So we pretty much have the landscape for the land use and housing bills before us, and we’re just kind of waiting to see what passes and what doesn’t. Nothing much more for a lot of us to do but wait and see (our friends at the League and UAC wouldn’t characterize these last few days like this – for them, it’s full time crazy city!)
Just a couple of notes about a couple bills we’re following (we’re up to 42 bills we’re tracking now!). As I noted in my email out to many of you yesterday, another bill was outed Monday (highly unusual this late). It certainly seems to be driven by something specific going on in a community somewhere in the state (in honesty, I think I know where and what it is, but I’m not going to out them all here). Normally bills popping out this late won’t go anywhere and are often meant to be messages, but this one – SB330 – Land Use Regulation Amendments – is sponsored by the Senate Majority Leader (Cullimore), so if he wants it to go, it likely will have a good chance.
The bill I had talked about earlier being a good move to at least start the process of revamping how we plan for future growth in unincorporated areas near city boundaries, HB457, was substituted on the Senate floor yesterday and all those planning parts of it for “urban reserves” and metro areas, were removed. None of that is in there anymore. The title of the bill has thus changes from “County Growth Planning and Annexation Amendments” to “County Governing Modifications.” It does allow for automatic annexation of unincorporated islands meeting certain conditions in all second class counties now, but there are some different provisions for each. Too bad on the annexation/incorporation planning provisions, maybe next year?
Finally, I just want to share another interesting study that I ran across having to do with just building more housing to alleviate housing unaffordability.
Throughout the debate about what to do to solve the housing affordability crisis, we all have surely heard the mantra that the way to bring down the price of anything in a market economy is to produce more of it – the basic idea is that something that a lot of people want and that is scarce will command higher prices as people who really want it bid it up to make sure they get it. Conversely, when a desired good is plentiful, the sellers will be more “desperate” to sell to somebody and thus will lower the price. Therefore, what needs to be done is just build more housing, of all kinds, and the price will come down.
There are those who have pointed to the data that shows much of the new housing that is being built is larger and more expensive, and thus does nothing for more general affordability. The housing industry, they say, is focusing on where the most profit is, and that is not in starter homes. So it doesn’t really matter if home builders are building more homes, if they are more expensive, it won’t help with affordability for those lower down on the economic food chain.
A recent story in The Atlantic, however, seems to show that the “just build more” camp may have a point. The story, titled High-End Construction Really Does Help Everyone, reports on recent research on the very topic. The paper, The Downmarket Impact of New Multifamily Housing by three researchers from various universities, comes to this fascinating conclusion, according to the writer of the story in The Atlantic:
What the researchers found was that the new housing freed up older, cheaper apartments, which, in turn, became occupied by people leaving behind still-cheaper homes elsewhere in the city, and so on. A new rung higher up the housing ladder permitted people lower down to climb. The paper estimates the tower’s 512 units created at least 557 vacancies across the city—with some units opening up no empty apartments (if, say, an adult child moved to the Central from their parents’ home) and others creating as many as four vacancies around town.
This process of people moving up to nicer housing, opening their previous dwelling to someone else from still lower value housing, is called moving up the vacancy-chain. Those getting into housing at the very lowest level of the vacancy chain are often those getting into the housing market for the first time.
Mast’s conclusion was that new housing allows families to move into wealthier neighborhoods, a change that tends to be correlated with lots of positive life outcomes for children, such as higher earnings and stable marriages. “Constructing a new market-rate building that houses 100 people ultimately leads 45 to 70 people to move out of below-median income neighborhoods,” he wrote. Barriers between rich and poor neighborhoods were permeable.
Now I’ve heard much of this before anecdotally, and generally think it is accurate. But as people have said the way to get the cost of housing down is to just build more housing, I thought that may be true when there isn’t a huge backlog of people waiting to get into housing, because every unit that comes available, no matter where it is on the vacancy chain, is going to have fierce competition for it as all those backlogged people vie to get into it, and they bid up the cost of that housing. And they don’t open up any new housing lower on the chain because they’re moving out of another shared household. Voila, the study rather confirms my thinking:
When a housing market is broken—expensive, overcrowded, with few empty apartments available—new construction creates fewer opportunities to relocate than it otherwise would.
In many cases, a vacancy chain stops because someone moves out of a home they shared with parents, friends, or an ex. And moving chains can take months or even years to bring vacated units onto the market, especially when sales are involved.
… market-rate condos produced more vacancies than lower-cost units because the latter were more likely to be occupied by people moving out of shared quarters—a childhood home, or one shared with roommates—and not emptying a unit for someone else to move into. A shorter vacancy chain is a sign of overcrowding being relieved. That’s a positive outcome, even if it doesn’t have the same impact on housing costs. But it is also a sign of a less healthy housing market to begin with: In places where lots of people are already doubled up, new housing creates fewer vacancies and therefore fewer opportunities to move.
Data has shown that we are many thousands of units behind demand here in Utah, which means many people are living in those shared arrangements. As soon as a unit opens up, there is intense competition for it. What that means is, we’re going to have to build a lot more housing for a relatively long period of time before we begin to see the effect that would occur in a more balanced market. Sigh. Do we have the patience to accomplish that? Do we have the resources? Regardless, it’s got to be done, just don’t expect to see much improvement in housing prices for a while!