Long-timers vs. newcomers: Census-reported rents are meaningless in some places

Earlier, I wrote about how the CNT/HUD Housing + Transportation Affordability index (HTA), while a very worthy addition to discussions around whether households can affordably live in suburban vs. urban areas, has a denominator problem at metropolitan boundaries, or even within metros which have severe income inequality. Yet LocationAffordability also has a numerator problem: For housing costs, it relies upon another Census data point which has One Weird Quirk.

Daniel Kay Hertz wrote an excellent “Definitive Field Guide to Median Rent Statistics” for City Observatory recently, noting that ACS-reported rents “Can’t answer: What is the median rental price facing people on the rental market today?”

 

DeKalb Market, Long Island University

The tract on the left (in downtown Brooklyn) is public housing, with a reported median monthly rent of $768; the tract on the right $2,467. But for someone just moving to town, the only vacancies are in that fancy new building. 

 

The rents that people report paying to the Census ACS are probably true, but in a few cities they have very little relationship to what vacant apartments are renting for. In particular, as Michael Lewyn flagged (and as we wrote up in Streetsblog a while ago) cities with rent control can look amazingly cheap:

[B]y looking at average rents, which in some cities include many rent-stabilized units, the calculation doesn’t necessarily capture what someone searching for shelter is likely to pay. If you’re trying to find an apartment in New York now, getting a place for the average rent would probably be extremely difficult.

Unlike the denominator problem, which shows up at a macro level, this discrepancy only really shows up at the micro level. I just noticed it in the recent “WalkUP equity ranking” from GW’s CREUA, which (based on HTA) found suspiciously low rents reported in some very upscale neighborhoods. I suspect the typical rents found are those paid by a small number of long-term residents in subsidized or rent-controlled units (set years ago), rather than those paid by the residents of the new luxury apartments.

HUD’s new Small Area Fair Market Rents are reported down to the ZIP code level (and have the big problem of not being available everywhere), which is a much larger level of analysis than Census tract, but they’re an attempt at figuring out a systematic answer to this problem.

What Would Jane Jacobs Do about zoning?

Tomorrow would have been Jane Jacobs’ 100th birthday, and so it’s a fine time to reflect upon her magnificent legacy of (empirically correct) ideas. Unbeknownst to many of her fans, she has a significant built legacy. 20 years ago, Toronto asked no less than Jane Jacobs about how to rezone two renewal areas on either side of downtown.

Distillery District

Toronto’s Distillery District, within the King-Parliament area that Jane Jacobs had a hand in rezoning.

The Kings Regeneration Initiative” targeted 400 acres of land along King Street, an east-west arterial with a streetcar. King-Spadina on the west side of downtown and King-Parliament on the east side were both declining CBD-adjacent industrial areas. Then-mayor Barbara Hall invited Jacobs to an advisory group on the regeneration project. “Paul Bedford, Toronto’s chief planner during Mayor Hall’s term, said that Jane kept encouraging him to take risks and to experiment,” writes Barry Wellman. The resulting code was a tremendous departure from how Toronto, and most other North American cities, regulated development:

Jacobs described the process in remarks given at Boston College’ law school:

Yet if the zoning were to be changed to permit dwellings, the developers would be blocked by rules applying to apartments, most especially parking requirements. Land coverage was high and parking couldn’t feasibly go underneath these sturdy but old buildings. Under the guidance of our very intelligent mayor at the time, these and almost all other regulatory controls were removed, except for fire and building safety codes. One rule was added: a ban against destruction of buildings, to prevent aesthetic and environmental waste. You would be amazed at how rapidly those dying districts have come back to life and blossomed. The principle at work here has been the addition of what the previous mixture lacked…

In the case of Toronto’s dying districts of downtown that were revitalized by radically overhauling the regulations, the mayor’s hardest job was goading and re-educating her own planning department, including the youngish man who then headed it.

The results have been breathtaking — and might surprise those for whom Jane is a hero for stopping bulldozers. Not only have the “Two Kings” not lost jobs, as many industrial lands taken out of production have, but the number of jobs has increased by 58%. Even more impressively, 46,000 dwelling units have been permitted in the Two Kings, many of them in very large new high-rises.

Of course, this approach would be much more difficult — if not impossible — to enact in America. It’s not that America over-regulates development per se, it’s that we regulate entirely the wrong things about development. As Jay Wickersham writes in the Boston College Environmental Affairs Law Review, the result is “an extraordinary situation. There is no other area in environmental law where the goals of the regulatory program are not just indifferent, but actively hostile, to the best thinking in the field.” From his introduction:

To paraphrase F. Scott Fitzgerald, Jacobs shows us that Euclidean zoning has been hard where it should be soft and soft where it should be hard. Zoning has been hard, or overly rigid, in dividing our cities and towns into uniform, low-density districts, each dedicated to a single primary use. And zoning has been soft, or overly permissive, in its failure to set design standards for streets, and for how buildings front upon those streets, that would reinforce the fundamental character of streets as public spaces…

Supreme Court rulings restrict municipalities to just two regulatory tools* that can shape development: Euclidean zoning (regulating density and land use) and historic designation (regulating appearance, but only meant for very limited circumstances). Euclidean zoning’s fixation on limiting density and land uses enforces conformity; even when it permits change, it’s only towards a distant, built-out end-state set forth in a comp plan. Jacobs writes:

[T]he greatest flaw in city zoning is that it permits monotony… Perhaps the next greatest flaw is that it ignores scale of use, where this is an important consideration, or confuses it with kind of use, and this leads, on the one hand, to visual (and sometimes functional) disintegration of streets, or on the other hand to indiscriminate attempts to sort out and segregate kinds of uses no matter what their size or empiric effect. Diversity itself is thus unnecessarily suppressed. (D&L, 237-238)…

Instead, Death and Life‘s chapter 13 argues for “zoning for diversity”:

The purpose of zoning for deliberate diversity should not be to freeze conditions and uses as they stand. That would be death. Rather, the point is to insure that changes or replacements, as they do occur, cannot be overwhelmingly of one kind. (D&L, 253, emphasis added)

Jacobs was not against regulation, but as an empiricist she held tremendous regard for the way cities had evolved as complex systems over the centuries — and fought the woefully simplistic (and completely ideological, perhaps even “faith-based”) Modern-era planning regulations and programs then in place. Alas, those regulations remain at the foundation of American planning today. Wickersham again:

According to Jacobs, “[a]ll zoning is suppressive,” an interference with the unfettered movements of the real estate market. But Jacobs is not attacking regulation, per se, or even the notion of government planning… she is attacking the functionalist presumptions shared by many city planners. In this view, a city is a functional, repetitive machine, rather than an ever-evolving organism… Her goal is to strike a middle course: to preserve and enhance diversity by avoiding large-scale, cataclysmic physical and social changes (which can be caused by rapid influxes of private investments, as well as by publicly sponsored urban renewal projects), without permanently freezing a community’s character.

Density-and-use zoning is the metaphorical hammer of urban land use: every potential problem ends up looking like a nail, and gets hammered to smithereens. It doesn’t matter if the problem has nothing to do with density or land use, and it doesn’t matter that density and land use are (as the Kings show) pretty darn incidental to the grand scheme of things. The only tool that we have is the wrong one, but we’re going to use it anyways. Wickersham notes that even the modest attempts to circumvent Euclidean zoning through discretionary approvals, or worse yet to somehow require diversity, are doomed to failure from Jacobs’ perspective:

Because these reforms are project-specific, and not comprehensive, the counter-productive, as-of-right requirements of Euclidean zoning have been sidestepped, not removed. To tempt developers into the project review process, regulatory systems will offer a density or height bonus to offset the increased time and costs that are involved. Such incentives can cause all parties to undervalue small-scale, incremental renovation and infill projects—the incremental reinvestments that Jacobs showed us were so important for the stability of an urban district. Thus, favoring large private investments can cause the same kinds of cataclysmic change that Jacobs decried in the public urban renewal projects of the 1950s.

Update: Shawn Micallef has a fantastic summary of Jane Jacobs’ Toronto legacy on Curbed today. The headline of this post spoofs Spacing Store’s #WWJJD t-shirt.

* Non-regulatory tools, like redevelopment, are also legal but are so difficult and fraught with such complexity that they’re unlikely to have a substantial impact on regional-scale land use challenges. Form-based codes are the most promising alternative to Euclidean zoning in the US, but in practice require such a radical overhaul of the planning-and-zoning process that they have yet to achieve wide adoption; Miami is the notable exception that rewrote its plan and zoning code all at once.

The crisis sharpened the segregation tax, with effects that will reverberate for generations

This sharp illustration of “the segregation tax” comes courtesy of DePaul’s Institute for Housing Studies. Calumet City has a housing stock comparable in age to that in Park Ridge or Des Plaines (areas whose development started in the 1920s, but mostly occurred in the 1950s); Harvey’s is mostly post-war. Similarly, Chatham, Auburn-Gresham, and Avondale all are principally 1920s bungalows and two-flats, with Logan Square having a large fraction of pre-WW1 houses and flats.

Prices in the mid-2000s boom rose substantially in all neighborhoods, fed by ample access to both prime and subprime loans. Even “during one of the hottest housing markets ever, our numbers were showing black buyers still experienced [home equity] losses,” notes Scott Holupka, pointing to disadvantageous subprime loans and inflated prices in segregated neighborhoods.

But the picture in the aftermath of the 2008 crisis has been terrible for majority-Black areas on the South Side, like Calumet City, Harvey, Chatham, and Auburn-Gresham. The “boom” has left huge numbers of Black homeowners underwater, without access to a ready market of creditworthy buyers, and in neighborhoods with sinking home values. On the White or Latino-plurality North Side, values didn’t fall as far during the bust, and have rebounded further since.

These diverging fortunes show that simply achieving milestones like buying a home, or graduating from college, isn’t enough — a deed or diploma’s value is socially constructed, and subsequent policies can do much to determine their future value. A study by Demos finds that the subsequent returns to education and homeownership matter just as much as equalizing access to such wealth-building opportunities:

Eliminating the racial disparity between Blacks and Whites in… would reduce the wealth gap by:
– Homeownership rates: -31%
– Returns on homeownership: -16%
– College graduation rates: -1%
– Returns on college graduation: -10%
– Incomes: -11%
– Returns on income [nil]

Note that equalizing incomes today won’t necessarily have an impact on the wealth that Black families will be able to pass on to future generations: “Even with equal advances in income, education, and other factors, wealth grows at far lower rates for black households because they usually need to use financial gains for everyday needs rather than long-term savings and asset building.”

Mel Jones, in a recent Washington Monthly article, points to how the widening wealth gap presents a particular disadvantage to young Americans of color:

You can’t discuss wealth inequality without talking about race; within the American context, they are inseparable. So the fact that Millennials of color feel the impact of a precarious financial foundation more acutely is not a surprise. For black Millennials in particular, studies point to a legacy of discrimination over several centuries that contributed to less inherited wealth passed down from previous generations. This financial disparity stems from continuous shortfalls in their parents’ net worth and low homeownership rates among blacks, which works to create an unlevel playing field.

Whereas many white Boomers may have used home equity loans to help pay college tuition bills, many black Boomers have negative equity to invest in their children’s education, in their own health, in getting their grandchildren a solid start. The accumulated disparities will cascade down to future generations.

Policies to more equitably distribute the returns on homeownership will have to act on both sides of the crosstown divide — not only lifting up the disadvantaged, but also moderating the outsize gains enjoyed by the “favored quarter.” Economic development should occur more equitably across regions, to help boost demand. However, this difficult task will be easy compared to better integrating the favored quarter, bringing more people closer to high-opportunity places.

Infilling Columbus Circle: What’s it worth?

Dan Morales’ proposal to fill the parking crater between Union Station and the Capitol complex.

Dan Morales recently shared some renderings on GGWash of what new buildings fronting Columbus Circle (the plaza in front of Union Station) might look like. The site is now mostly Senate-staffer parking, which has long annoyed the local chattering classes. The Capitol parking lots are, after all, the very last parking crater to mar the otherwise continuous urban fabric of central DC, and they sit right in front of heavily used Union Station.

It’s not that the Architect of the Capitol (AOC) particularly loves its surface parking. After all, they commissioned WRT to do a lovingly rendered plan to eliminate not just all of the surface lots, but even many of the surface roadways (ahem, I-395) on the House side. Instead of surface parking and unlovely parks, the 2050 plan shows more office buildings, with parking relocated to new standalone garages over/next to I-395. (A prime motivation is to eliminate the parking beneath office buildings, now considered a security hazard.) In short, AOC’s been land-banking the entire Hill in the assumption that its space needs will grow in the future.

Yet new planning efforts might identify that offices and support facilities continue to get more space-efficient, and that some of the land may be surplus to even the longest-term planning horizon. And, well, commercial prices are really rich…

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Those numbers piqued my interest. Let’s see, clockwise around Columbus Circle NE, the parking lots are:

  • Massachusetts to 1st (square 723, lot 800): 107,436 sq. ft.
  • 1st to Delaware (square 682, lot 808): 52,721 sq. ft. (currently park, not parking)
  • Louisiana to E (square 680, lot 801): 30,329 sq. ft.
  • E to Massachusetts (square 680, lot 805): 40,474 sq. ft.
  • I chose not to evaluate six other blocks that Morales proposed to fill in, in the interests of leaving a park between Delaware and Louisiana, and a one-block buffer between C and D.

The blocks to the west are zoned C-3-C, with a maximum FAR of 6.5. That would fit underneath the 80′ height maximum applied to Columbus Circle under the Height of Buildings Act. Thus, a maximum of 1.5 million square feet of office could be built on all four parcels, or 1.16 million on the three parking lots. Based on a land value of $200 per FAR-foot for offices in downtown DC, that’s $300 million for all four parcels, or $231.7 million for just the parking lots.

That value’s substantially higher than the $350 million that Lydia DePillis calculated as the value of all AOC’s surface parking, using tax valuations (which often lag market values).

How could a deal be structured? GSA, under the leadership of Dan Tangherlini, started dealing in “swap-construct exchanges” for sites like Federal Triangle South. In that arrangement, a developer builds a new building for GSA, which in turn “pays” the developer by granting title to surplus property. Maybe AOC could pay for further renovations, for removing its existing subterranean garages, or for new standalone parking garages (perhaps on the block between 1/2/C/D that houses the Monocle and the Capitol Police) with the revenue.

All of those sums sound like a lot of money. However, AOC projects do tend to be pricey: even $300 million is only half of the unfunded cost of Cannon House Office Building renovations. At least AOC would be able to get the money without enduring the wrath of its occupants, who sometimes point fingers at AOC’s spending.

So, Dan, now that you’re in the private sector, how about an unsolicited proposal to AOC?

Decking over freeways isn’t as lucrative as you might think — but there are alternatives

Ponte Vecchio for a new era

I-670 hides below this building in Columbus, Ohio.

Whether I’m biking down F Street and running headlong into it, or dodging its construction equipment on the infrequent occasions when I have to drive through the I-395 tunnel, it’s hard to miss Capitol Crossing — now the largest development underway within downtown Washington, DC. I knew that this was an unusual project, but it turns out that it’s incredibly unusual: the only instance of a privately financed freeway deck anywhere in the country.

The “Ponte Vecchio” example that everyone points to is The Cap at Union Station: two narrow retail buildings alongside the principal spine of Columbus, Ohio, all built on a bridge over a freeway. It is a marvelous example of a place connector, one that seamlessly unites two emerging neighborhoods to one another.

However, these caps aren’t exactly something that can be replicated everywhere, since it’s an incredibly expensive way to fix a place. The Columbus example was funded by the federal government, as a mitigation measure for widening the freeway below. Most other recent cap proposals resulted from similar mitigation measures — and thus most are parks, both because that’s what the government builds and because their relatively light weight keeps the cost of building a deck down. Klyde Warren Park in Dallas is one example; 70% of the money came from the federal and state governments.

Three things to keep in mind when evaluating a freeway cap:

2009 01 20 - 0573-0575 - Washington DC - I-395

The future site of Capitol Crossing, on a rare car-free day (Inauguration Day 2009). Photo by Bossi, via Flickr.

1. The price of the structure is only justifiable if you’re surrounded by very high-value land — namely, a high-rise, high-rent CBD of a high-cost city. This limits the situations where these caps make economic sense to premier sites. For instance, a few blocks of air rights over the Massachusetts Turnpike in Boston’s Back Bay are currently in the planning/proposal phase, having seen prior plans fall apart during the Great Recession.

Capitol Crossing’s developers paid the District $60 million for air rights and are sinking another $400 million into constructing a platform over I-395 just east of Union Station, yielding a cost per “FAR-foot” (square foot of potential development) of around $150-200. That’s substantially higher than the $75 per FAR-foot seen in recent transactions for development sites at the periphery of downtown — but comparable to the $190 per FAR-foot paid for “dirt” within downtown DC, which is pretty much extinct. The net result of this scarcity and high prices is that only the very highest value land uses, namely office and retail, are economically feasible at this development — residential just doesn’t pay enough.

(Calculation based on pre-construction cost figures and final buildout of 2.2 million square feet. Post building calculation doesn’t include demolition costs.)

The economic feasibility line might also be teased out from the RFI responses that Virginia DOT received regarding two sites over I-66 in Arlington — one at the edge of Rosslyn’s high-rise core, and another in low-rise East Falls Church (actually within Arlington County). Almost none of the responses deemed the EFC parcel economically feasible, but many of the responses indicated that the effective “land cost” for the Rosslyn parcels, including cost of construction, at nearly $100 per square foot of FAR.

Unlike private development, a park’s feasible land value is set off-market and is thus completely subjective. In a neighborhood in dire need of a park, or on an irreplaceable waterfront site, the value of a new park may indeed justify the cost of construction.

2. It’ll be much easier, and cheaper, to build a cap if the freeway is completely closed for a while — say, for a major reconstruction. Staging construction over an operating freeway is risky, dangerous, and ultimately costly. Hence, many existing freeway-lid projects, like the Prudential Center and Copley Place in Boston, were constructed before the road underneath them opened to the public. Columbus’ lid was built during an 18-month closure of I-670, for example.

Even at Capitol Crossing, the developer realized the folly of trying to keep the freeway open during construction, and proposed to close 395 entirely for 15-18 months. The closure eventually came to naught due to politics, but would have “cut in half the construction time,” according to the Post: “Building the deck requires installing about 150 caissons along the median to support a network of steel girders… installing the caissons while the highway is in use would be hazardous and disturb nearby residents.”

3. A more entrepreneurial approach that governments can take to such a project is suggested by Matthew Kiefer, who worked on an earlier iteration of the MassPike deal:

MassDOT should adjust its expectations about the revenue potential of these difficult sites to reflect economic reality. It should rely more on rent derived from the net profit of a stabilized real estate asset – percentage rent or a share of proceeds of future sales or refinancings – and less on initial land value, which can be illusory. The Commonwealth will be around for a long time to realize patient returns.

In this PPP structure, the state “speculatively” builds the platform, then executes a “ground lease” for the air rights while keeping the property under state control. This may require a more entrepreneurial attitude towards monetization than most state DOTs are willing to take, but well-located center-city land is a great long term investment. If you really believe in the quality and long-term value of the place that you’re creating, a percentage-rent ground lease is a great way to discount the rent up front but to participate in the long-term gains.

Interestingly, Brandywine Realty Trust also suggested the same net-lease arrangement in its response to VDOT.

4. There are lower-cost alternative to a full bridging project while minimizing the freeway’s footprint and impact. In many cases, the most expensive bit will be bridging the through-traffic lanes — but even sunken urban freeways usually have lots of other spaces. Embankments are usually excessive, and building platforms can be cantilevered out over their edges. Lower-traffic ramps and shoulders are easier to close temporarily for construction. Skybridges can be assembled off-site rather than in-situ, providing more connectivity across the site while minimizing closures of through lanes.

ULI sponsored a governors’ advisory panel study about another downtown Boston air rights parcel in 2012; it recommended a lighter approach than a full-on deck, with buildings surrounding the interchange and bridges over it. (Ironically, the parcel was created through the Big Dig project!)

5. Railroad air rights have also seen active development in recent years, e.g., Hudson Yards in NYC, River Point in Chicago, and 30th Street Yards in Philadelphia. However, the costs aren’t truly comparable to freeway decks: the column spacing can be much closer for railroads than for freeways, and the vehicle movements are rather more predictable.

Friday photo: CIAM’s embarrassing questions about your rowhouse

Jose Luis Sert book: Why is your house gloomy?

Can Our Cities Survive,” Jose Luis Sert’s provocative 1942 treatise on the future of Western cities, posed this set of “embarrassing” questions to residents of the era’s cities. Those who claim that rowhouses are uniquely well-suited for families might recall that, not that long ago, they were widely seen as “gloomy” and unfit for family habitation unless extensively modified — and that most of America still thinks so.

Of course, Sert was largely wrong — in particular, the automotive menace should be solved by restricting the cars, not the children — and the Modernists were never quite successful at convincing families that high-rises were worthwhile.

Attitudes had softened just a bit by 1950, when the regional chapter of the AIA issued a report called “Of Plans and People.” Washington was then in a frenzy over the need to house its exploding population. Rowhouses were merely “disreputable,” rather than intrinsically awful:

Home owners have insisted on increasingly severe restrictions against apartment buildings and row-houses–this despite the fact that for many families they are the most suitable forms of housing. Part of this opposition results from the crude design of these buildings. The ugliness of the typical Washington row-house with its two-story back porches has done more than anything else to bring the row-house into disrepute. If builders were more concerned about good design, the public might feel less need for “protection” against apartments and row-houses.

Friday photo: Mixed residential densities vs. single-density zoning

Richmond: around the Fan

Monument Avenue at Belmont, Richmond, Virginia: one, two, and six-family houses, side by side, on one of America’s most famous residential boulevards

Many of America’s most celebrated urban neighborhoods, like the Fan in Richmond, have a fine grain of different residential densities. Neighbors might live in buildings of broadly similar sizes, but at substantially different densities. But the entire premise of American zoning, as established in Euclid vs. Ambler, was to maintain uniformly single-family districts — uniquely among any country, as Sonia Hirt as shown.

The world’s best loved cities are the way they are not because of zoning bylaws but in spite of whatever zoning may now be in place… Serendipity, complexity, conjunction, anticipation, surprise and delight: these very human experiences are what great cities offer. But zoning is a blunt, inflexible tool. Zoning is by definition exclusionary, limiting things to a preordained set of possibilities. It determines what cannot be done, rather than what can be It does not anticipate nor nurture new, untried forms of city-building or habitation. It does not, in short, encourage the city of desire.

So little of the [American] city was built before zoning was introduced that its more deleterious effects are much magnified. There is very little evidence of the organic city, the intricate web of urban spaces and built forms that rose before the heavy hand of zoning was applied. There is no “old town” core of narrow lanes and multiple layers of use. And there is very little unpredictability, no edge. At the risk of sounding simplistic, it is boring.

— Lance Berelowitz, “Dream City” (Douglas & McIntyre, 2005), pg. 223.

Richmond: around the Fan

Bonus: down the street, an illegal mix of uses. Orchid shops and churches, oh my!