Tag Archives: housing

What HUD’s Been Up To

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by Michael Lewyn

There has been some controversy about the federal government’s new “Affirmatively Furthering Fair Housing” (AFFH) rule. Supporters hope, and opponents fear, that the rule will integrate lily-white suburbs and eliminate exclusionary zoning. However, there is reason to believe that the rule’s impacts will be fairly minor.

The Department of Housing and Urban Development (HUD) which enacted the rule, did so in order to implement sec. 808(d) of the Fair Housing Act, which requires federal agencies “to administer their programs…relating to housing and urban development…in a manner affirmatively to further” the policies of the Act—in other words, to affirmatively further fair housing.

In the past, HUD has sought to implement this statute by requiring grant recipients (such as local governments and public housing agencies) to draft an analysis of impediments (AI) to fair housing. An AI typically described impediments to racial integration, such as exclusionary zoning and racial disparities in mortgage lending. HUD decided that the AIs were not tremendously successful, because they did not contain enough data and were not adequately linked to other planning documents. (80 Fed. Reg. 42348).

The new rule requires grantees to create a new document called the “Assessment of Fair Housing” (AFH) every five years. The AFH will address a community’s barriers to integrated housing, such as “integration and segregation; racially or ethnically concentrated areas of poverty; disparities in access to opportunity, and disproportionate housing needs based on race, color [and other factors]” (80 Fed. Reg. 42355). The AFH will summarize any current litigation, analyze relevant data, and identify major factors limiting housing opportunity. The grant recipient must also set goals for overcoming the effects of these factors.To receive funding from HUD, a grantee must certify that it will affirmatively further fair housing, which means that it must promise to take meaningful actions to further these goals.  (80 Fed. Reg. 42316).  In other words, the grant recipient has to create paperwork stating: “This is why our city/county/area is more segregated than we would like, and this is what we would like to do about it.” Continue reading →

Not Racist- But Similar to Racism

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by Michael Lewyn

Is zoning racist? After a committee designed to study Seattle’s zoning codes suggested some significant reforms to the city’s code, Mayor Ed Murray said: “In Seattle, we’re also dealing with a pretty horrific history of zoning based on race, and there’s residue of that still in place.” Even if this remark is factually true, it doesn’t mean that today’s zoning is racist: low-density zoning exists in black neighborhoods as well as white ones, and opposition to changing such zoning crosses color lines.

But it seems to me that even though zoning is not consistently or intentionally racist, zoning is similar to racist housing discrimination (or “RHD” for short) in a few ways. Both involve a politically influential dominant class (in one case, whites generally; in the other case, homeowners of all colors) who have the votes to impose their will on the political process. In both situations, the dominators use their political power to exclude someone else from its neighborhood; racists usually seek to exclude blacks, while pro-zoning homeowners usually seek to exclude new residents regardless of color (to the extent that zoning is designed to exclude housing smaller or more compact than the status quo, such as smaller houses or multifamily dwellings).*

Both RHD and low-density zoning do, on balance, exclude blacks more than whites—though of course RHD does so much more consistently. One purpose of zoning is to raise housing prices (or, as courts and homeowners euphemistically say, “values”). And higher housing prices mean higher rents, which means that everyone has to pay more for less. If you don’t have any money, you are obviously going to suffer more from that policy than someone who has plenty of money, since the difference between having a small apartment and sleeping on the street is a bit more significant than the difference between having a 8000-square-foot mansion and a 12,000-square-foot mansion. And since blacks tend to have less money than whites, on balance blacks are going to suffer a little more than whites from these policies, just as they are going to suffer more from any tax imposed without ability to pay (for example, an increase in bus fares).** Continue reading →

Are Foreigners to Blame for High Housing Prices?

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by Michael Lewyn

Every so often I read an argument that says something like this: “There’s no way that rents can ever go down in expensive cities like New York and San Francisco, because rich foreigners are buying up everything, and as a result demand is essentially infinite. So there’s really no reason to allow new apartments because the foreigners will just buy them all.”

This argument could certainly be true in theory: for example, if an entire city were so expensive that only wealthy foreign investors could afford to live there. But it doesn’t seem to fit the social reality of the expensive city I am most familiar with (New York).

If demand was essentially infinite, there would be some evidence of this fact other than high real estate prices. For example, if New York was growing faster than any city in the United States, there might be a credible argument that new demand is truly insatiable. In fact, many low-cost cities are growing far more rapidly than New York and yet have cheaper rents. Between 2000 and 2010, Austin and Raleigh (both of which are far cheaper than New York) grew by 20 and 46 percent, respectively, while New York grew by less than 10 percent.

It could be argued that New York is dissimilar to other high-growth cities, because the number of wealthy foreigners is so huge that it makes New York a high-growth city. For example, if New York had to accommodate not only half a million new residents per decade but also three million wealthy foreigners seeking second homes, its housing-consuming population would have grown by about 45 percent over the past decade, about the same level of population increase as Raleigh. But are there really that many wealthy foreigners in the New York housing market? Continue reading →

Airbnb and affordable housing

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by Michael Lewyn

Over the past few years, the growth of Airbnb.com has made it much easier for people to rent out rooms in their houses and apartments. Before Airbnb, a traveler who wanted an alternative to hotels (which tend to be (a) quite expensive or (b) located in desolate-looking suburban arterials), would most easily be able to find a room through a temporary listing on Craigslist. However, these travelers had no way of knowing anything about their hosts, and would-be hosts had no way of knowing anything about their renters. By contrast, Airbnb, by providing a forum for hosts to review guests and vice versa, does allow some screening to take place.*

However, Airbnb has become politically controversial in high-priced, regulation-obsessed cities like Los Angeles and New York. Hotels and hotel unions quite understandably see Airbnb as competition in the short-term lodging industry, and wish to regulate it intensively (if not to destroy it). One common anti-Airbnb argument** is that Airbnb, by making short-term lodging more affordable, actually reduces the supply of traditional apartments—that is, apartments leased for a month or more at a time. The argument runs as follows: units that are on Airbnb for a few days at a time would, in the absence of Airbnb, be rented out as traditional apartments. Thus, Airbnb reduces the housing supply and raises rents.

This argument rests on an essentially unprovable claim: that Airbnb units would otherwise be rented out as traditional apartments. More importantly, the argument proves too much. If Airbnb hosts reduce the supply of apartments by not using their houses and spare rooms as traditional apartments, why isn’t this equally true of hotels who are not using their rooms as apartments, or homeowners who are not renting out every spare room? And if homeowners and hotels are reducing the rental housing supply, why shoudn’t they be forced to rent out their units as traditional apartments? Continue reading →

Cars Are Expensive (And Other Things The Census Taught Me)

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by Michael Lewyn

I just learned that national tables from the 2013 American Household Survey (AHS) are public. These tables contained a variety of information that I thought was at least mildly interesting. To name a few items:

  • Cars are really expensive—even when gas is cheap. The average household spent $800 per month on car-related costs. (Table S-04C). Only $200 of this sum was on gasoline—which means that even if gas was free, cars would still cost $600 per month. About half of household spending was for car payments, 15 percent was for insurance, and the rest was split between parking and maintenance.
  • Single family housing dominates the landscape. Sixty-four percent of all occupied housing units (and 62 percent of units built over the last several years) are detached single-family houses (Table C-01). This is especially true for owner-occupied units: even in central cities, 79 percent of owner-occupied units are detached houses (Table C-01-00).
  • Most single-family housing is not dense enough to support public transit. The average owner-occupied housing unit takes up 0.3 acres, as does the average housing unit built in the last several years. Thus, most blocks probably contain about three or four units per acre; basic bus service requires at least seven units per acre to be economically viable. (Table C-02). Continue reading →

In Defense of Airbnb

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(cross-posted from cnu.org, with some modifications)

The public benefits of Airbnb (a website allowing people to rent out rooms in their houses and apartments) seem fairly obvious to me. Visitors and new movers can pay less for their lodging by renting a room in someone’s apartment than by renting a hotel room, thus enabling longer trips, thus enabling city economies to benefit from more tourism. So it might appear that Airbnb might make housing more affordable, at least for visitors and movers.

But the hotel lobby and a variety of other opponents have sought to shut down Airbnb, especially in high-cost cities like New York and San Francisco where it competes most effectively with hotels.

For example, Sen. Dianne Feinstein (whose is in the hotel business)* has written an op-ed arguing that Airbnb allows landlords to “vacate their units and rent them out to hotel users, further increasing the cost of living.”

In other words, Airnbnb opponents see lodging as a zero-sum game: what benefits visitors must harm existing renters. By this logic, govenrment should just outlaw hotels, since every hotel unit is a potential apartment.

More seriously, the zero-sum argument assumes that every room rented to a visitor would otherwise be rented to a roommate. But the two “products” are not reasonably interchangeable; roommates involve advantages (such as familiarity and a regular rent check every month) and disadvantages (such as a 365-day relationship) that differ from those of Airbnb “temporary roommates.”**

Moreover, the supply of Airbnb rooms is actually pretty limited; for example, I just searched for Airbnb rooms in San Francisco renting for under $100 (and thus cheaper than most private hotels) and found a grand total of 486 rooms (not counting entire apartments, which compete more with ordinary landlords than with hotels). When I searched for rooms cheaper than the cheapest hotel on hotels.com, I found only 74 rentals- hardly enough to affect housing prices.  In less expensive cities, Airbnb is even less popular and thus even less likely to affect housing supply; for example, in Houston, I found only 139 rentals for less than $100. Continue reading →

Learning From My Condo

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While reading the Market Urbanism blog a few weeks ago, I noticed the following comment: “In cities with high rents and exclusivity, developers don’t build low-income or affordable housing, they build to maximize their profits. That means simply a greater abundance of unaffordable housing.” In other words, housing prices are whatever developers want them to be: if a developer decides that it feels like charging a million dollars for a condominium, it can wave its Magic Wand of Luxury, and can forever find rich people who will gladly pay a million dollars.

But my own condo-buying experience suggests otherwise. In 2002, I bought a one-bedroom condominium in Atlanta for $133,000. On one hand, Atlanta is not one of the nation’s more expensive cities; on the other hand, my condo is in one of the city’s most affluent areas, Buckhead. The average house or condo value in Buckhead’s zip code is about half a million dollars—lower than in Manhattan, but higher than that of many outer-borough neighborhoods. In short, this is a high-demand zip code.

My condominium was certainly a luxury building when it was built. In addition to the pools and clubhouses common in Atlanta buildings, this building has a 24-hour doorman, a fairly unusual feature in Atlanta. So I would imagine that when my building got its first occupants in 1988, the developer did not think it would be “affordable housing” in any sense of the word.

But then the recession happened. The last time I checked, Zillow.com said that the condo was worth only $94,000, and that if someone bought it, he or she would pay $516 for the mortgage and property taxes (plus condo fees). My condo is certainly far more affordable than I had envisioned, even by Atlanta standards.

What happened? Of course, the recession reduced demand for housing in Atlanta. But according to the National Association of Home Builders, regional housing prices are only about 10 percent below their 2006 peak—far below my unit’s 30 percent drop.

More importantly, there seems to be a lot of newer housing in Buckhead; Zillow lists 126 condos for sale in zip code 30305; almost half of them were built after mine (which was built in 1988), and 45 of them were built after 2000.  (By contrast, on New York’s 10023 zip code in the Upper West Side, only 30 of 291 units for sale were built after 1988.) Thus, it appears that Buckhead’s surge of new housing may have held down the price of older units such as mine.

It could be argued that because Atlanta is a low-cost city, its experiences are therefore irrelevant to those of more expensive cities. But in Atlanta, as in New York, new units are luxury units. Of the 45 condos for sale in my zip code built after 2000, not one is as cheap as mine. Only two of the condo units are being offered for less than $200,000 (though seven foreclosed units being put up for auction have lower “Zestimates,” which are Zillow’s guess of their value), and the median price is $375,000. Pre-2000 units are cheaper; five were less expensive than my $94,000 estimate, and ten foreclosures have lower Zestimates. The median price of pre-2000 units was slightly below $200,000. So in both Atlanta and New York, it appears that newer units are more expensive than older units.

It therefore seems to me that the law of supply and demand applies to housing even where new housing is significantly more expensive than older housing. The presence of new units holds down the price of older units by increasing the overall supply of housing and by making the older units less desirable in comparison. It logically follows that if any city builds (or allows the private sector to build) enough new housing, the desirability of new construction should make existing units more affordable. The only difference between a high-demand city and a low-demand city is that the city has to work harder to produce the new housing.