Podcast: Meea Kang on Developing Affordable Housing in California

This week I’m joined by Meea Kang, Rail~volution board member and founding partner of Domus Development. I caught up with Meea at the Rail~volution conference to talk about what it’s like to be an affordable housing developer building sustainable projects. We discuss the 16 variances needed to do transit-oriented development in Sacramento, workforce housing in Tahoe on a bus line with 60-minute headways, and what it takes to pass a state law that reduces parking requirements near transit.

How Should The Government Fix Affordable Housing?

Many American cities are experiencing a shortage of affordable housing. It’s a big problem that needs to be addressed, but there’s little consensus about how to address it. Add to that the NIMBY attitude that many people seem to hold toward affordable housing projects, and we’re looking at a problem that is both complex and politically charged.

Housing costs in San Francisco have skyrocketed in the past few years and it doesn’t look like they’ll stop increasing any time soon. One of the reasons for the price increase is because discretionary permitting prevents the housing supply from increasing rapidly as the population grows. Some such as the blog Market Urbanism believe that reforming regulations so that development is less restricted would go a long way in addressing the issue. On top of that, creating a land tax would encourage denser development, and funding housing vouchers with that tax money would ensure that the amount of funding increases when housing demand goes up and drives up the cost of land.

Los Angeles is suffering from a lack of affordable housing as well, and some feel that the local government should be doing far more to address the issue. Some suggested solutions to LA’s affordable housing issue include overhauling the zoning code so that it’s easier to develop, offering incentives to developers for building affordable housing, and preserving the current stock of affordable housing.

All of these proposed solutions include some form of government intervention. However, we have seen that some government responses, like rent control and subsidized housing, have not exactly solved the affordable housing problem in the past. If that’s the case, how should the government intervene in affordable housing issues? Whichever way we choose to address the problem, it’ll be important to understand the housing market, as well as acknowledge the shortcomings of our previous solutions.

On Gentrification, Supply, and Expansion

Living in the bay area can be particularly maddening. Even if you're working hard and making a good living, you are likely to still not be able to afford a house in the neighborhood of your choice. The reason being its so hard to build anywhere without coming up against NIMBYs and people that already have theirs. Take the BRT disaster where Berkeley rejected even doing the study for dedicated lanes in the city limits. It seems like progress is just a step away but defeat is often snatched from the jaws of victory.

I sometimes wonder why we can't just build more dense housing in employment districts or places where NIMBYs don't exist. There's a huge supply of land in these areas of San Jose with parking lots that could use serious transit infrastructure expansion. But the fact of the matter is that areas that are really desirable and dense are for the most part built out, and since they are built out their cost continues to increase dramatically because people really want to live there and there is a limited supply.

Take for example the Mission in San Francisco. For many years it was a lower income neighborhood known for its culture but over time transitioned. There are still vestiges of this in the compact and livable urban environment, but now the hipsters have come. I'm not sure that's a bad thing per say but we've seen this story before. Certain parties populate an urban neighborhood and then others follow until it becomes upper class, it gentrifies/yuppifies (a good read here on this subject). This end state of neighborhoods is seen as awful for the folks that were pushed out, but it is also seen as progress for the city as buildings get painted and the garden flowers are potted. This very end state of the process or "Starbucks Urbanism" is what becomes the mark of progress for those seeking it.

The problem however I see with this is not the end state per say, but the fact that the process has to happen at all. The biggest issue I have with the gentrification claim is that it can be rendered useless if we actually supplied housing for the actual market for housing. I know this is a claim long pushed by the planners and CNU set, but there's actually something behind the idea that we've overproduced single family housing and under produced urban types. What we've seen in urban neighborhoods with good bones over the last decade or so is a transformation based on lack of opportunity to improve without pushing out the middle.

But I do see a possible opportunity in the massive expansion plans that exist due to the transit space race to improve without pushing away. With multi-line expansion plans in places like Los Angeles, Denver, and Seattle, so many stations will be brought on line, the market won't be able to get to them all at once. One of the major benefits and worries of these new transit lines is that they will bring increased property values and push out existing communities. While this will provide better mobility to many of these areas, it's not likely to bring wholesale change to each of them. But it does start to provide opportunities for building housing that starts to change the urban vs. suburban market, without focusing it all on one close in neighborhood such as what has been happening in smaller regions that build transit over the last boom. We'll see what happens, but this is the theory I have.

Monday Night Notes

Hartford has been brutalized by parking. The loss of tax base to the virus of surface parking is staggering.
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Can you reduce GHGs and still grow?
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Is Paris more accessible than London? Some physicists say yes because the ants told them. Via Price Tags
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Can space be found for affordable housing in New York City?
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An interesting thought, the city as a living machine. How can we bring cities back to a pre-city natural state while still growing? This is an idea that is being explored in many places. A variant on this was discussed last year when discussing plans for the Lloyd district in Portland. It opened up some interesting discussion in the comments.

A Hearty Congratulations

Congratulations to my colleagues and friends at the Center for Neighborhood Technology. They have won the prestigious MacArthur award for Creative and Effective Institutions. They deserve it and if you're not familiar with their work, you might want to check them out. They are the ones who brought you the affordability index, car sharing before it was cool, and some nifty energy initiatives.

One Car, Two Car, Three Car, Blue Car

When you have access to transit, you use it. I'm looking at maps and doing GIS analysis on American Cities for most of my day. So I'm really interested in looking at these types of maps in cities outside of the US. In this instance, this is a map of car ownership and transit ridership in Melbourne, one of the cities that kept its streetcars. What is fascinating is the amount of single car ownership along the transit lines. Now it isn't controlled for income levels, self selection or the size of the household, but it would be interesting to take a look at the household costs for living near the lines vs. living away from them. Anyways, check it out at Transport Textbook.

Preserving Affordable Housing Near Transit

In a recent report, my day job with the National Housing Trust looked at the number of expiring section 8 and 202 units near fixed guideway transit stations in 8 cities. In these cities, 63% (65,000) of the units that are located within a half mile of the station will have their section 8 and section 202 housing contracts expire in 2012.

This is only eight cities with rail transit but when you think about the mobility that transit allows for people who already have a hard time, it's an even bigger deal when it disappears. A recent Center for Housing Policy report found that low and moderate income families spend as much or more on transportation than they spend on housing. So you can see why it would be important to preserve housing such as this near transit stations in order to give folks more opportunities than they would have if they lived on the periphery. There should be a concerted effort to preserve these affordable units near transit.

So imagine my hope rising when the MacAurthur Foundation along with Enterprise Community Partners pledged $3.5 million dollars to fund new and preserve affordable housing units in the Denver region near transit corridors.

ULC — a nonprofit group affiliated with the Denver Foundation that buys, preserves and develops urban real estate — is expected to be the sole borrower of the fund, and will be responsible for buying property for the TOD housing and partnering with local companies for site redevelopment.

For the TOD housing project, the ULC will target three types of properties — existing, federally assisted rental housing; unsubsidized rental properties; and properties that currently are vacant or used for commercial purposes that have desirable locations for new affordable housing.

This is a way to get out in front of the market. If used intelligently, much of the money could be used for landbanking along future transit corridors then provided to affordable housing developers who could never get in on the market later on. I hope this is replicated in other cities soon.

Insurance By the Mile

What a novel concept! I wonder if it would lower my costs. I already get a discount for driving low miles but it would give an even greater incentive to stay out of the car.

Living in Exurbia Getting Expensive

In case you missed it, this PBS show NOW talks about the tough times people are having living far from their jobs. My coworker Gloria is in the film too. I will say, one thing that bothered me is the interviews almost seemed like caricatures of people who live in urban places and in the exurbs. But at least we're starting to cover the issues as they continue to hit people hard.

The Queen Turned King

Between all of this mortgage meltdown/bank failure discussions is a discussion of city competitiveness. Recent blog posts have focused on Charlotte especially this one from the Urbanophile comparing Charlotte to cities in the rust belt. He comments that Charlotte is leading because of its attitude and that cities in the Midwest outside of Minneapolis and Chicago have just tossed in the towels.

As Ryan has said, Charlotte looks like it won't get hit too hard by sudden bank death syndrome but the Urbanophile's comments got me to thinking. While Charlotte is out there scaring the pants off of not only the Rust Belt, but titans of the South like Tampa and Atlanta, is it really because they "want it more"? When I ran back in college, I would like to say that if I ran against Haile Gebresellasie in the Marathon (He broke the world record this weekend) I could win if I wanted it more, but we know that's not even close to being true.

But what are Charlotte's advantages? I thought really hard and tried to think about it in terms outside of the creative class argument that people always try to make about cool places. I kept thinking about things like new beginnings and not really having glory days to look back on but when it got down to it the thing that stuck out to me was age group. Why are cities like Charlotte places where younger folks want to locate. I'll admit when I got out of grad school it was Denver, San Francisco, or Austin. But there has to be more than that right? I must not be thinking hard enough.

Everything I seem to come up with is without a backup in data, such as its a younger city in terms of infrastructure. But that doesn't explain cities like San Francisco or Chicago. Is it because banking was thriving and growing and folks moving down from the Northeast wanted to make it more familiar? Maybe that is it. All of these new exciting cities seem to have an influx of people from either California or the Northeast. It's certainly not Nascar thats pulling them towards Charlotte. I still can't bring myself to think that it's because cities don't want it bad enough. Thoughts?

It's Like Getting a Raise

Taking transit that is...

Jeanne Whitworth, wearing a dark blue jacket and skirt, settles into a Sprinter car at the Oceanside Transit Center, awaiting the four-stop ride to Rancho del Oro, where she lives. Whitworth, who works in downtown San Diego, commutes weekdays on both the Sprinter and the Coaster, a conventional Amtrak-style train, which intersect at Oceanside.

The two trains take an hour and a half. Whitworth, 42, could be home 15 minutes earlier if she drove there from Oceanside. "But I don't have to fight the traffic," she says, and she's saving a tank of gas every month. "It's like getting a raise."

But the highway mentality and misunderstanding of investments for people versus cars are still out there.

Cooke, a retired Marine Corps major-general, contends that $500 million would have been better spent adding two more lanes to six-lane Highway 78. He's also critical of the train's taxpayer subsidy, saying that everyone riding the Sprinter "is getting a free ticket to some degree."

Where You Live, and What It Costs

CEO for Cities made a nifty little movie showing the difference between two neighborhoods in Chicago and why people spend so much on transportation. How much money do you transfer to oil companies?

It's All About the Benjamins

Example 1: Charlotte

We talked with several riders who say gas prices and convenience have prompted them to give light rail a try, opting to pay $2.60 for a round trip ticket, rather than a gas guzzling trip to work.

“I did an analysis of it and I save $150 a month, not have to pay to park and drive my SUV uptown,” said Tim Gray, who has been riding light rail since its launch in November.

“I think I'm saving $75 to $100 a month. It really adds up,” said Bernice Parenti, who started riding a month ago.

That's the good kind of wealth transfer. Back into your pocket. So if all those folks filling up the lot at I-485 at the South End of the line saved $75 a month. That is $900 a year. No chump change for sure. It comes out to $672,000 a year in people's pockets. Or $20 million over the 30 year life of the vehicles. And that's just one station. Think about the folks who get rid of cars in the South End or Uptown Charlotte. Big money...for real people.

The Affordability Index is Online

The affordability index is a different way to look at housing affordability. Since housing has been going down the tubes lately, its not surprising that the crises is hitting the suburbs of major metropolitan areas the hardest. Why? Because they are out in the middle of nowhere and its getting expensive to move around by car alone. Well folks are now starting to measure the housing + transportation costs of families and individuals showing that true affordability isn't a cheap home in the suburbs, but rather the sum of these two costs.

Take a look at the costs of different neighborhoods. In a transit rich neighborhood with all housing being equal, your cost of would be 41%. But if you had to drive everywhere, your costs would be 57%. That's quite a lot of savings by living near transit. See for yourself if you live in a transit rich or auto dependent neighborhood.

H/T Carless in Seattle.

Is Auto Ownership Tied to a Reduced Savings Rate?

We know that cars cost a lot of money. Aside from the up front capital cost, operations cost people at least $8,000 per year. But ever since cars were produced for the working man by Henry Ford, it looks as if the purchase and ownership of these vehicles has cut into American wealth accumulation. If you look at the savings rate over the last century, it seems to be an inverse relation to auto ownership. This chart created by Scott Bernstein at the Center for Neighborhood Technology shows this relationship. (I've seen this chart in a number of iterations but this is all I could find online)

While everyone thinks that America is a wealthy nation, many people spend a good portion of their money on transportation. But it doesn't have to be this way. Cities that have good transit networks allow people to save money and cut overall emissions.

I want to reiterate that I think cars are an important part of our transportation network, but I think our complete dependence on them in most of the United States will lead many to the poorhouse sooner rather than later. In order to stem the tide, we need good transit. It allows people to pool their resources to pay for transport and allow for the building of wealth.

Giving Employees a Bonus by Charging for Parking

On the other side of the coin from the suburban subsidization is the money that can be saved by transit, whether its rail or an express bus. Richard Layman has a post over on his blog about when companies decide to charge for parking and give an allowance for transit. The original article was in the New York Times.

So What Pencils?

In every city in America right now there is a fight between a community and a developer. It's happening in Austin as M1ek and AC are discussing at the moment. In this instance the community is asking for something that the developer could, but does not want to give because really why should they? The rules were laid down and the developer followed them.

So when cities come up with extensive plans for the area around a light rail station that won't be there for a few years, what is a developer or city to do? The City of Aurora south of Denver is in that predicament right now. So what are citizens who want good development to do?

One way to go is to bank the land and do something that can be easily be turned when the market changes or when the rail line extension comes. Community land trusts and affordable housing funds could possibly do this or the city could buy it to hold although thats almost like the third way below. Another is to let them develop the junk they were going to, which in the case of Aurora, like Austin, is the much hated Wal-Mart. A third and sometimes unpopular way to go is to provide incentives to make the development pencil. This is what Aurora is thinking about as well.

Bob Watkins, Aurora's director of planning, said Aurora hopes the vacant plot will be developed into "a special place that would be unique and help establish an identity for the city."

The city is currently trying to develop an incentive package for the project.

"It probably is going to require some kind of incentive package ... I think the time is right. We have things happening with FasTracks, with RTD, everything that's going on," Hogan said.

RTD plans to extend light rail from the Nine Mile Station at Parker Road along I-225 and then swing away from the highway with a station planned at the location.

A big problem is figuring out where that is going to be since engineering on LRT projects and other improvements might take years. This is where developers can take issues into their own hands if they decide to help build these transit lines. Perhaps we'll start seeing more of that soon. So when a piece of land is scoped for future development, better make sure that everything people want is in order (coding, zoning, plans, affordable housing, etc) so you don't get unlucky and stuck with Wal-Mart or providing incentives.

Update: Here is a map of the area. The line will take an angle and go right.
Update 2: Had the wrong line. Better picture below.

When the Bubble Pops

The bubble is popping and the pundits are going nuts about it. On Wall Street folks like Jim Cramer are going crazy with the lending industry.



So when the housing market is down, what are the good investments? Apparently in New Jersey its housing near commuter rail stations. Easy access to transit and less housing cost is where people are going. According to realtors:

Homes along many of Central Jersey's commuter rail lines have a better chance of being sold than residences in more rural or suburban areas, according to real estate experts and housing statistics.

That's one of the conclusions drawn from a study of the sales numbers, which paint an uneven -- and depending upon where you live, unsettling -- picture of the Central Jersey housing market.

In some towns, the market is actually improving over last year, while in other areas, homes are languishing on the market even longer than in 2006, when the real estate bubble burst in earnest. Prices began to get soft in August 2005.

Hat Tip to Atrios & The Big Picture

Autocentricity in Consumerism

An odd thing happened to me today. I installed Quicken and downloaded my bank data onto my new computer since my hard drive crashed a few months ago. As I was categorizing each purchase, i came to a point where I couldn't find a category to put one of the recurring purchases I was making, BART tickets. There was no section for transportation costs because it was only car costs. There are so many things that go into auto costs including the list below. One thing that I had to add to this is traffic and parking tickets, of which I have gotten a few.



But what does this say about the overall consumer culture and our debt? Given that the median balance on the American credit card is $1,900, and 43% of Americans spend more than they earn, does this mean we are slaves to our cars?

According to this MSN Money article, the debt of America outside of our Mortgage is largely tied to non-revolving loans like the ones available for people to buy cars. That's just the capital cost for the car. Now what about operating the thing and roads? In 2005, the average American spends 18% of their income on transportation. Recent research suggests that this fluctuates between the exurbs and transit rich urban core with a difference of up to 16% between the extremes of 25% and 9% respectively.

In my own experience, I drive my car once a week and fill up the tank once a month. I probably wouldn't drive at all if my grandmother didn't live so far from BART. Otherwise I take Muni, BART, or walk. I would say that I'm around the 9% in transportation costs which allows me to pay a bit more in rent than I normally would be able to afford. But I'm also able to save up some money.

So in a consumer based, auto oriented society, we are largely tied to our cars, figuratively and sometimes literally. Over the last 60 years we've been so tied down that even personal finance software doesn't give us a transit choice but to enter it in ourselves. But as we've found out from parking, when given the choice for someone to unbundle, a lot of people will choose the alternative because there is one to choose. Someone gave an analogy recently, and forgive me for stealing it if you're reading but if there is a shelf full of only Pepsi how can you say that no one wanted to buy Coke? The choice wasn't there.

The Real Reason You're Broke....

Bus Chick has found an article that talks about what American's seem to do best...spend money and burn oil. None of my friends seem to be complaining about the cost of a car, probably because like me they drive it once a week. Although my roommate thinks that BART is way too expensive if you're going with two other people to the east bay. But it seems that the problem is not with carpooling but rather single occupancy vehicles, more specifically their costs. Why are we trying to subsidize housing so much when people are just gonna blow that extra money on their auto...

Americans are spending more on their vehicles than ever before -- more than $8,000 a year on average -- and it's driving some to the breaking point. Credit counselor Bill Thompson of Jacksonville, Fla., estimates that one out of every four clients his agency sees has overspent -- sometimes dramatically -- on a car. "They may be spending 15% to 20% of their (take-home) pay on just the car payment," said Thompson, who supervises credit counseling for the nonprofit Family Foundations, "and that doesn't include insurance, gas, maintenance and all the other costs of owning a vehicle."

Quite Amazing, perhaps transit is a part of the affordability solution. To take a look at how to address this issue through transit, check out the Affordability Index.