Greater Greater Washington

Development


Live chat: Matt Yglesias, Wednesday at noon

Are the very policies intended to sustain neighborhoods and preserve affordable housing paradoxically the same ones pushing rents up and families out to the suburbs? That's case Slate Moneybox economics writer Matt Yglesias makes in his e-book, The Rent is Too Damn High.


Photo by SusanAstray on Flickr.

On Wednesday at noon, Matt will join us to discuss the book and we hope you'll help us get things started with your questions in the comments.

"High rent is not a fact of nature," writes Yglesias. "It's a result of bad policy." Height limits, historic preservation and density caps intended to keep neighborhoods quaint, whether imposed overtly by official policy or subtly by zoning officials, act as supply caps driving up prices and imposing gentrification.

The conventional wisdom in community development is to preserve current buildings and fight redevelopment of existing low-cost rental units. But that's exactly what we've been doing for the last decade. Instead, the number of affordable units in DC has been cut in half since 2000. The low-cost housing that remains is often poor quality and far from public transit.

While much of the public debate about DC development policies today centers on the height limit, that's far from the only restriction on growth. Locals governments also impose mandated lot sizes, building setbacks, floor area ratios, and parking minimums that restrict the amount of housing and drive up the cost of building new development.

So what's the solution? Yglesias takes the economist's perspective, targeting supply and demand:

[W]e need to acknowledge that there are only two sustainable ways to reduce the price of housing. One is to lower demand by making a given place a worse place to live. Detroit features high crime, low-quality public services, and a bleak job market. The rent in Detroit is not high. [...] The other way is to increase housing supply.
Opponents of smart growth policies contend the suburbs have grown because of America's desire for a white picket fence and a two-car garage. Yglesias says that through policies that discourage additional housing units from being built in urban cores, we've given families little other choice but to turn their backs on urban cores in search of cheap housing. By easing restrictions on urban housing supply, some of those families could move closer to the core, cutting their commute times and reducing their carbon footprints.

Yglesias resists policy prescriptions, instead closing with a call for those on both ends of the political spectrum to let go of failed policies and take a fresh look at possible solutions. "Many on the Leftstarting with my inspiration, Jimmy McMillanare confused about the relationship between housing affordability, regulation, gentrification, and quality of life over the long term," writes Yglesias. "On the Right, the problem is one of myopia and identity-driven resentment." He also wants our public debate "to better distinguish between the price of land (a speculative investment commodity, like stocks or bonds) and the price of houses (a consumption good, like a car or a refrigerator)."

Yglesias has faced some pushback in urban development circles. In a reflection of how fast the online news cycle moves, we already have articles asking if the pro-density movement has gone too far, even though at last check DC's height limit remains alive and well.

At a time of political polarization, is it asking too much for liberals predisposed to distrust corporate developers and conservatives prone to distrust government solutions to come out of their corners? What processes in our systems of government and public debate could be better utilized to facilitate the discussion? Can a happy medium be found between opponents of DC's current development restrictions and the skyscrapers feared by their supporters?

Post your questions in the comments, and we'll try to ask as many as we can during the chat. And join us on Wednesday at noon for what should be a very informative discussion.

Miles Grant grew up in Boston riding the Green Line, and has lived in Northern Virginia riding the Orange Line since 2002. Also blogging at The Green Miles, he believes enhancing smart growth makes the DC area not just more environmentally sustainable, but a healthier and more vibrant place to live, work and play. 

Comments

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What kinds of smart growth solutions would you recommend for a smaller city with no existing rail transit, with a medium level of housing demand? Adding rail transit and increaing density in transit-accessible locations doesn't seem like a short-term solution in such a place, economically or politically. But to persuade local politicians that they should move in a better direction, what arguments should one make?

by SJ on May 18, 2012 11:04 am • linkreport

In an area like DC, with so many political jurisdictions involved, is it better for those jurisdictions that are willing to allow for increased density to pursue such without coordination with their neighboring jurisdictions, or does that create imbalances that are harmful to the region long term?

by SJ on May 18, 2012 11:10 am • linkreport

You mentioned previously that you thought the street car was a bad investment for DC. Why do you think that? What would you prescribe instead for DC?

by guest on May 18, 2012 11:41 am • linkreport

If we accept the premise that density is desirable, how does building more housing units actually lower rents in practice?

Housing is prohibitively expensive in Manhattan and it's also extremely densely populated, for example. Let's say we build more housing in DC's core by removing the height limit and the average rent in the metro area decreases; but rents in the core increase (due to higher demand for density) while the rents on the fringe decrease (due to greater overall supply of housing in the market). Has the policy succeeded because some housing in the overall market is now less expensive? Or has it failed because now the only affordable housing is the housing with the highest transportation cost?

by Rob on May 18, 2012 12:20 pm • linkreport

@Rob

Housing is prohibitively expensive in Manhattan and it's also extremely densely populated...

Yes - but that's not really the right question. The question is if NY is dense enough given the market conditions.

Let's say we build more housing in DC's core by removing the height limit and the average rent in the metro area decreases; but rents in the core increase (due to higher demand for density) while the rents on the fringe decrease (due to greater overall supply of housing in the market). Has the policy succeeded because some housing in the overall market is now less expensive? Or has it failed because now the only affordable housing is the housing with the highest transportation cost?

I don't think your hypothetical is how the situation would actually unfold. Values would increase, but the rents would stablize and even fall in real terms in the core on a per sf basis.

I think Ryan Avent laid out a plausible future in this post:
http://www.ryanavent.com/blog/?p=2363

by Alex B. on May 18, 2012 12:34 pm • linkreport

@Alex B. you're right, the Manhattan example is a bad one, I just don't have a better way of asking this at the moment. I've thought for a long time that this debate could benefit from drawing some marginal cost curves to flesh out different scenarios. The housing market is very difficult for me (and presumably others) to think about purely conceptually.

by Rob on May 18, 2012 1:00 pm • linkreport

Matt,

Can you tell us why you think an area like the CBD is a better place to lift the height limit than an underdeveloped area, such as Anacostia or Brentwood?

by Vik on May 18, 2012 5:34 pm • linkreport

"Yglesias says that through policies that discourage additional housing units from being built in urban cores, we've given families little other choice but to turn their backs on urban cores in search of cheap housing."

I don't see the historic preservation laws prohibiting anyone from building in the Logan Circle district. What laws is he talking about? If there's money to be made building apartments, someone's going to make it, regardles of historic status...just look around. There's an incredible amount of underused land around and close to the core that hasn't been developed becasue of high crime rates and a lack of reliable public transit. Has Matt ever strayed into NE? Maybe if we worked on crime and transit there would be more areas that developers would like to build before we destroy our skyline for some starchitects idea of a masterpiece.

by Thayer-D on May 21, 2012 9:35 am • linkreport

Thayer-D: Logan Circle is indeed a historic district. Any old building likely can't be changed in any way that would be visible from the street, and new buildings go through design review that very frequently forces them to shrink down considerably.

by David Alpert on May 21, 2012 9:44 am • linkreport

@Thayer-D:

I don't see the historic preservation laws prohibiting anyone from building in the Logan Circle district. What laws is he talking about?

Just an example, take the old post office on 14th and T: HPRB rejected the initial design: http://greatergreaterwashington.org/post/11274/more-residents-wont-make-wallach-or-u-street-like-ballston/

The approved design lost 10 units compared to the initial proposal: http://greatergreaterwashington.org/post/11608/breakfast-links-preserving-history/comp/11596/

I don't think Yglesias said those laws prohibit development. A better word is that they constrain development, and those constraints have costs that most people fail to realize or acknowledge.

by Alex B. on May 21, 2012 9:46 am • linkreport

David and Alex,
That's my whole point, that Logan is a historic district as I noted, but there's still a Tsunami of development going on. So a development looses 10 units out of how many? Developers are notorious for setting an unrealistic number of units only to "compromise" on less. This give and take is how it's supposed to work anyhow. Take the row of old buildings on the NE corner of 14th and W. I don't know if they're historic, but they saved the facades and are pumping up a 7-8 sotory apartment building behind it. Shold it have been a 15, or 35 story building? Is this the reason the rent is too damd high? No, it's becasue we have a booming economy, relatively speaking, but let's not destroy what makes this city so special when there's ample room to grow. I'm thankful that there's a ton of money circulating in this city, cause architects like me can find work, but the evidence just dosen't support your contention, IMHO.

by Thayer-D on May 21, 2012 10:47 am • linkreport

Shold it have been a 15, or 35 story building? Is this the reason the rent is too damd high?

Maybe.

Yes, there's a lot of development. However, given the massive demand for living in the city, I'm not sure how you can say that the development we see is actually enough.

What makes you say that 10 more apartments would be unrealistic?

but let's not destroy what makes this city so special when there's ample room to grow.

The assertion that growth will destroy everything is false. The notion that this city is more special than others is similarly false, just the status quo bias speaking. Likewise, I see no evidence that we actually do have ample room to grow, given all of the constraints we face and the metrics we have (for example, the sale price of new housing is well above the cost of construction - in an efficient market, you'd expect the two to be aligned with one another).

If we have a booming economy (i.e. demand), shouldn't supply be booming as well? And shouldn't we be measuring that in some other metric than just looking at cranes across the skyline?

by Alex B. on May 21, 2012 10:54 am • linkreport

Amigo,
I'm not sure if I'm mis-speaking or if you are deliberatly mis-quoting me for your arguments, but...If you think that building should have been 35 stories, you must like Chicago's North Shore where these miniskyscrapers stand cheek to jowel by the turn of the century 3-7 story fabric. Who ever win's that debate, so be it, but I and many others would morn the loss of harmony these glass and steel towers bring to their neighborhoods.

"However, given the massive demand for living in the city, I'm not sure how you can say that the development we see is actually enough." I never said that the development we see is enough, I'd scare you with how dense I'd like to see this city, I just think you're barking up the wrong tree.

"What makes you say that 10 more apartments would be unrealistic?" Nothing, becasue I never said that. As far as I'm concerned, those 10 more units wouldn't have harmed anything, but 35 stories sure would.

"The notion that this city is more special than others is similarly false" Is Paris special? Is Rome? If they are special, what makes them so and us not? I think DC is special, but being a native, maybe I'm a DC hick.

"The assertion that growth will destroy everything is false." Where are you getting this stuff? All I do while going through the city is putting up imaginary infill development that would make this a GGW.

"Likewise, I see no evidence that we actually do have ample room to grow, given all of the constraints we face and the metrics we have." I'd direct you to Bing Maps, or even be happy to give you a tour of those neighborhoods that don't make many headlines in GGW, but if you can't see the potential all around, then so be it.

If density is your goal, we have a lot in common, but if everytime a developer says, "these regulations are killing me", you feel empathy, we'll then I'd recommend hanging around some developers for a while. You'll find a lot of things "killing them" while they count their money.

by Thayer-D on May 21, 2012 11:24 am • linkreport

@Alex B., I think Thayer-D used "what makes this city so special" in the sense of "what gives this particular place the great charm that it has" and did not necessarily mean that DC is "more special" than other cities.

by A Streeter on May 21, 2012 11:29 am • linkreport

"If density is your goal, we have a lot in common, but if everytime a developer says, "these regulations are killing me", you feel empathy, we'll then I'd recommend hanging around some developers for a while. You'll find a lot of things "killing them" while they count their money."

how about empathy for the people, whether 20 somethings starting out, or empty nesters looking for a new start, who want something urban walkable and have limited means. The folks who are forced to make due with very little space, or with staying in the suburbs, because the rent is, well, too damned high.

by EmptyNesterCouple on May 21, 2012 11:32 am • linkreport

@Thayer

If you think that building should have been 35 stories, you must like Chicago's North Shore where these miniskyscrapers stand cheek to jowel by the turn of the century 3-7 story fabric. Who ever win's that debate, so be it, but I and many others would morn the loss of harmony these glass and steel towers bring to their neighborhoods.

I don't have a direct opinion on how tall any given project should've been.

It's interesting you bring up Chicago, because Chicago is one example of a city that's managed to increase supply in accordance with demand. The result is that rents in Chicago are remarkably affordable compared to rents in DC or NY or LA or SF...

Nothing, becasue I never said that. As far as I'm concerned, those 10 more units wouldn't have harmed anything, but 35 stories sure would.

You're conflating the economic arguments with design arguments here - and that was my point.

Is Paris special? Is Rome? If they are special, what makes them so and us not? I think DC is special, but being a native, maybe I'm a DC hick.

Sure, Paris is special. DC has its own charms, too - but I reject the notion often used that those charms mean it should never change.

I'd direct you to Bing Maps, or even be happy to give you a tour of those neighborhoods that don't make many headlines in GGW, but if you can't see the potential all around, then so be it.

I walk through those neighborhoods all the time. My point is that if you want to direct development there, that is also a cost, it is also a constraint.

Furthermore, the rising tide raises all boats - allowing more density and more prosperity in the core won't stop redevelopment adjacent to it - if anything, it will make those places more valuable because of their proximity to the core.

If density is your goal, we have a lot in common, but if everytime a developer says, "these regulations are killing me", you feel empathy, we'll then I'd recommend hanging around some developers for a while. You'll find a lot of things "killing them" while they count their money.

No, it's not that the regs are killing the developers. You're right, many of them are making a killing. That's not the problem.

The problem is the Chicago example. Unlike Chicago, they're making such a killing that the middle class can't afford to buy what they're selling. And a big part of the reason why is because of the regulations and constraints.

So, no - it's not the developers, it's the people they're building for. That's the real concern.

by Alex B. on May 21, 2012 11:40 am • linkreport

@ Empty Nester,
20 years ago I couldn't afford Dupont circle, so I lived in Historic Logan Circle, with a much higher level of crime. If you want to afford DC, I'd suggest you move Petworth, Brightwood, Trinidad, Takoma DC, etc. If you show empathy towards those current fellow citizens and the crime they put up with by lobbying to make those living conditions reasonable, I'll call some developers to set aside affordable apartments for 20 somethings and emtynesters. You don't have to go to the suburbs if you don't want, but I can't guarantee you'll get the neighborhood of your choice, like I and many others wheren't.

by Thayer-D on May 21, 2012 11:51 am • linkreport

I don't think Yglesias said those laws prohibit development. A better word is that they constrain development, and those constraints have costs that most people fail to realize or acknowledge.

Someone has probably made this point up-thread, but I think that for many homeowners, driving up the cost of housing is a feature, not a bug. I have a rowhouse a dozen blocks from the Capitol building. They're not making any more of those. If they knock down a few and install an ice-skating rink, I win: the nominal price of my house goes up.

Similarly, if I own a condo, and DC passes a moratorium on building any new condos, I win: the nominal price of my condo goes up.

I say "nominal price" rather than "value" because at some point, the things that city living offers that you don't get living in a cul-de-sac go away with insufficient density.

But at some point, the struggle against new residential development by existing homeowners is a rational economic act.

by oboe on May 21, 2012 11:59 am • linkreport

"If we have a booming economy (i.e. demand), shouldn't supply be booming as well?"

"No, it's not that the regs are killing the developers."

Then, what is it? Those regulations where the whole point. Now you're point seems to be they're not building middle class housing. Did you ever wonder why? Upgrading to fancy bathroom fixtures is cheap compared to pouring foundations, but the return is well worth it. The sad fact is that building is mostly a rich person's endevor. I'd say let's expidite the permiting process to get more of these projects in the pipeline. Maybe they'll over build and we'll end up with a bunch of affordable housing, it's happened before. I'm also for increasing density for setting aside affordable units like in MOCO, but personally, if we built the streetcar lines, we'd stimulate more development than all these option.

by Thayer-D on May 21, 2012 12:04 pm • linkreport

Then, what is it? Those regulations where the whole point.

Yes, they are. You've mis-read my statement - those statements are not contradictory at all. The regs hurt us consumers, not the developers.

The sad fact is that building is mostly a rich person's endevor.

There's nothing sad about that fact. That's how markets work - the new construction will always be more upmarket than the older stuff, all else being equal.

So what? My point is that the new, luxury construction still has benefits to the rest of the people in the housing market.

I link to this post all the time because it's the most concise summary of the concept: http://www.austincontrarian.com/austincontrarian/2008/06/filtering.html

Without constant maintenance, apartments deteriorate from "tip top" to "slightly dilapidated." Renters, sensible people that they are, are not willing to pay as much for bad quality. Rents fall, and the apartments "filter down" into the pool of affordable housing.

If you want more affordable apartments, build more tip-top apartments. Increasing the supply of high-quality apartments lowers the rent for high-quality apartments, all else being equal. Falling rents for the good units encourage landlords to let the older ones slide into the affordable sub-market.

On the other hand, if you want to raise the rents for older properties, then discourage the construction of new apartments. Restricting supply will raise the rents for high-quality housing, including older, well-maintained properties. Higher rents will encourage landlords to spend more on maintenance and renovation to move their properties from the low-quality sub-market pool to the higher-quality sub-market.

This is pretty basic supply and demand. But some people just don't believe it.

Thayer wrote:

Maybe they'll over build and we'll end up with a bunch of affordable housing, it's happened before. I'm also for increasing density for setting aside affordable units like in MOCO, but personally, if we built the streetcar lines, we'd stimulate more development than all these option.

With the caveat that they can't overbuild if they're not allowed to build in the first place, I don't disagree with any of this.

by Alex B. on May 21, 2012 12:27 pm • linkreport

"20 years ago I couldn't afford Dupont circle, so I lived in Historic Logan Circle, with a much higher level of crime. If you want to afford DC, I'd suggest you move Petworth, Brightwood, Trinidad, Takoma DC, etc."

My wife will divorce me if I insist on moving to a place she's uncomfortable.

" If you show empathy towards those current fellow citizens and the crime they put up with by lobbying to make those living conditions reasonable, I'll call some developers to set aside affordable apartments for 20 somethings and emtynesters."

A. Im all for decreasing crime and supportive of it, but my impression is that when that happens the area becomes unaffordable for those who've lived there, because folks like me move in. B. My income is too high for "affordable units" but too low for more than 1BR in an area my wife would live in (we also have other expenses to deal with)

"You don't have to go to the suburbs if you don't want, but I can't guarantee you'll get the neighborhood of your choice, like I and many others wheren't.

Right now we DO have to STAY in the suburbs. I can't find anything that particularly works even in Petworth, at least not in the better blocks. Ditto for the better blocks of Trinidad. I do NOT expect a subsidy, or anguish on my behalf - ALL I expect is that when someone points out the cost of regs, folks acknowledge that its people like us bearing the cost, not just them greedy developers.

by EmptyNesterCOUPLE on May 21, 2012 12:35 pm • linkreport

@ Empty,
Then let's focus on getting rid of the crime in those neighborhoods that you could afford. I hear you about your wife, I'm even getting a bit old to deal with some of those hassles, it just seems that if the government is going to deal with affordability, they shoud start with those families that can't afford the nicer blocks of Petworth AND have violence thrusted at them on a daily basis.

@ Alex,
So the reg's are responsible for the lack of middle class housing, not the developers...I'm confused, if the developer is the one who builds housing and they aren't being harmed by the reg's, how exactly is the middle class being screwed by those reg's?

by Thayer-D on May 21, 2012 12:52 pm • linkreport

@Thayer

So the reg's are responsible for the lack of middle class housing, not the developers...I'm confused, if the developer is the one who builds housing and they aren't being harmed by the reg's, how exactly is the middle class being screwed by those reg's?

Did you read the link I provided in my last post about filtering?

by Alex B. on May 21, 2012 12:59 pm • linkreport

"@ Empty,
Then let's focus on getting rid of the crime in those neighborhoods that you could afford."

yes, but by that point I may be retired and not needing to stay in this region. Im also not sure why housing can't be addressed at the same time. In fact they go together - more new development, means more tax dollars DC can spend on police, social programs, and schools.

by Emptynestercouple on May 21, 2012 1:16 pm • linkreport

@ Alex,
I read it and you're right. I guess we just don't agree that the regulations are overly restricting the supply. If developers where sure they'd make 100 times the money, I'm sure they'd build much more, but considering the recent real estate downturn and not wanting to flood your own market, I think the developers are just whining about the regs. Ultimatly I think you'd agree with that also,

"No, it's not that the regs are killing the developers. You're right, many of them are making a killing. That's not the problem."

by Thayer-D on May 21, 2012 1:18 pm • linkreport

@Thayer

I guess we just don't agree that the regulations are overly restricting the supply.

If they weren't, we'd expect prices to mirror the cost of construction. They do not - prices are substantially higher.

What's your basis for saying there's not a restriction on supply? I'm looking for some data, not just the presence of some vacant land in an otherwise undesirable location.

As for how the middle class is being squeezed - isn't it obvious? Developers build for the luxury market segment, since demand is there. But they can't even meet the demand there, so renovations occur in older housing, which filters up to those more affluent submarkets and that raises rents on the middle class.

by Alex B. on May 21, 2012 1:25 pm • linkreport

@ Alex,
I guess I see the market as fluid and bound to change from one year to the next. Right now the market is hot and that will only encourage building. Even the Mayor said as much at the National AIA convention held this last weekend at the convention center. Prices will eventually mirror the cost of construction, and my guess is that will kill the building boom. Till then, I'm going to encourage as much building as possible with out loosing our skyline, cause when the music stops, architects go hungry.

by Thayer-D on May 21, 2012 1:35 pm • linkreport

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