. Saying people living at the lowest income levels should not have access to downtown is the same if not worse than the voices and powers that seek to exclude people from their neighborhoods.

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