Friday, February 15, 2019

Solutions to Gentrification

To follow up on previous posts about gentrification and rising housing costs (here and here), I've laid out some policy recommendations, most of which have already been articulated by the Obama Admin and the Urban Land Institute.

Much of the narrative around gentrification has been shrouded in confusion. The left-wing activists who have taken up this cause frame the problem in terms of race and class warfare, which might be emotionally appealing but is factually wrong. Rent hikes are not caused by malicious landlords intent on taking every last penny from their working class tenets, or white hipsters and yuppies conspiring to remove minorities from an area, but bad land use policies that drive up rents by restricting the supply of housing; landlords and yuppies, like other suspected bad faith actors, are simply following the incentives created by governing agencies.The negative affects of gentrification (i.e. pricing out low income often minority tenets) cannot be alleviated without eliminating the main contributing factor to astronomical rent hikes: artificial limits on the supply of housing. As I explained in the previous post, the main problem is local zoning and building code restrictions that prevent developers from creating enough housing to accommodate growing populations. One very straight forward solution is to allow more by-right development, especially for rent controlled and low income housing, and waive impact fees (Jakabovic, Ross, Simpson, & Spotts, 2014). This would not only expedite the construction approval process, eliminating the time needed to apply for multiple variances and entitlements, but also reduce the cost of starting projects (Jakabovic et al., 2014). Reducing or eliminating parking space minimums, restrictions on unit size and density requirements will allow developers to build accommodations for more residents (Jakabovic et al., 2014). Inclusive zoning that allows alternatives to single family housing, such as group homes, multi-family complexes, Accessory Dwelling Units, and mirco-units will not only provide more options but also make metro areas more affordable for more people. Additionally, allowing non-profit charities to build tiny houses for the homeless, which could be done as low income housing, would both reduce homelessness and alleviate the burden on city shelters saving local taxpayers money and providing the underclass with an independent living space and an opportunity to get back on their feet. Waiving impact fees would be a necessary first step to allow these types of projects. As the Urban Land Institute noted in their 2014 report on affordable housing, impact fees tend to impose higher costs on smaller projects when they fail to account for factors such as unit type and size. Offering property tax exemptions for affordable and low income housing production would also make it more readily available.

Streamlining permitting and monitoring processes and coordinating housing regulations across multiple jurisdictions would make new rental units, both market rate and rent controlled, more affordable, on the supply side. Urban regions often have multiple jurisdictions with different building and zoning codes (Jakabovic et al., 2014). Having to comply with multiple and sometimes contradictory sets of procedures and regulations burdens developers working in multiple jurisdictions; coordinating zoning and building codes or having a unified code for all land and housing regulations would reduce compliance costs (Jakabovic et al., 2014). Eliminating duplicative paperwork for the underwriting, due diligence, and monitoring processes for each lender and regulatory body would also reduce compliance costs (Jakabovic et al., 2014). Additionally, jurisdictions should provide developers with a clear permitting time frame to reduce delays in construction and holding costs (Jakabovic et al., 2014). Of course, housing markets are not monolithic so cities and states will have to tailor any land reforms to the needs of their residents.

Instead of trying to find a convenient scapegoat to blame for these problems, we could work together to find solutions without the unproductive protests and grievances. Unfortunately that would also require us to change the current narrative about gentrification which many people are politically and emotionally invested in.

References

Jakabovics, A., Ross, L. M., Simpson, M., & Spotts, M. (2014). Bending the cost curve: Solutions to expand the supply of affordable rentals.

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