Tag Archives: NYC

Gentrification & Socioeconomic Diversity

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Lisa Brewster

Lei Ding et al. have posted a Federal Reserve Bank of Philadelphia Working Paper, Gentrification and Residential Mobility in Philadelphia, to SSRN. The abstract reads,

Gentrification has provoked considerable debate and controversy about its effects on neighborhoods and the people residing in them. This paper draws on a unique large-scale consumer credit database to examine the mobility patterns of residents in gentrifying neighborhoods in the city of Philadelphia from 2002 to 2014. We find significant heterogeneity in the effects of gentrification across neighborhoods and subpopulations. Residents in gentrifying neighborhoods have slightly higher mobility rates than those in nongentrifying neighborhoods, but they do not have a higher risk of moving to a lower-income neighborhood. Moreover, gentrification is associated with some positive changes in residents’ financial health as measured by individuals’ credit scores. However, when more vulnerable residents (low-score, longer-term residents, or residents without mortgages) move from gentrifying neighborhoods, they are more likely to move to lower-income neighborhoods and neighborhoods with lower values on quality-of-life indicators. The results reveal the nuances of mobility in gentrifying neighborhoods and demonstrate how the positive and negative consequences of gentrification are unevenly distributed.
I am not in a position to fully evaluate the methodology of this paper in this post. At first glance, however, it appears to be a well-constructed and large study, tracking “the residential location and financial health of a random sample of more than 50,000 adults.” (1) At the same time, useful household characteristics like income and race were not available to the authors, so the study has some significant limitations.

Given the intensive debates that gentrification engenders in NYC and elsewhere, it is still helpful that the authors offer up some facts and grounded interpretation of those facts. The authors specifically find that “gentrification is associated with positive changes in residents’ financial health: Residents in gentrifying neighborhoods experience an average increase of 11 points in their credit scores, compared with those who are not residents.” (1) At the same time, their results “suggest that less advantaged residents generally gained less from gentrification than others, and those who were unable to remain in a gentrifying neighborhood had negative residential and financial outcomes in the gentrification process.” (2)

Those who decry gentrification as well as those who promote it (quietly, more often than not) will find support for their positions in this paper. But those who are trying to understand just what we are talking about when we talk about gentrification and its effects will be left with a more textured understanding of how the demographics of gentrifying neighborhoods change. If cities are serious about promoting socioeconomic diversity, they must understand what is happening when neighborhoods are in flux.

California Dreamin’ of Affordable Housing

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Architecturist

Just A Dream for Many

Yesterday, I blogged about the affordable housing crisis in New York City. Today, I look at a report from the Center on Budget and Policy Priorities, How Housing Vouchers Can Help Address California’s Rental Crisis. It opens,

California’s severe shortage of affordable housing has hit low-income renters particularly hard. Nearly 1.6 million low-income California renter households paid more than half of their income for housing in 2013, and this number has risen 28 percent since 2007. While the shortage is most severe on California’s coast, many families throughout California struggle to pay the rent. A multifaceted approach with roles for local, state, and federal governments is needed to address the severe affordable housing shortage, but the federal Housing Choice Voucher program can play an outsized role.

California’s high housing costs stretch struggling families’ budgets, deepening poverty and hardship and exacerbating a host of other problems. For example, 23 percent of Californians are poor, according to Census measures that take housing costs into account, well above the poverty rate of 16 percent under the official poverty measure. California has 14 percent of the nation’s renter households but nearly 30 percent of the overcrowded renters. And California has one-fifth of the nation’s homeless people, more than any other state. A large body of research shows that poverty, overcrowding, housing instability, and homelessness can impair children’s health and development and undermine their chances of success in school and later in the workforce.

Housing vouchers help some 300,000 low-income California families afford the rent, more than all other state and federal rental assistance programs combined. Vouchers reduce poverty, homelessness, and housing instability. They can also help low-income families — particularly African American and Hispanic families — raise their children in safer, lower-poverty communities and avoid neighborhoods of concentrated poverty. Moreover, so-called “project-based” vouchers can help finance the construction of affordable rental housing in areas with severe shortages.

Yet the number of vouchers in use has fallen in recent years, even as California’s housing affordability problems have worsened. Due to across-the-board federal budget cuts enacted in 2013 (called sequestration), 14,620 fewer California families used vouchers in December 2014 than in December 2012. By restoring funding for these vouchers, Congress can enable thousands more California families to afford safe, stable housing. (1, reference omitted)

Really, the analysis here is not California-specific. The authors are arguing that low-income families benefit greatly from rental subsidies and that Congress should restore funding for housing vouchers because they provide targeted, effective assistance to their users. While California has a high concentration of voucher users, all low-income renter households would benefit from an increase in the number of housing vouchers. No argument there.

I am disappointed that the report does not address an issue that I highlighted yesterday — attractive places like NYC and California continue to draw a range of people from global elites to low-income strivers. Policymakers cannot think of the affordable housing problems in such places as one that can be “fixed.” Rather, it must be seen as, to a large extent, a symptom of success.

So long as more and more people want to live in such places, housing costs will pose a challenge. Housing costs can be mitigated to some extent in hot destinations, but they are hard to solve. And if they are to be solved, those destinations must be willing to increase density to build enough units to house all the people who want to live there.

Severe Crowding in NYC

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"NLN Scott Stringer" by Thomas Good

NYC Comptroller Scott Stringer

New York City Comptroller Scott Stringer has issued a report, Hidden Households, that shows that more than one in twelve NYC homes are crowded. The report opens,

New York City is in the midst of a protracted housing emergency. The City’s net estimated rental vacancy rate is the official statistic used to gauge a housing emergency, but there are other important variables that shed light on the state of our housing environment. Chief among these is crowding. Crowding is an established predictor of homelessness and a critical indicator of negative health, safety and economic household risk factors. The City’s “hidden households”, which contain nearly 1.5 million New Yorkers, are the topic of this report.

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Among the most notable crowding trends detailed in the report, we find that New York City’s overall crowding rate, which includes rental and ownership housing units, rose to 8.8 percent in 2013, compared to 7.6 percent in 2005 – a proportional increase of 15.8 percent. The City’s crowding rate is more than two and a half times the national crowding rate of 3.3 percent. The proportion of crowded dwelling units increased in all of the City’s boroughs except Staten Island during this time period with increases of 28.1 percent in Brooklyn, 12.5 percent in Queens and 12.3 percent in the Bronx.

Severe crowding, defined as housing units with more than 1.5 persons per room, also increased substantially, surging by 44.8 percent from 2005 to 2013, with increases seen in every borough. Most notably, the proportion of studio apartments with three or more occupants rose by over 365 percent from 2005 to 2013. All told, 3.33 percent of all dwelling units in NYC were classified as severely crowded in 2013, compared to a national severe crowding rate of 0.99 percent. (2)

The report only focuses on the problem of crowding, but it would be helpful to mention one of the main solutions to crowding — building more housing. To the extent that the NYC Comptroller can push down construction costs in NYC and support increased density in appropriate neighborhoods, he would help reduce crowding in the long run.  Lots of people want to be in NYC. We need lots of apartments to house them.

Inclusionary Housing and Equitable Communities

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Lincoln_Institute_of_Land_Policy_-_Cambridge,_MA_-_DSC00178

The Lincoln Institute of Land Policy has released a policy focus report, Inclusionary Housing: Creating and Maintaining Equitable Communities. The Executive Summary opens,

After decades of disinvestment, American cities are rebounding, but new development is often driving housing costs higher and displacing lower-income residents. For cities struggling to maintain economic integration, inclusionary housing is one of the most promising strategies available to ensure that the benefits of development are shared widely. More than 500 communities have developed inclusionary housing policies, which require developers of new market-rate real estate to provide affordable units as well. Economically diverse communities not only benefit low-income households; they enhance the lives of neighbors in market-rate housing as well. To realize the full benefit of this approach, however, policies must be designed with care. (3)

The report uses the term inclusionary zoning to refer to

a range of local policies that tap the economic gains from rising real estate values to create affordable housing—tying the creation of homes for low- or moderate-income households to the construction of market-rate residential or commercial development. In its simplest form, an inclusionary housing program might require developers to sell or rent 10 to 30 percent of new residential units to lower-income residents. Inclusionary housing policies are sometimes referred to as “inclusionary zoning” because this type of requirement might be implemented through an area’s zoning code; however, many programs impose similar requirements outside the zoning code. (7)

The report notes that

Policy makers are understandably concerned that affordable housing requirements will stand in the way of development. But a review of the literature on the economics of inclusionary housing suggests that well-designed programs can generate significant affordable housing resources without overburdening developers or landowners or negatively impacting the pace of development. (4)

The report is obviously addressing two of the most important issues facing us today — the housing affordability challenge that many households face as well as the increasing stratification of communities by income and wealth.

There is a lot of value in the survey of the academic literature on inclusionary housing policies that is provided by this report. At the same time, there is some fuzzy thinking in it too. For instance, the report states that, “As the basic notion of supply and demand suggests, the addition of new units in a given market will inevitably put some downward pressure on the cost of existing units. But the larger effect tends to be upward pressure on housing costs because new homes are primarily built for higher-income residents.” (12)

This analysis ignores the well-accepted concept of filtering in urban economics. Filtering describes the process by which occupants of housing units go from higher-income to lower-income as the unit ages, becomes outdated and is subject to wear and tear. If higher-income households move to the newest housing, then other another household, typically of lower-income, can move into the vacant unit. If the number of households remains constant, then housing prices should decrease as housing development increases.

Because the real world does not look like an economic model, many people think that new housing causes increased housing prices. But the cause of the increased housing prices is often the same thing that is causing new housing construction:  increased demand.

Take NYC for instance. In recent years, it issues permits for 10,000-20,000 or so new units of housing a year, but its population has grown by about 60,000 people a year. Combine this with the fact that new housing construction is both a sign and result of gentrification in a particular neighborhood, it is no wonder people think that housing construction pushes prices higher. While this is an understandable line of thought for the man or woman in the street, it is less so for the Lincoln Institute.

My bottom line: this is worth a read, but read with care.

 

Affordable Enough for NYC?

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Real Affordability for All has released a report, Real Affordable Communities: Mayor Bill De Blasio and the Future of New York City. The report opens,

Across the five boroughs, the affordability crisis is growing every day. Today, low- and moderate-income New Yorkers continue to be priced out of their neighborhoods. The incomes of countless New Yorkers are not increasing while rents keep rising. The growing gap between lower incomes and higher rents is making New York City increasingly unaffordable.

Indeed, a recent study released by StreetEasy, The High Burden of Low Wages: How Renting Affordably in NYC is Impossible on Minimum Wage, found that a New Yorker earning $15 an hour could afford just one neighborhood: Throgs Neck in the Bronx.

“The extent to which rent growth has outpaced income growth in New York City means low-wage workers face three options: find several roommates to lower their personal rent burden, take on more than one job, or move out of New York City,” the study finds.

According to a close analysis of the most recent Census data, Bloomberg’s housing efforts generated a shortage of more than 400,000 affordable units for low-income New Yorkers. Low-income here is defined as a household earning less than 50% of Area Median Income (AMI). For a household of four, that means an approximate annual income of less than $42,000. (In 2012 New York City area median income was $83,600 for a family of four; the 2015 New York City area median income for a family of four is $86,300).

Overall, utilizing the 2012 census data, more than 700,000 low-income New Yorkers were left behind by Bloomberg’s housing plan. To tackle the affordability crisis, Mayor de Blasio has proposed preserving or creating 200,000 units of affordable housing. He wants to achieve that goal through mandatory inclusionary zoning and dense new residential development in various neighborhoods.

To succeed, de Blasio will need to avoid repeating the mistakes of Bloomberg’s housing agenda, and ensure that real affordable housing is created for the huge number of low-income New Yorkers who were not served by the previous administration and still struggle to survive. (1-2)

The Real Affordability for All advocates that “Low-income neighborhoods like East New York and the South Bronx will be empowered to offer a ‘density bonus’ to developers in exchange for real affordable housing below 50 % of AMI and for career-oriented union construction jobs for local residents at new development sites.” (7)

The report provides an example pro forma for one building to demonstrate that this plan is do-able. The report does not, however, indicate where the De Blasio Administration would find the $15 million in additional subsidies it would take for this one building to be built according to the Real Affordability for All guidelines.

At this point, the plan is more of a wish list than a serious proposal, but it does make clear that there is a deep need for deep housing subsidies among low- and moderate-income households.

Wednesday’s Academic Roundup

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Rapid Growth for Property Managers

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hot air balloons

Buildium.com quoted me in Can Rapid Growth Endanger Your Business? It reads, in part,

For property managers, the prospect of rapid growth can be thrilling. You lease the units in your first building, fill vacancies quickly, add services that let you charge higher rent, the building owner compliments your work, and before you know it, you’re thinking: “Why not more?” After all, why waste a great opportunity to make more money by simply repeating what you’ve done so well at your first property? All the stars seem aligned…

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7 Steps to Find Out If You’re Ready to Expand Your Property Management Portfolio

Here are seven steps to take before fast-tracking you company’s expansion:

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#6: Know the local rules & the laws

If the buildings you manage are different entities — one rent-controlled and the other a cooperative in an historic neighborhood, for example — you must understand their different requirements. The same can hold true for buildings in different communities where regulations covering trash pick-up and snow removal may vary.

And differences can be even greater for buildings in different states. In New York City, multifamily buildings with more than four units [may be] rent-regulated and involve a complex set of regulations between landlord and tenant, says attorney David Reiss, a professor of law and the Research Director at Brooklyn Law School’s Center for Urban Business Entrepreneurship. “If you don’t know what they are, it can be a recipe for disaster,” he says.

Also important to know, he says, is that some buildings are located in historic districts, which the Landmarks Preservation Commission can authorize, and that affects how owners and managers can renovate, rehab, and maintain exteriors, Reiss says. “You might have to place an air conditioning unit a certain way.”

#7: Consult with other property managers

Besides doing your homework, talk to owners and managers of similar properties who’ve expanded beyond a single listing. Reiss says many communities have property management organizations that share information, or your city or town may have an association of like-minded businesses. If not, maybe, you can become a local hero by starting one.