Brandon Donnelly — Daily insights for city builders. Published since 2013 by Toronto-based real estate developer Brandon Donnelly. — Page 1233

Alan Ehrenhalt recently published a balanced piece in Governing that largely reflects my own views on inclusionary zoning. It’s called:  Why Affordable Housing Is So Hard To Build .

His argument is that there are lots of cities trying to build more affordable housing, but that most strategies have not yet proven to be all that successful.

I’ve written a few posts on inclusionary zoning. The most recent is this one . And though I believe that a mix of incomes is a critical component of good city building, I am having a hard time believing that inclusionary zoning is the silver bullet that will get us there. Admittedly, it sounds like a great idea. But how does that translate into reality?

Here’s a snippet from Alan’s article (shout out to Daniel Hertz of City Observatory who seems to get cited in almost every article I read these days):

Just about every city that has tried an inclusionary zoning law in recent years has had a similar experience. In some cases, the results have been much worse. According to BAE, Chicago’s inclusion law produced $19 million in 11 years, but only 760 affordable units. Thirteen years of inclusionary zoning in Seattle brought the city $31.6 million in fees and a grand total of 56 units. As the urbanist Daniel Hertz wrote recently, inclusionary zoning has been “more powerful as a symbol than as a way of helping people.”

Of course, the devil is in the details. Many inclusionary zoning policies allow cash in lieu of actual housing:

San Francisco actually has had an inclusionary zoning law since 2002, and it has been a flop. It mandates a 12 percent affordable set-aside, but allows developers to escape the mandate by paying a fee to the city. As in Arlington, this is what they have done. A study by the research firm BAE Urban Economics found in 2014 that after 12 years the San Francisco law had brought in $58.8 million in developers’ fees and had generated 1,560 units. That’s better than nothing, but it’s a drop in the bucket for a city facing an affordability problem in virtually every neighborhood.

All this said, I’m still not so sure that it’s as simple as eradicating the cash in lieu option and forcing mandatary inclusionary zoning. As Alan rightly points out in his article, if we set the bar too high, then all of a sudden it starts making some market rate housing infeasible to build. 

And if this ends up lowering the overall supply of new housing, then we could be hurting affordability while at the same time trying to mandate more of it. Does that make sense? Clearly this is not as simple as it may seem.

I get the appeal for cash poor cities. It sounds like free affordable housing. But I’m always suspect of “free” lunches. In any event, I think we can all agree that this is an important discussion to be having.

Right now, there’s an apartment building in San Francisco that is trying to encourage car-free living by offering residents a $100 per month credit that can be used for Uber and/or for public transit. Prospective residents can even get a $20 credit to go check out the community. (The program is a partnership with Uber.)

The reason this leasing strategy caught my attention is because we’re at a point where city builders are now trying to recalibrate themselves to this new emerging world. 

When I was at the Land & Development conference earlier this month, one developer brought up this exact point. He more or less asked: If you’re starting development on a new building today and you’re expecting approvals in 2 or so years and completion in another 3 or 4 years, what do you think the state of cars/driving will be at that point? Should you really be building all that underground parking?

These are great question. And they highlight one of the challenges of development. It takes a long time to bring new supply to the market and a lot can change during that time period. My sense is that we are pretty clearly seeing downward pressure on driving and car ownership.

That said, this isn’t the case in every city or in all parts of a particular city. I just got back from a trip to a Detroit where it’s pretty hard to imagine the city being oriented around anything but the car. But in cities like San Francisco and Toronto, car-free living is already a reality for many people and so we need to respond to that.

How do you see yourself driving, or not driving, in the next 5 to 10 years?

Blogger and programmer Eric Fischer has an excellent post up on his site where he looks at: “ Employment, construction, and the cost of San Francisco apartments .” It’s worth a good solid read.

What he did was dig deep into whatever data he could find – the data goes back to the beginning of the 20th century in some cases – to try and figure out a solution to San Francisco’s housing affordability problem.

Many (including myself) have argued that, at least part of the solution, is to build more, not less, housing. However, others, such as Tim Redmond of 48 Hills , have argued that building more market-rate housing would simply exacerbate the current situation.

In Eric’s analysis, he looked at everything from median rents and new housing units constructed (above graph) to annual wage growth and income inequality. I particularly liked his summary of the city’s various building booms. 

In the end, here’s the conclusion that he came to:

“In the long run, San Francisco’s CPI-adjusted average income is growing by 1.72% per year, and the number of employed people is growing by 0.326% per year, which together (if you believe the first model) will raise CPI-adjusted housing costs by 3.8% per year. Therefore, if price stability is the goal, the city and its citizens should try to increase the housing supply by an average of 1.5% per year (which is about 3.75 times the general rate since 1975, and with the current inventory would mean 5700 units per year) . If visual stability is the goal instead, prices will probably continue to rise uncontrollably.”

By visual stability, he is referring to maintaining the current urban fabric of San Francisco just the way it is. In other words, he is making the link between preservation and affordability in a prosperous and growing city.

Intuitively, this makes sense to me. It’s unrealistic to think that you can maintaining some level of housing affordability without allowing supply to increase alongside demand.

At the same time, I do not believe that preservation needs to equate to no changes whatsoever. Urban preservation, to me, should be about dutifully respecting the past while still looking firmly towards the future. And that’s how I believe successful should be approaching this problem.