All posts by Roger Valdez

A recent report by the Harvard University and the University of California, “The Economic Impacts of Tax Expenditures: Evidence from Spatial Variation Across the U.S.” has been getting a lot of attention in the press (check out Paul Krugman’s take on the study) lately for a report with such a wonky title.

For those of us in the various theaters of the land use war in Seattle there is one paragraph in the summary of the study that should get special attention:

In particular, areas with a smaller middle class had lower rates of upward mobility. In contrast, a high concentration of income in the top 1% was not highly correlated with mobility patterns. Areas in which low income individuals were residentially segregated from middle income individuals were also particularly likely to have low rates of upward mobility.

At first reading, this might seem to bolster the argument that some make for something called “inclusionary zoning,” a requirement that private developers should build price controlled units into their market rate projects. The basis of that argument is that greater mixing of income levels should be required and achieved through setting and controlling housing prices of a set aside number of housing units.

Notwithstanding the questionable nature of this strategy—that controlling the prices of a few hundred units of housing is the way to achieve economic diversity and upward mobility for the poor in a neighborhood or city—the study should be carefully considered for its implications on this discussion of normative housing price in Seattle.

Some might argue that this is “proof positive” that lowering housing prices in new development will result in greater economic integration and thus result in greater upward mobility for people with lower incomes. But let’s reverse the logic of that argument; gentrification (a term that stubbornly resists a quantitative definition) itself is a kind of inclusionary strategy. Why not move people with higher incomes into lower income neighborhoods? Wouldn’t that also be a salve for economic pain in low income neighborhoods? And gentrification or displacement is a watchword in any discussion of the so called impacts of light rail in the Rainier Valley.

However, the argument cuts two ways: if we demand that developers build price controlled units into their housing in rapidly growing neighborhoods because it supports upward mobility of people with lower incomes, then we must also consider the reverse—putting more people with higher incomes into neighborhoods with lower incomes— might have the same effect.

Continue reading “New Report: Seattle Needs More Housing Choices”

Last week Seattle Councilmemer Richard Conlin said something that made perfect sense to me:

We may not be as successful if we devote our resources into the new housing in a very hot neighborhood in producing as much help for people who need affordable housing as if we focus our resources on, say, along the light rail line in Rainier Valley, where there is easy access to some of those jobs and where there are lots of great communities, such that can be built up there. It is a matter not so much about, say, everything there and not here, but what is where is the most effective way in which to deploy the resources that you might be able to have, which we know we can’t create all the affordable housing that we would like to have. The government efforts are not possible to do that. So we have to figure out where our resources are most effective.

Councilmember Conlin was talking about South Lake Union when he was referring to a “hot neighborhood.”

Here’s the reaction to Conlin’s comments from a couple of advocates quoted by Dominic Holden in the SLOG:

Philippa Nye, of Ally Community Development, was the first to speak at a comment period, denouncing the idea: “Having everyone commute from Rainier Valley or Rainier Beach feels like housing segregation to me.

She was hardly alone—I heard from several people this week. “Having council suggest redlining and segregation is part of Seattle’s future makes my stomach hurt,” says Rebecca Saldaña, a program director of the housing advocacy nonprofit Puget Sound Sage.

What’s odd is that Saldana’s group Puget Sound Sage produced a report on light rail in the Rainier Valley that said this: Continue reading “Conlin is Right On the Money”

Mike Lindblom wrote a pretty decent story on the idea of gondolas in Seattle. Unfortunately the headline touts the gondola as a solution to a “traffic mess,” which plays into the narrative of transit as a means to improve the flow of car traffic. Most of us view transit as a way out of auto dependence, not a way of making our car commute faster. Nevertheless, the article gave fair play to what might seem like an outlandish mode of travel for Seattleites.

But there’s another big issue for innovative transit solutions like gondolas: supply and demand. In order to create the demand that would support lots of transit innovation, we need to aggregate that demand geographically. That means dense, compact development patterns.

I’ve pointed out before that when we disperse demand, we end up increasing the costs to operate transit, a cost soaked up by government subsidy. When we have lots of people in one place, it’s more efficient and cost effective to get them where they need to go and back again.

I love the gondola idea. But if we’re going to create more transit supply (which can be expensive to build), we need to work on the demand side too. Seattle and the surrounding region has a tendency to forget that while modes are important (BRT, light rail, monorails, gondolas etc), there must be adequate, dense demand to make them competitive with driving.

With housing, we fuss about price while at the same time, restricting supply – we need to do the opposite. With transit, we’d also have better outcomes for affordability if we allowed more density. In the case of housing, increased supply has a salutary effect on price, while in the case of transit, an increase in demand has a similar salutary effect.

Density solves the demand problem for transit, concentrating it in fewer places, creating efficiencies and even competition between modes and innovative solutions (think about all the car sharing going on for profit!)

Gondolas in Seattle? Absolutely! But don’t forget the density.

Some people like to talk and write about “greedy developers.” Greed is an attribute of people; there are definitely greedy real estate developers in Seattle. But there are also greedy bus drivers, greedy kindergarten teachers, and the greedy guy who makes 10 trips to the all you can eat sushi bar. Why one profession attracts greedy people and one does not is a sociological question, not an economic one. Consideration of how a piece of land becomes a financially viable project should dispel the notion that real estate development is a greed driven enterprise, or an easy way to exploit zoning and “laugh all the way to the bank.”

The business of real estate development is often characterized with a simple story of rich fat cats buying up land, building things on it, and then reaping massive profits by selling off what they build. However, like any business or organizational venture, real estate development is no sure thing. Business is like love; it’s about taking risks. One does not find Mr. or Ms. Right by sitting a home watching television; such a venture requires engagement and vulnerability.

Real estate development is about transmuting risk into profit; it requires taking a chance. The certainty levels of profit in real estate development are very low, and if they were higher there would be many more cranes than are on the horizon now. Projects that are coming out of the ground now came a long way, and it may have taken years of work and lots of money to get it done. Here’s a quick sketch of the factors affecting development.

Continue reading “A Fistful of Contingencies: Developers, Risk, and Profit”

Whatever one might think of the Seattle Times editorial board, there is one story that the paper is running this week that confirms that their reporters are at least in touch with reality. The headline—Apartment boom in Ballard comes with risk of overbuilding—is a little bit odd and displays some of the basic prejudices held by many about density, housing, and affordability. Reading the headline one would think “overbuilding” was a crisis for Seattle. But the story simply confirms what many of us have been arguing for a while now: if you want lower housing prices, allow the construction of more housing. The only people hurt by too much supply are developers.

The article by Eric Pryne reads like a primer in the economics of housing supply and demand.

Developers are building [apartments] because demand has risen, led by a demographic surge of young adults who prefer in-city living, at a time when there’s little new supply.

Few projects were built during the recession. The last new complex in Ballard opened more than two years ago.

Because of the economy—it is harder to buy a single-family house these days—and the appeal of living in the city younger people are opting for living in Seattle rather than other places. This is exactly what transit advocates, sustainability  and smart growth proponents all want to see happen. But all these people need a place to live, and the market is responding by building more housing.

What does that do to the price of housing in the Seattle market?

Owners of new rental projects, with loans to pay off, will do whatever it takes to fill units, Gardner says, and that will put pressure on other landlords to cut rents or offer concessions to keep up.

“By the end of 2013,” he says, “it’s going to get ugly.”

Ugly for whom?

Continue reading “Seattle Times: More Housing Means Lower Prices”

The apparent high cost of living in a dense transit oriented neighborhood, measured mainly by the monthly cost of housing, is significant barrier to building support for density.

Yes, all this density is wonderful, but, as the NIMBY and naysayer will always say, “it’s too damn expensive.” The right response to that argument is, of course, to ask them a question: “compared to what?” Compared to driving every day, damaging lakes and streams with sprawling pavement, and changing the planet’s climate, density is a bargain, even a steal.

But when monthly rents seem high, those prices are the only number people can associate with new growth and change. Monthly housing prices become the sticker price of sustainability, and the shock associated with rents is one of biggest barriers (along with the perception that city schools are bad) to getting wider and deeper support of new growth in Seattle.

How do we account for all the other values lost and gained when new development changes a neighborhood? How does a policy that promotes more supply account for the loss of the corner store, support a neighborhood school, or offset somehow the noisiness of a healthy, vibrant neighborhood.

The answer, I think, is redefining how we measure affordability.

Today we have a wholly inadequate way to describe affordability. Nobody actually enters the housing market planning to spend exactly 30 percent of her monthly income on housing. A person, of any income level, in the housing market considers a number of factors along with price. Proximity to affordable day care, good schools, even having a yard are all things that get considered by someone in the housing market. But we don’t consider the price of those goods when we talk about affordability.

To paraphrase Shakespeare, there are more things to an affordable neighborhood, urbanists, planners, and housing advocates, than are dreamt of your measure of affordability. The Center for Neighborhood Technology (CNT) has already suggesting considering transportation costs when determining housing affordability.

Continue reading “Time to Dream Big on Measuring Affordability”

I wrote at Seattle’s Land Use Code about the upcoming emergency vote Councilmember Richard Conlin has proposed to stop development of some small lot cottage development in single-family neighborhoods. Why a few unique cottages being successfully developed under existing code is an emergency is still a mystery to me, especially since this is exactly the kind of infill development many of us wanted when the Council undertook a review of Detached Accessory Dwelling Unit regulations years ago. The emergency vote seems to be emblematic of the Seattle Problem—trying to make good things happen but then when they do, imposing rules that effectively prevent those good things.

The substance of the issue is that a developer has figured out what the planners at City Hall call the arcane details of the land use and tax code to figure out how to build tall, cool looking cottages on small and irregular lots in single-family neighborhoods. This has provoked the ire of some single-family neighbors who, in turn, have provoked the Council to throw on the brakes. The truth is that there are very few of these houses being built, and what’s so bad about them being “out of scale” with the surrounding neighborhood.

The fact is that the emergency in Seattle is that we have yet to see innovative land use solutions for Transit Oriented Development, for infill, and for other housing options. It’s true we have apodments and other efforts are underway to make a dent in our need for more housing, so why would we stop something that seems to be addressing that need?

Contact the Council—there isn’t much time, the vote would happen Monday—and let them know what you think. I posted this message to Councilmember Conlin’s Facebook page (it was subsequently deleted by Conlin) and I urge you to give your thoughts about whether this issue even needs a vote. Shouldn’t we wait and see whether this is a problem? Maybe it’s actually a good thing.

Continue reading “Big Houses, Small Lots, and the Seattle Problem”

When I read this headline in Grist a couple weeks ago, “What other cities can learn from Seattle’s troubled ‘deep green’ building program,” the first thought that came to mind was that it isn’t the program that’s troubled, but our culture in Seattle. The problem, somewhat unique to Seattle, is the tendency to think big, plan big, but when it counts, hit the brakes. Other cities could learn a lot from Seattle, but unfortunately the lesson is about what not to do.

The author of the article cites a list of what he means by troubles, and it includes resistance from “code cops,” problems with financing, the expense of building green, and, of course, neighborhood resistance to change. He also wisely points out that you can build the greenest of green buildings only to find people’s behavior doesn’t change; make your building perfectly balanced and watch someone turn the thermostat up or down to get more comfortable.

Unlike the weather, for which we just have to accept and prepare, these troubles are all things within the limits of our control. What I’d call the Seattle Problem is the tendency to push for innovation that will create great things, but then, at the same time, create rules to be sure absolutely nothing bad happens. Ironically, this rule making ends up limiting the good things we want. More after the jump.

Continue reading “Seattle’s Yellow Light on Green Building”

The Seattle City Council recently passed regulatory reforms to ease restrictions on land use to create jobs. I was an enthusiastic supporter, erroneously credited with being “in charge of the secret negotiations to bring forth the proposals.” I’m thankful to all the people who actually did work to get it passed. But, unfortunately, the measures to relax requirements under the State Environmental Policy Act (SEPA) are almost canceled out by State mandated growth targets and new requirements for parking in areas exempted from SEPA.

The intention of SEPA when it was passed in 1971 was to disclose and mitigate environmental impacts from new development. The State stepped in because local governments were allowing projects to go forward without enough review. The new legislation was intended to be stronger than local laws. However, over the years, local ordinances passed by local governments afforded equal or better protection than SEPA. In many cases all that was left was a redundant and time-consuming SEPA process. The regulatory reform package was intended to eliminate that redundancy, saving time, money, and creating jobs.

That was the plan. But a closer look reveals that the package may have been two steps forward, a press conference, and then a step and a half backward. The plan was always touted as being a rather modest relaxation of rules and regulations, but it may be even more modest than previously thought.

More below the jump. Continue reading “The Seattle Problem: Two Steps Forward, Two Steps Back”

Sigh. Now the news is full of apodments. I like saying the word, apodments, because it sounds like part of John F. Kennedy’s inaugural address that was edited out. I hear him saying, in that beautiful Boston accent, “Ask not what your country can do for you, but ask when you can move into an apodment!”

But seriously, apodments are good for our country—or at least our city—since they offer an affordable alternative people who want to squeeze into city life affordably. Some neighborhood groups are beginning to band together in a kind of pan-NIMBYism to halt the spread of this kind of housing, but I think it’s misguided. People worried about the price of housing should love apodments. And so should neighborhoods.

From an economic standpoint, apodments make sense. As I wrote in another post, smaller, compact, and tiny apartments are an efficient use of space, creating new development projects that can lead to construction jobs. If someone owns two single-family lots in Eastlake, why not let them create a project that will maximize the use of that land, and allow people to live how they choose to? I’ve been going on and on lately about how we Seattle liberals need to let go, and let the market when it comes to land use. Apodments make sense, encouraging property owners to maximize the use of their land.

And housing price, something I think we shouldn’t worry and fret about so much, is something that still troubles Seattleites. The problem, the price worrywarts say, is that, “Seattle is too expensive.” The apodment, tiny and more affordable units right in the heart of active vibrant neighborhoods, is an excellent way to open up real estate renters could never afford.

Living in dense, vibrant neighborhoods means a person doesn’t need a car. Neighbors who live by proposed apodments express a worry about parking. I’ll admit, the parking in Eastlake, especially on the street where the apodments are proposed, is really bad. Could it be any worse? I doubt it. And I don’t think the City should be subsidizing parking by mandating that developers build it. If nobody wants to rent an apodment because it has no parking, the price of the apodment will come down, and people won’t build them anymore. If they do, it’s likely that the renter doesn’t own a car in the first place—saving money is part of why they’re moving into an apodment.

Apodments aren’t for everyone, but why not see what happens with them? I think it’s weird that neighbors, particularly in Eastlake, who own big, spacious homes, are coming out on their lawns to defend the poor, pathetic, hapless, future apodment renters. “A pod is not a home!” declares one flier. Why not let potential apodment renters decide for themselves whether they can make a pod a home?

The thing about local opposition to apodments that discredits it almost immediately is that the opponents are saying that the potential renter of an apodment doesn’t really want to live there. If that’s true, that potential renter won’t rent an apodment. If enough people walk away from apodments, the projects will go unrented and they will fail. On the other hand, if lots of people love apodments, renters will pay rent and forgo a car.

Let’s give the apodment a try. If it’s true that nobody really wants to live there, then these kinds of projects will lose money, and nobody will build them anymore. If they succeed, then we’ve created some good, infill development for people who don’t have a lot of money to spend on rent and cars, but want to live in the heart of the city. And yes, if I could, I’d live in one myself.