Category Archives: Burlington

And another thing

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This is the last grant-funded post, so we’ll try to keep it snappy, not sappy. What do we know about housing, anyway? Not a lot, but a good deal more than when we signed on to this gig 10 months ago.

For what they’re worth, we’ll leave you with a gratuitous thought and an anti-climactic ranking.endgame1

Housing can’t simply be left to the private market, any more than health care or education. It’s time for people to accept that resolving the housing-affordability crisis will require significant new governmental investment; and alleviating the socioeconomic and racial segregation that continue to stand in the way of fair housing choice, all across the country, will require concerted government intervention. Why shouldn’t the right to decent housing and fair housing choice be a public policy priority commensurate with the right to health care or the right to receive an education?

Rankings abound at New Year, so here’s one with an ancillary question: Rent or buy? 504 counties around the country are listed in order of rental affordability — that is, the percentage of local median income that’s required to pay median rent of three-bedroom apartment in that county. Also listed is the affordability percentage of a median priced home. Compare the percentages to see whether it’s more affordable to rent or buy.

No. 1 in rental affordability (or unaffordability) is Honolulu, at 73 percent. Buy. No. 505 is Huntsville, Ala., at 23 percent. Buy.

You can get  to the Excel table by clicking here.

The only Vermont county in the table is Chittenden (listed as Burlington/South Burlington). Sorry, Bellows Falls, Bennington, et al, but that’s the way of these national surveys.

Burlington/South Burlington comes in at No. 152 in rental affordability, at 40 percent. Buying affordability: 46 percent. The recommendation: Rent.

Lake Champlain Burlington, Vermont.
 

That’s despite the fact that, according to the table, the cost of a 3 BR apartment in Burlington/South Burlington went up 12.2 percent in the last year.

Sounds a little high to us (so much for the 3.3 percent figure we’ve been hearing) but again, what do we know?

Could be worse.

The economic damper

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If  a crisis isn’t mentioned in a presidential debate (as the national housing crisis was not, in either of the televised colloquies over the past week), does that mean it doesn’t exist?bench2

Of course not. Whether the candidates are willing to discuss it or not, the affordable housing shortage remains a damper on economic vitality and job creation. Burlington’s latest housing market analysis (July 31) gets to this point right in the first paragraph:

“Burlington’s housing market is marked by an imbalance between supply and demand. … The rental housing imbalance translates into high housing costs (relative to income) and lower quality rental housing stock. … An imbalanced rental housing market also impedes economic growth since employers have trouble recruiting and retaining their workforce.”

The same can be said for many other communities in Vermont and beyond, as seen in these news bulletins from the last few days:employment4

  • Toyota Financial Services decided to pull out of Los Angeles and move to Plano, Texas, in part because of LA’s high housing costs and rent burdens.
  • Well up the coast, in northwest Oregon, the lack of affordable housing “threatens the viability” of major cheese company that is subsidizing a housing task force in a county, beset by negligible development.bench3
  • In Key West, the Naval Air Station has trouble retaining civilian employees because of high housing costs. About half the base’s firefighter recruits wind up leaving after a few months’ training because they can’t afford to live there, according to the chief.
  • In Travers City, Mich., the housing shortage repels new workers, in a kind of vicious cycle. bench1 “Builders can’t construct housing because they lack works and workers won’t relocate to the area because they can’t find housing,” The Traverse-City Record-Eagle laments.
  • Colorado, the rental market is so tight in some ski towns that some workers are living in their cars or in temporary shelters. Several hundred Vail Resort workers recently confronted another kind of indignity: they were informed that they’d have to share rooms in the employer’s housing complexes.employment3

Capital ideas

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This country’s shortage of affordable rental units runs into the millions, and Vermont’s is in the thousands. Where’s the money going to come from to build or rehab our way out of this hole? Government spending falls chronically and abysmally short, but there’s a glimmer of hope that a growing fraction of the massive need can come from an unlikely source: private investors. finance1

But first, consider the scale of the need. According to the recent Harvard report on rental housing, 11.4 million renter households are “severely burdened,” paying more than 50 percent of their income for housing. (An additional 9.9 million are simply “burdened,” paying more than 30 percent.)

In Vermont, 26 percent of the 75,000 renter households are severely burdened — that’s 19,500 households living in places that are far beyond their means. And in Burlington, 35 percent of the 9,500 renter households are in that position – about 3,300 households.

The federal government’s primary subsidy for affordable housing development is the Low Income Housing Tax Credit, which produces in about 100,000 affordable rental units a year. Then of course there’s the challenge of maintaining affordability for units whose tax credits expire, a challenge that Vermont’s housing nonprofits and state agencies contend with annually as they marshal limited public resources to preserve the affordability of what’s here. And even though they’ve been largely successful, what’s here isn’t anywhere near enough. Yes, the private market is turning out new rental housing to meet the growing population of renters, but the great majority of those new units are high-end.

A new report from the Urban Land Institute and NeighborWorks America, “Preserving Multifamily Workforce and Affordable Housing,” describes a range of new financing vehicles that seek to create or preserve affordable housing. Sixteen partnerships o investment companies – some new, some well-established — are profiled. One thing they have in common is that they offer returns to their investors– who include philanthropies, university endowments, pension funds and private individuals in the single digits, below what the typical real-estate investor might expect to receive. These entities include private equity funds and two real estate investment trusts (REITs) that focus on affordable multifamily developments.

The hook is that this investment sustains a social good: affordable housing. If “socially responsible investing” is popular among Vermont’s progressive monied class, why can’t affordable housing be one of their fiduciary causes? A creative financier might even find some way to enlist the UVM endowment or the state pension fund in support of affordable housing development.finance2

The report also mentions another possible funding source for affordable housing — the EB-5 program, which pulls in big investments from foreigners (typically from East Asia) in exchange for green cards, and which we’ve harped on before. Yes, EB-5 is supposed to be a job-creation program, but it turns out that real estate development developments are among the most popular EB-5 projects, in part because the construction jobs count. (Check out this article, “Real Estate: Still the Darling of EB-5.”) True, affordable housing isn’t the typical EB-5 project, but it has been done – in San Francisco’s Hunter’s Point Shipyard, and in Seattle, near the Seahawks’ stadium. Next up, Miami.

How about Newport, Vt.? 

The Burlington College land deal

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Burlington College’s intent to sell off much of its lakeside acreage drew opposition when it was announced two years ago. Now, as a development plan awaits City Council approval, the grumbling continues. Some of the grumblers apparently cling to an obsolete fantasy: namely, that most of the property could be spared development and conserved as greenspace. Burlington-College

Thumbnail history: In 2011 the college bought 32 acres from the Catholic diocese for about $10 million, then came to the realization, after a couple years of stagnant enrollment, that it couldn’t afford the payments. To survive, the college would have to sell off a big chunk of the land, and it revealed its plan to do so to housing developer Eric Farrell a little over two years ago.

The deal wasn’t done, though, and there was a window of many months when someone else — someone like the Nature Conservancy, say, or a land trust — could have stepped forward to offer the $7 million or so that would have been necessary to buy the developable land for conservation purposes. No one did, though. That’s why the greenspace fantasy is obsolete.

Not developing the land was not an option, at least if Burlington College wass to stave off bankruptcy. And if the college were to go belly up, well, then ownership of the property  would have reverted to creditors (principally a bank), leading to a development scenario perhaps less palatable than Farrell’s.

If there’s anything reasonably left to grumble about, it’s in the details of the agreement the City Council will review next week. Among those details, as we understand them: The city is acquiring 12 lakeside acres for $2 million to be maintained as parkland (a parcel, by the way that has been appraised at $2.9 million). Farrell will develop about 550 housing units on 16 acres, of which 160 will be affordable to families of income below 65 percent of the median, with other units targeted to people of moderate income, while the rest are market-rate; and 200 beds for students on a parcel the college will retain for its campus.

This much is clear: The city is in desperate need of more affordable housing, and it has its inclusionary zoning ordinance to thank for the affordable units in this scheme, and (2) This inclusive new neighborhood, as planned, will be one of exemplary economic diversity.

Surprise! Some rents going down

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Burlington’s chronic housing-affordability problem is bad enough — more than a third of the city’s 9,500 renting households are paying more than half their income for rent and utilities, which puts them in the “severely burdened” category — but guess what? It’s getting arguably worse. burlingtonapt

HUD just came out with its 2016 fair market rents for the Burlington/South Burlington metro area, and they’re lower than they were for 2015. This despite the fact that actual rents in this area have been going up every year. (The 2016 numbers are up and down across the state, as Vermont Housing Finance Agency’s news blog helpfully details.)

If you really want to know why Burlington’s numbers went down, you can go to the HUD page to see the methodology. The unfortunate upshot, though, is that anyone with a Section 8 housing voucher is going to have less to choose from in 2016 than they do this year. That’s because apartments that cost more than the “fair market rent” are off-limits for subsidy. (If it makes you feel any better, remember that majority of Burlington’s “burdened” households don’t have vouchers anyway. Nationally HUD rental assistance extends to only about one-fourth of the people who are income-eligible.)

OK, let’s consider a two-bedroom apartment. The 2016 “fair market rent” is $1,172 (as compared to 2015’s $1,302). What are the offerings on Craigslist?

Here are the first 10 listed rents for two-bedroom apartments in Burlington and environs (South Burlington, Colchester) that we found at noon Monday. (Craigslist is constantly updated, so if you do the search the results will vary):

$2,500, $1,600, $2,500, $2,100, $1,425, $2,400, $2,025, $2,000, $2,000, $1,650.

How “fair” is that market? Now, perhaps Craiglist rents tend to be above average (are there studies that document this?), but there’s not much consolation in that, especially if you have a housing-choice voucher.

New life for old idea?

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When the housing-unaffordability problem comes up at a public meeting in Burlington, chances are someone will stand up and call for rent control.  rental1Never mind that the city rejected the idea three decades ago and no one has made a serious effort to revive it locally. It’s an idea that never goes away, though, and is getting some fresh currency these days — where else, in California, the housing-unaffordability epicenter.

Rent control’s heyday was in the ‘70s and ‘80s, apparently. Massachusetts did away with it in 1994 via a statewide vote, but it can still be found in many municipalities in New York, New Jersey and Maryland, as well as California, where tenants’ advocates are pushing to get more communities to sign on and have come up with an organizing toolkit. “Rent control moment gains momentum as housing prices soar,” read a recent news headline, but a closer look suggests that much of the impetus is in California. Most states, after all, have laws that prohibit rent control, although in Washington, there’s an effort to lift the ban for Seattle.

Any groundswell in favor of rent control would have to grow out of large numbers of renters, and renters are certainly on the increase nationally. A new Harvard report announces that “that 43 million families and individuals live in rental housing, an increase of nearly 9 million households since 2005 — the largest gain in any 10-year period on record.”

Renters are a distinct minority in Vermont, where the home-ownership rate is above average. In fact, renters outnumber homeowners in just two cities — Burlington and Winooski — so if rent control were plausible anywhere in Vermont, those would be the likely places. City voters would have to approve a charter change, which would require legislative approval. How unlikely is that?

Burlington voters overwhelmingly rejected rent control in a special election in 1981, during Bernie Sanders’ first mayoral term. (Actually, they rejected the creation of a “fair housing commission,” which everyone agreed was a proxy for rent control.) They were influenced by a publicity campaign against the measure mounted by commercial interests.  burlingtonhouseSanders’ critics on the left complained he didn’t try very hard to see the idea through, and in fact he went on to promote affordable housing via a range of other policies.

Barring a major ground shift, rent control will remain one of those recurrent policy ideas with no traction in these parts. Like single-payer health care.

Unease Down East

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Burlington and Portland, Maine, have a few things in common. They’re the biggest cities in their states, they both pride themselves in their trendy livability (as measured by magazine rankings, food-trucks per capita, those sorts of things), they both experienced negligible development of rental housing for many years, they both worry about gentrifying neighborhoods, and they both have a housing affordability problem.

Portland’s problem might seem a bit more acute, thanks in part to a six-part series in the Portland Press Herald that elaborates on what the mayor-elect calls a “housing crisis.” portland1The themes echo other crises around the country – soaring rents (up 40 percent over the last five years), stagnant or declining incomes, middle-income renters priced out and fleeing to the burbs.

The average two-bedroom apartment in Portland, according to the newspaper, is $1,560. That’s too bad, because an apartment like that is out of reach for anyone with a housing voucher. HUD puts the fair-market rent for a two-bedroom in Portland at $1,074 – which happens to be well below Burlington’s $1,309. What’s more, landlords in Portland can capitalize on the hot rental market by charging non-refundable application fees, which their counterparts in Vermont cannot.

How Portland is going to relieve its “crisis” is an open question. The mayor-elect has appointed a committee. The city is examining municipally owned land with an eye toward potential sites for affordable housing. New developments are supposed to make some units affordable for middle-income renters, but that inclusionary policy apparently doesn’t extend to the working poor. Here, as elsewhere, the remedies seem to pale before  the problem.

Modest proposal revisited

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At first glance, The Times’ recent  exposition on the surfeit of Chinese residential real-estate investment seemed exotic, distant. The money seems to be flowing into hot, upscale regions to the south, and one of the investors even asserted, “Chinese people like newer areas.” china1

But before you conclude this phenomenon has nothing to do with us, in graying old Vermont, consider this: Chinese students are enrolling in U.S. universities in increasing numbers, the story pointed out, adding: “Their parents often buy homes in college towns.”

“If you look at the stuent populations of any major or nonmajor university,” the Times story quoted a Chinese real estate executive as saying, “you’ll get a really good indication of what property prices are going to do.” What he apparently meant is that Chinese buyers, who more often than not pay cash, bid prices up.

This brings to mind the University of Vermont – never mind whether it qualifies as a major or a nonmajor institution. It’s eagerly stepping up its quotient of international students – part of the strategic plan, don’t you know – and the lion’s share of those students come from China. These are students, generally, whose parents can afford to pay full fare.

Here we pause and pivot to point out two independent trends:

  • Chinese investors are pouring money into American residential real estate, and many of them hanker to live in this country.
  • Vermont is desperately short not just of affordable housing, but of the capital needed to fill that need.

All of which suggests that we revive the EB-5 idea we floated a few months ago. Why not tap the profusive cash of Chinese investors who yearn for green cards to build affordable housing for Vermonters – affordable housing in upscale, high-opportunity areas, no less. With their residency established, the parents could then find accommodations for themselves near their collegiate offspring. China2

We can’t resist noting, again, that the Vermont regional EB-5 office is headquartered in the same state agency (Commerce) that hosts the Department of Housing and Community Development.

The co-op alternative

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 Before Burlingtonians succumb to the blandishments of “purpose-built” student-housing developers, they might do well to consider an alternative with a long tradition of affordability: student co-op housing.

Student housing co-ops are scattered around the country. Perhaps the best known is the Berkeley Student Cooperative, which dates from 1933 and offers housing to about 1,300 students in 20 properties.  Berkeleystudentcoop1According to the co-op’s website, monthly rent is about $745 in a room and board house (compared to $1,354 in a university dorm triple) and $433 to $881 a month for single room in an apartment. (By comparison, the market rate for a one-bedroom apartment is typically over $2,000.) No wonder there are 1,000 students on the waiting list.

And yes, some of those Berkeley co-op houses have game rooms and hot tubs.

A thumbnail case for student co-ops can be found here, on the website of the North American Students of Cooperation (NASCO). Housing co-ops operate on variations of a shared-equity model. Here’s NASCO’s description of a common form:

“In a ‘Market Equity’ coop, a member joins the coop, buys a share, and lives in a unit.  This is similar to something like a condo complex, but instead of owning one condo, you own a share in the whole complex.  When you decide to leave the coop, you can sell your share at whatever the market will pay for it.”

Housing co-ops also come with shared governance, work expectations, and so on. They’re not limited to students, of course. Champlain Housing Trust has five co-ops with 81 apartment units in Burlington, with another one on the way on Bright Street.

You’ll never be faced with this choice, but it never hurts to ask: Which would you rather see on the northeast corner of North Winooski Avenue and Main Street: purpose-built student housing, with a climbing wall, or a student housing co-op without one?

 

Daunting affordability gaps

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Here’s a seat-of-the-pants calculation that shows one dimension of Burlington’s (and Vermont’s) affordability problem for renters:

According to Vermont Housing Data, Burlington has 9,596 rental units. Of the households living in them, 61 percent are paying more than 30 percent of their income for housing — the standard threshold of unaffordability. By that standard, 5,853 rental units in Burlington are unaffordable to the people who live in them.

Lake Champlain Burlington, Vermont.

(The same source reports Vermont’s rental units at 69,581. More than half the households in those units – 52.5 percent – are paying more than 30 percent. That puts the state’s unaffordable rental units at 36,530.)

Those are just the figures for the standard housing burden. In Burlington, 35.7 percent of renters are severely burdened, paying more than 50 percent of their income on housing. That works out to 3,426 rental units that, for them, are severely unaffordable (and 18,369 such units statewide).

These are unsettling numbers, and of course there’s no easy remedy or policy panacea (although doubling public funding for affordable housing and raising the minimum wage to $15 would probably help).

Inclusionary zoning – which requires a specified percentage of units in new developments to be affordable – is among the policies that can be brought to bear. For a thorough, thoughtful treatment of the subject by Rick Jacobus, a Burlington alum, click here. He points out, among other things, that “inclusionary housing is one of the few proven strategies for locating affordable housing in asset-rich neighborhoods where residents are likely to benefit from access to quality schools, public services and better jobs.” In other words, it’s fully in keeping with the renewed national emphasis on affirmatively furthering fair housing.

He also writes that “inclusionary housing has yet to reach its full potential.” That’s an understatement in Vermont — one of 13 states that has statutes authorizing inclusionary policies that virtually no municipality except Burlington has taken advantage of – and in Burlington itself, where an inclusionary ordinance has been on the books for 25 years. Over that period, the policy has resulted in only about 260 affordable units (many of them condos).

That relatively low number reflects, in part, a lag in Burlington housing development in comparison to the rest of the county. What accounts for that, and is there any way the city’s inclusionary policy could be tweaked to make it more effective? Answers to these and other questions may be a year away. The Housing Action Plan calls for hiring a consultant to review the city’s inclusionary policy and make recommendations by next fall.