Do the Affordable Housing Laws Work?

[George_Apley]

You and your peers simply aren't a profitable enough demographic for prime land downtown. If you want to live in the city, then get a better job. That's all there is to it.

I know you're an immovable brick wall, so not sure why I'm wasting my time... but it's not about "downtown" anymore. It's getting too expensive to live anywhere nearby to the city for anyone not making well over the median income level.

I know you don't care, but there it is.

 

[JumboBuc]

But there are brand new Toyota Camrys and then there are brand new BMW Z4s. If we extend the analogy to housing, not enough Camrys are being produced and too many BMWs are being produced.

This is because there are negligible supply restrictions on car production and huge supply restrictions on apartment production. Auto companies are free to produce as many cars as the market demands up to their cost level. They can offer as many $100k cars as demanded and as many $75k cars as demanded and as many $50k cars as demanded and as many $25k cars as demanded, etc. However, if there were only a limited number of spots for new cars every year then it wouldn't be worth it for auto manufacturers to use up these spots on lower-margin $25k cars and so only high-end cars would be produced. Toyota would give up on Camrys all together and only make high-end Lexuses. Since there is only a very limited amount of Boston real estate up for development, this is the dynamic you end with in the market for new housing.

Right now, only the housing equivalent of $100k and $75k cars are being produced in Boston. The number of spots available is exhausted on just these two types. Maybe some day soon developers will find that these two markets segments have been exhausted and so they'll start producing some $50k car apartments to reach this market segment. More lax zoning could also increase the number of spots up for development and maybe open up space for more $50k new car apartments. However, other than a huge turn for the worse in the Boston economy, I can't see any situation where new $25k car apartments will be available here. There's no way we can expand the number of spots available enough to reach this market.

 

[kmp1284]

I know you're an immovable brick wall, so not sure why I'm wasting my time... but it's not about "downtown" anymore. It's getting too expensive to live anywhere nearby to the city for anyone not making well over the median income level.

I know you don't care, but there it is.

There are plenty of places that fit the bill in relatively close proximity with access to transit. Certain people seem to feel entitled to something better though.

 

[Oakley]

There are plenty of places that fit the bill in relatively close proximity with access to transit. Certain people seem to feel entitled to something better though.

Such as?

 

[fattony]

This is because there are negligible supply restrictions on car production and huge supply restrictions on apartment production. Auto companies are free to produce as many cars as the market demands up to their cost level. They can offer as many $100k cars as demanded and as many $75k cars as demanded and as many $50k cars as demanded and as many $25k cars as demanded, etc. However, if there were only a limited number of spots for new cars every year then it wouldn't be worth it for auto manufacturers to use up these spots on lower-margin $25k cars and so only high-end cars would be produced. Toyota would give up on Camrys all together and only make high-end Lexuses. Since there is only a very limited amount of Boston real estate up for development, this is the dynamic you end with in the market for new housing.

Right now, only the housing equivalent of $100k and $75k cars are being produced in Boston. The number of spots available is exhausted on just these two types. Maybe some day soon developers will find that these two markets segments have been exhausted and so they'll start producing some $50k car apartments to reach this market segment. More lax zoning could also increase the number of spots up for development and maybe open up space for more $50k new car apartments. However, other than a huge turn for the worse in the Boston economy, I can't see any situation where new $25k car apartments will be available here. There's no way we can expand the number of spots available enough to reach this market.

Wow, very well said.

 

[JonFrum]

Stockholm is known for its effort to keep housing 'affordable' - at least for those who are already there. It is also known for having probably the worst housing market in all of Europe. People from outside who get a job in Stockholm literally can't find housing in the city. For all intents and purposes, they are regulated out of moving into the city. You can't even sublet your apartment - the housing police will find you and punish you.

Regarding 'affordable' housing - a term that again literally, has no definition: The housing projects around the city were built to correct the market's failure to produce affordable housing (no quotation marks needed). How did that work out for you? They became housing of last resort, rather than the housing of the working class they were intended to be. And who did that? Hint: Not the evil right wingers.

Private efforts to produce affordable housing were made by philanthropists in the city. Woodbourne in Jamaica Plain is an example. Near Forest Hills, it was meant to be housing for train and streetcar operators. Instead, they kept adding nice little features to the houses, and the price point moved to the supervisor/manager class of buyer. Thanks, well-meaning soft left do-gooders.

The so-called affordable housing programs carried out in Boston and elsewhere are akin to throwing a thousand starving people a carton of Oreos once a month. A drop in a bucket that just grows larger as time passes.

When was the last time you saw someone say how many low-cost units it would take for market rents/costs to stop increasing, and actually drop? Would 100 do it? Five hundred? A thousand? At some point, vacancy rates would start going down, and landlords/owners would have to cut their asking price. Right?

Wrong. Lower housing costs would get telegraphed around the region and as far away as the Caribbean, and demand due to immigrants would increase. And prices would start rising again. Which would require another building boom, with hundreds more units to increase supply. I'd love to hear where all these units are going to be built. Are we going to tear down the single family houses in West Roxbury and build three deckers? It boggles the mind.

A true solution - probably the only rational one? Dump all zoning regulations that limit builder discretion. And dump all 'community input' - no more endless committees of self-important Lenins. Then, let greed do it's work. That is, if you really care about 'affordable housing.'

 

[Matthew]

Check this out:

DC Area Rents Drop 3% as New Apartment Supply Rises

There are a number of reasons that rents are now falling, but primarily it is due to high levels of new supply and a pipeline that now seems oversized compared with demand.

 

[FitchburgLine]

Lets see all the people saying "luxury housing cant lower rents" "no reasonable amount of development can accommodate demand" and "the only way to get affordable housing is *insert misguided government intervention here*" admit their mistakes or qualify their position, because that sure looks like housings construction lowering costs in an expensive city.

 

[Matthew]

Japan also provides good examples, thanks to the way zoning is implemented over there.

http://nextcity.org/daily/entry/japan-shows-the-way-to-affordable-megacities

As construction in Tokyo continues to outpace population growth, prices are also falling, according to data compiled by Japan Property Central. Average monthly rents per square meter in Tokyo have fallen by about 250 yen, or about $2.40, over the past 10 years. That means the monthly rent on a 1,000-square-foot apartment would be more than $200 cheaper in 2013 than it was in 2003. (Overall price levels in Japan are about the same as they were 2003, with periods of deflation canceling out those of inflation.)

Zoning categories are largely controlled by a growth friendly central government, which sidesteps many of the problems caused by exclusionary-minded NIMBYs.

Aside from isolated projects here and there, city planning did not begin in Japan in earnest until 1919. Even today, zoning standards are very lax compared to cities in the Americas and Europe. The construction-loving Japanese central government generally runs the show when it comes to land use regulation, with more change-averse localities sidelined in the name of economic development. (Just this week, a new round of zoning deregulation was announced.) Skyscrapers are relatively rare in Japanese cities — though this has been changing gradually over the past half-century — since building height depends on street width, and streets tend to be very narrow. Development in Tokyo, Osaka and other large cities in the Tokaido megalopolis is still much easier than in peer cities in the West like Paris, London, New York and San Francisco.

That said, Japan certainly has its share of NIMBYs. For example, the famous Narita airport was mired in controversy for decades. And Japan has stronger property rights protection than English common law countries. They do not employ the concept of Eminent Domain the way we do here.

But Japanese culture seems to be more amenable to the idea of change, so there's always a demand for new construction. They don't obsess as much over historical preservation in the same way we do here. Perhaps that's a side effect from losing everything in the war. But also, frequent fires were a problem for centuries beforehand. When I visited Kyoto we were shown many "old" buildings that turned out to be reconstructions done within the past 100 years -- the previous structures had burned down for one reason or another.

In any case, it seems that Japan is one of the few places in the world still capable of building human-scale neighborhoods, with really nice streets, and public transit we can only begin to envy. There's probably lots of lessons for us if we can only be open to them.

 

[pixelsand8]

Lets see all the people saying "luxury housing cant lower rents" "no reasonable amount of development can accommodate demand" and "the only way to get affordable housing is *insert misguided government intervention here*" admit their mistakes or qualify their position, because that sure looks like housings construction lowering costs in an expensive city.

I've never said that more housing doesn't "lower" rents but it doesn't change the character of the problem. You still need to earn a shit ton of money to live decently in DC. Poor and middle class people are still just as screwed. And strangely enough I had to click the link to get this tidbit;

In DC proper, rents actually rose by 0.8 percent despite the large number of new apartments delivering, thanks to a continued high level of demand. In the NoMa/H Street sub-market, rents increased 3.9 percent.

So more supply, while nice, is no panacea for areas with the most demand (ie the vast majority of Boston).

 

[underground]

If you're looking at new supply with rising prices and concluding that new supply doesn't lower prices, then you're presuming that the supply increase was the amount needed. DC is one of the hottest markets in the country, so without having the numbers in front of me, I wouldn't be surprised at all if demand still isn't being met.

 

[dwash59]

So more supply, while nice, is no panacea for areas with the most demand (ie the vast majority of Boston).

Rents went down in Rosslyn, which is like rents going down in Davis Square. It's one metro stop from DC proper. I think many people would be quite happy with rents going down in Somerville.

 

[Matthew]

So more supply, while nice, is no panacea for areas with the most demand (ie the vast majority of Boston).

Uh, 0.8% is a heck of a lot lower than Boston's rent growth.

You should also take note of the fact that, as shown in the graphic, The District proper had the least amount of new units go online of the three areas.

One year of increased supply isn't going to do shit. This has to be a long-term process. That's why I said it was pernicious that zoning laws have strangled growth here for decades. It's all the units that weren't built over the last 50 years that would help right now. We can't solve that problem instantly -- it's going to take many years. There's no way around the irresponsible behavior of NIMBYs past.

What's interesting about The Ballston-Rosslyn corridor is that they've been planning TOD growth for decades. And it seems to be working.

 

[George_Apley]

Rents went down in Rosslyn, which is like rents going down in Davis Square. It's one metro stop from DC proper. I think many people would be quite happy with rents going down in Somerville.

*raises hand*

Of course with the T on the way, I'll be priced out of Union in the next couple years.

 

[pixelsand8]

Uh, 0.8% is a heck of a lot lower than Boston's rent growth.

You should also take note of the fact that, as shown in the graphic, The District proper had the least amount of new units go online of the three areas.

One year of increased supply isn't going to do shit. This has to be a long-term process. That's why I said it was pernicious that zoning laws have strangled growth here for decades. It's all the units that weren't built over the last 50 years that would help right now. We can't solve that problem instantly -- it's going to take many years. There's no way around the irresponsible behavior of NIMBYs past.

What's interesting about The Ballston-Rosslyn corridor is that they've been planning TOD growth for decades. And it seems to be working.

The problem here is that I think we are debating two different issues. Many here are looking to lower rents long term, which increased supply will fix. I'm more concerned with figuring out a way to stop the emergency bleeding going on now that will significantly alter the character of the city. If we sit around and wait for the "new supply" train to catch up it will be far too late and the damage will of already been done. It's probably too late now anyway. Too many people are gone because they are not "economically viable" for the new Boston. The city might be doing great economically but it's suffering culturally. Some good observations on this from a recent reddit thread;

http://www.reddit.com/r/boston/comments/2r7mah/does_boston_lack_underground_art_music_and/

 

[Matthew]

No, I understand. I've been trying to make both points as well. That's why I keep pointing to the need for some kind of "affordable housing" help in order to solve the near term problem. It's not a permanent solution. It's supposed to be for the short-term. But since zoning continues to exist, and continues to destroy long-term affordability, we keep on running into crisis after crisis.

Note that even before zoning there were housing crises as well. So it's not only zoning that causes the problem. It's just the most proximate, self-created cause. And as Japan shows, it is possible to do zoning in a way that doesn't necessarily hurt affordability. So, perhaps the focus should be on ending American-style, exclusionary, snob zoning.

 

[cozzyd]

One way to immediately lower demand is to find a way to incentivize lots of student housing, especially for grad students. Students rooming together have quite a bit of buying power, even if individually they don't. I think only MIT has significant grad student apartment-style housing, and even at MIT, demand exceeds supply (and I think the primary driver to off-campus housing is cost, not "not wanting to live in a dorm").

 

[393b40]

Another solution to this problem would be to incentivize the cities around Boston to get their act together and build good urban environments people want to live in near their transit hubs, for example, Worcester, Lowell, Quincy, Brockton.

It doesn't all need to be about Boston all the time. Any city that has good transit access and a good urban environment could be a great way to take housing stress off Boston. The characteristics that make Boston desirable such as activity, culture, walkability etc. can be replicated to some degree elsewhere.

 

[George_Apley]

One way to immediately lower demand is to find a way to incentivize lots of student housing, especially for grad students. Students rooming together have quite a bit of buying power, even if individually they don't. I think only MIT has significant grad student apartment-style housing, and even at MIT, demand exceeds supply (and I think the primary driver to off-campus housing is cost, not "not wanting to live in a dorm").

Only if that housing is affordable for students living off of loan money. As much as I want to see all the colleges in the area add thousands of units of student housing, if those dorms/suites/student apartments are costing more than the market rate, upper classmen and grad students will choose to live in off-campus housing. And I'm not seeing any movement by the universities to lower their room & board costs...

 

[cozzyd]

Only if that housing is affordable for students living off of loan money. As much as I want to see all the colleges in the area add thousands of units of student housing, if those dorms/suites/student apartments are costing more than the market rate, upper classmen and grad students will choose to live in off-campus housing. And I'm not seeing any movement by the universities to lower their room & board costs...

Well, universities aren't so stupid as to have dorms lying empty, hopefully... more likely the cost of housing is set by the desire to be at near 100 % occupancy.