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Tracking Housing Affordability

By | | Housing, Useful Data
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Zillow reports that “home values grew the most in markets with the strictest land-use regulations.” That’s not exactly news to Antiplanner readers, but it’s nice to hear others confirm it.

Unfortunately, Zillow bases its measure of who has strict land-use regulations on the Wharton Land-Use Regulation Index. This is the best index available but it still has a few problems. First, it is more than ten years old. Second, it only measures the strictness of city zoning, not the strictness of rural zoning near the cities (i.e., growth management). Third, it doesn’t measure how easy it is to get variances or zone changes.

As an example of the problems, Zillow concludes from the Wharton index that Houston and Dallas have “medium strict” regulations, while the least-strict rules are found in places such as Indianapolis and Kansas City. Of course, Houston has no zoning, though it does regulate heights and setbacks. The unincorporated areas around both Dallas and Houston also have no zoning and don’t regulate anything except development in riparian areas. Continue reading →

$530/Square Foot for Affordable Housing?

By | | Housing
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A lot of federal money for housing is funneled through non-profit organizations, and those non-profits become lobbyists for continued federal funding. Yet it isn’t clear that they actually do much to make housing affordable. This can be seen from a blog post by Roger Valdez, who says he “was a non-profit housing director for about three years.”

His post analyzes an affordable housing development in the Seattle area being planned by a non-profit called the Plymouth Housing Group, whose purpose (according to its 2016 IRS form 990) is to “develop and manage affordable housing for homeless and very low income individuals.”

Valdez notes that, from 2008 through 2017, non-profits produced 5,576 units of housing. Someone miscalculated to be 620 units a year (they divided by nine when in fact there were ten years from 2008 to 2017). Obviously, that’s more like 558 units per year. Continue reading →

Gentrification and Housing Affordability

By | | Housing
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An opinion piece in the Los Angeles Times this week repeats the argument that gentrification is reducing transit ridership. The Antiplanner was not persuaded by this when the claim was presented in the Eastsider last fall, but it and Senate Bill 827 raise another issue: what does gentrification do to housing affordability?

A standard theory of housing is that people who can afford to do so buy new homes and older homes trickle down to lower-income people. But this assumes that the older homes aren’t torn down to make way for the new. In regions with urban-growth boundaries, most new homes can be built only by sacrificing old ones — gentrification. This process is further encouraged by cities like Portland and Los Angeles that subsidize developers to build transit-oriented developments along rail transit lines.

People who already own homes aren’t hurt by this; in fact, their home values rise. But gentrification can price renters out of their housing and leave them with no comparably priced housing to go to. Continue reading →

Housing in 293 Urban Areas in Nine Nations

By | | Housing
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Early this week, Wendell Cox released his latest annual survey of housing affordability of metropolitan areas around the world. “Housing affordability cannot be evaluated except in relation to incomes,” he notes, and he compares median home prices with median household incomes in each of 293 urban areas.

At one time, he says, home prices in nearly all of these urban areas were between two and three times household incomes, and they still are in dozens of housing markets in the United States and Canada, as well as a few in Ireland. In other parts of the world, however, home prices have risen to, in some cases, more than ten times household incomes. Of the 293 urban areas documented by Cox, about a quarter have median home prices that are more than five times incomes, and another quarter are between four and five times incomes.

In the United States, lenders generally allow borrowers to pay up to 28 percent of their incomes on a mortgage. At 4 percent interest, a household can dedicate 28 percent of their income to a mortgage on a home that costs three times their annual income and pay it off in 15 years. When home prices reach four times their annual incomes, they need more than 20 years to pay off the loan. At five times their incomes, more than 30 years are required. At six times their incomes, they would need to get a 48-year loan, which is not available in current markets. At seven times their incomes, it becomes impossible for them to buy the house without dedicating more of their incomes to the mortgage than most lenders would allow. Continue reading →

Throwing Money at Housing Won’t Work

By | | Housing
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Recognizing that “rents are going up much faster than the incomes” in places like New York and Los Angeles, Secretary of Housing and Urban Development Ben Carson recently told NPR that cities need to move “away from the concept that only the government can solve this problem by throwing more money at it.” In response, Portland’s Mayor Ted Wheeler tweeted, “Secretary Carson, if you don’t think gov’t can provide solutions, then you should step aside and allow someone up to the task to lead.” Apparently, in Oregon it is an apostasy to think that any problem can’t be solved by throwing tax dollars at it.

This is particularly ironic when Portland is now suffering cost overruns on its so-called affordable housing projects comparable to those for its light-rail projects. One project that was supposed to cost $200,000 per unit is coming in at $285,000 per unit–a 42.5 percent overrun. Wheeler proudly tweeted that the city just approved another project with 203 units of so-called affordable housing. Because home prices in a market of nearly 820,000 homes are going to be significantly influenced by the subsidized construction of 203 more–Not!

As the Antiplanner previously noted, “affordable housing is not the same as housing affordability.” Affordable housing is government subsidized housing for people too poor to afford housing. It is not intended or expected to influence the overall housing market because it does nothing about the underlying conditions that have made housing expensive in the first place. The problem in Portland, and the entire West Coast, is that housing is unaffordable to almost everyone, not just the very poor, and the only real solution for most people is to move away. Continue reading →

Affordable Is Not the Same as Affordability

By | | Housing, Urban areas
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Too much housing news is based on the failure to distinguish between affordable housing and housing affordability. Affordable housing is government-subsidized housing for low-income people. Housing affordability is the general level of housing prices relative to the general level of household or family incomes, often measured by dividing median home prices by median family incomes.

Areas where housing is affordable, such as Dallas or Raleigh, may still need some affordable housing for very poor people. But areas where housing is not affordable, such as Portland or San Francisco, will not solve their housing affordability problems by building more affordable housing. Despite this, politicians, reporters, and editors all promote more affordable housing to address housing affordability issues.

The San Jose Mercury News, for example, accuses Republicans of “sabotaging” the Bay Area’s affordable housing plans by cutting federal housing budgets. But the federal government didn’t impose urban-growth boundaries that have restricted development to 17 percent of the Bay Area, so why should federal taxpayers subsidize affordable housing that isn’t going to solve the region’s self-inflicted housing crisis? Continue reading →

2nd Quarter Home Price Indices

By | | Housing, Useful Data
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Someone just paid $1.1 million for a tear-down/fixer-upper in Mountain View, California. That’s not really news, as prices in Silicon Valley have been increasingly outrageous. What’s news is that they bought the house with the provisos that the existing owner will get to live there for seven years; the buyer didn’t get to see the interior of the home; and the buyer is required to make improvements before closing on the home. As the San Francisco Chronicle says, the new owner probably figures it will take seven years to get the permits to rebuild the house anyway.

The problem for the buyer is that the same forces that have made housing prices rise in Silicon Valley–namely the urban-growth boundaries adopted by San Mateo and Santa Clara counties–have also made prices more volatile. In other words, what goes up will come down. As shown in the chart above, San Jose prices today are already higher than they were at the peak of the 2006 housing bubble, indicating that another bubble is likely to deflate fairly soon. Continue reading →

Ending Economic Apartheid

By | | Housing
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Thanks to its greenbelt and slow-growth policies, Boulder, Colorado is the nation’s most-expensive and least-affordable housing market of any city not in a coastal state. As a result, as noted in an op-ed in The Hill, the number of black residents in Boulder declined by 30 percent between 2010 and 2016, leaving less than 1.6 percent of the city with African-American ancestry.

Closer to my home, the Bend Bulletin argues that the state of Oregon “works against affordable housing by, among other things. . . artificially increas[ing] the price of land through its urban growth boundary system.” Although cities are required to maintain an inventory of developable land within their growth boundaries, the paper notes that permission to expand their boundaries takes years.

The Oregon legislature effectively admitted that this is a problem last year when it passed a law allowing two cities to develop land on up to 50 acres of land outside of their growth boundaries. But can anyone seriously believe that adding 100 acres of new housing will make housing more affordable in Oregon? Continue reading →

HUD Backs Off on Housing Mandate

By | | Housing
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In a case with national ramifications, the Department of Housing & Urban Development (HUD) has effectively given up on its efforts to impose high-density housing on low-density suburbs in the name of racial integration. HUD had ordered Westchester County, New York, to build low-income housing in response to claims that county zoning led to segregated housing.

This was widely seen as the model for HUD’s affirmatively furthering fair housing rule, which requires local governments that have received federal housing funds to review local housing patterns with the de facto assumption that, if the community is not perfectly integrated, whatever segregation exists must be due to local zoning rules making housing less affordable.

In response to HUD’s order, Westchester County had submitted an analysis finding that, while the county was not perfectly integrated, local zoning was not the cause. The Obama administration had rejected this analysis, but the current administration accepted a new analysis that “essentially the same” as the rejected one. Continue reading →

Portland Housing Stupidity Grows

By | | Housing, Urban areas
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Here’s an incredibly stupid idea to deal with Portland’s housing affordability problems: Multnomah County proposes to build tiny houses in people’s backyard. The people will get to keep the houses on the condition that they allow homeless people to live in them for five years.

That’s supposed to be an incentive. For five years, you have to share your yard with a homeless person who may be suffering from a variety of problems, after which you get to keep whatever is left of the tiny home. But as one Portland neighborhood activist points out, what homeless people need is healthcare and social work, not to be warehoused in someone else’s backyard.

I suspect homeowners are going to be wary of this offer because they will have little control who lives in their yard. Not only would the homeowners be required to maintain the tiny houses while the homeless person or people lived in them, Portland is making it increasing difficult for landlords to evict unwanted tenants.

Continue reading →