- The Role of Prepayment Penalties in Mortgage Loans, by Andrea Beltratti, Matteo Benetton & Alessandro Gavazza, CEPR Discussion Paper No. DP10504.
- Inclusion by Design, Thinking Beyond a Civil Rights Paradigm, by Robin Paul Malloy, Land Use Law and Disability: Planning and Zoning for Accessible Communities, Cambridge University Press, 2015.
- Cancer Diagnoses and Household Debt Overhang, by Arpit Gupta, Edward R. Morrison, Catherine Fedorenko & Scott D. Ramsey, Columbia Law and Economics Working Paper No. 514.
- Zoning and Land Use Planning: How Real is Gentrification, by Michael Lewyn, 43 Real Est. L.J. 344 (Winter 2014).
- Maximizing Inclusionary Zoning’s Contributions to Both Affordable Housing and Residential Integration, by Tim Iglesias, Washburn Law Journal, Vol. 54, No. 4, 2015.
- Securitization and Mortgage Default, by Ronel Elul, FRB of Philadelphia Working Paper No. 15-15.
- The Effect of Large Investors on Asset Quality: Evidence from Subprime Mortgage Securities, by Manuel Adelino, W. Scott Frame, & Kristopher Gerardi, FRB Atlanta Working Paper No. 2014-4.
Tag Archives: land use
Housing Affordability for Moderate-Income Households
The Center for Housing Policy’s most recent issue of Housing Landscape gives its Annual Look at The Housing Affordability Challenges of America’s Working Households. The Center finds that
Overall, 15.2 percent of all U.S. households (17.6 million households) were severely housing cost burdened in 2013. Renters face the biggest affordability challenges. In 2013, 24.3 percent of all renter households were severely burdened compared to 10.0 percent of all owner households. (1, footnote omitted)
The Center summarizes “the severe housing cost burdens of low- and moderate-income working households.” (1) Unsurprisingly. these households face
significantly greater affordability challenges than the overall population. In 2013,21.2 percent of working households were severely cost burdened (9.6 million households).Twenty-five percent of working renters and 17.1 percent of working homeowners paid more than half of their incomes for housing that year. (1)
The report notes some modest good news:
Since 2010,the overall share of working households with a severe housing cost burden has fallen.This modest decline is the result of a complex combination of factors, including the shift of some higher-income households from homeownership into rental housing. An insufficient supply of rental housing and sustained increases in rents have led to millions of working households having to pay too much for housing or live far from their jobs, in substandard housing,or in poor-quality neighborhoods. (1)
Federal and local housing policy has not yet come to grips with the fact low- and moderate-income households have been paying a significant portion of their income in housing costs year after year. Household have to make difficult trade-offs among cost, distance from employment, housing quality and neighborhood quality.
The Center notes that more can be done to support affordable housing at the federal and state levels, but it is not clear to me that there are any politically feasible policy responses that can make a serious dent in the affordability of housing for working households.
Reiss on Fair Housing Falsehood
The Providence (R.I.) Journal quoted me in its Truth-O-Meter column: Mike Stenhouse: According to HUD, It’s Unfair, Unjust for Wealthy to Live in Exclusive Neighborhoods. The column reads, in part,
For more than three years, the Rhode Island Division of Planning has been working on RhodeMap RI, a long-term economic development plan meant to help guide efforts to improve the state’s economy.
The process, partly financed by a $1.9-million grant from the U.S. Department of Housing and Urban Development (HUD), didn’t get much notice until a nearly 200-page draft of the plan was released in mid-September, igniting a firestorm of controversy.
Critics of the plan denounced it as a thinly disguised blueprint for social engineering. If it is implemented, they say, local communities will be forced to cede authority to the federal government on issues such as affordable housing and land use, and individual property rights will be under threat.
Supporters, including Governor Chafee and the planners and community leaders who drafted the plan, say it’s a well crafted, comprehensive guide that will help move the state’s economy forward over the decades ahead. They say there’s nothing in the plan that would infringe on individual property rights or local home rule.
The debate grew so heated at one meeting a shouting match broke out, with charges of racism and bigotry hurled. And last week, at a meeting of the Statewide Planning Council, opponents called it unconstitutional, socialist and even treasonous. Nonetheless, the council voted unanimously to adopt it.
Mike Stenhouse, CEO of the Rhode Island Center for Freedom and Prosperity, a conservative research group, has led the opposition. A few weeks ago, he talked about the plan on WPRO-AM’s “The Dan Yorke Show.”
Yorke asked Stenhouse to cite a component of the plan “that highlights what you think is problematic.”
“I’m going to give you my interpretation,” Stenhouse responded. “I don’t have their plan in front of me. What we believe, for instance, take Poppasquash Point in Bristol. According to HUD, it is patently unfair and socially unjust that wealthy people can live in an exclusive neighborhood.”
We wondered whether Stenhouse was right about HUD’s view of wealthy neighborhoods such as Poppasquash Point, one of the state’s priciest enclaves.
When we asked Stenhouse about his statement, he told us he was not directly quoting HUD, but said that his statement was “an accurate interpretation of HUD’s openly stated intent.” He provided links to multiple documents to support his position.
While we don’t view Stenhouse’s statement as a direct quote of HUD policy, we do believe that listeners who heard Stenhouse’s preface — “according to HUD” — would assume he was summarizing HUD’s policy.
Stenhouse’s backup is comprised primarily of links to a news story and an editorial in Investor’s Business Daily and links to various legal documents and HUD regulations.
* * *
According to David Reiss, a professor of real estate and housing policy at Brooklyn Law School, “HUD does not interpret the FHA [Fair Housing Act] to mean that `wealthy people’ can’t `live in an exclusive neighborhood.’”
“An exclusive neighborhood is an expensive one – the FHA does not ban expensive neighborhoods.” Reiss continued in an email statement. “What it does do is ban exclusionary practices. Exclusionary practices are those that exclude people based on certain of their characteristics such as their race, sex or religion. To my knowledge, HUD has never taken the position that merely living in an exclusive – that is, expensive — neighborhood violates the FHA.”
We also asked HUD whether Stenhouse had accurately characterized its rules.
“There are simply no policies, practices, regulations or anything that can validate such hyper hyperbole,” Brian Sullivan, a public affairs officer with HUD, said in an email statement.
Our ruling
Mike Stenhouse said “According to HUD, it is patently unfair and socially unjust that wealthy people can live in an exclusive neighborhood.”
There’s no doubt that HUD has challenged what it considers to be discriminatory practices at the community level, including exclusionary zoning ordinances.
But that’s not nearly the same as objecting to the right of wealthy people to live in expensive neighborhoods.
We rule Stenhouse’s claim False.
Transit-Oriented Development No Panacea
The Government Accountability Office issued a report, Multiple Factors Influence Extent of Transit-Oriented Development. The GAO writes that
From 2004 to 2014, FTA [Federal Transit Administration] allocated $18.9 billion to build new or expanded transit systems through the Capital Investment Grant program. One of the key goals for many local governments when planning major capital-transit projects is to encourage transit-oriented development as a way to focus future regional population growth along transit corridors. Transit-oriented development is generally described as a compact and “walkable” neighborhood near transit with a mix of residential and commercial uses.
GAO was asked to examine transit-oriented development. This report addresses (1) the extent to which transit-oriented development has occurred near select transit lines that received federal funds and the factors and local policies that affect transit-oriented development, and (2) the extent to which FTA considers factors related to the potential for transit-oriented development when assessing proposed projects and the extent to which FTA’s assessment of these factors is consistent with the factors that local stakeholders told GAO affect a project’s results. To address these issues, GAO reviewed relevant literature and visited six federally funded case study transit projects in Baltimore, MD; Washington, DC; Charlotte, NC; Santa Clara County, CA; San Francisco, CA; and Houston, TX, selected for diversity in local programs, markets, and geography. During these visits, GAO met with stakeholders, such as local officials and developers. GAO also interviewed FTA officials. In commenting on a draft of this report, DOT noted FTA’s longstanding commitment to encourage transit-oriented development.
The GAO’s findings are quite mixed, but it did note that “many of the factors or local government policies that supported or hindered transit-oriented development are generally consistent with FTA’s summary assessment for economic development and land use.” Some promote transit-oriented design as a panacea for what ails American communities and others argue that we are too developed and too dispersed for it to make much of a difference in how we live and work. This report does not really move the debate one way or the other, but it does provide some interesting case studies that can help to inform the debate.
Manufacturing Jobs in NYC
The New York City Council released a report, Engines of Opportunity: Reinvigorating New York City’s Manufacturing Zones for the 21st Century. I am always worried that discussions of increasing manufacturing jobs, especially in a city as expensive as New York, are informed by a romantic vision of a past that cannot be recaptured. This report seems to be aware of that trap. It focuses on marginal improvements that can be made to support the kind of manufacturing and creative economy jobs that can survive the brutal competition for space and skilled employees that New York companies have to deal with.
The report makes three land use policy recommendations:
1) Industrial Employment District – A zoning district which provides the space for those industries which are critical to the economic well-being of thousands of New Yorkers and the health of the overall economy. In places where a concentration of manufacturing/ industrial activity exists — in many of the existing “Industrial Business Zones” for instance — a re-writing of the use regulations to focus on the protection and growth of these industries is essential, as is allowing for additional density to create the option for more space for new and existing firms to expand. Combined with strategic incentives and targeted enforcement, these districts will provide a stable regulatory framework for investment.
2) Creative Economy District –A dynamic new combination of industrial space and commercial office space. These creative economy districts would no longer be hindered by competition with incompatible uses like mini-storage or nightlife or blocked-out by unproductive warehousing of property in hope of future residential rezoning. With the additional density, property owners would gain much more lucrative development opportunities than under the current zoning while growing the City’s employment base. Robust workforce development strategies will need to be implemented in tandem with these new districts to ensure a wide variety of New Yorkers will have access to these new jobs.
3) A Real Mixed Use District–Mixed-use industrial-residential-commercial neighborhoods like parts of SoHo or Long Island City or Williamsburg or the Gowanus have a unique dynamism that has made them tremendously desirable. Other cities are increasingly trying to emulate the dynamic synergy of these mixed-use neighborhoods. The creation of the “MX” zone acknowledged the value of mixed-use neighborhoods and tried to find a solution that could increase the residential capacity while maintaining their dynamism. Unfortunately because MX allows but does not require a mixture of uses, the economics of real estate have lead residential development to dominate and displace other uses. A zone which supports and requires the creation of commercial and compatible industrial space alongside residential would create dynamic new neighborhoods instead of just residential development. (5)
The big problem with this (and similar reports) is that it does not directly address the opportunity cost of such proposals. What are we giving up when we create these new zoning districts? For one thing, we make less land available for residential uses, which tend to crowd out other uses because of the immense demand for housing in New York City right now.
More generally, how do we properly balance the various needs of the City in our overall zoning plan? There is no right answer to such questions, but they should be asked and proposals like this should put their answers on the table for others to consider.
Regulation and Housing Supply
Gyourko and Molloy have posted Regulation and Housing Supply to SSRN. Unfortunately, it is behind a paywall (although it is also available at NBER if your library has access and an earlier draft can be found here). The abstract of this book chapter states that it reviews the scholarly literature on the causes and effects of local government regulation that “influences the amount, location, and shape of residential development.” The abstract continues,
We begin with a discussion of how researchers measure regulation empirically, which highlights the variety of methods that are used to constrain development. Many theories have been developed to explain why regulation arises, including the role of homeowners in the local political process, the influence of historical density, and the fiscal and exclusionary motives for zoning. As for the effects of regulation, most studies have found substantial effects on the housing market. In particular, regulation appears to raise house prices, reduce construction, reduce the elasticity of housing supply, and alter urban form. Other research has found that regulation influences local labor markets, and household sorting across communities. Finally, we discuss the welfare implications of regulation. Although the large positive externalities of some specific rules are clear, the benefits of more general forms of regulation are very difficult to quantify. On balance, a few recent studies suggest that the overall efficiency losses from binding constraints on residential development could be quite large.
Land use geeks are familiar with Gyourko’s analysis of land use regulation, but many non-economists are not. Even if they are, they often give it short shrift. I found the extension of their analysis beyond the borders of the U.S. interesting:
In theory, the availability of buildable land might not constrain the supply of housing units if housing could be constructed as densely as necessary to meet demand. But in most places in the U.S.—and indeed around the world—local land use policy imposes limits on residential development that restrict the size and type of housing units that can be built on a given amount of land. These restrictions add extra costs to a construction project, creating a wedge between the sales price of a house and the cost of buying the land and building the structure. (3)
As communities struggle with housing affordability, the link between land use regulation and housing costs is one that should not be ignored.
Reiss on C-Span on Evolving Cities
C-Span has posted the footage from the Brooklyn Book Festival panel that I moderated:
Planning and Protesting: Cities Evolve!
With the city constantly evolving, each major project has its supporters and protesters. Authors Gregory Smithsimon and Benjamin Shepard (The Beach Beneath The Streets – Contesting New York City’s Public Spaces) and Daniel Campo (The Accidental Playground: Brooklyn Waterfront Narratives of the Undesigned and Unplanned) and Peter Linebaugh (Stop, Thief! The Commons, Enclosures, and Resistance) discuss how public space is shaped through policy, perspective and protests, how to agree to disagree, and the dynamics of shaping a city’s growth and change. Moderator David Reiss, Professor, Brooklyn Law School.
BLS Dean Nick Allard makes a cameo appearance at the beginning . . ..
