Tag: affordable housing

• 50% of apartments in New York are under a form of rent control

  A friend of mine who lives in New York recently sent me this interesting article: “The Perverse Effects of Rent Regulation.” And he sent it to me, because he wanted me to take note of this stat:

  There are, effectively, two rental markets in Manhattan. Roughly half the apartments are under rent regulation, public housing or some other government program. That leaves everyone else to compete for the half with rents determined by the market.

  50% is a big number. I would never have guessed that the New York rental market would be split in such a way. But it is split because it’s fairly clear what would happen if it weren’t: 

  “Poor people would be priced out of Manhattan,” he says. “Period.”

  This, as the article argues, could threaten the diversity that has made New York the economic and cultural hub that it is today. But at the same time, there are a number of important questions: Is 50% the right split? And are the control mechanisms in place the right kind of mechanisms? Should rent controls be attached to people as opposed to apartments, which is how it’s typically done today?

  Diversity is hugely important and there will always be a portion of any city’s population that cannot afford market rents. But intuitively, and I could be wrong, 50% seems high. It seems high because these types of rent regulations achieve the exact opposite for the balance of the market that has to pay market rents: their apartments become more expensive.

  I’ve been having a lot of discussions lately about affordable housing and rent control always comes up. I think that in a lot of cities there needs to be some sort of intervention in the market to keep them from becoming homogenous playgrounds for the rich. But I also believe that many policies–which may sound great in theory–can have unintended market consequences. These need to be seriously looked at.

  2014.03.27

• What are Generation Y condo dwellers going to do when they have kids?

  I gave a talk about condos this evening at the Ted Rogers School of Management. For regular readers of this blog, the material wouldn’t have been all that new. I talked about supply and demand in housing markets and 2 of the projects that TAS is working on. The best part though was the Q&A, which, I think, was longer than the actual talk.

  One question that I particularly liked (maybe because I’ve blogged about it before) was the question of what all these Generation Y condo dwellers are going to do when they decide they want a family. We know that people are getting married later and that more people are living alone. So there are some demographic changes at work here. But people are still going to have kids and people are still going to need more space.

  At that point, I think 2 other, interrelated, factors come into play: first, a lot of people still feel you need a house in order to raise kids; and, second, there’s a problem of affordability. Multi-family dwellings (built out of reinforced concrete) are inherently more expensive to build than wood-framed single family homes.

  To deal with these factors, a lot of young couples in Toronto (at least from my own empirical research) seem to be looking to inner city neighborhoods like Leslieville, Roncesvalles, Trinity Bellwoods, High Park, the Junction and so on. They still want to be in the city, but they want a house, for their kids. Problem is, everybody is trying to do the same and it’s creating tremendous pressure on our low-rise housing stock.

  So what’s going to happen in the longer term?

  Well if low-rise housing keeps appreciating at the rate it has been, we could reach a point, I think, where all of a sudden condos become the more cost effective solution.

  For example, let’s say a young family is looking for a 3 bedroom home. It’s not inconceivable that the 1,500 square foot, 3 bedroom condo could become the cheaper option. At $650 per square foot (I’m assuming a slightly higher number because I’m assuming this is at some point in the future), you’re looking at roughly a million dollars. No question this is a lot of money, but what if the alternative (a single family home) is $1.5 million?

  I’m sure there will always be a segment of the market that rushes towards the suburbs and/or a house when they decide they want to have kids. But I think we’ll see more and more families decide–either because of cost or because of a lifestyle preference–that having children in a condo isn’t all that bad.

  What do you think? Would you ever raise children in a condo?

  2014.03.11

• Closing the homeownership affordability gap

  Through TAS, I’m involved in an affordable homeownership seminar at Ryerson University. The goal of the semester is to develop a comprehensive policy document for how best to deliver affordable homeownership units in Ontario. 

  The students are still working on their final report, but I wanted share one thought that came to mind as I was reviewing the draft.

  As a first step, I think the question of affordability needs to begin with a broader look at the market rate housing market. Have we optimized for the delivery of new housing or are we operating in a state of perpetual supply deficits?

  The reason for this question is that—as I’ve written before—I subscribe to Edward Glaeser’s argument that easing housing regulation and increasing supply can go a long way to broadly improving housing affordability. It won’t make New York as affordable as suburban Houston (Glaeser says), but it will help to avoid some of the outrageous pricing that can occur in severely supply constrained markets like San Francisco.

  Once this has been addressed, it then comes down to deciding how you want to make up the shortfall. If you want to provide housing below its costs (the market rate), somebody is going to have to pay for the difference. However, if you’ve optimized around the market rate, it means that the required subsidies should be less than they otherwise would have been. This makes it more cost effective for governments, or whoever else is providing the subsidy.

  So my point is to not take the market conditions as a given when looking at affordability. Are there structural changes that could be made to improve affordability more broadly?

  There’s certainly no easy answer, but it’s an important discussion to be having. Let me know your thoughts in the comments below.

  2013.11.22

• Is San Francisco so liberal that it’s actually conservative?

  One of the things I’ve always found funny about San Francisco is that, despite being a bastion of liberalism, it’s a city that’s incredibly anti-development. From the outside, it seems like a city filled with NIMBYs. Doesn’t that seem odd given its reputation as one of the most progressive cities in America?

  Of course, many would argue that part of the reason so many people love San Francisco is because it’s done such a great job of preserving its history. And don’t get me wrong, I think that’s important. But as I’ve argued before, development should be about a balance. We should be looking to the future, while not forgetting the past.

  Let’s put some numbers to this discussion.

  According to Atlantic Cities, San Francisco has produced on average 1,500 new housing units each year over the past decade. Seattle does about 3,000. And in the Greater Toronto Area, we’re probably around 30,000. I’m not sure if the Atlantic Cities numbers represent only the city proper but, either way, the spread seems massive. Even still, market analysts, such as George Carras of RealNet, have argued time and time again that the Toronto region needs 40,000 new housing units a year just to keep pace with demand!

  So what happens when supply doesn’t keep up with demand and you have a robust economy that continually draws in people from around the world? You get San Francisco. And you get expensive real estate and high rents that relatively few people can afford. San Francisco regularly tops the list of most expensive real estate markets in the US.

  This is a phenomenon that I don’t think many people appreciate: When you fight development you restrict supply and when you restrict supply you hurt housing affordability. This is the argument that economist Edward Glaeser makes in his book, the Triumph of the City, when he talks about why housing is so affordable in Houston.

  Now, if you think about it for a second, this actually means that it’s entirely contradictory to be a NIMBY and, at the same time, an advocate for affordable housing. The two are at odds with each other. Do you want an exclusive city with only enough housing for rich tech moguls? Or do you want an inclusive city with enough new housing supply for the middle class?

  When asked, I’m sure many liberals would choose the latter of those 2 scenarios. But in practice, at least in San Francisco, it would appear that many are opting for the former. And it’s happening because residents want their perfect community to remain unchanged. However, in the process, the values that supposedly underpin that community are being threatened.

  Which makes me wonder: Is San Francisco so liberal that it’s actually conservative?

  2013.11.16