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In Bill Virgin’s column How to rein in housing prices? It’s simple [SeattlePI], he draws a comparison between keeping gas prices down and housing prices.

The first reaction to gasoline prices over $3 per gallon to many is to control prices, yet that limits expenditures on new drilling and refining ventures. With the reduced affordability of housing, the author speculates tongue in cheek what would happen if housing prices were controlled.

If gouging the motorist is wrong, so is gouging the prospective home buyer — or so this line of thinking goes. The solution is simple. Make it a crime to sell your house for more than you bought it.

How else do we stop the exodus of the middle class from new urban areas, sprawl and longer commute times?

Sarcasm aside, neither gasoline nor housing prices lend themselves to easy fixes or palatable remedies. Gasoline is going to be more volatile and, on average, more expensive as worldwide demand for petroleum grows and supplies tighten — unless you’re willing to allow drilling anywhere, set prices for every step in exploration, production, refining and marketing, or take everyone’s car away.

With smart growth initiatives, new urbanism, zoning and other restrictions the very things that make certain areas more appealing to buyers, are constricting supply and development of new housing, a solution to affordability has to be underneath another stone that needs to be “un-turned.” Its hard to believe that current property owners, who are sitting on a windfall of homequity gains, would be willing to give that up to sell their homes for what they paid for it.

And by the way, aren’t we in a free market system?

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Source: ArtNet.com

I was attending a panel discussion last week called VU 2006 hosted by New York University’s Furman Center and the New York Times. One of the phrases that came up repeatedly was affordable housing and the question was asked: “How do you define affordable housing?”

According to The City of San Diego:

The U.S. Department of Housing and Urban Development (HUD) defines “affordable” as housing that costs no more than 30 percent of a household’s monthly income. That means rent and utilities in an apartment or the monthly mortgage payment and housing expenses for a homeowner should be less than 30 percent of a household’s monthly income to be considered affordable.

The median family income of the specific market is used to calculate the affordability.

I think there is the tendency to associate affordable housing with housing for the poor. However, its use today is primarily in reference to the middle class. Worker housing is affordable housing [AHI]

Cities and towns across the US are losing workers who have become priced out their markets [NYT]. Its a real problem and a hidden future cost of municipalities as they try to replace these workers.

For example, New York City will offer housing subsidies [NYT] of up to $14,600 to entice new math, science and special education teachers to work in the city’s most challenging schools.

The housing boom has priced out many in the middle class who have been forced to seek other areas for affordable housing [ContraCostaTimes.com].

This type of gentrification has long-term implications for the haves and the have-nots. Local retail stores, forced to leave because of rising retail rents, are replaced by chain stores reducing the appeal to the area by the buyers who were attracted to the housing in that location in the first place.

I can’t seem to get past the irony here. The very residents that created a community that attracts more residents and development are the ones being displaced.

Thats something the new residents simply cannot afford.

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A reconstruction of the growth of Baltimore,
Maryland, over the last 200 years. The U.S.
Geological Survey used historical records as
well as Landsat satellite data to create this
sequence.

There are lot of elements that are affected by sprawl – unchecked and unplanned gowth. I would have thought that more solutions would be made apparent as funding filled cities coffers from tax revenues. Here are a collection of relatively random thoughts about urban sprawl and how it impacts housing:

• The environment — Sprawl impacts the environment by fragmenting and destroying wildlife habitat, for example, and discharging polluted runoff water into streams and lakes. NASA is working on ways to delivery satellite information to city planners [NASA]

• Affordable housing —Sprawl, along with gentrification, pushes affordable housing away from the city center. Placing a moratorium on open market development appears short-sighted [SF Guardian]because the tax revenues generated by open market housing helps fund it. Further restrictions make open market housing more limited in supply [Chattanoogan] and associated support services more expensive. Supply and demand still apply to sprawl.

NASA

• Transportation —As workers in city centers expand their search for cheaper housing, transportation needs also increase. Commuting times are expanding. Outlying areas are developing new identities as the commuters take residence. [WP]

In an unusually large planned suburb that will take 50 years to build [boxtank] in near the Great Salt Lake…

which will stretch over 20 miles and accomodate 162,800 homes and 500,000 people in a string of walkable communities that will take over 50 years to build. The development lies on the largest privately owned tract of land (144 square miles) in the United States that is near a major metropolis. The owner of the land, Kennecott Utah Copper Corp., created Kennecott Land to oversee the development of the surplus mining land it owned along the Oquirrh mountains into a string of communities emphasizing sustainable development practices.

See the full CNN story

Managing sprawl is difficult as multiple municipalities are impacted. Leadership and an agreeable strategy for all sides are seldom clear. In fact, with all the discussion about sprawl, I find straightforward solutions rare because each situation is unique and it takes immense planning, vision and funding.

Now that the housing boom is essentially over (unprecedented growth in housing development and prices), I think urban planning advocates missed a great opportunity.

_Previous related posts_
Thomas Jefferson: The Founding Father Of Sprawl? [Matrix] Sprawled In The Suburbs, There Is Hope For The New-Urbanist [Matrix]
Creative Brain Drain Weakens Long Term Urban Revitalization [Matrix]
Development Is Goin’ Down…town [Matrix]

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In the LA Times Seeing Factories as Essential Parts, the tag line reads The shape of modern American cities may be changing as urban planners weigh the conflicting merits of housing versus industry.

In many large urban markets, like Los Angeles and New York, it is getting more and more difficult to consolidate large parcels of land to create more housing. Politicians are all for it because it replaces a tepid tax base with a strong tax base. New York City has upzoned neighborhoods to encourage development, while land in outlying areas of LA are becoming scarce.

When is enough, enough? I have heard the joke in the NYC said on more than one occasion that its only a matter of time that Manhattan will become one big condo development.

At the same time, restricting supply will push housing prices even further.

Local governments are beginning to take steps to protect industry as residential developers eye industrial land for housing:

• Long Beach – Adopted a strategy in January for protecting jobs and creating business that discourages conversion of industrial property to residential or commercial uses. Formal policies are expected in a year.

• New York City – Just wrapped up public comment on boundaries for a series of “industrial business zones” proposed by Mayor Michael Bloomberg last year. The Industrial Business Zone Boundary Commission could be convened by the end of the month to decide on the boundaries.

• San Diego – Has mapped the city’s industrial areas and drafted a plan to protect prime industrial land. The City Council’s land use and housing committee began hearing testimony on the draft, and the Planning Commission will address it later this month.

• San Francisco – Last month began a series of community meetings to discuss its Eastern Neighborhoods plan, proposed zoning changes to balance industrial land protection and residential development in the South of Market, Mission, Potrero Hill and Waterfront districts. The Planning Commission eventually will weigh in on potential zoning changes.

• San Jose – Changed the general plan on 4,000 acres in North San Jose to increase industrial density on part and allow housing on the rest in a compromise to protect manufacturing land and allow necessary residential development. The plan is in limbo after an unfavorable court ruling on March 2. The city now must decide how to proceed.

• Santa Monica – Is updating its general plan to find ways to preserve areas for industrial and light manufacturing uses. The new plan should be completed within a year and a half.

• Ventura – Recently debated industrial protection as it refigured its general plan. Zoning and economic development details are in the works.

Supply would certainly temper prices in a weakening market, but what happens when industry can’t afford to locate in the very same market the housing market is there to serve (at least partially?) The influx of new housing units can change the texture and characteristics of an area to the point where the reasons for moving there in the first place are lost.

There is a fine line between progress and a solid tax base.

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A few weeks ago, I submitted a post about the release of Larry Sicular’s Stamford Review and the two articles I had contributed [Matrix]. The Gothamist posed a series of questions to us:

1. New York is already Overcrowded– in this issue of the Stamford Review one of the authors writes that Flushing is more dense than San Francisco, and Staten Island is as dense as Seattle. What’s the most overcrowded part of the city?
2. The article also says that developable land is running out. Since new building starts are accelerating, and new people are immigrating to the city every day, what happens when the land runs out?
3. Rich people will obviously be able to afford apartments no matter how expensive they get– but where will all the poor people go? And should NYC be doing anything to protect them?
4. What neighborhoods are going to be targets for this massive redevelopment?
5. In many neighborhoods, like Red Hook, we’re seeing historic buildings get torn down and replaced by big box stores and ugly new residential developments. Is that an inevitable consequence of the city’s growth?
6. What’s the deal with Governor’s Island? Should the city be using that for housing?
7. People in their late 20s and early 30s are facing a pretty tough situation with very high housing prices– do they have a prayer of seeing things improve, or are we going to soon face a situation like Tokyo’s, where middle-class families of four live in 500 sqft or less?
8. If you had to pick three neighborhoods that offered the best value for a new couple purchasing their first home, what would they be?
9. What are the biggest misnomers and bad ideas about today’s housing market?

Here’s a brief overview, links and answers to these questions posed by the Gothamist.

Reconfiguring New York City [Matrix]
Download the report for free [Stamford Review]
On the Reconfiguration of New York City [Curbed]
That Toll Plaza Feeling at 109th and Broadway [Curbed]

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I stumbled across the latest issue of the National Catholic Reporter (ed. note- its an independent weekly established in 1964) with the front page headline: Catholic real estate bonanza: Firm touts ties with Vatican in bid for U.S. church property [NCR]. The article was about An Italian-owned Manhattan real estate development company claiming ties to high-ranking Vatican officials is bidding on properties owned by dozens of U.S. dioceses and religious orders.

Why is the Catholic church under contract to sell $100M in assets in three US cities and taking bids on $250M more?

• Changing demographics – The church was experiencing a shift from North and East to West and South and from city to suburb.

• Payouts from sexual abuse scandals – The church has paid off a $1B in lawsuits to date with more expected.

In Boston, the church has sold more than $200M in real estate since 2003 [Boston Globe].

Its not clear why the purchaser would announce the deal if they are still bidding on other properties with the church. The municipalities would benefit as these properties presumably would enter the tax roles as their ownership and use changes.

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[The Stamford Review] makes the well-documented conclusion that New York City may face a total build-out crisis in seven to 10 years, reported in its most recent issue, all the more alarming.

Source: 70’s Alphabet City by FilthyMess.com

This press release provides an overview of the current issue [Stamford Review]. Stamford Review editor Larry Sicular states:

The city depends on housing construction to help support its economy, but by the time a child born here today reaches the fourth grade there may not be any vacant land left for development,” said Larry Sicular, publisher/editor of The Stamford Review. “Focused on following the strengthening or weakening real estate market, few people have stopped long enough to look forward to the very difficult planning decisions facing us.

I have known Larry for more than 20 years and I jumped at the opportunity to contribute two articles to the current issue:

• The Gentrification of Manhattan [pdf]
  
• Manhattan’s Housing Market and the Media [pdf]
  

Here are the portions of the press release that pertain to the Gentrification article:

• As Manhattan has gentrified, pricing differentials among neighborhoods like Tribeca and the Upper West side have dramatically slimmed down, by 35% since 1989. (Miller, Miller Samuel Inc.)

• High land prices are forcing developers to create bigger, more profitable units, but demand has shifted to mid-sized units. A growing supply of unsold, large, pricey units is the result. (Miller)

• New developments in emerging New York City neighborhoods now cost almost as much for homebuyers as those in established markets. (Miller)

Here are the portions of the press release that pertain to the Media article:

• In 2005, the media were so determined to find bad news about a housing bubble that they oversimplified and drew misleading conclusions about market statistics. (Miller)

• Now, after two consecutive quarters of quiet markets, the media has adjusted its terminology from a “bubble ready to burst” to a “soft landing” or a more “normalized” market. (Miller)
  

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The Stamford Review, Spring/Summer 2006 is the third issue and was just released. It can be downloaded for free on their web site after a simple registration or hard copies can be purchased for a nominal fee. The intention of the publication was to bring together a diverse group of writers who are passionate about their topics to write about issues that affect New York City real estate, land use, architecture, and urban affairs.

See the author list below.

Shameless plug: I wrote two articles for this publication The Gentrification of Manhattan and Manhattan’s Housing Market and the Media

I hope you enjoy them.

Larry Sicular is the editor and has been a professional colleague of mine for 20 years. The journal, which is a labor of love for him, takes a monumental effort to coordinate, edit and publish and I truly appreciated the opportunity to be in it.

In the introduction of the publication, Larry describes the current issue as being:

…about the reconfiguration of New York City, a physical transformation that has been fueled by a mixture of population growth, increased affluence, and an unusually strong housing market. What is happening here is mirrored to varying degrees in successful cities elsewhere in this nation and across the globe.

Here, nine experts praise and critique city government’s efforts to guide this transformation, to meet and balance growing demands for market housing, affordable housing, open space, industrial space, and historic preservation. Even as the housing market softens, these policies will have long-term effects and will continue to be debated.

In recent years it has been easy to forget Jonathan Miller’s reminder that twenty years ago Manhattan’s housing market relied on government tax policy to stimulate demand. Julia Vitullo-Martin applauds the results of public and institutional investment in the Bronx, but she notes that destructive government policies helped depress the borough in the first place.

Much of our attention is drawn to the city’s extensive rezoning of former industrial areas on the Brooklyn waterfront and the west side of Manhattan. Frank Braconi questions whether these initiatives are sufficient to meet the needs of our growing population, while Kimberly Miller and Mark Alexander address what will be required to make the rezonings a success. Peter Beck shows us that limited public resources, directed to these areas for affordable housing, could perhaps be more effectively spent, while Lisa Kersavage shows us how rezoning need not have cost us valuable historic resources. Pamela Hannigan praises the city policy that is creating new industrial business zones in order to preserve and stimulate the valuable manufacturing resources that remain.

And then there is Governors Island. Is there a greater possibility for adding a jewel in our crown than the history and open spaces that this island offers and represents? Our third issue is dedicated to the possibilities of Governors Island.

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The National Association of Home Builders (NAHB) reported in their press release [NAHB] that Builder Optimism Rises For Rental Apartments, Declines For Condos At Year-End 2005.

There are two points that can be made here (I know this is just a press release) regarding the real estate market and whether someone is going to write a check to the mortgage company or the landlord:

• Rental Apartments – As mortgage rates rise, rental rates rise. Potential buyers that are on the fence as to whether they would qualify for a mortgage are bumped from the bubble (sorry – sort of the analogy that is used at the Indy 500. The slowest racer of the day sits on the bubble and can be bumped off by the next racer that runs a faster time.) As these people are bumped, they become renters, which drives up the rents due to increased competition. The current housing market has come largely at the expense of the rental market. Builders made the transition from rental to condo developments in about 2003 but may return back to rentals if mortgage rates rise this year.

• Condo Units – Condo units are entering the market at an increasing pace. However, one of the driving forces of the housing boom has been the adjustable rate mortgage. In contrast to the fixed mortgage rates, which have actually fallen since the fed changed its stance on the market by raising short term rates, rising short term rates have priced out many buyers who would have used the 1-arm mortgages.

For an interesting explanation of the rent versus buy decision, see Houses: Buying Versus Renting by Margaret Smith, Professor of Economics, Pomona and College Gary Smith, Professor of Economics, Pomona College.

She writes:

Comps can help us judge whether the price of a particular house is high or low relative to the prices of other houses, but they tell us nothing about whether housing prices are high or low in any absolute sense. First-time homebuyers invariably ask, “Is now a good time to buy?” Clients who already own homes often ask if trading up is a good investment or if downsizing is a smart financial move. We have also had clients ask if we are in a housing bubble and if they should sell their house and rent until sanity returns.

Tags: NAHB

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National Geographic has a really cool image gallery that compares New Urbanist and Sprawl suburbs [NG]. Wait a sec…National Geographic? Here’s a cheesy interactive page of the same info [NG].

• New Urbanism – promotes the creation and restoration of diverse, walkable, compact, vibrant, mixed-use communities composed of the same components as conventional development, but assembled in a more integrated fashion, in the form of complete communities [newurbanism.org].

• Sprawl – A haphazard and disorderly form of urban development [COA].

Here’s more discussion from the City of Austin:
-Residences far removed from stores, parks, and other activity centers
-Scattered or “leapfrog” development that leaves large tracts of undeveloped land between developments
-Commercial strip development along major streets
-Large expanses of low-density or single use development such as commercial centers with no office or residential uses, or residential areas with no nearby commercial centers
-Major form of transportation is the automobile Uninterrupted and contiguous low- to medium-density (one to six du/ac) urban development
-Walled residential subdivisions that do not connect to adjacent residential development.

I was specifically interested in National Geographics definition of the residential components and how they differ between the two types of suburban growth:

New Urbanism

• Different housing types—apartments, row houses, detached homes—occupy the same neighborhood, sometimes the same block.

• People of different income levels mingle and may come to better understand each other.

• A family can “move up” without moving away—say, from a row house to a single-family home.

• Property values don’t necessarily suffer when housing types are mixed. New-urbanist neighborhoods are generally outselling neighboring subdivisions, and some of the United States’ most expensive older neighborhoods—Washington, D.C.’s Georgetown, Boston’s Beacon Hill, for example—are marvels of mixed housing.

Sprawl

• Developers often fill whole subdivisions with one type of residence—say, $300,000 ranch houses.

• Zoning often outlaws apartments and houses in the same development.

• Sequestered in a narrow sliver of society, people may develop or maintain intolerance of those outside their ilk.

It seems logical that New Urbanism is more appealing (to me on first glance anyway) based on the points made above, but look at the discussions raised Suburban Dystopia[Polis]. Suburbs are experiencing a renaissance [LA Times]. Actually I think nearly every fad or movement in housing is being seen now. When the market is as strong as it has been, more expensive alternatives gain in popularity. Here’s another California pro-Suburb article that came out on the same day. [SF Chron]

The correction of a 50 year old housing pattern is not so easy. In addition, restrictions on use, such as zoning, transportation, building codes, etc. tend to drive the prices up. The move toward New Urbanism means a potentially better living experience but at higher prices.

Tags: GSE

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In a market Q&A story Mobile-home land grab riles new homeowner [MW] a reader submits a question about the rights of park owners to evict their tenants in order to re-develop the land.

Rapidly rising real estate prices over the past 5 years have caused many to pause and reflect about whether the asset, in this case a mobile home park, is being used to its full potential.

Its not so much the details of this situation I find so interesting, but its the whole concept of alternative or highest and best use.

• Trailer Trash Talk — In the case of the trailer park, many are on leased land and if the landlord chooses to sell the property for development, the landlord simply refuses to renew the leases.

Recent posts on this topic in Matrix

• Hotel Conversion to Condo [Matrix] — The value discrepency between hotels and condos is so pronounced, that it may takes years for the hotel room counts to meet demand.

• Boy Scout Camp Grounds [Matrix] — Many Boy Scout organizations are sitting on a windfall as ranks thin and assets are underutilized.

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One of the casualties of the housing boom has been hotel capacity in major metropolitan areas as hotel owners compare the returns of hotel uses versus condominium conversion. In the article, Putting out The Ritz: When hotels go condo Hoteliers in New York are converting grand old inns to condos. Now Washington has joined the trend, and more will follow suit [CNN/Money]. this phenomenon is discussed.

The trend has, so far, been mostly confined to New York City, where the world famous Plaza, the recently remodeled Drake, the Mark and the Stanhope will soon undergo a condo conversion.

For cities like New York, the loss of rooms can translate into lost revenue for the city. About 1,100 rooms per year are currently being constructed in Manhattan yet more than that are being converted to condo for a net loss in inventory. Tourists bring needed revenue to the city and need to be adequate to attract large conventions. Its a problem with no obvious solution unless the housing market cools, thereby slowing these conversions.

There is already a glut of condos on the market in Washington DC [CNN/Money]. Washington is starting to see this activity on the relative scale that New York has been seeing this for several years. A renowned landmark in DC is catching a lot of attention for this very reason.

_Conversion or “Break-in” [sorry] of Watergate_

“Watergate” is a general term used to describe a complex web of political scandals between 1972 and 1974. The word specifically refers to the Watergate Hotel in Washington D.C.

The phrase eventually morphed into a suffix for scandal “####-gate.”

“On June 17, 1972, police apprehended five men attempting to break into and wiretap Democratic party offices. With two other accomplices they were tried and convicted in Jan., 1973. All seven men were either directly or indirectly employees of President Nixon’s reelection committee, and many persons, including the trial judge, John J. Sirica, suspected a conspiracy involving higher-echelon government officials. In March, James McCord, one of the convicted burglars, wrote a letter to Sirica charging a massive coverup of the burglary. His letter transformed the affair into a political scandal of unprecedented magnitude”[InfoPlease].

But did you know that a portion of the Watergate complex was comprised of co-op residences? Now the hotel portion is being converted to condominium because it is up to 3x more valuable to its owners.

In 2003 the co-op portion of the complex wanted the hotel owners to convert the hotel to co-op [WE Guide] instead of condos. Now in 2005 [WW], the conversion to condo is actually taking place. Actually, I always thought that the complex was on leased land but that would make condo conversion difficult or unlikely since the condos could not be owned in fee simple …but this is to be saved for a rainy day discussion.

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