The Great Housing Debate: A Profusion of Panaceas

Just about everybody agrees that we need more affordable housing, and there are lots of ideas for making it happen. So far, though, none of them have come to much.

A row of houses.
A row of single-family homes in an old Minneapolis neighborhood. (Shutterstock)
I’m a natural contrarian, but even a contrarian has to admit that some elements of conventional wisdom are difficult to challenge. We are in the midst of a housing urgency. I won’t call it a crisis because that word is dying of overuse. But it’s an urgency — a condition in desperate need of relief.

According to one reliable survey, a quarter of all renters in America, most of them working poor, are paying more than half their monthly income on rent. It’s very hard to live decently that way. Even among those generally described as middle class, a majority are paying more than 30 percent. To use the technical term, they are “rent-burdened.” Freddie Mac, the quasi-private housing finance agency, says we have a supply shortage of 2.5 million units. We simply need to build more places to live.

This is a national problem. Here’s one local snapshot: In Salt Lake City, rents have increased by 78 percent in the past two decades. Two-thirds of that increase has come in the last five years. Salt Lake City is a reasonably prosperous corner of America, but those numbers are making life quite difficult even for those with stable jobs and incomes.

In the past couple of years, we have seen the rapid expansion of one particular effort to do something about this: to revise zoning laws that require single-family homes in three-quarters of the country’s residential neighborhoods. Minneapolis started this ball rolling two years ago by voting to make single-family zoning illegal. It didn’t mean you couldn’t build a single-family house on your property — just that local governments couldn’t require you to build that way.

Since then, the drive to abolish single-family zoning has succeeded at the state level in Oregon. It is being written into the long-range plan currently being drafted in Charlotte, N.C., where 84 percent of the residential land is currently zoned single-family. It is popping up widely in northern California: Sacramento’s city council passed a bill early this year that will allow dwellings of four units on every residential lot in the city. Berkeley, Calif., which is now zoned 83 percent single-family, has voted to ban that type of zoning by 2022.

HERE’S WHERE I GET TO BE A CONTRARIAN AGAIN. In Minneapolis, to start with the trailblazer, not much is happening. The Minneapolis StarTribune reported in early January that “one year after its final adoption by the city council, the controversial plan hasn’t led to many visible changes in the landscape.” The city’s manager of code development, speaking of the move to upzone for multi-unit construction in single-family neighborhoods, admitted that “those have been fairly slow to ramp up.”

It may be fair to object that a year is too short a time to pass judgment on the Minneapolis experiment. Perhaps it is. But more systematic research has come to similar conclusions. The urban scholar Yonah Freemark, studying residential neighborhoods in Chicago after nearly a decade of upzoning, concluded a couple of years ago that it had had no effect on the creation of newly permitted development. Michael Storper, an urban planning professor at the University of California, Los Angeles, told an interviewer that “what upzoning did not do in Chicago, and is not likely to do anywhere, is create incentives for housing construction in the areas where middle-class and lower-income people most need it at the prices for which they need it.”

Upzoning isn’t a bad idea. It just isn’t much of a panacea. Why doesn’t it produce the results it was designed to produce? There are a couple of reasons. The most frequently touted feature of these new zoning rules is that they allow for the construction of “accessory dwelling units” (ADUs), or to use the common description, “granny flats.” It isn’t difficult for a newspaper feature writer to pile up examples of homeowners who added onto their property to house a family member, but the truth is not many people are going to do this. A high-quality ADU in a moderately affluent city can cost $400,000. We will never have enough granny flats to make a significant dent in our housing shortage. We don’t even have enough grannies. This is a feel-good change destined to have relatively little effect.

The current wave of zoning reform isn’t just about granny flats. It’s also about allowing the construction of fourplexes and other small apartment buildings in what had been exclusively single-family neighborhoods. Some of this will no doubt happen. But the problem here is that developers won’t be flocking to build cheap housing on these properties. They will lean toward housing for the affluent, on which they can charge higher rents. This wouldn’t solve the fundamental existing problem.

A more substantive solution that has been around for more than a decade is the requirement that developers set aside a given share of their newly built units for low- or moderate-income tenants. This sounds like the right thing to do, and in some places it probably has been. But the percentage of affordable units is a delicate calculation. If the percentage reaches a certain number, and in some areas that can mean just 25 percent of the units, the developer will decide not to build anything at all. The project doesn’t cost out. As a way of dealing with this problem, many cities have offered developers an alternative: Pay a certain amount into an affordable-housing fund in lieu of putting up buildings. The developers nearly always choose this option, and the result is that we have quite a few cities with well-stocked funds but precious little new modestly priced housing.

IF WE WANT TO CONSIDER ANOTHER SIDE OF THE COIN, we can always look at New York City. It is an article of faith in state and local journalism never to use New York as an example of anything, but in this case it may be instructive.

When he took office as mayor in 2014, Bill de Blasio made a dramatic promise to built 200,000 new affordable units over the next 10 years. Later, he raised it to 300,000. This was to cost a total of $82 billion. No other city could afford to spend that much money.

In the years since then, New York has indeed seen the construction of many new apartments — 50,000 of them by July of 2020, plus a larger number of units declared remodeled. The de Blasio administration claimed victory. But in 2019, 41 percent of New York’s renters were still classified as rent-burdened.

And when it came to new units, there was a noticeable phenomenon of income creep. Far more of the units were going to middle-income rather than truly low-income residents. A family of four could qualify as low-income with an annual income of $68,000. If I’m reading the numbers right, the same family could make $187,000 and still qualify for a partial subsidy. “We did have a major emphasis on affordable housing, and a great deal of spending on it,” says Samuel Stein of the Community Service Society. “And yet the problems have persisted.”

There is one powerful argument that has emerged in the wake of the disappointing performance of affordable housing set-asides. The argument is that we should forget about these percentages, remove as many regulatory restrictions as possible and encourage developers to build almost any kind of housing they want — luxury units included. The idea is that the sheer increase in supply, even on the expensive side, will trickle down and free up a significant number of units at the lower end. The analogy is to selling cars: If you can sell enough Cadillacs, Mercedes and Porsches, then Chevrolets and Hyundais turn up at the dealer’s showroom in decent shape and at decent prices, giving buyers with modest incomes a substantial break. This might be true, but at the moment there is no solid evidence for it.

SO WHERE DOES THAT LEAD US? I think it leads us to what Scott Wiener and other California legislators have been trying to do for the last several years, without success so far. That is to encourage density, even tall apartment buildings, within as much as a half-mile of transit stations. This legislation has been through several versions, and all of them would permit multi-unit buildings in some single-family neighborhoods, but the truth is that in most cities (not all) there is plenty of commercially zoned land that could absorb most of the density — vacant parcels, parking lots, abandoned strip malls, warehouses — land that is not offering what tax lawyers call “highest and best use.”

Taking full advantage of this property would require taxing it at rates high enough to incentivize the owners either to build residential units on it or sell it to someone who would. Could we get that kind of taxation accomplished? I’m not sure. But I do know that concentrating on underused commercial land would be a pathway to a significant increase in supply — not the dribs and drabs that we would get from granny flats and duplex apartment buildings on leafy residential streets.

This isn’t a genuine panacea any more than the other schemes floating around at the moment. But when we get stuck on panaceas, often we don’t get much of anywhere at all.

Alan Ehrenhalt served for 19 years as executive editor of Governing Magazine, and is currently one of its contributing editors. He can be reached at ehrenhalt@yahoo.com.