Housing

CodeNext and “community character” in a changing world

~ dankeshet ~ 46 Comments

Austin is revamping its land development code (i.e. “zoning”) in a project known as CodeNext.  It would be difficult to overstate how important this process is.  As I have said, zoning really is the central problem in Austin, as in many other cities.  Circumstances change and when cities don’t adjust to the changing circumstances, you end up with policies that don’t match the problems that the city is facing.  In a city faced with too many people driving too far and too many people driving until they qualify because central city housing is so expensive, Austin’s tight restrictions on multifamily development in the central city are really a bad leftover from a previous century.

Community Character

CodeNext’s current round of public meetings is framed less on change, though, but more on maintaining continuity.  This is how they describe it in the email they sent:

CodeNEXT is an unprecedented opportunity for Austinites to shape the way we live now and for generations to come. To be effective in framing how land can be used throughout the city, a revised Land Development Code should consider the unique character found in different types of neighborhoods throughout Austin. That’s where you come in. [emphasis in original]

We’re inviting you to walk your own neighborhood and document the features that make it unique. What do homes in your community look like? Your streets? Businesses nearby? Anyone can do it and we’ll show you how!

Although the framing here hints at things other than maintaining physical infrastructure (types of businesses), the majority of this framing is built around the idea of the “character” of a neighborhood reflecting the physical infrastructure of buildings, and nothing more.  I believe this is a mistake.

People Change Even When Buildings Don’t

I believe the buildings-first perspective is a poor perspective from which to guide policy.  As Edward Glaeser wrote in his book Triumph of the City: “Cities aren’t strcutures; cities are people.”  In the places where central Austin’s physical infrastructure has stayed pretty much the same over the last few decades, the neighborhoods have changed in character greatly.  I have friends who bought starter homes in sketchy neighborhoods and now live in expensive homes in swanky neighborhoods, all without either moving or the buildings around them changing much. The difference is that more people want to live in that neighborhood now, driving prices up.

Supply, Demand, and Price

In any market, including the housing market, supply and demand together determine the price.  In the housing market, the supply are the homes, the demand is the number of people who want to live in those homes (and the amount those people are willing to pay).   As time goes by, more and more people want to live in Austin, through many processes: natural growth as people have children, those kids grow up and move out to places on their own; a lot of urbanization as people move from the rest of Texas to live in Austin, and some cross-country migration as people generally move from the Northeast to sunnier places in the South and Southwest.  That is to say, the demand for living in Austin has gone up dramatically, and is currently trending upward.

So, the question for “community character” is: which determines a community’s character more: the price of living there, or the present form of buildings.  Preserving the character of the supply of buildings in the face of new demand means allowing all the change to come in the form of swings in price, as has happened in many places in Austin. Preserving the character of housing prices (e.g. “a good place for starter homes”, “an affordable neighborhood”) in the face of rising demand means changing the supply dramatically.

When it comes my turn to participate in the CodeNext hearings, I will express my preference for preservation through change: preserve (and restore) household affordability by changing the character of zoning constraints on supply.

How to measure “shaping”

~ dankeshet ~ 2 Comments

Summary: To measure how much “shaping” a rail plan does, don’t look just at static 2030 projections.

In the latest Central Corridor Advisory Group meeting (video here), there was an interesting question of whether the most important numbers that Project Connect should use when evaluating potential rail routes are the data from 2010 or the CAMPO projections for 2030.  Kyle Keahey, Urban Rail Lead for Project Connect, framed this decision as “serving” existing populations or “shaping” land use patterns and future growth.

Serving and shaping are both valid but aims of a new rail plan, and each goal might be achieved to a different amount by different plans.  However, the way to measure them is not the 2010 data vs. the 2030 projections.  The 2030 projections are based on the Capital Area Metropolitan Planning Organization (CAMPO) model, which I do not believe included any provisions for rail.  Therefore the growth it projects, according to the model, is coming even if we don’t build rail.  Building toward that growth is still a mode of serving, just serving a future population, projected to exist even in a no-build scenario.

But these projections aren’t set in stone.  Areas might grow faster or slower than assumed or even lose population.  Sometimes, changes in projected growth can be for reasons that nobody anticipated: Seattle’s Eastside suburbs would probably never have grown so fast if it weren’t for the explosive growth companies like Microsoft experienced.  But often, the changes in growth are due to policy decisions.  West Campus, for example, experienced explosive growth when the UNO zoning plan came into existence, allowing growth to occur.  The East Riverside Corridor plan that City Council passed is similarly all about shaping the nature of future growth along that corridor.  The “CAMPO model” (PDF) doesn’t actually consist of one projection, but two: one based on a no-build scenario and one based on a “financially constrained” scenario.  By comparing projections based on each transportation plan, CAMPO is analyzing how each plan shapes the future.

If the Central Corridor Advisory Group is being asked to shape the future and not merely serve, it will need similar alternative projections.  There may not be time to perform as sophisticated an analysis as CAMPO does, but it at least needs to be aware what sorts of questions it’s trying to answer.  Questions like: if we put rail here, will that result in more people living there?  Working there?  Living there without cars?  The answers to these questions are difficult, but shying away from them or assuming answers because the questions are difficult is not a good way to make decisions.

After all, if we don’t believe that spending $500m on a rail system will change the projected future land use and transportation patterns of our city, we might as well save that money and not build it at all.  I think rail is one foundation for shaping the city and that’s why we’re pursuing this process.  But that means that, instead of merely chasing one static, no-rail projection of 2030, CCAG should be planning what 2030 will look like.

Rail alone can’t achieve that plan.  If a neighborhood is as built out as zoning allows it to be, then frequent, high quality rail service will not draw new residents, merely raise property values and make the area less affordable.  That is why I think it should be clear to residents that, if we are planning on building a rail line to your area, that will have to go hand-in-hand with reshaping your area to be amenable to rail, by including high-density zoning, high grid connectivity, and all the other elements that are necessary to make a rail line successful.

Edit: After I posted this, Jace Deloney took to twitter to make some excellent points about this post.  Read the storified version here.  One point he made was that we should look to serve places “that already have the sort of density & zoning that can support high transit service.”  I agree!  Sending rail to places where it is needed and that will make the best use of it is the right move!  I just want to point out that if you are going to try to shape a place with rail, you should use at least use measurements of shaping that make sense, and not static projections.

The point I was trying to, but failed to make in the final paragraph was not that sending rail to already-built places is wrong–indeed sending rail to already-built places is the best guarantee that by the time you build it, there will be people there–but rather, that your future growth projections should be in line with land use law.  If the law doesn’t allow for the kind of growth you are projecting, you are making projections not only about future consumer demand for living spaces, but also about what future City councils will pass.  Perhaps that makes sense for a private-sector forecaster, but for the City Council itself to pass the plan, the Council should either go ahead and pass the law that allows for that growth or it should not use that growth in its projections.

The Musical Chairs Model of Housing Markets

~ dankeshet ~ 11 Comments

I first developed this idea when commenting on this post on the Austin Contrarian.

Musical chairs is a pretty simple game. No matter how many people there are, if there’s one fewer chair, everybody will scramble hard to get a chair.  Not only does everybody want a chair, but everybody knows that everybody else wants a chair, so they all have to work extra hard to compete against one another.  Just add one more chair, though, and all of a sudden life gets leisurely.  It doesn’t matter whether you place the chair near the fastest person or the slowest person–everybody will shift over and eventually, even the slowest person will find that last remaining chair.

This is a decent start to a model for a housing market.  Just about everybody wants a place to live.  If there aren’t as many homes as there are people, people will have a hard time finding a place to live and they will start to scramble.   Soon, everybody knows somebody who has had to scramble to get a place to live so they, in turn, scramble to get a place to live as well–knowing that other people out there are competing with them.  In musical chairs, the last one left without a chair loses.  So, too, in the housing market; except that instead of being left out of the game, they have to sleep on the streets, or couchsurf, or crowd together many people in a bedroom.

In musical chairs, the fastest to a chair gets to sit in it.  In the housing market, roughly speaking, the person who is willing and able to pay the most for a given property gets to rent or buy it.  Instead of the slowest person losing, the poorest does.  Instead of competing on speed, renters and homebuyers compete both on speed and ability / willingness to pay.  Instead of chairs getting sat in faster and faster, prices (both purchase prices and rents) go higher and higher.  Even if a poorer person lucks out and manages to rent a great apartment for cheap, if there are others out there with more money still looking for homes, next year the landlord will probably raise the rent.

And, just as it doesn’t matter much in musical chairs whether you add a chair near the fastest person or the slowest person, it doesn’t matter much whether the new housing stock you build is dedicated to the richest folks or the poorest folks.  If you add a chair, everybody will just shift chairs until even the slowest has found a seat.  If you add housing, everybody will move around until even the poorest folks find the last remaining housing.  This is the phenomenon sometimes known as “filtering.”

Obviously, this isn’t a perfect model.  Even when there are as many homes as people, sometimes homes sit empty while people sit homeless.  However, in the environment Austin and most cities in the US are in right now, we have all the signatures of a game of musical chairs: low vacancy rates and high, rising prices.  There are more people scrambling for chairs than there are chairs.  In such an environment, the first and most important affordable housing strategy is not to focus on the mix of housing that gets added, it’s to focus on making sure enough new homes to house everybody get built and built fast.  Whether the new housing is super nice and intended for rich folks or super spartan and intended for poorer folks, people will shuffle until everybody finds a home.  But if there aren’t enough homes to go around, it won’t be the richer folks sleeping in the streets.

Affordable Housing, Abundant Housing

~ dankeshet ~ 3 Comments
Some more thought about the affordable housing conference.
It seems to me there are two affordable housing problems, related but distinct.  First, the problem that some people can’t afford the basic costs of rent in Austin.  An apartment has costs: taxes, construction, maintenance, land, etc.  These add up to a breakeven rent that’s higher than some people can afford to pay.  Reducing those costs (e.g. finding cheaper ways to maintain a house) can make the breakeven rent more affordable, but there will always be some people who can’t pay, even without any landlord making a profit.
Second, there’s the abundance problem: when there are more people who want to live here than there is housing, they bid up the rents.  Rent no longer reflects costs, but demand.
The only ways to address the affordability problem are redistributive.  The city doesn’t assess taxes on apartments run by nonprofits (raising taxes slightly on everybody else), who pass the savings on to renters.  Or the city mandates developers lower prices on certain apartments, redistributing potential profits from the developer to the renter.  But trying to fix scarcity problems by redistribution is like trying to fit a carpet too big for a room one corner at atime.  The more market weight you give to the needy just pushes demand up on other units, driving more marginally-able-to-pay residents into unable-to-pay status.  The only way to deal with the scarcity problem is to get more units built.
Austin has major scarcity/abundance issues.  Sky-high downtown rents reflect demand and scarcity, not just construction costs or tax costs.  At the housing + transit conference, I saw a lot of people using the language of redistributive solutions: Tax-incremented financing, density bonus, finding federal and foundation matching funds, etc.  But the only person talking scarcity and abundance was the developer, not the politicians or staffers.