Affordable Housing

[earthling]

I still do not believe KC is anywhere near to having an affordable housing problem. There are many many areas inside the metro with very affordable housing, they may just not be the absolute most desirable part of town. I can't afford to have a ribeye steak for lunch every day, but that doesn't mean we have an affordable meal problem in KC.

^In general it would seem that way but KC's rents are rising at a faster rate than wages even though rent increase are below US avg.. IIRC, KC's rent/wage growth ratio is one of the worst in country. One of KC's biggest weaknesses is a per-capita GDP below US avg and it's partly due to below avg wages. Great for biz, not so great for affording housing. KC is still affordable overall but housing costs are rising faster than wages. Maybe it's the wages that should be addressed rather than pressuring affordable housing?

Isn't that mostly because KC is a bit late to the game as far as luxury urban housing? I feel like KC is still playing catch up with most cities as far rents go, so right now rents are rising faster than incomes, but most cities have already gone through that. Also, I think KC's urban rents are going to flatline soon anyway because of the lack of high paying urban core jobs. Demand to live in the city will eventually slow if more jobs don't come downtown.

Although because the city is basically slowing growth by adding the affordable housing requirements, inventory might become more limited regardless of jobs or new units coming online and that may keep rents going up.

I think it will be interesting to see if the affordable housing thing has long term effects and if the city ends up changing that. Bad thing is KC may lose a year or more of development while it figures that out.

No way does KC have an affordable housing problem though. There are plenty of affordable housing in KC. It may not be in the newest buildings, but KC's is still cheap, even in the urban core. It seems like the city is prematurely slowing growth before KC really even gets a lot of true luxury apartments and builds a reputation for having such a lifestyle.

KC's Total Cost of Living is still below US avg and agree there's not directly an affordable housing problem relative to rest of country. What's happening is an increase in housing cost relative to wage increase that is apparently among worst in country and so it's a local relative housing cost *change* problem over last decade. Lots of ways to measure it but overall it seems to me addressing wages makes more sense than addressing affordable housing, though I think it's fine to offer incentives for affordable housing with 'public benefit' requirements over incentives for market rate and broader requirements for luxury (not entirely get rid of it, KCMO needs to adjust that and soon).

[beautyfromashes]

People in this city have always thought as the core of the city as the cheapest places to live when it should be the opposite. It will take time for the paradigm shift to take hold. It will happen though. It’s inevitable.

[earthling]

^Yeah, that too.

[earthling]

Found what I was referring to above...

According to a study from March by First American Financial, Kansas City, Missouri, was among the top five housing markets that saw the greatest year-over-year decline in affordability.

The study attributes this to a 4.3% decline in household income and a 16.5% increase in nominal house prices compared to last year.

https://www.kcur.org/housing-developmen ... d-a-chance

Still likely total cost of living below US average but a more drastic relative change.

[beautyfromashes]

^ yeah, I hate when people pull numbers for just KCMO, like it’s not part of the larger metro and people can’t move across a state or city line to live. I’d guess KCMO proper has the cheapest housing prices in the metro. But, I only seem to hear complaints about affordability from those looking for a DT apartment or in a rapidly revitalizing Midtown.

[earthling]

^Wages still a problem metro wide. KC is one of few metros (and STL) that has a GDP below US average, partly due to wages lower than average.

[beautyfromashes]

^Wages still a problem metro wide. KC is one of few metros (and STL) that has a GDP below US average, partly due to wages lower than average.

But, isn't our cost of living well below US average as well?

[earthling]

^For now, but apparently COL/wage ratio rising faster than rest of US. KC's per-capita GDP has been decreasing over last decade. In past, KC's GDP was above US average. Wages need to be addressed, at least keep up with comparable markets.

[FangKC]

People in this city have always thought as the core of the city as the cheapest places to live when it should be the opposite. It will take time for the paradigm shift to take hold. It will happen though. It’s inevitable.

In most parts of the world, the central parts of cities are the most expensive.

[beautyfromashes]

^For now, but apparently COL/wage ratio rising faster than rest of US. KC's per-capita GDP has been decreasing over last decade. In past, KC's GDP was above US average. Wages need to be addressed, at least keep up with comparable markets.

Respectfully, I feel a little bit like you’re trying to pick stats that make your point. What is our COL/actual wages compared to comparable markets? I don’t care about growth. We were depressed for so long.

[earthling]

^Nah I'm just posting as detached observer based on a broad range of stats I've followed for 20 years as a stats nerd and more recent PE investor/analyst. Am also critical of cherry picked stats to support an agenda and noted there are many ways to measure, not any one methodology is 'correct'. I have no agenda or vested interest to promote for affordable. I do agree that KC doesn't really have a major affordable housing issue but simply pointing out KC per capita GDP (related to lower wages) are not keeping up with comparable markets and US avg while housing costs rise as just _one_ notable measure that stood out to me out of probably a hundred that I follow.

Here's metro GDP per capita for starters. Of major league team metros only STL, Detroit and large retirement/tourist metros have lower, though KC has been improving lately, though the KCUR report now says household income declined. However metro median household income isn't KC's issue (it's actually pretty good), the issue is typically lower wage for same role relative to US avg while housing cost/wage ratio increasing faster than US avg.

[FangKC]

New urban opportunity: Alleys, mews, and accessory units

The unsung alley has the potential to create an intimate American urbanism, it just needs a little attention from urban designers.

...
The use of alleys in TNDs allowed for more compact and human-focused frontages on streets—part of the restoration of a walkable public realm. That move has been successful—as far as it goes—and yet urbanists may be missing a significant opportunity to transform urban places. An architect and urban designer, Thomas Dougherty, makes that case in a recent e-book, The American Alley: A Hidden Resource.
...
Meanwhile, another overlooked piece of American cities, accessory dwelling units (ADUs), has come back into style recently. New urbanists have been promoting ADUs for decades, but recent state and city legislation has kicked their resurgence into high gear. That trend is most evident in California, where a 2016 state law made ADUs legal on single family lots. The law dramatically increased the construction of this dwelling type, and ADUs now make up 40 percent of housing building permits in Los Angeles, and 38 percent in San Jose, according to the Terner Center at UC Berkeley.
...

https://www.cnu.org/publicsquare/2021/0 ... sory-units

[Highlander]

People in this city have always thought as the core of the city as the cheapest places to live when it should be the opposite. It will take time for the paradigm shift to take hold. It will happen though. It’s inevitable.

In most parts of the world, the central parts of cities are the most expensive.

Depends on where you are in the core. KC has some pretty expensive neighborhoods in the core and the outer core (depending on one's definition), places like Prairie Village, Brookside, and Fairway fetch a much higher price than their similar sized suburban counterparts. KC just doesn't have the commuting woes that many other American cities do which drives up the demand for inboard housing.

[FangKC]

Eyes on Milwaukee
Plan To Renovate Every City-Owned Home Gains Traction

https://urbanmilwaukee.com/2021/06/30/e ... -traction/

[phuqueue]

Moving to Affordable Housing, since a tangent fully focused on NYC is not really relevant to KCMO municipal elections.

This is what your microeconomics textbook tells you should happen, but it's not what happens in the real world. Housing is a segmented market and spillover between segments can be limited. I have previously posted about the illustrative example of NYC, where new high-end housing sprouts all around the city like weeds, but prices at the low end continue to rise. This is because developers demand a high return on their expensive new construction and prefer to let it sit vacant until they can realize that return than discount it too much, so your reasoning fails where you assume that people will move into that new housing. Prices within that high end have fallen because of how much excess supply is available, but it doesn't trickle down to the lower end, which is, for all intents and purposes, a different market. To be fair, KC is a different city, where the overall range of prices is more compressed than in NYC and where construction costs are surely lower than in NYC (I didn't actually look this up, but I'm gonna go out on a limb and assume it's true), so maybe you will see somewhat more spillover between market segments there (though incomes are also lower in KC than in NYC), but I think it is nonetheless telling that in a city suffering a severe affordability shortage, letting developers build the housing they want to build has not alleviated the shortage at all.

But in fact, developers in NYC do not get to build what they want. And prices go up at the low end of the spectrum due to simple issues of supply and demand: the population of the country is continuously growing, but large cities do not produce new housing at a rate that keeps up with that growth, especially in these times where there are many people wanting to move from suburbs to urban centers. If there is less housing than the number of people who want housing, then the people with the least money (or the least inclination to remain in that city) get outbid and get forced out of the market. When there is sufficient housing available, the owners of the worst properties have no choice but to accept whatever rent payments their tenants are able to scrounge up, or else they'll have no tenants at all. We don't even have to look to other cities to find examples of slumlords ending up with buildings that had been luxurious in the past. A developer's intentions no longer mean anything at all once the building has already been constructed. There is absolutely no reason why a city cannot consist entirely of housing which was originally built as luxury housing, and that's certainly better than a city with substantial amounts of housing that was built as cheaply as possible.

This would be all well and good if it in any way acknowledged the decision developers make to leave their new luxury construction vacant instead of discounting it too steeply. The reason a city can't consist entirely of housing that was originally built as luxury housing is that the people who own the luxury housing don't consider it fungible with non-luxury housing and don't face sufficient economic pressure to immediately take whatever price the market will support for it in that moment. It might be the case that, over a matter of years or decades, housing that was once built as luxury will fall out of the luxury tier and trickle down to lower price tiers, but that long-term process is of little use to people who need a home right now.

Development in NYC and elsewhere does not keep up with growing demand due to oppressive zoning limitations. There's an endless supply of detached houses in middle-class neighborhoods in New York which could be redeveloped into moderately-priced apartments, but they are off-limits. Even in neighborhoods where zoning allows for redevelopment, it's usually done in a NIMBY fashion of prioritizing "neighborhood character" over construction efficiency. This results in all sorts of absurdities in which developers pay an arm and a leg for a medium-sized building in a hot neighborhood and then replace it with one that's only a couple stories taller. It's a very expensive way to produce a pitiful amount of new housing. And this is to say nothing of affordable housing mandates and other fees that are tacked onto major developments (like requiring them to literally build and finance a public school or library as part of their development). These are smart policies in the short run because they allow the city to cash in on the high land values, but they also ensure that market-rate housing continues to only be viable at absurdly high price points because the tenants are literally funding the construction of an entire school. And then we could touch on how the zoning code essentially requires most large projects to include expensive underground parking, even in a lot of areas that have excellent transit and low car ownership. You couldn't do better if you deliberately designed a system that made it impossible to produce market-rate affordable housing. And in NYC it sort of halfway works simply because there are enough rich people to sustain a decent pace of new construction, but the system could certainly be better.

These would also be fine points if any of them addressed the fact that so much housing is intentionally left vacant until it can command the returns that the developers are looking for (incidentally, this is also a phenomenon with commercial real estate). I suspect that it's true that even filling these vacant units wouldn't be remotely sufficient to keep up with demand, but that's sort of beside the point, which is that the fact that the units are left vacant at all goes to show that simply building housing, no matter what kind of housing it is, is not enough to affect the entire housing market across all price points. NYC does have a NIMBY problem, as all cities do, but before taking on the harder fight against NIMBYs, it might be a good idea to tackle the low-hanging fruit of simply filling up empty apartments that already exist.

(Also, I looked at your previous post that you linked to regarding the changing housing prices in New York. The source that you linked to in that post was specifically talking about an increase at the bottom end of the for-sale condo market *in Manhattan* while the rest of Manhattan condo market declined. The page had a table with data by neighborhood citywide, and when sorting by average rent and by average sale price it looked like the cheaper neighborhoods had generally lower levels of year-over-year rent increase than the top neighborhoods, and at first glance I didn't see any obvious trend in the sale prices. But regardless, NYC subsidizes a lot of below-market housing projects. It's one of De Blasio's signature issues. That people are still complaining about affordability seven years into his term does not reflect well on the prospects of using "affordable housing" as a silver bullet to address housing shortages, even if it can at least contribute some amount of new housing which might not otherwise exist.)

The NYT link that I provided about the supply of vacant units was also focused a lot on Manhattan (though it discussed other boroughs as well, the vacancy numbers were specifically about Manhattan), so data on the Manhattan market is a closer to apples-to-apples comparison. Sorry if you thought I was trying to pull one over on you by saying "NYC." I do realize that without better citywide data, it's not bulletproof, but it does also mesh well with the subjective experience of seeing new luxury towers all over the place while rents continue to rise (surely even someone who would prefer to live in Brooklyn could bite the bullet and move into a brand new luxury unit in Manhattan if the price were right, just as people who would prefer to be in Manhattan but can't afford it should be expected to move into units they can afford in the outer boroughs; that thousands of units are intentionally left vacant in the heart of the city is not a meaningless data point even in the absence of comparable data on the other boroughs). The table you're referring to doesn't include any data on different tiers to allow us to draw any conclusions about whether high-end construction drives down low-end prices. A "lower level" of YOY increase is still an increase, and it should come as no surprise that neighborhoods that were less desirable in the first place would ramp up prices at a slower rate than hotter neighborhoods, but the generally more or less expensive character of a whole neighborhood is, at best, a pretty weak proxy for price tiers within the housing market. And if you ask housing activists in NYC what they think about the city's efforts to subsidize below-market housing, you're going to get an earful about how little of it has been built and how expensive it can still be despite being considered "affordable." I'm not sure there are too many people who are very impressed with BdB's follow through on this, or really on any of his "signature issues."

[kas1]

This would be all well and good if it in any way acknowledged the decision developers make to leave their new luxury construction vacant instead of discounting it too steeply.

The NYT article you cited said that 3695 out of 7727 condos built in Manhattan in the last 5 years had not been sold. It said that there's about a 6 year supply of condos available in Manhattan while usually it's 2 or 3 years. While in a perfect world every unit would be occupied, a few thousand units taking a few extra years to sell is insignificant in a city of 8.4 million people, and a city with a healthy housing market should be able to house all of its people while still allowing for some percentage of the housing units to be unavailable in any given moment. If your point is that building too many $40 million penthouse condos has not resulted in an immediate, tangible change in housing costs for people earning minimum wage then yes, that is trivially obvious. Yet it is also clear that building more housing units will result in cheaper housing overall. And, notably, developers have no incentive to continue building units which they cannot sell. Most of what's being built is rental, and it's not sitting empty.

And in any case, when I refer to luxury housing I'm not exclusively talking about eight-figure condos. In the context of local politics, subsidized wood-framed apartment buildings are considered "luxury" and there is no obvious reason why they would perpetually remain in that category. Those exact same buildings would be considered affordable housing if they were built elsewhere. Ultimately, that's what makes all of the local handwringing about affordable housing so stupid. These are buildings that receive tax incentives because the rents charged are insufficient to cover the cost of construction. That these buildings represent the top of the market is a testament to just how affordable the market is.

[herrfrank]

Meanwhile, wood-framed construction, exterior staircase, McComplex apartments are getting 2000/ month for 1BRs at 135/ Metcalf. These buildings would be refugee shelters in other parts of the world. IIRC midtown apartments are now around 1400 for a 1BR (in an older building). There is price inflation happening in rental housing here.

Detached, SFH in large parts of the core of the metro are still selling below 200k -- I cannot reconcile this divergence with rents continuing long-term. Either houses go up to a 300k price floor or apartments come back down to 1000/ month.

[phuqueue]

I'm not here to argue against the plain statement that "building more housing units will result in cheaper housing overall," and I won't be boxed into making the NIMBY argument that I already explicitly disclaimed in my previous post in the other thread, but I don't believe it is "clear" that simply telling developers to have at it will result in affordable housing. My point in bringing up the NYC example was not, in fact, that "building too many $40 million penthouse condos has not resulted in an immediate, tangible change in housing costs for people earning minimum wage." Actually, the NYT article wasn't even about "$40 million penthouses," so that's kind of a disingenuous take in the first place. My reason for bringing up NYC was that it shows a glut and shortage existing simultaneously in what is allegedly all just one market, which would be kind of a curious situation if it were really the case. I'm under no illusion that a few thousand apartments will resolve NYC's housing crisis and it was never my intention to suggest otherwise, but if housing across various market segments is so freely interchangeable, then the mechanical application of basic principles of microeconomics that you rely on would suggest that those few thousand apartments should, at least, not be sitting vacant.

My broader point, as I already made it in the other thread, and which I brought up the NYC example to illustrate, is that it is foolish to rely on the wrong tools to do something they are not intended to do. Developers are not in business to provide affordable housing, they are in business to make a profit. The market does not operate to drive prices down to whatever we consider affordable, it facilitates "price discovery" and what economists would describe as an "optimal" allocation of resources, which by no means implies that everybody gets the thing in question at a price they can afford. If it turns out that sellers want a higher price than buyers are willing(/able) to pay, and sellers are not otherwise compelled to sell at the buyer's lower price, they won't do so, and this is what we see happening with these thousands of vacant NYC apartments. Whatever other virtues developers or the market might have, ensuring that everybody has a home is simply not what they exist to accomplish.

It is also worth bearing in mind, as you yourself pointed out, that "developers have no incentive to continue building units which they cannot sell." Strictly speaking, though, there are no units that developers "cannot sell." But there might be units they can't sell at the price they want (in NYC, apparently a few thousand of them), which means their incentive to build is reduced to the extent that prices fall and their return shrinks, down to having no incentive at all where the return is unacceptably small or nonexistent. Even if relaxing some zoning rules, overcoming NIMBYs, etc might reduce costs, thereby raising returns and permitting some additional housing to be constructed (maybe even at lower pricing tiers as the luxury market becomes oversaturated), they will still hit a floor based on, if nothing else, the high cost of labor and materials, so the lower prices we are hoping to achieve will end up acting as a brake on building activity. They are not going to keep building until everyone has a home, they're only going to keep building until it is no longer lucrative enough to continue. All of which brings me back to my conclusion from my earlier post: the housing crisis will require government intervention to resolve, not developers acting unfettered in a free market.

Ultimately, that's what makes all of the local handwringing about affordable housing so stupid. These are buildings that receive tax incentives because the rents charged are insufficient to cover the cost of construction. That these buildings represent the top of the market is a testament to just how affordable the market is.

I'm sure that is very comforting to the KCTenants demonstrators sharing their stories of rent hikes driving them out of their homes. Don't worry everyone, the market actually is very affordable and it is stupid for you to wring your hands over it.

[kas1]

My reason for bringing up NYC was that it shows a glut and shortage existing simultaneously in what is allegedly all just one market, which would be kind of a curious situation if it were really the case. I'm under no illusion that a few thousand apartments will resolve NYC's housing crisis and it was never my intention to suggest otherwise, but if housing across various market segments is so freely interchangeable, then the mechanical application of basic principles of microeconomics that you rely on would suggest that those few thousand apartments should, at least, not be sitting vacant.

That the housing market is all interconnected does not imply that it is perfectly liquid and that units are all interchangeable. If something is imbalanced then it will cause a cascading effect across adjacent segments of the market, but 3000 units is a rounding error in a market the size of New York. The effects will simply get lost in the noise before they spread very far.

No one disputes that these cascading effects exist when rents go up in one sector, yet there's entrenched resistance to the idea that these effects also work in reverse.

My broader point, as I already made it in the other thread, and which I brought up the NYC example to illustrate, is that it is foolish to rely on the wrong tools to do something they are not intended to do. Developers are not in business to provide affordable housing, they are in business to make a profit.

But developers do not need to directly provide affordable housing. Developers can only decide what sort of returns they want at the time of construction. Beyond that point the price will fluctuate based on what somebody is willing to pay for it. The overwhelming majority of the housing in Kansas City is old. Nobody knows or cares how much someone spent to build a house in 1950. The urban core was ultra-affordable for a number of years because buildings were worth less than it would cost to build them from scratch. Now the values are rising to close the gap with new construction, and this will shake up the market. I'm not unsympathetic to people who are impacted by this. But the metro area is full of old houses, whether in old Johnson County or Raytown or wherever. As long as there's a sufficient supply of total housing, there will always be shabby, rundown areas where you can find a deal. And that's not just hypothetical. North Johnson County has already seen an influx of low-income households as wealthy people keep moving further south. There are payday lenders around the corner from downtown Overland Park. There's a finite number of rich people, and they can only live in one home at a time. No matter how much they move around, they'll always be leaving behind homes to be occupied by non-rich people. If one area is gentrifying, another area must necessarily be doing the opposite. Ideally, though, there'd simply be enough new construction in the gentrifying neighborhoods to accommodate the newcomers without any mass displacement.

This is analogous to saying that carmakers need to manufacture affordable cars so that poor people can own cars. They don't need to do this because there's an endless supply of used cars, and if you're desperate enough then you can practically name your own price for some pile of garbage. If there were no barriers on building new housing then the housing market would work nearly as well as the car market (and old houses hold up better than old cars).

Of course, the larger problem here is that many people do not earn enough money to finance the construction of a decent house, which forces them into the situation of only being able to live in rundown neighborhoods. In that regard there's certainly a need for government intervention.

And some people will never be able to afford any type of housing because of disabilities or other exceptional burdens, and the government should take care of those people. But the government should not need to produce housing for people who are healthy and employed.

[FangKC]

Rent is going up so fast, it’s not just pricing out residents — it’s hurting Kansas City

...
If you zoom in on eastern Kansas City, the data is even bleaker. Over the same time period, rent increased by 13.1% in eastern Kansas City. Meanwhile, Nevinger calculates only 4.8% wage growth for the same part of the metro over the same time period, using U.S. Bureau of Labor Statistics data.

"So 12 months earlier, your rent in east Jackson County, in Independence and east Kansas City, was $791 per unit, which was the lowest in the Metro area," Nevinger says. "And now it's all the way up to $895."
...

https://www.kcur.org/housing-developmen ... apartments