The Urbanist Musings of Pete Saunders

Let’s Put an End to "Tales of Two Cities"

I look around the Internet and read (presumably) the same things other urbanist types read about what’s going on in our cities.  However, I often come to conclusions that are contrary to the general urban consensus.

Take these three pieces, two from City Observatory and one from Next City.

The City Observatory pieces were written by blog buddy Daniel Kay Hertz.  The first, from November, comments on the inaccuracies that come with many real estate websites that attempt to estimate median rents in various neighborhoods.  He focuses on inaccuracies he found on a site called Zumper:

Zumper is a relatively new website that features rental listings in cities around the country. So far, so good. Zumper has also made a name for itself through its “National Rent Reports”—more or less monthly press releases that claim to track median rental prices around the country. These reports have received copious media coverage, from the Bay Area to Seattle to Nashville to Chicago to Boston to LA to Miami to Denver, and so on.

Unfortunately, Zumper’s reports also appear to be severely affected by the problems we listed above, and possibly others. I first noticed this in its report for my hometown, Chicago. Back in August, Zumper’s National Rent Report declared that the median one-bedroom apartment in Chicago cost $1,920—a number that would raise eyebrows among anyone who has actually looked for one-bedroom apartments in that city. A cursory glance at Zumper’s neighborhood-level data reveals issues that should call the entire report into question.

And why should we question Zumper’s reports?  Well, because they derive them from their own listing data.  Why would that matter?

\It seems more likely that half of Zumper’s listings are in just three of the city’s (wealthiest) neighborhoods. As of the writing of this article, Zumper claims to have over 4,000 apartments listed in the Near North Side—the most expensive part of the city—and just 11 in Jefferson Park, five in West Garfield Park, and zero inSouth Lawndale, three of the cheaper neighborhoods.

 If the entirety of the city of Chicago was just the Loop and north lakefront, as many people seem to think it is, Zumper’s data would be accurate.  But Chicago is much bigger, and far more complex, than that.

Sadly, many people want to fervently believe that Chicago is just that sliver of the North Side.

Hertz’s second article, published last week, serves as a follow-up to the above piece and earlier work.  Here, he notes that median prices, for purchase or rental, are poor indicators of actual housing affordability.  Median numbers are skewed by concentrations at high and low ends, and greater attention must be paid to variance:

After all, the median is simply the home for which equal numbers of other homes are more and less expensive. That may be a good definition of “typical,” but it can make us forget that most homes don’t cost the median: they’re either more or less expensive. And it matters just how much more and less expensive they are. In other words, it matters how much housing prices vary. A neighborhood where every home costs $400,000 will have the same median price as a neighborhood where half of all homes cost $400,000, a quarter cost $150,000, and a quarter cost $650,000. But only the second neighborhood has a large number of homes that might be affordable to people with moderate incomes.

I think this bolsters a point we can all understand — a small number of high-priced or low-priced homes can vastly alter the affordability picture.

Then I saw this piece from Next City.  Writer Anna Clark notes that Detroit is experiencing an uneven rebound, with growing demand and commensurate high prices within select neighborhoods near downtown, but still with a substantial surplus of vacant and abandoned homes that ultimately suppresses prices.  Citing the high number of cash purchases for homes in Detroit, Clark says banks haven’t caught up to the city’s comeback:

In Detroit, there were 3,500 sales of single-family homes in 2014. Only 462 of them received a mortgage. That means that nearly 87 percent of sales were in cash — and that doesn’t include homes sold in foreclosure auction. Comparatively, the overall metro area saw only 53 percent in cash sales the same year. Nationwide, it was 43 percent.

“The number one issue that we, in the end, identified in Detroit is that it’s incredibly hard for homebuyers to get a mortgage right now,” say Svenja Gudell, chief economist with Zillow. The 2014 numbers weren’t an anomaly. Zillow’s data shows that only 529 properties in Detroit were purchased with a mortgage in 2013 — up from 318 in 2011, but down from 772 in 2009. Of those 529 mortgages, more than one-third were made in just four ZIP codes (48126, 48226, 48201 and 48207), encompassing Downtown, Midtown, Corktown, Lafayette Park and adjacent neighborhoods. Detroit has 46 ZIP codes in all.

What I find odd are the explicit and implicit conclusions drawn from all three articles.  Hertz notes that variance is a key factor in affordability, but implies that adding more units would make neighborhoods more affordable.  On the other hand, Clark says that perhaps redlining has returned to the Motor City and stands as the major obstacle to furthering the city’s revitalization.

I think all three pieces highlight what’s happened in cities after demand for its housing stock disappeared, and is now returning.  Preference for an urban lifestyle is growing, but it hasn’t yet reached the point where it impacts all parts of all cities.  Many urbanists simply assume the return and permanence of demand and propose strategies geared toward supplying it.  However, not all cities, especially Rust Belt cities, are quite there yet.

I also find that many current urbanists want to put economic clothing on what is largely a sociological phenomenon.   The disappearance of demand in cities is only in part economic.  The pull of suburbia did indeed present new economic opportunities for many, through the late 1960s and early 1970s.  But too many people seem to forget, or understate, the importance of push factors that fueled suburban growth as well.  Perceptions of crime, poor schools and social unrest sent as many people out of our cities as did economic opportunity.

In the same way that pull factors (a desire for more space, better schools) explain only a part of suburban expansion, rent gap theory can explain only a part of urban revitalization.  City rebound begins, and only begins, when people feel that the perceived social benefits of city living — amenities, diversity, shorter commutes — outweigh the perceived social costs — most notably high crime and poor schools.  If the impact of those costs can be mitigated, more revitalization takes place.

The social calculation takes place before any economic one does.

Furthermore, the social calculation is not evenly distributed throughout an entire city.  It started within select enclaves that resisted or weathered the social changes of the ’60s and ’70s.  Ultimately revitalization, now phrased as gentrification, spread outward from those select enclaves.  But neighborhoods far from the select enclaves, perhaps missing a key public transit connection, lacking in the same “charm” as another neighborhood, or plagued with negative perceptions, witness very little of the urban rebound.  In fact, they fall off the mental landscape of potential new city residents, and their extremely low prices and rents reflect the lack of eyes that seek them out as viable places to live.

Complicating matters even more is that the same revitalization process is proceeding at different rates and started at different times in cities across the country.  New York’s rebound started in the ’80s, meaning it’s had a generation of post-industrial revitalization activity.  Detroit’s arguably started in the last five years, after the Great Recession and despite a devastating and humbling bankruptcy.

Is the solution to New York’s housing affordability issues now a supply matter?  Most assuredly.  It has passed a demand threshold that makes consideration of more units in even the most dense city in America necessary.  Same for San Francisco, and even the rest of the Bay Area.  Also for Boston.  DC can now be considered at the threshold for such debate.

But what about Chicago, where a case can be made that revitalization hasn’t touched all parts of the city, and could play a role in its crime rates?  Or Milwaukee, where the urban preference is in an earlier stage?  Or any number of Sun Belt cities, where suburban-type expansion still takes place within core city boundaries?

My point is, not all cities have solved the problem of demand yet.  Our coastal cities have, bolstered by post-industrial economic changes that altered the social calculations.  Many other cities in the Rust Belt and Sun Belt have not, either because social conditions haven’t changed, or economic conditions haven’t improved enough, or they’re still pursuing the suburban dream.

Let’s find the right prescription for each city and metro, instead of proposing an ill-fitted one for them all.

2 Responses to “Let’s Put an End to "Tales of Two Cities"”

  1. arcady

    The thing is, cities change. They decline, until suddenly they don't anymore. They have plenty of housing/land, until suddenly they don't. Somerville in the 80s looked like it was on the same trajectory of decline as Detroit, and things like the zoning code date from that time and that mindset. The problem is that the economic situation changed, and the regulations didn't keep up. Hopefully, we can think of things that are helpful in the Detroits and Chicago South Sides while providing enough flexibility that things don't become disastrous if they do happen to become the next Somerville.

    Like

    Reply

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