The Urbanist Musings of Pete Saunders

CSY At Forbes: Strategies For Metro Area Housing Markets — Fitting The Policy With The Challenge

California State Senator Scott Wiener, chief sponsor of  SB 827, a measure that would exert greater state control over zoning in transit-adjacent areas throughout California, stands in front of the California State Capitol Building.  Source:
(Note: This was posted at my Forbes site last month.  If you’re only familiar with the things I post here, you’re missing a whole other facet of my writing!  I invite you to check the Forbes site out.  Here’s a sample of my content there. -Pete)

California state senator Scott Wiener, representing San Francisco, is rapidly becoming the legislative darling for many American urbanists. or the evil face of gentrification, depending on who you ask. Weiner believes that California’s housing crisis — stratospheric housing prices and rents in the state’s largest metros, and not nearly enough new housing production to meet the soaring demand — has a very simple solution. California’s metros need more housing, and need it now.

Weiner and fellow state senator Nancy Skinner are the authors and sponsors of California’s SB 827, a measure that would effectively exert state control over zoning in transit-adjacent areas throughout the Golden State. Zoning has widely been accepted as a municipal responsibility since it survived its challenge in the U.S. Supreme Court in 1926. However, SB 827 calls for statewide standards for residential development located within a half-mile of a major transit stop or within a quarter-mile of a “high quality transit corridor”; if enacted the law would establish minimum standards for density and building height, and relaxed off-street parking requirements, with the intent of creating more moderate and high density housing for California residents. The bill certainly has its supporters and detractors, and will likely be the focus of intense debate in Sacramento.

SB 827 may or may not be the right response to California’s housing crisis. Yet one thing is clear — such a measure would never arise in Texas to address housing in the Texas Triangle, or in Ohio to deal with housing matters in their Big Three cities of Cleveland, Columbus and Cincinnati. The development landscapes are different, and the housing challenges are different. In an era when local autonomy may be growing in the face of struggles at the state and federal levels, metro areas should be free to devise the housing policies that work for them. Employing the wrong policy prescription could be disastrous.

Last week, I wrote about metro housing markets around the country and argued that what afflicts the high-priced metros on the coasts may not impact the low-cost metros in the nation’s interior, and that different policy strategies are needed to address the entire spectrum of housing challenges. Looking at U.S. Census American Community Survey data from 2008-2016, and focusing on total housing units, median prices and rents, the number of owner-occupied and renter-occupied units, and vacancy rates, I was able to distinguish four metro area housing types, for the 51 U.S. metro areas with more than one million residents, based on these factors:

Expensive Metros. Metros with median home values above $266,000 (average of median home prices in 2016 for the 51 largest metros) and median rents above $923 (average of median rents in 2016 for the 51 largest metros) that are adding housing units at a rate less than 7.4% (average rate of housing unit growth for the 51 largest metros, between 2008-2016). Infill development, whether in the core cities or in suburban areas, is the dominant method of adding housing units.

Expensive/Expanding Metros. Metros that are just as high-priced as the ones in the first category but generally are adding more housing units annually. This group exhibits a mix of infill and greenfield development as a method of adding housing units.

Expanding Metros. Metros in this category have median home values and rents below $266,000 and $923, respectively, and are adding new units at a rate greater than 7.4%. The metros in this group have been able to keep prices down by continuing to add units on the metro periphery.

Expended Metros. With median home values and rents below $266,000 and $923, respectively, and new units being added at a rate of less than 7.4% annually, the metros in this category could be considered the slow-growth counterparts to the fast or moderate growth metros in the first three categories, resulting in fewer units added overall.

The categories led to this chart:
51 Largest U.S. metros, by housing category

I ended the previous post by saying different policy approaches should be devised based on the specific housing challenges presented in each category. Here’s how I view housing policy by category:

Expensive Metros. Regional housing development policy. State Senator Wiener may be pushing forward the best response to date for California’s housing crisis. Urban theorist Richard Florida, citing a report by urban economist Issi Romem, recently noted that the outlying neighborhoods of our largest cities and many of the nation’s earliest, inner ring suburbs can play a crucial role in the affordability crisis. They have the ability to accommodate additional housing but have been built out at standards that some would consider outdated. These areas could use not only more housing, but a greater mix of housing types. Where I believe State Senator Wiener’s bill falls short, however, is in its imposition of a metro housing policy at the state level. Ideally the thrust for such a housing policy should emerge at the regional level, not the state; metros should advocate for policies that address their specific conditions.

Expensive/Expanding Metros. Infill housing development policy. The metros in this category see strong housing demand in their core areas and on the suburban periphery. The development focus here should be two-fold — continue to support infill housing development in the core, building where infrastructure assets and other amenities exist, but seek to broaden the range of housing types on the suburban periphery. Unlike the expensive metros, where the housing crisis is a region-wide issue, there still may be the ability for individual municipal action to meet the demand.

Expanding Metros. Set the stage for a greater diversity of housing types. As today’s expensive metros grew outward in the suburban expansion that followed World War II, few metro leaders then realized that housing development could become more difficult, resulting in higher prices across the board. Today’s expanding metros would do well to broaden their focus to include more “missing middle” housing at the suburban periphery, and to consider the infrastructure — even transit — that could support it. At the same time, expanding metros should take care to preserve the character of inner ring neighborhoods in their core cities, so that their historic qualities — and people — aren’t overwhelmed by redevelopment.

Expended Metros. Rehab and contemporize housing; build on strengths, market struggling areas. Metro areas in this category face two significant challenges. First, they suffer from well-known economic malaise, either from decades of manufacturing contraction, or the sudden jolt from the Great Recession. Their local economies are not producing enough economic thrust to grow at rates seen in the above three categories. Less well known, however, is that many also suffer from an abundance of housing — older housing in Rust Belt cities that’s rapidly becoming obsolete as residents move to the metro edges or out of the region, or newer Sun Belt speculative housing built at the latter stages of the 2000s housing boom that failed to take off and continues to lay fallow. Rust Belt metros should use this oft-neglected housing stock to incentivize redevelopment, especially when adjacent to rebounding areas, by encouraging rehab and infill development where possible. It’s possible that Sun Belt metros could use infrastructure investment to stimulate the reuse of vacant housing, and create stronger demand as a result.

It’s worth noting that national debate on metro housing policy is being driven by the experience of the eight metros in the expensive bin, and six in the expensive/expanding one. At the same time, there are fifteen metros in the expanding category, and another 21 in the expended one (Chicago was left out; it didn’t fit neatly into any category). The experience of the majority of our metro areas should not be neglected.

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