The Laws of Affordable Housing!

The affordable housing Holy Grail

 

How does one obtain affordable housing when Government’s own reports state that housing is out of reach for most of its population? Do we build housing en-mass, do we curb speculative activity or do we let the market deal with it?

Well the answer is not easy if one does not know the laws of affordable housing. So from Strong Towns here are the laws of affordable housing:

 

THE IMMUTABLE LAWS OF AFFORDABLE HOUSING

5 IMMUTABLE LAWS OF AFFORDABLE HOUSING

1.  Developers don’t pay the costs of construction; tenants and buyers do.

A developer who doesn’t pass costs on will not be in business for very long. For this reason, anything that makes development more costly for developers makes housing more costly for people. And remember, time is money; a convoluted permitting process makes housing more expensive too.

 

2.  Housing demand is regional.

Regulations might stop your neighborhood from growing, but that won’t stop people from moving to your city. Every house that doesn’t get built in your neighborhood is a house getting built somewhere else, usually at the edge of town. The level of cognitive dissonance in people who, on the one hand vociferously proclaim their love of the environment and slander the destruction of agricultural or environmentally sensitive land at the edge of town, and on the other vehemently oppose development in their neighborhood could be the subject of whole dissertations in social psychology (not to mention the environmental cost of longer commutes from the edge of town). As Strong Towns member and contributor Johnny Sanphillippo pointed out in a recent article, these tract homes were once symbols of status and modernity.

 

3.  If your zoning and building code mandates expensive housing, housing will be expensive.

Most zoning codes place minimums on the size of dwelling units, the size of lots, and countless other factors that affect the cost of building housing. Unfortunately, these minimums don’t generally envision affordable construction types, even in the most progressive and challenged of housing markets.

 

4.  Affordable housing isn’t affordable if your transportation costs are too high.

Leaving the cost of transportation out of the definition of affordable housing favors development where land is cheap but the transportation system is built around the private automobile. Cars are not cheap–even according to car advocates.

 

5.  Today’s affordable housing was the last generation’s luxury housing.

Many of the older neighborhoods that provide the lion’s share of affordable housing today were once the shiny new environs of the expanding American middle class, who built massive amounts of new housing in the middle of the last century with amenities like washing machines that were the newest, hottest consumer amenities of their time.

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Source: https://www.strongtowns.org/journal/2017/5/8/immutable-laws-of-affordable-housing

 

Sounds rather familiar right? The very debate above was played out in the three-year Unitary Plan debate before the Plan itself went live (in part) November last year. The Unitary Plan was meant to have the 10% affordable housing ratio when 14 or more houses were built-in a development but it was taken out of the final Unitary Plan version by former Mayor Len Brown. Len did the right thing as Inclusive Zoning has been known to do the opposite overseas when it came to supplying affordable housing (it effectively extra taxed the other 90% putting their housing options further out of reach).

We know developers do not pay the full cost of a development if the Watercare example is anything to go by. When you get a new water connection you only pay 33% of the cost of that connection meaning the City is cross subsidising that connection. However, even if developers were to pay full cost it will still get passed onto the house buyer one way or the other. So having a central authority funding and building that infrastructure rather than a regional authority or the private sector would help ease some of the costs to the developer and house buyer.

Transport costs is one often missed out the most. Just because you paid $400,000 for a house on the fringe compared to $650,000 for one near the City Centre or Metropolitan Centre does not mean you scored a good deal on your $400,000 house. Not when you add your hour or longer commute by car into the mix in comparison to someone who is within thirty minutes of their job being near the City Centre or a Metropolitan Centre OR has access to decent rapid transit such as the Southern Line from Papakura to Britomart. So beware of those who promise cheap housing on the fringe when they have not factored in transport or new employment centres.

 

The Auckland Development Donut

 

 

Strategies for Affordable Housing

Stronger Towns promoted three strategies none of which are that hard to do. What in this case Auckland lacks is will power from Central Government to assist Auckland getting housing across the line.

Those strategies:

Three STRATEGIES FOR ACHIEVING HOUSING AFFORDABILITY

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1.  Reduce minimum lot sizes and relax density restrictions in single-family zones.
The cost of purchasing land is a significant portion of the total cost of a house. This is especially true in low-density residential development where the buildings occupy a much smaller footprint. If your zoning code requires large lots, the houses that are built will be more expensive than if they could be built on smaller lots. That’s a mathematical fact that should be intuitive but has escaped scrutiny in most communities with affordability issues.Restricting development in low-density residential zones also increases the cost of housing by the same logic: if you can only build one housing unit on a lot, the cost of that land must be absorbed by that single unit. Allowing more units spreads the land costs over many households, lowering the total cost of development.There are several ways to increase the amount of housing in residential areas without altering the overall character of development. Accessory dwelling units (ADUs) have received more attention of late. Duplexes, three-flats, and even small four-unit buildings can easily be designed to fit in with nearby single-family homes. These kinds of buildings should be allowed by right in low-density residential zones–no strings attached. Unlocking such large areas of land for modest increases in immediately opens up huge development potential without threatening the existing character of neighborhoods.

A mix of single-family homes and duplexes on a Milwaukee street. Can you spot which is which? (Image from Google Earth). Source: Stronger Towns

In fact, if you live in an older residential neighborhood, chances are high that there are examples of this kind of development right in your own backyard and you’ve never noticed. Try counting mailboxes or utility meters on houses near you sometime–you might be surprised what you find.

 

2.  Fix your zoning: if by-right development is economically infeasible, you’re creating artificial scarcity.

Only the biggest players have deep enough pockets and the requisite experience to fight for rezoning or variances. The rest will simply look elsewhere for adding units, or not build them at all. What’s worse, when big developers fight through the process, they need to scale up their projects to recoup the costs (see Law #1). It’s a double whammy: expensive housing that also tends to be out of scale with the surrounding neighborhood.

 

3.  Take a more active role in providing affordable housing.

This may be surprising given that the other strategies we’ve discussed involve government doing less. Think of it as a barbell strategy: enabling private developers to do what they do best (build lots of new housing at the most affordable prices possible) while empowering local governments to directly house those in greatest need, who are least likely to be helped by private activity. We Americans have a predilection for convoluted public policy when direct government action is far more effective. Inclusionary zoning is a case in point: we’ve conned ourselves into thinking we can have our cake and eat it too by coercing developers into providing Affordable Housing. At best this has very little effect, at worst it backfires (See Law #1).

One intriguing example of this approach comes from no less than the conservative, small-government bastion of Utah. The state has developed a program to place chronically homeless persons into publicly-owned housing. By most accounts it is an astonishing success (although the magnitude of the success is cause for some debate).

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Source: https://www.strongtowns.org/journal/2017/5/8/immutable-laws-of-affordable-housing

 

The Missing middle
Source: Brent Toderian

 

 

Note the ‘affordable housing’ take down and why America is turning away from Inclusive Zoning and how Auckland dodged a bullet by taking it out of the Unitary Plan.

Ultimately though the strategy put forward above was made possible by a Government (a conservative one at that) cooperating with the City and helping those in need of housing that otherwise would never be able to be housed.

It is a case affordable housing can be done in Auckland, we just have a lack of will power from some major players in making it happen.

 

For further reference about sprawl and inevitable sprawl see: Sprawl While Inevitable Sprawl Does Cost a City

And no when I say smart growth I do not mean a water tight Metropolitan Urban Limit that forbids development outside it and does not move without expensive court action . By smart growth I mean that both intensification, regeneration and sprawl are all inevitable. But how we handle each of the three in urban growth will become the determining factor on a City’s finances and overall health.
Smart growth is looking at getting the best development for the City in a given area. Just as you can create sprawl by going out you can also create sprawl by going up with tall single use monoliths. It all comes down to the commute for work, education, amenities, recreation and retail/hospitality. The tweet below looks at costs in the United States of sprawl. That said if you take a deeper look the difference between a single use facility and a mixed use facility stands out.

quote context: http://pllqt.it/sO0WxM

 

 

 

 

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One thought on “The Laws of Affordable Housing!

  1. You will be happy to know Ben that the Holy Grail of affordable housing has been found, it’s called Texas for one, plus there are others.

    3x median multiple income, that is the cost of housing in Texas, and used to be in NZ as well.

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