August 17th, 2011

A Few High-Level Remarks about Development, Zoning, etc.

My current research interest (read: Aspie "special interest", irritating obsession, derogatory term of choice) is "What is the Job Market/Economy of the Future?" Future, for these purposes, is 10-30 years. I got interested in this when I realized that while R.'s and my anticipation of densification was in fact occurring, neither of us had any sense of how the economy of the future might differ from what-it-is-today. (Please don't say, get a job in health care. Everyone knows that, all right? It is therefore not a possible research interest, except to show that maybe it's not actually true. But I think it is, so other than getting into speculation about how the regulatory and credentialing environment might change, again, not a possible research interest.)

Because it is my nature to get horrifyingly distracted by anything involving real estate/the built environment, I started exploring multi-family housing on the theory that multi-family housing generates jobs (definitely) and possibly more net jobs than single-family housing (probably not a question I can answer without buying some big databases and doing some programming, neither of which is going to happen). In the course of exploring multi-family housing, I stumbled across mall + residential redevelopment, which was so fantastically weird, that I couldn't resist digging around in that for a while. That led me to residential REITs, and that led me to Avalon and a few other developers who target "places" (generally, but not always, states) which have laws like Massachusetts 40B or New Jersey's Mount Laurel decision, or Connecticut's law, which provide a mechanism for overriding "home rule".

Why are REITs (who spent the previous decade and a half developing and managing LIHTC buildings, which are a wildly different proposition that I'm fantastically uninterested in) that specialize in (judging by the amenities, locations and rents) luxury multi-family focusing on "high-barrier-to-entry" states? Easy answer: they are trying to develop multi-family in areas with (a) jobs and (b) good schools. Needless to say, _all_ of those places are already built-out single family and very opposed to multi-family development (<-- may not be true; please supply counter-examples). MA, NJ and CT provide a legal structure for "breaking" "home rule" zoning that prevents multi-family: include a certain percentage of affordable housing and as long as the local jurisdiction is uniformly unaffordable, you can go build anyway (subject to _state_ level environmental and other regulations). Town planning boards become _much_ more cooperative to multifamily proposals (because if they don't make it go to court, they can still negotiate for whatever details they really care about) in this environment.

Once the towns are in compliance (usually some percentage of units in town must meet certain price/rent/income constraints based on local/regional median income), they can give the finger to future multi-family developments -- uniformly or selectively, as they please. The effect of the law from the perspective of Avalon could not be better: _they_ can build, but once they've got a complex or few in place, _no one else_ can compete.

I don't have much of an opinion about the regulatory structure as it exists (altho on many of the days when I think the Christian Scientists might be right about doctors, I also tend to feel that Houston might be right on the subject of zoning). I _do_ have opinions about how some people approach the regulatory structure (that whole thing in Concord really appalled me), and I'm not inherently opposed to changing the regulatory structure -- but I voted no on this:

http://www.sec.state.ma.us/ele/elepip10/pip102.htm

A libertarian might look at that and say, hey, getting rid of laws, that's good, right? But on the other hand, it would have had the effect of creating a much bigger set of regulatory hurdles to get over (never mind the social justice aspects). Would a libertarian really vote to create _more_ regulation that further limits the rights of property owners?

I don't have any specific suggestions about how the zoning process should be changed, either at the local level or any other level. What I do know is that people get really excited about the built environment (especially when it changes) and important symbolic and cathartic purposes are served by slowing down the development process and making everyone talk to each other. I might come up with something eventually. Mostly, I don't really care.

What I _do_ care about is predicting the future, and the immediate future economically is that we are further into the business cycle, at a point when housing development should be taking off again. But it does not make sense to do single family housing right now, so multifamily should be taking off: there's money, there's desire (new units are being absorbed and rents are still rising). The only thing slowing multifamily down at this point (before it was chickenshit finance partners or lack thereof) is regulation.

There are people in New Jersey who are very coherent on the subject of preserving their low density single family housing within a good commuting distance of great jobs. They don't get sidetracked by whether the units will attract the wrong kind of people (either lower income or with kids or whatever might make multifamily less desirable to a town, in terms of reducing property tax income and increasing costs); they just fucking hate density. I find this somewhat amazing, because the inside of my head is sort of like SimCity: I _expect_ density and when density doesn't happen, I start looking for what slowed it down. My people are not healthy and must need something. (<-- See? Worry about propaganda embedded in video games. That stuff works.)

A more absolutist person on the subject of property rights might say, hey, why shouldn't they get what they want, as long as they pay enough in property taxes to afford their services and don't discriminate based on protected classes or whatever -- money ought to buy you something, right? And this is where we get down to how contingent property rights actually are. If you sell the beach and the owners don't let people use it, then everyone else lost something for the benefit of a few. If you cover up Thornton Creek, if you dam the river, if you etc. Some of things, we collectively say, okay, we'll sacrifice the salmon for the hydropower. We'll let you have that section of beach if we can make the rest public and you pay us a lot of money every year for the privilege (property taxes). I'll sell you the right to block my view of Mt. Rainier. Etc.

All those people occupying healthy, closer in/older suburbia and keeping the school districts nice are going to have to give a little, however, because property rights are contingent, and vast oceans of people who were once totally okay with sacrificing hours of their day to own their own piece of paradise out on the fringe can no longer afford to do so and must instead find a place to live, work and raise their family. Closer in. Where a whole lot of people already are. We're _going_ to navigate this, somehow, and our _existing_ regulatory framework is our starting condition. We might be able to change that framework (people tried really hard in 2010. They failed.). But this is what we've got. And what _I_ want to know is where all those young families are going to land and where their kids are going to go to school and where they are going to shop and who is going to hire them.

Because _I_ want to understand the economy/job market of the future. Soon.

We Have No Bananas, How About a Carrot? More on Zoning, Development, etc.

People think about all kinds of things when they are looking for a place to live and raise their kids. Some of these things work better in single family housing: multi-family shared walls can lead to more serious and intractable noise problems than houses separated by a substantial setback on each side. My condo had some noise reduction, but kitchen and bath cabinets are famous for producing a drum like sound when the doors are allowed to close that even decent walls have trouble suppressing. Uninsulated water pipes in walls are particularly obnoxious -- you hear every flush from the floors above, not to mention if someone does laundry.

People often like the idea of a yard in principle, but in reality, it serves little purpose and requires substantial upkeep in neighborhoods with good schools: kids don't typically get much exercise in a yard (even if it includes play equipment), so unless someone really wants to garden, it's kinda useless other than providing a place for pets to do their business. If you don't maintain the yard to neighborhood standards (which can be very high), it impacts your relationship with your neighbors.

A friend reminds me of the sex offender registry and points out that in higher density neighborhoods, there are likely to be more sex offenders within a given radius -- because there are more people within a given radius. That's a bit of a stumper to me. I've known a variety of people over the last few years who spent a lot of time monitoring that registry (weirdly, they were all raised Catholic, but that's probably a coincidence -- there are a lot of people in New England who were raised Catholic), and they were all highly committed exurbanites (probably not a coincidence). While the observation is a fair one (more people = more bad people near me), it jars with everything I believe about safety. I do _not_ feel safe on a nearly empty street. I _do_ feel safe on a busy street (well, barring things like a developing riot, which I have been around a time or two, but that's a whole different kind of busy from the kind of busy I'm thinking of here).

What I do know is that any choice of residence means giving up some thing and getting others. I think this is why Avalon properties have so many commonalities (and Princeton has slightly different commonalities and so forth). They've identified a market that wants 2 and 3 bedroom units at a certain distance from job centers, with good public schools, that likes 3-6 story buildings with a clubhouse, pool, fitness room, etc., and plenty of parking and is willing to pay within a certain range for all of that. I have to believe these are families that might, in another decade, have bought into a master planned community with a park and a pool and a clubhouse. There are lots of small, infill developers whose complexes are too small for a pool, but who can put together a good fitness room -- and even smaller developers whose complexes have no common areas outside the lobby, halls, stairs, elevators and maybe a secured garage. Those small complexes aren't necessarily cheaper and if you've discovered one you really like you might have to wait a long while to get in.

I'm not arguing that families with children are shifting to multifamily because they've suddenly developed a preference for carrots over bananas. I'm arguing that they're at the store, and the bananas are gone, look like crap or are hideously expensive -- but the carrots are cheap, organic and plentiful. Carrots are pretty sweet, might help your night vision and can have a nice crunch to them. You can't make banana bread with them, but you can make carrot cake.

Does multifamily 40B development hurt single family home prices?

Some people at MIT took a look at this question:

web.mit.edu/cre/research/hai/pdf/40B_report_HAI_0405.pdf

I would argue that many of the developments are too small to really matter, but you sure can't say that about Woburn's Kimball Courts. I would also argue that their impact area is overly oriented towards sight lines and may be inadequate to take into consideration traffic impact -- but most of the developments were so small it wouldn't have mattered anyway.

I forgot about this:

"Fear of a protracted battle gives developers incentive to maximize project density
in their initial proposals to compensate for anticipated extra costs, and the failure to resolve the
question of density in earlier stages leaves towns with little leverage once the courts render the
permit decision."

I noted that the number of units tends to get negotiated down when working with a town zoning board, thus, if I were a developer, I'd ask for extra to deal with that inevitable knockdown. Turns out you have to _do_ way more units, if you need to cover legal costs associated with getting the project permitted under the litigation version of 40B. I failed to think of that, because most of the developments I've been looking at were LIPs done somewhat cooperatively with the town.

Also: 25% if the units are available to people earning up to 80% of area median income; 20% if the units are available to people earning up to 50% of area median income.

We're Full, There's No Growth, We Should Rehab Not Build New

There are all kinds of arguments rallied by people who would like their low density town to stay that way.

(1) We're at buildout already (we're full).

I'm not entirely certain I had ever heard this argument prior to moving to New Hampshire, and that's actually kind of amazing. The year before I was born, my parents moved from Crown Hill, a city neighborhood north of Ballard in Seattle, to what was then unincorporated King County, now Shoreline. Shoreline had few vacant lots left when my parents moved in; nearly everyone like my parents who was leaving the city for a suburban home of their own in those years was moving to Lynnwood, a little further north and (I believe) an incorporated municipality at the time. My dad was working as a union electrician employed by an electrical contractor -- he helped build a lot of those houses, he did the wiring in the house I grew up in and he added a second floor to it. I believe he picked the guy who built our house, based on his experience with homebuilders in the area. My dad found a corner lot that was subdividable and bought part of it from the owner; we grew up next to the people who were willing to share their land with us (for a price). The kids were moved out, but the dad was an engineer at Boeing. I remember him helping me come up with a winning paper airplane for Field Day one year in school.

So I absolutely knew that a town could get to a point where it had few vacant lots, and where the vacant lots remaining for infill development had so many problems that it was really better not to try. As I grew up, I saw people put together quite amazing (and expensive) ways to build on those steep, landslide prone lots.

But the idea that "built out" meant "no more building" was just -- literally -- unthinkable. I knew about teardowns in Shoreline. I saw small lots get bought, combined, and bigger things be built on them. Etc. And Seattle proper provided further examples of same. "Built out" just means you have to remove something in order to build something new, and thus the new thing needs to make more money. In order to make more money, it usually has to be bigger, which usually means it has to be taller. Once it is bigger, either you have to find someone with a lot more money, or it has to be sold or rented to multiple people. Simple.

Move to New England, and meet the new form of "build out", where "build out" is an argument against further development. Bizarre. Unnatural. Very New England, tho. I'll probably be puzzling out how much of this is explained by decades long economic stagnation and how much of this explains decades long economic stagnation. And, in classic New England fashion, I won't take it particularly personally.

Most of the time.

(2) There's No Growth.

There are places in the United States that are not growing. In fact, some places are shrinking (Detroit. Detroit comes up a lot, now that I think about it.). Boston is growing. Greater Boston is growing. I _think_ Eastern Massachusetts is growing altho I'm less certain of that. So the "we're not growing" thing is really stupid, especially when people in Chelmsford and Westford try to say it. Then it's actually sort of embarrassing and cringe-inducing.

(3) We Should Rehab Not Build New

I read Jane Jacobs. I loved Jane Jacobs. Jane Jacobs had a big influence on me. But I'm not an idiot. Jane Jacobs said that the great thing about older buildings with smaller spaces is that they're crappier and therefore cheaper and they are cramped and therefore cheaper. Thus they are affordable to people who cannot afford nice, new and spacious. This had a lot of resonance when she was first writing about the Village, however, over time, it has stopped resonating about the Village, because the Village has been rehabbed into glossy preserved perfection and it ain't cheap any more.

_Arrival City_ actually does a fantastic job of explaining slums: the per square foot price to rent or buy in slums in arrival cities is higher than in much posher parts of town (or other towns). However, smaller spaces are available with fewer square feet, thus allowing people to get a place where otherwise they cannot. It's the classic "it's more expensive to be poor" conundrum, where you get a volume discount, whether it's on your house or your toilet paper. It _is_ more expensive to be poor, only you consume so much less that it's cheaper. Very difficult to remember this when you hit an amount of wealth that allows you to be price-insensitive on things like, say, toilet paper.

In an area that is _truly_ not growing, and even more so if the population is shrinking, rehabbing makes sense to provide decent, affordable housing. That's why you don't rip down Amsterdam, NY's enclosed mall; you keep it and move downtown into it, because you live in a place that suffers from Weather and enclosed malls are all about the absence of weather. But as long as the number of people living in an area increases, a rehab-not-build strategy in no way benefits the poor. If you build enough new stuff (and believe me, it'll take way more than you would readily believe), then the poor people can move into the newly vacated slightly less new stuff. But when a place is really growing (like inner ring suburbs with good schools are growing), crappy shit gets torn down and replaced with glistening, gargantuan, luxurious, er, shit.

All three of these arguments (we're full, there's no growth, we should fix up what we have) are pushed heavily by people who like low density (and perhaps are snobs, altho that is less clear) and do not want anyone in town to tear down low density and replace it with higher density. Not just not their neighbors. ANYONE in town. Not just not subsidized. ANYONE.

But the dumbest argument they put forward is this one: we'll never catch up to the 10% mandated affordable housing by building big complexes that are only 20% or 25% affordable. For one thing, they massively confuse two issues. Rental complexes almost always count in their entirety to the 10%, which means the 75-80% you think makes your situation worse really, really, really doesn't. But even if they didn't, a 20-25% affordable complex is a _lot_ of affordable housing compared to what the market is otherwise producing in your town (that is to say, NOTHING).

They must thing we're innumerate or something.

Newton, multifamily, school enrollment

http://www.wickedlocal.com/newton/features/x999955327/Newtons-student-enrollment-spike-sparks-talk-of-tax-hike

I would particularly draw attention to this:

"“We seem to attract many, many students,” said Committee Chairwoman Claire Sokoloff. “There are other high-performing schools that haven’t gotten the same [enrollment increases] as ours, and it’s a credit to our system that we continue to grow.”"

What a lovely, humane and welcoming response to a difficult situation.

Newton produces enrollment analyses that are readily available online and they have a bunch of big multifamily complexes (2 by Avalon). Even tho all the rental units (including market rate) in a 40b development count towards whether they make 10% or not, they haven't reached 10%.

www3.newton.k12.ma.us/sites/default/files/enrollment_analysis_report_11_23_09.pdf

The projections for Avalon at Chestnut Hill were low to about the same degree that the 2nd Avalon development in Lexington proved to be low.

http://www.wickedlocal.com/newton/news/x902755745

My estimate (.4 * number of units) is coming in a little for these complexes.

According to City Data's websites, median gross rent in Newton is about $300 less than in Lexington.

One of the enrollment analyses (might not be the one I pointed to) or perhaps a blog entry that I've lost track of, mentioned that there's a lot of tear down activity in Newton (tear a single family down and built a duplex in its place). While they can pretty easily track big new multifamily complexes (and they do) when projecting future enrollment, it's trickier to try to get a sense of the effect of all those individual single family -> two unit changes.

While no zoning process is free from struggle, the Newton process appears to be productive and generally satisfactory -- or at least everyone is well-behaved when there are representatives from the press running around.