First off, show me that this is in fact a true crisis. Show me people who are truly priced out of every available housing option in the entire metro area.

Guess what, if you don't have a lot of money, you don't get nice things. That is a fact of life. That means you live in places that people with more money probably chose not to.

That is not a crisis. That is called the real world.

by dcdriver on Dec 19, 2012 12:45 pm • link • report

There is not a lack of affordable housing in the District and surrounding area. (Just look at home prices east of the river.)

The problem is that there is a lack of supply of housing in areas that people - who have a choice - want to live. While these areas are diverse, typically they offer most or all of the following features: good schools, good access to transit, low crime, and the ability to walk to restaurants, stores, parks, etc. The article correctly identifies the solution as increasing the supply of neighborhoods that offer these features.

Of course, this is easier said than done. For example, as stated in the piece yesterday, PG County is missing a massive opportunity by not focusing mixed-use development around its multitude of Metro stations. This is highly unfortunate for everyone in the region, since there are only so many other places the region's expected growth can go without requiring significant new transportation infrastructure.

by Rebecca on Dec 19, 2012 12:48 pm • link • report

Rebecca hits the nail on the head. There is no shortage of affordable places, just a shortage of affordable places that have all the features some people want.

by Adam L on Dec 19, 2012 12:53 pm • link • report

There is no shortage of affordable places, just a shortage of affordable places that have all the features some people want.

Not sure I follow this logic. Part of the problem is that it conflates basic services (decent schools, decent transit access, etc) as if they were amenities in a condo - like granite countertops or stainless steel appliances.

Those places are cheaper, but that doesn't make them cheap. Those negatives all impose costs. However, I'm not sure why people keep putting those social and economic negative qualities out there as evidence that we don't really have an issue with housing supply.

by Alex B. on Dec 19, 2012 1:20 pm • link • report

I'd second Rebecca's point. This is especially relevant to the whole height increase issue, where people continue to focus on desirable neighborhoods when there's so much room to grow, if the government decides to focus on these less glamerous neighborhoods.

by Thayer-D on Dec 19, 2012 1:21 pm • link • report

"First off, show me that this is in fact a true crisis. Show me people who are truly priced out of every available housing option in the entire metro area. "

do a dozen unrelated men living in a older 3bR house in disrepair in an aging suburb count as priced out? two or more families sharing an apartment in an aging walkup apt complex? People paying over half their income toward rent?

There may not be many people sleeping outdoors in this region - but there are lots of people in housing situations that are very stressful, and that there really is no excuse for. Especially as many of the solutions simply involve getting out of the way of the free market. Or doing things like adding transit to enable density, that have substantial side benefits unrelated to housing.

by AWalkerInTheCity on Dec 19, 2012 1:32 pm • link • report

"when there's so much room to grow, if the government decides to focus on these less glamerous neighborhoods."

I think the OP was quite supportive of expanding options in less glamorous nabes. But since lower income folks cannot pay rents that will drive market rate development in such places, adding more housing in those places means either A. Direct govt investment/subsidy or B. Making those places desirable to residents with choice - which means adding transit AND amenities.

by AWalkerInTheCity on Dec 19, 2012 1:34 pm • link • report

+1 me on Rebecca too.

Also have we ever admitted that there is a cost to other tenants in providing required low-income units in a development or is that still an un-mentionable.

by Tom Coumaris on Dec 19, 2012 1:35 pm • link • report

"There is no shortage of affordable places, just a shortage of affordable places that have all the features some people want. "

so an immigrant family, with a job in NoVa, is supposed to move to a high crime area in EOTR DC, and accept a long commute (either very long via transit, or fairly long in a cheap auto that they can barely afford given the wear and tear the long commute imposes). A high crime area with substandard schools no less.

its perhaps not surprising that they choose to double or triple up in substandard apts instead.

If what people are saying is that decreasing crime in EOTR DC or close in PG, or improving schools in those areas, is a good idea and will improve housing choices in the region, I agree (though of course when those happen prices in those places will increas). But I don't see why waiting on those good things should preclude other policy changes that will more directly address the problem.

by AWalkerInTheCity on Dec 19, 2012 1:39 pm • link • report

"Also have we ever admitted that there is a cost to other tenants in providing required low-income units in a development or is that still an un-mentionable."

its odd to mention, since the OP does not call for such a policy in their long list of recommendations.

I would also note that in Arlington, where low income units are traded for density bonuses, there is probably no increase in cost to other tenants.

by AWalkerInTheCity on Dec 19, 2012 1:41 pm • link • report

so an immigrant family, with a job in NoVa, is supposed to move to a high crime area in EOTR DC, and accept a long commute (either very long via transit, or fairly long in a cheap auto that they can barely afford given the wear and tear the long commute imposes). A high crime area with substandard schools no less.

To a certain extent, yes. The notion that a person or family is entitled to live in a neighborhood that is close to jobs, in a good school district, etc. is very odd. Money provides choices. Lack of money decreases those choices. It isn't the government's responsibility to maximize convenience for everyone.

by dcd on Dec 19, 2012 1:48 pm • link • report

It seems too easy to respond to people concerned about affordable housing with "well look at all that affordable housing over there!"

As Alex B and AWITC point out, there are additional costs to those places so just hand-waving it away isn't a solution. We need to create more places with good connections and more housing in existing demand areas to soak up demand.

Also have we ever admitted that there is a cost to other tenants in providing required low-income units in a development or is that still an un-mentionable.

There is no requirement for low-income units unless you want to build more than is allowed by-right (IZ). And in that case, you end up making more profit than you would by-right. Doesn't look like a cost to me, looks like a benefit to both low-income people (more housing) and developers (more profit). And since rents are set by market rates, there isn't an extra cost to other tenants, because the developer can't get more per-unit for the larger building in the same place than the smaller one.

by MLD on Dec 19, 2012 1:52 pm • link • report

As 14th Street NW transitioned from what it was for many years to what it is becoming now, lower cost/density housing was changed irrevocably. Existing structures were upgraded in part to justify much higher rents/sale prices and to offer many of the housing amenities that market would require. New housing was built that included $300k-$600k one bedroom condos. It is not just the SUPPLY but the type of housing supplied that influences price. Dramatically increasing further the supply of expensive condos and apartments with lots of amenities will NEVER result in a substantial and sustained reduction in the price point or average rent in that neighborhood. The same thing is happening/happened in Capitol Hill, H Steet, etc. Housing prices are not than influenced by short or intermediate term changes in demand or supply on the margin. Prices are sticky. And as anyone who has owned real estate or lived in a "neighborhood in transition" will tell you, the momentum is almost always in a single direction. Price the prior neighborhood residents out and cater to the new, more affluent clients of the future. It never goes back.

by Tom M on Dec 19, 2012 1:53 pm • link • report

When the cost of transportation both reduces the SOL of the already poor - and when the inconvenience leads to long commutes by car, at the expense of the regions air quality, and the planets health, I think thats an issue of concern for all. And I think decent schools, and safety are basic rights.

"Money provides choices. Lack of money decreases those choices."

Running our society that way IS a choice. But even if you accept that distribution of life chances based on market earnings is just - why should we accept govt interventions in the housing market that AGGRAVATE the housing situation of the poor?

"It isn't the government's responsibility to maximize convenience for everyone."

I would suggest that its the govts responsibility to comfort the afflicted, and to afflict the comfortable - but in this case there are policy options that would comfort the afflicted, well improving things for most of the comfortable as well.

by AWalkerInTheCity on Dec 19, 2012 1:54 pm • link • report

People are moving into all neighborhoods. This is happening in every neighborhood. Things are still really expensive.

And the presence of other neighborhoods doesn't mean that development must remain static in neighborhoods that are higher value.

But again, even our "cheap" neighborhoods are still really expensive.

by drumz on Dec 19, 2012 1:55 pm • link • report

" And as anyone who has owned real estate or lived in a "neighborhood in transition" will tell you, the momentum is almost always in a single direction. "

not this again. new high end housing in a neighborhood undergoing gentrification may make housing in that neighborhood more expensive, as the area becomes more desirable. But that will soak up demand from OTHER neighborhoods and hold down or reduce rents there. It hasn't happened in DC because the combination of institutional constraints (including NIMBYISM), other causes of lag, etc mean that supply has not caught up to demand.

by AWalkerInTheCity on Dec 19, 2012 1:57 pm • link • report

AWITC - Expensive housing doesn't "soak up excees demand from other neighborhoods". They are in NO WAY complimentary or competing goods. They are different markets.

by Tom M on Dec 19, 2012 2:01 pm • link • report

AWITC- At least in much of DC density is maxed out without bonuses for low-income units and that's why it's required by law. Otherwise there would be no need for the law- developers would take advantage of the bonus voluntarily.

In a building where rents are $3K and a certain number have to be available for Section 8, which is I guess about $1K, I'd assume the market rate tenants do pay higher. It's better to just say that's our desired policy and we accept the costs to other tenants than to sweep it under the rug.

Estimating the cost in each building also would allow us to objectively determine whether the amount of defacto private subsidy is better spent in that building or through allowing more units of off-site housing to be built by the builder.

Not taking a side, it would just be good to know.

by Tom Coumaris on Dec 19, 2012 2:02 pm • link • report

Want cheaper housing in DC. Put a 20 year moratorium on office building construction. {not that I am supporting this).

by davidj on Dec 19, 2012 2:07 pm • link • report

At least in much of DC density is maxed out without bonuses for low-income units and that's why it's required by law. Otherwise there would be no need for the law- developers would take advantage of the bonus voluntarily.

This doesn't make sense. If unlimited density were allowed without low income units, why would developers take advantage of a bonus for building low income units?

The reality that exists is that we have decided how big developers can build, using zoning tools. We allow them to build a bit bigger if they include some low-income units. There is no "requirement" unless you want extra than what is allowed by right.

In a building where rents are $3K and a certain number have to be available for Section 8, which is I guess about $1K, I'd assume the market rate tenants do pay higher.

Perhaps this is true if you compare the building with low-income units to the exact same building without low-income units. But that second building isn't allowed to be built legally so there's no point in making that comparison.

by MLD on Dec 19, 2012 2:10 pm • link • report

. Price the prior neighborhood residents out and cater to the new, more affluent clients of the future. It never goes back.

1. Never say never. Places like 14th Street saw their fortunes decline from when they were first developed at some time. Long time horizons, I know, but far shorter than 'never.'

2. There is and will be fundamental neighborhood change, no doubt about that. However, we're not just talking about the dynamics of specific neighborhoods. We're also talking about the housing market as a whole, for the entire region.

Expensive housing does indeed soak up demand from other neighborhoods, because the demand is somewhat finite. Our supply is not even close to keeping pace with growing demand, however.

by Alex B. on Dec 19, 2012 2:11 pm • link • report

The data does not really show a huge problem with affordability measured strictly as a function of how much people spend on their housing relative to their income. Market forces make it so that the typical worker earns enough to afford the typical housing unit.

What the region may have a problem with, as noted previously by others, is not enough supply in high demand areas - that is, an inability to provide high value for the money people spend on housing. Only the highest income earners can comfortably live in highly valued areas, but for those people, it is affordable. There are thousands of other affordable housing units but they are not necessarily located in highly valued areas.

by Scoot on Dec 19, 2012 2:12 pm • link • report

Alex B -- Are your arguments internally consistent. To make your first two points you have to believe that the market works fairly well. But to say that supply is not even close to keeping pace with growing demand suggests you believe in fundamental market failure. Which is it?

As to 14th Street NW -- Just before the major change of the Whole Foods was completed, my dear friend rented a one bedroom for $800/mt in the hood. 5-10 years before that many of the large houses in Logan Circle were either unoccuppied or very run down. I'm willing to wager that you will not see affordable housing in that neighborhood -- except were subsidized directly or indirectly -- in the next twenty or more years. That is more than a long time horizon, that is a generation.

by Tom M on Dec 19, 2012 2:19 pm • link • report

@Alex B and AWalkerInTheCity

I think our policy should be to improve basic services in underserved areas, especially where they have excess transit capacity. We shouldn't try to build even more housing in areas that are A. already expensive (places like Arlington and central D.C. are likely to remain so) and B. already straining with the number of people (let's not kid ourselves that certain portions of the Metro are jammed).

by Adam L on Dec 19, 2012 2:22 pm • link • report

Correction to "We shouldn't try to build even more housing..."

Of course I think we should try to maximize housing options in downtown D.C. but we shouldn't pretend like somehow this will appreciably change the availability of affordable housing.

by Adam L on Dec 19, 2012 2:25 pm • link • report

Supply is not keeping pace with demand because it takes years to get anything from conception stage to construction project. And in the meantime your project went through so many public meetings that you didn't get to build as many units as you wanted to. It's not a belief in "market working well" vs "market failure," the market can work well in some ways and poorly in others. I like the attempt at "gotcha" though.

Also gotta love this fallacy:
I'm willing to wager that you will not see affordable housing in that neighborhood
Therefore nothing can change that and I'm right that rents only go up!

by MLD on Dec 19, 2012 2:26 pm • link • report

Are your arguments internally consistent. To make your first two points you have to believe that the market works fairly well. But to say that supply is not even close to keeping pace with growing demand suggests you believe in fundamental market failure. Which is it?

Yes, those arguments are consistent. The market process works just fine. Units filter up to more attractive and expensive submarkets as demand increases.

Supply is not growing, however, to keep pace with that demand. This is due to all sorts of constraints on supply, most of which are regulatory.

Those market mechanisms work the same way whether supply is constrained or not - the only difference is the size of the deadweight loss.

I'm willing to wager that you will not see affordable housing in that neighborhood -- except were subsidized directly or indirectly -- in the next twenty or more years.

Well that all depends on a) what kind of policy changes we see (not just in DC or that 'hood, but in the region), and b) how you define 'affordable.'

by Alex B. on Dec 19, 2012 2:26 pm • link • report

MLD- There is a maximum FAR that be bonused and, like I said, many if not most, developers gain that maximum without low-income housing. That's why the new IZ rules were written and that's why developers flooded the permits office just before it went into effect.

I think the better argument is that we've made a community decision we want a certain amount of low-income housing in every neighborhood's new developments no matter how expensive (economic diversity).

by Tom Coumaris on Dec 19, 2012 2:32 pm • link • report

I'm not sure if anyone has posted it here, but I thought Stephen Smith's article is insightful WRT the current luxury construction boom.

http://www.bloomberg.com/news/2012-12-04/filtering-or-how-i-learned-to-stop-worrying-and-love-the-luxury-condo.html

by JS on Dec 19, 2012 2:37 pm • link • report

"Yes, those arguments are consistent. The market process works just fine. Units filter up to more attractive and expensive submarkets as demand increases."
So the market works fine for lower income people but not for "expensive submarkets"? I thought we where talking about affordable housing, not "I wish I could afford a two bedroom condo rather than a one bedroom condo on U street."

"so an immigrant family, with a job in NoVa, is supposed to move to a high crime area in EOTR DC, and accept a long commute" I had to move to a high crime area when I couldn't afford what I wanted in a low crime district. In fact, that's one of the reasons the neighborhood changed.

Does every expensive housing market mean the market isn't working well? Does the cost of luxury cars mean there aren't enough lower end models? Strange, all the cities like DC, Boston, NY, and London, while not perfect are usually the ones deemed to be "working". Didn't the market become much more affordable when the market crashed four years ago?

by Thayer-D on Dec 19, 2012 2:40 pm • link • report

"Affordable" housing mostly consists of older places that don't have the kind of amenities that affluent people expect. It's those kind of places that need to be conserved. Trying to build new "affordable" housing will never result in more than a handful places, unless we go the full-on housing project route, which is out of favor these days.

by Juanita de Talmas on Dec 19, 2012 2:49 pm • link • report

So the market works fine for lower income people but not for "expensive submarkets"?

That's not what I said at all.

Let me try and re-phrase. Market mechanisms work, they happen right now. Supply and demand meet at a given quantity and price. This will happen whether the market is working efficiently or not.

My point is simple: constraints on supply mean that the market is not operating efficiently. Our current housing market is not efficient at all.

by Alex B. on Dec 19, 2012 2:52 pm • link • report

"I had to move to a high crime area when I couldn't afford what I wanted in a low crime district. In fact, that's one of the reasons the neighborhood changed."

And the areas in NoVa they move to are far from crime free as well - but to suggest that families take housing thats not that cheap for its quality, far from their jobs AND accept both high crime and poor education -well you can ask them to do so, but I think its a sign that it would be better if housing were less costly.

"Does every expensive housing market mean the market isn't working well? Does the cost of luxury cars mean there aren't enough lower end models?"

We allow luxury cars to be built in the numbers the market dictates. If we limited by law the construction of all new cars, that would certainly raise the prices of used cars, top to bottom, and create an affordable car crisis.

" Strange, all the cities like DC, Boston, NY, and London, while not perfect are usually the ones deemed to be "working"."

Chicago, Philadelphia, and many other cities have lower costs of living and work.

"Didn't the market become much more affordable when the market crashed four years ago"

A. Compared to the prices in the early to mid 2000s - which were already a problem and B. Mostly in the farther suburbs, which present all kinds of sustainability and transportation cost issues

by AWalkerInTheCity on Dec 19, 2012 3:04 pm • link • report

"Expensive housing doesn't "soak up excees demand from other neighborhoods". They are in NO WAY complimentary or competing goods. They are different markets"

its not expensive housing vs housing for the poor. Its expensive housing vs slightly less - someone looking at new units, if the new units are not there, will look at five year old units - and on down the line. In NoVa there are agingapts being renovated for yuppies, decreasing the supply of affordable housing - if there were more new hirises, the demand for the renovated older buildings would be far less.

by AWalkerInTheCity on Dec 19, 2012 3:07 pm • link • report

Didn't the market become much more affordable when the market crashed four years ago?

If you were looking to buy a house yes. Rent stayed high and even went higher as some people who could have bought instead went back to renting.

Plus in the most expensive areas of the DMV the dive wasn't very steep.

by drumz on Dec 19, 2012 3:08 pm • link • report

While this piece provides an important part of the solution - supply - it's simply not sufficient. The market builds to the high end, and leaves most moderate and lower income working households without options they can afford. We need to increase supply and have policies that create more affordability through such actions as restoring funding to the Housing Production Trust Fund, and strengthening inclusionary zoning.

by Cheryl Cort on Dec 19, 2012 3:13 pm • link • report

While this piece provides an important part of the solution - supply - it's simply not sufficient.

True, but it is necessary. Any discussion about affordability that doesn't start with the necessary (if not sufficient) bit of adding more supply isn't much of a solution.

The market builds to the high end, and leaves most moderate and lower income working households without options they can afford.

There's nothing that ensures the market will only build for the high end. The market will build for the middle if it is allowed to do so, and if the cost of construction isn't too high (or the approvals process too long).

We also need more supply so that the definition of 'affordable' changes. There's no inherent reason for market rate prices to be so expensive. Other cities with more efficient housing markets show what is possible - if the market-rate prices are lower (thanks to more efficient markets that can more freely add to the housing supply as demand warrants), then the market-rate rents will be affordable to a much larger portion of the population. This allows resources for below-market-rate housing to be focused on people who really need it.

by Alex B. on Dec 19, 2012 3:23 pm • link • report

As to 14th Street NW -- Just before the major change of the Whole Foods was completed, my dear friend rented a one bedroom for $800/mt in the hood.

Do you know what $800/month will rent you in a city like Atlanta? A large 1 bedroom unit in a nice (if not shiny and new) hi-rise with tons of amenities and surrounded by lots of shops, restaurants, parks and transit, in an area significantly safer than Logan Circle pre-Whole Foods.

I think the fact that this blog post is trying to allude to is that cost of living in DC is expensive in areas that don't provide a lot of livability value, and really, really expensive in areas that provide a lot of livability value - even though there are also lots of people with high incomes.

by Scoot on Dec 19, 2012 3:35 pm • link • report

Alex B: Are you actually arguing that there will be a marked decline in rental prices in Logan/14th Street NW as a result of supply increases either in that neighborhood or elsewhere in the region? I've monitored listings in real estate and on craigslist and other sites, I cannot find one bedrooms for less than $2,200. That is just short of 3 times what the price was a few years ago. AND many of those ads say the unit was renovated or has amenities that the people who can afford that would want. Even if that dropped by HALF, $13,000/year for a one bedroom is not affordable for a two person family earning as much as $30,000/year. So what is your definition of "affordable"?

by Tom M on Dec 19, 2012 3:39 pm • link • report

Scoot -- DC is an expensive area. Agreed. That housing supply changes are likely to make it substantially less expensive? I do not agree with you on that -- or the blog post author for that matter.

by Tom M on Dec 19, 2012 3:42 pm • link • report

I actually never said that housing supply changes would make existing housing less expensive. I actually believe that the blog post author's proposal to build demand by supplying more housing is, of course, likely to drive prices up rather than down.

What I do agree with the author on is that we can provide our already-expensive housing more value by increasing housing stock in demand-rich areas. That way, housing may still be expensive, but at least it's worth it.

by Scoot on Dec 19, 2012 3:51 pm • link • report

Are you actually arguing that there will be a marked decline in rental prices in Logan/14th Street NW as a result of supply increases either in that neighborhood or elsewhere in the region?

Not sure where you got this argument from, but I wasn't making it. However, it could happen - but it all depends on a) what kind of supply increases we're talking about, and b) what submarket of apartments you're expecting to see a decline in rents for.

AND many of those ads say the unit was renovated or has amenities that the people who can afford that would want.

Perfect evidence of filtering up: landlords are renovating their units to meet demand for high-rent apartments, as new supply is not fully capturing that demand because there is not enough of it.

$13,000/year for a one bedroom is not affordable for a two person family earning as much as $30,000/year. So what is your definition of "affordable"?

30% of gross income spent on housing is my definition. That's the HUD definition.

So, no - even if rents in Logan dropped that much, they might not be affordable for your hypothetical couple. But that's also not the point - the rent could very well be affordable in a downmarket apartment in an adjacent neighborhood.

The housing market does not limit itself just to Logan Circle.

by Alex B. on Dec 19, 2012 3:52 pm • link • report

Tom M.
It would take A LOT of supply to bring prices in an area like 14th street down significantly.

However,

That's not to say that its not a good idea to provide what supply we can. Because what is built will help filter prices in other neighborhoods and such. That 30k couple still may not get to live there but it opens up an apartment or what that would have been occupied by someone else. Someone else posted a link about Filtering and how it applies to housing that's what we're talking about.

Also it may not bring down prices per se but it will slow the rate of rise.

by drumz on Dec 19, 2012 3:56 pm • link • report

"I actually believe that the blog post author's proposal to build demand by supplying more housing is, of course, likely to drive prices up rather than down. "

how does adding to supply "build demand" at a regional level??

by AWalkerInTheCity on Dec 19, 2012 4:21 pm • link • report

Oh good grief! You would think this article is solely about the poor and low-income folk.

There is now a pattern here that whenever "affordable" is mentioned, here comes the "poor, low-income" talking points.

Since I actually live in the area some of you are suggesting people should move to if they want cheap housing, I'll offer this about the "affordable options." Right now, there are townhome condo's selling for 385k. However, if you qualify (make less than 80 or 85k) under their "affordable housing" program, the same home will cost around 320k.

For some, 380 is way to high to afford, especially if they live alone. But 320 just might be more manageable.

Is this an example of an "affordable housing" option or am I just making this up? And if so, what exactly does that have to do w/low-income and the poor...who couldn't afford either option?

by HogWash on Dec 19, 2012 5:28 pm • link • report

While the policy responses in this article are largely appropriate, the primary driver of both the problem and solution is the private sector.

In the last real estate cycle, the best development opportunities were in the exurbs. Places like Loudoun saw the fastest price appreciation and developers built as if this trend would last forever. So, that market got saturated right around the time demand shifted toward closer-in, walkable communities. As a result, prices stagnated or went down in the exurbs where there was excess supply and a stuffed pipeline. Prices went up rapidly in walkable areas where there was a lack of development and a minimal pipeline.

Developers are now playing catch up, trying to redirect the slow moving development process toward the new demand hotspots. It doesn't help that regulatory burdens and community opposition make development a slower process in walkable areas than in greenfield locations in the exurbs. So, we're seeing a slower response to a shift in market demand than usual.

In the long run, the private sector will catch up with demand and prices will reach a truer state of equilibrium. However, in the long run, we're all dead, so it makes sense to grease the wheels of change to get to that equilibrium quicker. Of course, the nature of markets is that they will likely overshoot and eventually we'll be talking about how there's way too much supply in urban walkable places and not enough somewhere else. Thus, a new cycle is born.

by Falls Church on Dec 19, 2012 5:28 pm • link • report

"Want cheaper housing in DC. Put a 20 year moratorium on office building construction. {not that I am supporting this)."

Yes, and cut the police department in half and hire recruits who failed the police exam at least two times. Double the number of positions in all other DC agencies and then hire only political supporters. Stop investing anything in public schools (aside from the aforesaid political jobs). Finally, tax the hell out of anyone above the poverty line. Then DC housing prices would come down for sure. Oh wait, we tried that -- it was called the Barry era.

by Axel on Dec 19, 2012 5:53 pm • link • report

@ Alex B.
"My point is simple: constraints on supply mean that the market is not operating efficiently. Our current housing market is not efficient at all."

I'm assuming by constraints you mean regulations such as zoning which dictate what can be built where and how large can it be, like height restrictions. Does this mean that only a city with no zoning has an efficiently operating market? That would mean that places like Houston are efficient markets while DC is incredibly inefficient. What if some of those very regulations (like form based codes)ensure the building of a lovely environment which spurrs the market along, while no zoning creates the opposite. Isn't the "free market" full of developers wanting to control their developments with regulations (HOA) to ensure their investments? Where's this clear line you're implying between efficiently running markets and not? I'm afraid it's not that simple.

by Thayer-D on Dec 19, 2012 8:10 pm • link • report

The expensive areas to live are the ones near transit, specifically Metro and (soon-to-be streetcar). Building more metro, light rail, and streetcar won't be fast or cheap, but giving developers as many places as possible to build TOD is the best way to reduce upward pressure on prices.

by Amber on Dec 19, 2012 8:46 pm • link • report

I'm assuming by constraints you mean regulations such as zoning which dictate what can be built where and how large can it be, like height restrictions. Does this mean that only a city with no zoning has an efficiently operating market?

No, of course not. Chicago is also a fairly efficient market - the price of new construction units is near the cost of building new units.

That would mean that places like Houston are efficient markets while DC is incredibly inefficient. What if some of those very regulations (like form based codes)ensure the building of a lovely environment which spurrs the market along, while no zoning creates the opposite.

Houston is indeed a pretty efficient market.

http://www.austincontrarian.com/austincontrarian/2012/03/this-is-how-housing-markets-are-supposed-to-work.html

Of course, DC does not have form based codes. Houston is likewise not free of all regulation, just Euclidian form-based zoning.

Isn't the "free market" full of developers wanting to control their developments with regulations (HOA) to ensure their investments?

Sometimes, but not always. I don't see what that has to do with constraints on supply, either.

Where's this clear line you're implying between efficiently running markets and not? I'm afraid it's not that simple.

Of course it's not that simple, and I'm not sure why you get the impression that there's a clean line. Like all things, we have a spectrum. My explanation may be simplistic about the mechanisms, but I'm only attempting to describe the broad framework.

An efficient market allows supply to increase to meet demand; an inefficient one does not. And the increased cost and reduced quantity of housing we all bear is the deadweight loss.

by Alex B. on Dec 19, 2012 9:46 pm • link • report

Alex B.
Could you explain what exactly you mean by constraints on supply if not regulations like zoning?

In biology, there are constraints to growth everywhere, it's part of any ecology with out which an imbalance might proove catastrpohic. The strong adapt and the weak perish. Mind you I'm probably as much a free marketer as you and most here, but the constant bashing of regulations needs some refining.

As you acknowledge, it isn't simple, but that shouldn't stop you from elaborating on the mantra of breaking the height restrictions or complaining about historic preservation designations, especially on this site where people are sophisticated on these issues.

Also, if you acknowledge that developers love any regulations that make them richer and hate the ones that reduce their profits, then you must acknowledge that regulations are rules that make a free market run more smoothly, lest one predator get the upper hand consistently, and spoil the stew for everyone, including themselves in the long run.

"Isn't the "free market" full of developers wanting to control their developments with regulations (HOA) to ensure their investments?
Sometimes, but not always. I don't see what that has to do with constraints on supply, either."

Then let's say regulations are for those times when a developer isn't entirely thinking about the common good. And it has everything to do with supply becasue if a developer can reduce the supply when the demand is up, he can extract more profits. So what's good for the market at the supplier's end is bad for the user's end. It's nirvana that all players will be loving life. Infact, the other conundrum is would you rather be in a tight market where you could find work or a cheap market where there are no jobs. It's hard to separate the two.

You acknowledge it isn't simple, but then go on to say something simplistic like "An efficient market allows supply to increase to meet demand; an inefficient one does not. And the increased cost and reduced quantity of housing we all bear is the deadweight loss."

How does DC not "allow supply to increase to meet demand"? Most visitors would marvel at our skyline full of cranes. And to think one can develope a market that is free of inefficiency is not to understand how brilliantly inefficient humans can be. It reminds me of the modernist ideal of building as a machine for living, which dosen't account for the intangibles that define quality of life, no matter how inefficient something might seem on paper.

I'm a free marketer also, but like any good game, we need rules to ensure some modicum of fairness. Not every kid is large, and when the big kids throw an elbow to score a goal, that dosen't make for a good game, that's just shooting fish in a barrel.

by Thayer-D on Dec 20, 2012 5:00 am • link • report

BTW Alex,
Here's an article that makes your point exactly. I don't agree with it on many levels, but thought you'd enjoy it.

http://www.bloomberg.com/news/2012-12-04/filtering-or-how-i-learned-to-stop-worrying-and-love-the-luxury-condo.html

by Thayer-D on Dec 20, 2012 6:21 am • link • report

Could you explain what exactly you mean by constraints on supply if not regulations like zoning?

Of course I'm talking about zoning, I'm just rejecting the black/white corner you're trying to paint me in.

I've elaborated at length on the subject before, both here and at my own site.

Suffice it to say we know zoning and regulation constrains our supply. I'm in favor of loosening that constraint. I like Ryan Avent's approach that states we don't know where exactly we are on that spectrum, but looser regs (in terms of supply, e.g. density) are better and will allow the market to work more efficiently.

Also, if you acknowledge that developers love any regulations that make them richer and hate the ones that reduce their profits, then you must acknowledge that regulations are rules that make a free market run more smoothly, lest one predator get the upper hand consistently, and spoil the stew for everyone, including themselves in the long run.

Your mistake here is to think all developers think the same. Their attitudes vary a great deal, often depending on whether they have a foot in the door or not.

How does DC not "allow supply to increase to meet demand"? Most visitors would marvel at our skyline full of cranes.

Those visitors are asking the wrong question. The question is not "are there cranes, yes/no?," but "how many cranes would there be in a more efficient marketplace?"

And to think one can develope a market that is free of inefficiency is not to understand how brilliantly inefficient humans can be. It reminds me of the modernist ideal of building as a machine for living, which dosen't account for the intangibles that define quality of life, no matter how inefficient something might seem on paper.

You are moving the goalposts here - inefficiency in the sense of economics means something very specific. It does not mean the same thing as you've applied it here.

http://en.wikipedia.org/wiki/Deadweight_loss

I'm a free marketer also, but like any good game, we need rules to ensure some modicum of fairness. Not every kid is large, and when the big kids throw an elbow to score a goal, that dosen't make for a good game, that's just shooting fish in a barrel.

I have no idea what you are getting at with this analogy.

Again, show me where I've called for the elimination of all regulation.

Likewise, I fail to see how restricting supply is 'fair.' It favors the haves - those that currently have the land - over the have-nots. That seems rather unfair, no?

by Alex B. on Dec 20, 2012 8:11 am • link • report

"Of course I'm talking about zoning, I'm just rejecting the black/white corner you're trying to paint me in."

I'm not trying to paint you anywhere beyond the words you've chosen to express yourself with. Rather than always repeating the black and white statement that...
""My point is simple: constraints on supply mean that the market is not operating efficiently. Our current housing market is not efficient at all."

The implication is clear. Anything that constricts efficiency isn't good, unless you add the gray shades from which we both agree life resides in. You don't call for the elimination of regulation, but when you say...

"I like Ryan Avent's approach that states we don't know where exactly we are on that spectrum, but looser regs (in terms of supply, e.g. density) are better and will allow the market to work more efficiently."

...the implication is clear. If looser regs are better, no regs are the best. If you acknowledge that some reg's are a necessary evil, then I'd say they aren't evil, if they protect us all from something truely evil. You end by saying that you fail to understand how restricting supply is 'fair'. Again, "loosend regulations" would still be unfair then becasue they defacto restrict some supply. Much like Warren Buffet assures us that higher imcome tax won't stop a trader from making money on a good deal, I don't think some regulations keep developers from making money where there's some to be made.

by Thayer-D on Dec 20, 2012 9:06 am • link • report

...the implication is clear. If looser regs are better, no regs are the best. If you acknowledge that some reg's are a necessary evil, then I'd say they aren't evil, if they protect us all from something truely evil.

What drives me nuts is that you're accusing me of oversimplifying things (in a blog comments section, of all things) and then you write something like this.

Not all regs are created equal, because they don't regulate the same thing! I like form-based codes. Very little of our current zoning (generally speaking, not just in DC) deals with form, however. Most is focused on use. And the parts that do deal with form aren't dealt with well.

Much like Warren Buffet assures us that higher imcome tax won't stop a trader from making money on a good deal, I don't think some regulations keep developers from making money where there's some to be made.

Our current regulations absolutely do. Say you're a small-time developer in a market with decent but not overwhelming demand with a relatively small lot and you want to build some apartments. The zoning code requires you add parking spaces, which dramatically increases your cost. It prevents you from building - because you can't hit that target market. Perhaps your lot is too small to geometrically fit the required parking.

Maybe you'd rather build to the prevailing height in the area, but that would exceed the FAR you are allowed. Rezoning the parcel takes a lot of time and money before the ZC. All these things add cost, and that cost has to be passed on to the end user, or the developer won't build.

Now, if the demand increases such that you think you can charge higher rents, then your development pencils out on paper, even with those higher costs.

This isn't to say that costs shouldn't be passed on to the end user - what I am saying is that we need to be very understanding of exactly what those costs are and what we get out of it.

If you manage to quote this as 'all regulation is bad' I just might snap.

by Alex B. on Dec 20, 2012 9:16 am • link • report

Dear Thayer -

Regulation of what is built makes sense when A. whats built has externalities and B. Those externalities have a larger cost than the costs due to the zoning.

The classic types of urban zoning are on use - seperating industrial - commercial -residential - etc. And on density - floor area ratio restrictions. The former are justified because of the impacts of uses on each other - idnustrial and heavy commercial impacting negatively on residential mostly. Density is because of the impacts of high density residential on lower density areas - and the classic response is to A. Preserve existing neighborhood form in built up areas and to enable a mix of different neighborhoods in new areas.

On mix - despite a case that some kinds of residential, and some kinds of industrial mix well (the Jane Jacobs discussion of lower Manhattan, I guess) most of us are okay with seperation of industrial and residential by zoning. We have learned a great deal about the costs of over seperating commercial and residential. I would suggest its strongly the case that those uses are overly seperated in the USA today in general, in DC, and in DC's suburbs.

As for density, the maintenance of low density character in built up areas, often goes overboard - not allowing higher density in defined corridors along busier roads, ignoring existing dense buildings when looking at neighborhood charecte, etc. In the suburbs zoning of vacant land has often without logic - too little high density, and that not colocated with transit and employment.

Additionally there are zoning limits that impact placement of a house on a lot - thats the stuff that DPZ etc have critiqued.

Its quite possible to accept zoning in principle, while wanting zoning that is both freer, and more reflective of urbanist principles.

But I zoning is not the only form of supply limitation. There are process issues as well. And in many parts of the metro area inadequate transit or bike/ped provision, or streetscape/public space issues that needlessly limit the supply of WUPs (and the corrections do not necessarily have to be a massive construction of new rail facilities, which is probably not feasible) And, as many have pointed out, reducing crime and improving schools would probably make possible the building of dense WUPS at those metro stations that are not yet in the process of development - notably those EOTR and in PG county. I do not disagree with that approach, but dont think it can be the only one.

by AWalkerInTheCity on Dec 20, 2012 9:18 am • link • report

@Thayer-D

You're picking and choosing from Alex's words and then extrapolating out that Alex things "no regs" is the right solution. From the entirety of what Alex has said it is clear that he/she doesn't think that. So instead of actually addressing differing views on the question at hand, you choose to change the argument to he-said-she-said-what's-your-position.

For example, you are misinterpreting the following:
My point is simple: constraints on supply mean that the market is not operating efficiently. Our current housing market is not efficient at all.
"constraints on supply" does not mean "regulations," it means the fact that we are not able to build enough supply to meet the current demand.

It is clear from just looking at the DC housing market is that we are not building enough housing supply to meet demand. That is evident just from looking at how prices are going up, how older (but completely livable) buildings are being completely gutted and redone as new apartments, and so on. If we want to work on the affordability problem we must work to increase supply so that older stock can filter downmarket.

by MLD on Dec 20, 2012 9:19 am • link • report

My point is simple: constraints on supply mean that the market is not operating efficiently. Our current housing market is not efficient at all.

I thought "the market" is the ability to price things. A market "not operating efficiently" means that the price is not adjusted quickly enough. In DC housing clearly that is not true.

What I think is meant is that the SUPPLY is not responding to the market price signals quickly enough. This is not "market inefficiency."

by goldfish on Dec 20, 2012 9:35 am • link • report

What I think is meant is that the SUPPLY is not responding to the market price signals quickly enough. This is not "market inefficiency."

If it can't respond quickly enough due to structural factors or distortions (like certain regs) then that pretty much is the definition of market inefficiency.

by MLD on Dec 20, 2012 9:38 am • link • report

MLD, the supply, whatever it may be, is always constrained. The constraints may be physical -- impossible to instantaneously truck something, slow response to discover new oil, the long lead time to build a new house -- or it may be due to regulations or political constraints -- a war interrupts oil deliveries, import constrains reduce the amount of lumber -- but in either case in "the market," the price is adjusted accordingly much more quickly than the supply. Thus the market is indeed working.

by goldfish on Dec 20, 2012 9:46 am • link • report

i think you two are defining market differently - goldfish is looking at it more narrowly as the institutional arrangement by which sellers and buyers are matched ("is the NYSE a sufficiently liquid market") and MLD and AB are looking at the entire supply and demand curves and their interaction ("price controls on oil have led to a dead weight loss, ergo the oil market in country X is inefficient")

by AWalkerInTheCity on Dec 20, 2012 10:00 am • link • report

I can see the point of saying that people who can't afford to live close to city centers should move to where housing is more affordable - you know, all those neighborhoods with the skeery crime and poor if any grocery stores and long commutes to the city centers where jobs are.

I would venture that probably, these comments are coming from the exact same people that complain about the city's traffic problem, since in a lot of the "affordable" exurbs, access to public transportation cannot always be described as convenient. Frequently, you need a car.

And that's ignoring the price premium to clean up the inevitable property crime, cost of additional transportation, and limited other services. You know, like decent school systems, which we all pay for over the long run.

No, the government is not "obligated" to provide a damn thing. At the same time, it's short sighted to insist on just exiling those that make under six figures - including a large portion of the city's service staff that us rich people rely on.

by Trixie on Dec 20, 2012 10:00 am • link • report

"If you manage to quote this as 'all regulation is bad' I just might snap"

Please don't. It's like the republican democrat argument when repub's say regulations distort the market and dem's say they're necessary for fairness. Turns out they're both right, it's just a matter of degrees, which is the nuance your statements don't imply.

As for the regulations keeping out smaller players becasue it's one dollar to much, there are many small time developers getting into the game, one rowhouse at a time. In fact that's how almost all the big time developers got their start. The market sorts out which ones made smart decisions and which didn't, but the existing regulations never stopped any from getting into the game, so we'll have to disagree on that one.

"This isn't to say that costs (from regulations) shouldn't be passed on to the end user - what I am saying is that we need to be very understanding of exactly what those costs are and what we get out of it." If all developers have to pass on the costs, then how is that skewing the market place? I work for a small firm that has to swallow the latest lead paint regulations (for example). We whine about it, but we're not going to close shop much like a trader isn't going to get out of the stock market becasue the Capital Gains rate goes up a bit.

Knowing your position is as nuanced as mine then, I might refrase this statememt...
"My point is simple: constraints on supply mean that the market is not operating efficiently. Our current housing market is not efficient at all." ...to
"My point is simple: regulations ought to be eased in order to make the supply of housing better meet the market demand"
Then we'll just sit back and let the market work more efficiently, until the next housing bust.

by Thayer-D on Dec 20, 2012 12:28 pm • link • report

As for the regulations keeping out smaller players becasue it's one dollar to much, there are many small time developers getting into the game, one rowhouse at a time.
Alex explained how regulations hurt exactly these kinds of smaller projects: zoning variances and public meetings cost more on a per-unit basis for smaller projects, making those projects less feasible.

Then we'll just sit back and let the market work more efficiently, until the next housing bust.

So we shouldn't increase the rate at which we add to the housing supply because we need to keep a bubble going? The bubble wasn't created by oversupply of housing, it was created by too much credit availability which generated the demand. The demand in DC is already here and it doesn't seem like it's created by a credit bubble, since credit is pretty hard to come by these days. Not sure what your point is other than fear-mongering.

by MLD on Dec 20, 2012 12:36 pm • link • report

I actually accept the vascillations of a market that sometimes produce booms and bursts, so I'm not trying to fear monger anyone. Last time I checked, it was the easy money that led to the last housing bust, which in theory was answering demand, until it vascilated the other way.

My point is that the credit crunch is as much if not more responsible than the regulations in keeping small time developers out since the reg's affect everyone, but the credit crunch is holding back projects. Allthough I hear that's improving, just not fast enough for everyone.

by Thayer-D on Dec 20, 2012 1:02 pm • link • report

The housing bubble was not about building too many houses:

http://thinkprogress.org/yglesias/2011/09/18/321872/what-housing-boom/?mobile=nc

Now, a lot of the houses we did build were built in the wrong place. But that's also a product of regulation. There is demand in places like DC, but it's a lot harder to get approval to do so here than it is in a greenfield exurb somewhere - and a lot of development just follows the path of least resistance.

The real bubble was in the prices for housing (and thus is the credit used to buy them), not the actual number of units.

by Alex B. on Dec 20, 2012 1:13 pm • link • report

"The real bubble was in the prices for housing (and thus is the credit used to buy them), not the actual number of units."

Truer words never written.

I'd hate to think, however, that the "affordable" housing problem in the DC area is now about more exhaustive audits of potential loans, larger down payments that people can't afford, and a 1/4 of the population having damaged credit histories and renting.

by charlie on Dec 20, 2012 1:46 pm • link • report

Alex,
I said "it was the easy money that led to the last housing bust" and you said, the bubble was caused from the credit used to buy the houses. Easy money=credit, ergo we agree!

You also bring up an interesting question about where the housing was built. You say regulation led to the ex-urb building boom, but there was also a shift in culture where people's additudes about city living has also changed for reasons well know.

Ultimatley, there would be more (urban) housing getting built if credit was loosened up, so shouldn't we also be calling for easier money while we call for loosening building regulations? I realize this might turn in to a circular argument, but my point isn't simple and either is the definition of what constitutes a market. That's why this constant call for raising the height limit is wrong headed.

by Thayer-D on Dec 20, 2012 2:30 pm • link • report

"I'd hate to think, however, that the "affordable" housing problem in the DC area is now about more exhaustive audits of potential loans, larger down payments that people can't afford, and a 1/4 of the population having damaged credit histories and renting."

There is an affordability problem looking at the RENTS (and transport costs) compared to incomes.

by AWalkerInTheCity on Dec 20, 2012 2:37 pm • link • report

@Thayer-D
Ultimatley, there would be more (urban) housing getting built if credit was loosened up

Why would this be the case? Easy credit for homebuyers doesn't magically make it easier to build buildings in the city. It probably would lead to more conversion of existing units into higher-cost units (kick out low-income residents, gut and turn into condos).

That's why this constant call for raising the height limit is wrong headed.
You are the only person in this thread who has said anything about the height limit.

by MLD on Dec 20, 2012 2:57 pm • link • report

Getting financing is what's held up many a project, so easier credit would feul both ends of that equation, like it did in the last housing boom.

The reason I bring up the height limit is that Alex B, the person I've been speaking with mostly, defines that particular regulation as one of the principle reasons we have a housing supply issue.

by Thayer-D on Dec 20, 2012 3:18 pm • link • report

One severe shortage of affordable housing is for individuals with disabilities. The Supreme Court's Olmsted decision laid the legal framework to move those who can live in their communities out of nursing facilities. Lives of choice within neighborhoods improves functioning and quality of life. What is needed are units in transportation centers that allow walkability to daily needs like shopping, visitability, public transportation and unit accessibility...The problem is that many of these individuals have incomes of only SSI/SSDI and places like those described start out at the top of the $$$ hill. Some units need to be incorporated in all these new developments for these folks who require these amenities for daily life. It is only just that all benefit from development, not just the few, the wealthy or the connected.

by Chris J. on Dec 20, 2012 5:04 pm • link • report

I'm not really ready to out myself on the internet, hence the name, but Chris J's point applies to people with income WAY, WAY above SSI/SSDI limits.

I'm a GS-13, make a little under six figures, and have been looking at buying a place. However, I was just diagnosed with a degenerative neurological disorder. Lots of stuff that I had been looking at doesn't really make sense for me to buy anymore. I probably need to buy a condo in an accessible building with an elevator. It should be near transit, but probably should have parking, because I will likely be able to drive longer than I'll have stamina to take transit.

I certainly don't think the government owes me anything and I function just fine right now, so I shouldn't qualify for any programs for the disabled. However, I was kind of amazed to find how little there is to buy in DC for less than 600K that does not involve flights of stairs. I was really surprised actually at how little there was. There really is a shortage of accessible housing in general.

by Not Ready to Be Public With This Yet on Dec 20, 2012 7:21 pm • link • report

Most folks don't live in 5 story wood-frame stacked condos because they like it, they buy it because it is all they can afford. So before one jumps on the condos/mixed use density bandwagon, remember that in most cases this is what is being built, except for in the priciest areas.

Party-walls and a small yard are acceptable to most people, if not desirable (many do not desire the upkeep of a large yard) Planners can contain "sprawl" (whatever that means) quite well enough within the bounds of mixed use townhouse level density. Look at Old Town, or Adams Morgan, mostly townhouses. But the key word is contain and mold the sprawl into strings of pearls, not eliminate. Distribute the villages, connect them with reasonable choices of transit (car, bus, bike etc) but make them villages.

However, in order to achieve a higher percentage of townhouse level density, there needs to be some give on the containment of development. Not a lot, just some. If the region is to expect 2 or 3 million more people over the next 20 years, and only 200K of them will be housed inside the beltway...well, it doesn't take a rocket surgeon to realize that most of the new growth (perhaps 90%) will be in Loudoun, PWC, PG, Howard, Anne Arundel, etc counties.

by stevek_fairfax on Dec 20, 2012 11:03 pm • link • report

What is considered affordable to everyone that amount differs to all humans are we talking about $500 rent or $300,000 condo as affordable. Affordable depends on what your income is, a $1 million condo could be considered affordable to some.

Simply put you can not make housing affordable unless someone is subsidizing it.

1 The builder/developer wont take less; who in there right mind would if you could get more

2 Building more housing does not make rent cheaper; out of all the apartments built in the city within the past 5 years how many are below $1500 none.

@ stevek_fairfax

How do those people in those villages get to wherever they want to go. You will either end up building parkways, highways, trains or adding tons of buses.

Then you will continue sprawl some wont accept townhouses; I know many who flat out said that they would never live in a townhouse due to them not wanting neighbors and they would live 40, 50 or 60 miles away and drive then be in a crowded area.

by kk on Dec 23, 2012 11:56 pm • link • report

Most of the affordable housing is in areas of high crime. Crime is an extra cost that those residents must incur, not only directly but in the lack of businesses etc that want to move to those areas, reducing opportunities for the poorest residents. Thus, affordability is a bit chimeric, if you end up spending a lot more in security, stolen things, inability to go outside at night. That was my experience living in an affordable high crime neighborhood.

You could do a lot for the residents of those areas directly: better policing, better education, better jobs programs.

by SJE on Dec 30, 2012 8:42 pm • link • report

KK:

1. Affordable housing is defined by HUD as about 30% of your annual income.

2. You're conflating two things. You're seeing the fact that new apartments are expensive and not being cheap. A. No one has said the new aptartments would be cheap (rather the existing apts become cheaper or don't rise as much). B. There are many confounding things that also have an effect on the supply of new housing and the price of said housing.

3. While some people won't accept a townhouse, many will based on the desire of companies to build them.

by drumz on Dec 31, 2012 9:35 am • link • report