The Affordable Housing Crisis in America's 5 Top Cities
American cities are riding a wave of renewed interest in urban living that revved up in the mid-‘90s and quickly reinforced itself with plummeting crime rates, improving schools and expanded infrastructure. Foreigners fleeing economic skittishness at home have stashed their thick wads of cash in Manhattan skyscrapers and Beverly Hills compounds. And 20 years after many predicted the Internet would all but eliminate the need for traditional office space, the latest tech boom has made corporate life more centralized than ever in live/work/play downtowns and city neighborhoods, until recently considered fringe.
Concurrently, wage growth has stalled, barely budging since the Clinton era if accounting for inflation. Income inequality has become the subject of surprise best-selling treatises and the cause célèbre of even Republican politicians. A growing liberal outcry has addressed the crisis of New York, San Francisco and Los Angeles being out of middle class reach.
An Urban Institute report put the issue in stark focus earlier this summer: every last one of America’s 3,007 counties falls short of having the units to house its most impoverished residents.
Here’s the current affordable housing situation in five cities at the center of this perfect storm of demographic shifts, tech riches and foreign investment.
San Francisco
The tech industry pays lip service to certain strains of San Francisco’s bedrock liberalism. But unicorns and angels—however whimsically named—have challenged the Bay Area’s inclusive bohemian culture in the form of 400% rent increases and Google employees stepping over homeless people to hop on the company’s private shuttle bus to Mountain View. Well-intentioned efforts by the city to address the problem have barely kept up with market dynamics of the Silicon Gold Rush. Since 2005, 6,559 affordable units have risen just as 5,470 were lost to evictions via the Ellis Act and landlords taking the highest rent they can.
Meanwhile, startup companies continue to pass over Silicon Valley for the downtown offices young workers and CEOs crave. That has made once-seamy areas like South of Market and even the Tenderloin desirable to affluent tenants. Forget about Twitter HQ spiffing up a neighborhood. Even proposed jails could take over space from affordable housing in a quaintly low-rise city whose aversion to vertical rezoning further constrains the market.
San Francisco is acutely aware of its affordability crisis. But housing costs consistently grow at the highest or second-highest rate of all American markets. Independent stores are somewhat protected by relatively strict retail ordinances: businesses with more than 11 existing locations worldwide are required to get a pricey and slow-going “conditional use” permit from the city before moving in. (Mayor Ed Lee wanted to up that number to 19.) Looking toward the fall, a $310M bond measure is on the November ballot, as are other attempts at staving off the crisis.
But Don Falk, the CEO of nonprofit housing organization TNDC (pictured above, speaking at a Bisnow event), said that ”given the rate of growth in employment in San Francisco, there is little optimism that we can build our way out of the problem."
Even relief valves are sharing in the digital wealth…and becoming out of reach for those already priced out of the City by the Bay. Trulia last year reported that Oakland saw the second biggest rent increases of any market in the country.
Chicago
The Windy City’s high-profile struggle with violent crime has cast a harsh light on the segregation of its neighborhoods. To address the problem, Mayor Rahm Emanuel in 2012 rolled out the Chicago Infrastructure Trust, an initiative that sought to hasten new development through private money and avoid the glacial process of procuring federal funds. The payoff for corporations would be a sizable chunk of the “sexy” projects’ profits. Unfortunately, those profits have been slow to materialize.
Indeed, it took two years for CIT’s first project—a green 60-building development—to get underway, and that was after initial grand plans were curtailed. The private investment in the undertaking totaled a measly $12M. Yet even the skeptics acknowledge it’s too early to call the vision a bust, likening it to a startup in its infancy. CIT continues to take steps forward, tentative as they may be. Late last month it announced a contest to design affordable housing units, two of which will rise on vacant lots, with an eventual 1,000 homes to follow.
More broadly, downtown Chicago is in the midst of a rental boom, with 3,000 new units expected by year’s end and another 5,000 due in 2016. Yet towers like Jones Chicago crow more about their luxe amenities than modestly priced units. Meanwhile, a 240-unit building at 625 W Division St will include 48 affordable apartments, but only half are required to be attached to the main tower.
New York
Bitching about the cost of living and gentrification has long been a favorite pastime of New Yorkers. But even with the financial industry briefly hobbled by the Great Recession, the waning days of Mayor Michael Bloomberg’s administration brought the anxiety to a fever pitch. Bill de Blasio won City Hall on the back of his “Tale of Two Cities” and has made the development or preservation of 200,000 affordable units the centerpiece of his leadership.
The clearest outline of this plan came in January when the mayor announced a 10-year housing proposal that would include 80,000 new affordable units. They’ll be clustered in five areas (East Harlem, Long Island City, East New York, Highbridge, Bay Street) in each of the boroughs and rise following yet another round of zoning revisions. (Bloomberg rezoned an astonishing 40% of the city, leading to high-rise residential construction in previously industrial waterfront districts.)
Yet the proposals worry residents of those communities since the controversial (and recently extended) 421a tax credit only requires that 20% of a new development’s units be affordable. With market rate apartments often outnumbering others four to one and fresh construction sometimes faulted for de facto segregation (see: “poor doors”), locals fear City Hall is throwing them the scraps of grass-fed gourmet meals eaten by market rate tenants. Certainly, the unbridled growth of Billionaires Row, a citadel of foreign ultra-wealth on and around 57th Street, has kept these fears alive.
Certain developments (along the Greenpoint waterfront, for example) have promised more than 20% of units will be affordable. And developer Two Trees won plaudits for allotting more affordable units in its blockbuster Domino Sugar project than even de Blasio’s City Hall had sought. Still, New Yorkers are grumbling about the failure, or glacial pacing, to deliver public amenities like parks along with shiny new buildings. And claims of racial discrimination by the types of organizations de Blasio’s affordability plan is meant to help cast doubt on the clarity of the mayor’s vision.
Washington, DC
Rent gains in the capital have trailed those in other major cities like San Francisco and Miami. But DC’s notorious segregation (while somewhat alleviated in booming neighborhoods like Columbia Heights) and intractable homeless problem lay bare the long-term difficulties facing the city.
“No jurisdiction has enough affordable and available rental units to meet the demand by extremely low income, very low and low income households,” David Bowers, the vice president of Enterprise Community Partners (pictured above speaking at a Bisnow event) tells us. He added that the district is currently 24,600 units short of affordable homes needed to house those populations. And this despite the fact that more apartments went up last year in the Greater Washington area than at any other point in over a decade.
One high-profile development allotting space for the less fortunate is the conversion of the former Walter Reed Medical Center. Homeless military veterans will claim 75 units in that sprawling campus, which spans 66.5 acres. Private development firms including Dantes Partners, W.C. Smith, Somerset Development and Jair Lynch Development Partners have also stood out in their commitment to affordability.
“The public and private sector need to move beyond million dollar conversations about a billion dollar problem if we want to fully address the affordable housing issue in DC and the region,” says Bowers.
LA
Recent trend pieces have hyped up LA’s affordability relative to New York amid a perceived crush of artists and writers heading west. Those on the ground might tell a different tale. The homeless population has spiked 12% in two years. And “mansionization” has become the buzzword of the city’s real estate circles as moguls tear down already massive compounds and replace them with steroidal palaces deemed crass by residents of ritzy communities like Bel-Air hardly known for their discreet displays of wealth. Downtown LA, until recently a haven of artists and raw loft spaces, has gone beyond rejuvenation and now has median rents approaching $2,500 a month.
On the other hand, LA recently voted to boost the minimum wage to $15 an hour, making it by far the biggest city to enact such sweeping change. Last month, the California Supreme Court upheld an ordinance stating developers could be required to include affordable units in their projects. The City Council is leaning toward an amnesty deal for landlords of cheap but inhabitable apartments to go unpunished for renting them without a permit. Developers like Meta Housing have spoken to the importance of affordability with projects in Long Beach and San Pedro (rendering above) that target the creative class.
And LA’s notorious sprawl—for decades the butt of jokes among New Yorkers and San Franciscans—makes gentrification somewhat less conspicuous in denser cities awash with new, inevitably “luxury,” condo towers.
