Category Archives: housing crisis

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.? 

Zoning’s link to unaffordability AND inequality

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Rising income inequality has become a major public concern over the last few years. What some of us may not realize, though, is that zoning is one of the likely culprits.

Yes, zoning and other land-use restrictions can contribute to housing unaffordability, but also — by extension — to income inequality and diminishing productivity.furman2

That’s the argument that Jason Furman, chairman of the president’s Council of Economic Advisors, brought to the Urban Institute in an address last month. His remarks had scholarly underpinnings, in the form of charts and footnotes.

Here’s a compressed version of what he said: Income inequality has increased over the last several decades, as have land-use restrictions in the more productive metropolitan areas. Meanwhile, labor mobility has declined — workers are less likely to switch jobs and move around the country for higher pay — and so have annual increases in productivity. The drop in mobility ( or “fluidity”) is not well understood, but one cause appears to be the high cost of housing in high-wage, productive cities (such as Boston or San Francisco) that many would-be employees can’t afford to move to.

“Zoning and other land-use restrictions, by restricting the supply of housing and so increasing its cost, may make it difficult for individuals to move to areas with better-paying jobs and higher-quality schools,” he said. (He acknowledged that some land-use restrictions can be beneficial, but that some can be harmfully excessive, in such forms as minimum lot sizes, off-street parking requirements, height limits, prohibitions on multifamily housing, and lengthy permitting processes.)

Hampered mobility diminishes economic growth, he said, citing the same recent study we referred to in a recent post.

Generally speaking, Furman said, zoning restrictions tend to favor well-to-do property owners, who defend these restrictions so as to safeguard their assets. Stringent zoning reduces housing supply, maintains high prices, reinforces wealthy enclaves, and effectively repels people of moderate or low income. The restrictiveness of land-use regulations correlates with the gap between construction costs and house prices — the bigger the gap, the more land costs figure into the those higher prices.

“The timing of tighter land use regulations may not have been a coincidence,” Furman said. “After a turbulent decade of the 1960s in the United States that saw racial tensions flare, with rioting in many urban areas around the country that damaged or destroyed both residential and commercial structures, thousands of high income, predominantly white families moved out of many cities, spurring the continued rise of racially and socioeconomically homogeneous communities. These communities were also strictly zoned, a choice which may very well have been a part of a conscious or unconscious attempt to maintain this homogeneity through the affordability channel.”

Nowadays, there’s an increased demand for multi-family housing, but this form of housing tends to be heavily regulated, he said, and one of the nation’s challenges is to reduce regulatory barriers to increasing the supply of this housing option. In fact, the Obama administration is promoting an initiative (the Multi-family Risk Sharing Mortgage) to shore up the “limited supply of credit” for multifamily developments.

What’s more, Obama’s FY16 budget includes $300 million for Local Housing Policy Grants — a competitive program, he said, designed to provide funds “to those localities and regional coalitions” that support “new zoning and land use regulations to create an expanded, more flexible and diverse housing supply.”

Hmm, any interest in Vermont?

Good news, mostly

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  • Little backyard houses — aka “accessory dwelling units” — are springing up all over Vancouver. vancouver This is a partial remedy to the affordable rental shortage that afflicts municipalities all over North America, including Vermont. It also affords an optional living arrangement for older people who want to age in place. In Vancouver, these appendages are called “laneway houses,” and some of them are pretty handsome. There’s plenty of room for additions like this in Burlington, even if we don’t have alleys — and in plenty of other Vermont communities, too.
  •  A “mobility program” in heavily segregated Baltimore moves families from high-poverty public housing complexes in the city to higher-rent, higher-opportunity suburbs. This is an initiative very much in the spirit of affirmatively furthering fair housing, but it serves a small fraction of the subsidy-eligible families in need and it operates largely under the radar, to minimize opposition. One obstacle: a shortage of affordable housing in suburban communities.
  • Plattsburgh has a new 64-unit affordable housing complex, called Homestead on Ampersand.  plattsburgh2It’s just a couple of miles from the neighborhood where complaints about a proposal for a smaller affordable housing complex prevailed.
  • Columbus, Ohio, plans to transform a vacant downtown building into “workforce housing” – which in this case means housing for people who make $40,000 to $60,000 a year. The made-over building would feature micro units – apartments of 300 square feet or so and targeted, presumably, to single Millennials. We’ve touched on the micro movement before, which seems to be taking hold mostly in bigger metro areas (here’s a roundup with a national map; for a more substantial study of the phenomenon, click here).   But it has also spread to Kalamazoo and, as we’ve noted, Syracuse, so there’s no reason it couldn’t work in an over-priced city like Burlington, where officialdom is forever wringing its hands about how young professionals have trouble finding affordable accommodations.

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.

Renters arise!

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 Since 2005, the number of renters in this country has gone up 9 million, to 41 million, the biggest surge of any decade on record. That brings the share of renting households to 37 percent, the highest in half a century. Meanwhile, their rents are up and their incomes are down: From 2001 to 2014, rents rose 7 percent (above inflation) and incomes dropped by 9 percent.

The biggest increase in renter households, surprisingly, came from the Baby Boomer cohort – people in their 50s and 60s. In fact households 40 and older make up the majority of renters.apartment

These are among the findings in “America’s Rental Housing,” a 44-page study out this week from Harvard’s Joint Center for Housing Studies.

Not only are there many more renters, but many more of those renters can’t comfortably afford to live where they do. In 2014, 49 percent of renters were “burdened” (meaning they paid more than 30 percent of their incomes for rent and utilities) and 26 percent were “severely burdened” (more than 50 percent). According to Vermont Housing Data, Vermont’s current rates are a tad higher: 52.5 percent and 26.4 percent.

Yes, the housing burden falls most heavily on low-income people, but it’s growing among the middle-income stratum as well:

“(T)he sharpest growth in cost-burdened shares has been among middle-income households. The share of burdened households with incomes in the $30,000–44,999 range increased from 37 percent in 2001 to 48 percent in 2014, while that of households with incomes of $45,000–74,999 nearly doubled from 12 percent to 21 percent. Regardless of income level, though, the shares of cost-burdened households reached new peaks in 2014 among all but the highest-income renters.”

Meanwhile, only about one-fourth of eligible lower-income households receive housing assistance (Section 8 vouchers are not an entitlement!); funding for HUD’s three biggest rental assistance programs is about the same (corrected for inflation) as it was seven years ago, when the economy crashed; and the HOME program, a major source of federal funding for housing programs, has been cut way back. Private developers continue to add to the multi-family housing supply, but most of the recent additions “serve the higher end of the market,” according to the report. As it happens, high-income households (annual $100,000 or more) represent a small but fast-growing share of the rental market.

The report asserts:

“The challenge now facing the country is to ensure that a sufficient and appropriate supply of rental housing is available for a diversity of households and in a diversity of locations. While the private market has proven capable of expanding the higher-end rental stock, developers have only limited opportunities to meet the needs of lowest income households without subsidies that close the large gap between construction costs and what these renters can afford to pay. In many high-cost markets, moderate-income households face affordability challenges as well.”rental1

“Diversity of locations” is an invocation of AFFH (affirmatively furthering fair housing) and the goal of ensuring that a good share of affordable housing is in “high-opportunity” neighborhoods,” as in what follows:

“Policymakers urgently need to consider the extent and form of housing assistance that can stem the rapid growth in cost burdened households. Beyond affordability, they also need to promote development of a wider range of housing options so that more renter households can find homes that suit their needs and in communities offering good schools and access to jobs. It will take concerted efforts by all levels of government to capitalize on the capabilities of the private and not-for-profit sectors to reach this goal.”

Dare we suggest that concerted efforts have yet to be mounted, or even contemplated, by government at many levels?

NIMBY notes from all over

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Fresh news of NIMBY opposition to affordable housing comes out of … well, our own backyard.

From North Country Public Radio, we learn that residents in Plattsburgh managed to persuade the planning board to reject a proposed four-building residential complex, alleging familiar sorts of adverse effects that low-income people would have on traffic, safety, property values. plattsbugh Affordable housing is a permitted use in that district, but…

 “It is transient housing,” one resident complained. “ They put people in there who are just out of jail, prison whatever until they can get back on their feet … I don’t want it in my area.”

“This concept of us serving transients is so far from reality,” countered the director of the housing organization that would be referring tenants. “The majority of the people that we serve are disabled. They are the veterans in your community. There are elderly people in your community that we serve…”

She might have also cited reports, like this one, that affordable housing can have an uplifting impact on economic development and property values.

Oh well. The developer is appealing the rejection in court. “The thrust of it was, they did not want ‘these people’ moving into their neighborhood,” the developer’s lawyer said.

Plattsburgh is in good company. Upper Saddle River, a toney community in New Jersey, is being sued for rejecting a multi-family housing complex, and thus, by proxy, new residents who happen to be black or Latino. Another interesting case of NIMBY opposition to multi-family housing recently arose in Arizona, where the “backyard” in question belonged to a mortuary! Apparently the mortuary and the developer resolved their differences, though.

NIMBYism gets some of the credit, or blame, for California’s housing-affordability crisis, and it certainly comes in many forms, as this entertaining catalogue attests. Among our favorites are “mega-mansion NIMBYs.” 

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?