Housing Affordability in SLC

"The consensus among real estate experts is that the recent expansion in housing supply has managed to keep DC area rents from spiraling out of control....December's year-over-year multifamily apartment rent growth in the DC metro region was 2.6 percent.....considerably lower than the national average of 4 percent.....attribute this to DC’s above-average multifamily housing stock growth rate (3.6 percent last year, compared to 2.4 percent nationally)....supply has narrowly outpaced demand recently. - Greater Greater Washington.

Seems pretty clear to me. If rents are rising, supply is not meeting demand. SLC's rents are rising; We can't control demand; we can only control supply. There is strong market demand for housing, and the limit is regulatory. Relax regulatory limits, and increase supply.

I recognize no one wants a high-rise worth of buildings looking into their backyard. For owner-occupiers, their homes are their primary investment, and they are willing to fight to project that, which makes them politically powerful. So clearly some sort of buffering is going to be necessary. What that is going to look like is (broadly) hammered out: Two story buildings, over a half basement, with a total height of about 30'. The major conflict is over cars, and where to put them. On-street parking can accommodate 3 cars per 33' lot. Beyond that, off-street parking is required. How that is going to work out needs serious consideration as part of accessory dwelling units.

I'm opposed to efforts focuses on increasing the supply of owner-occupied housing. I rent, and I resent the implication that it means my housing preferences are inferior. It's also deeply inequitable: Providing a few more owner-occupied houses means a few more people are going to be able to 'win the lottery' by buying a home and sitting on it while it appreciates, without it doing anything to alter the fundamental dynamics of the housing market.

But relying on market solutions alone is not going to solve SLC's affordable housing problems. All the housing that is being added is being added on the higher end of the market. This is natural, and somewhat necessary--new construction requires higher rents. While that mitigates the tendency for mid-range apartments to be rehabbed and upgraded, it doesn't provide short-term relief for the low end of the rental market.

Market rate new construction requires high rents. So to provide low rents, a non-market intervention is required. SLC, as part of its homeless initiatives, is already engaging in this policy, at the low-income level. I'd like to see that extended further into the low-middle, and middle-income levels (50-80% of area median income).

As a long-term policy, a 'overbuild' in elevator apartments is appealing. Permit a very large number of high-rise apartments. Apartment construction is 'lumpy', and buildings 'package' units big bunches. Over-building is a expected characteristic of the development cycle; people start new projects until the financing runs out; the projects take a long time to complete, and my the time many hit the market, the increase in supply has caused rents to fall, and the projects are no longer profitable. Rather than competing with the private market at the peak of the cycle, the city should take over 'orphan projects' partially through the development process, and convert them to use as affordable housing. Denver's housing agency has done so with single family homes on a pretty successful basis.

To go even further, SLC could use public money to 'overbuild' the multi-family market after the development cycle has peaked. I'm less of a fan--the oversupply generates a 'hangover' effect that last decades, suppressing new market-rate multi-family development. I'd far prefer reducing market costs for new multi-family construction.

Finally, I'd like to suggest that the regulation most in need of attention is per-unit parking requirements. Parking is expensive, and mandating 2 stalls per unit seriously affects the affordability of a unit. There are increasing number of people in SLC that would be willing to make do with one less car (or no car) if that made rent cheaper. As a back of the envelope calculation, assume that a stall in a parking garage costs $40,000 to build. Using the 'building worth is 10 years of rent' ratio, that means a $40,000 bit of real estate is worth about $333 per month. I think many people would be willing to shed a car to reduce their rent by that much.

The immediate objection to such a policy would be the ease of violation: Deprived on on-site parking, people turn to on-street parking, and then overflow into near by areas, putting them in conflict with other users of on-street parking. Potential policy solutions include permitting reduced parking ratios only where on-street parking is metered for all nearby areas. For districts lacking meters, residents in the low-car or car-free units could be required to verify that they do not have a registered vehicle.

Parking in the CBD

I was reading this, and was struck by this bit at the end:

"argued parking lots can be a boon to the city — they're being used, after all. And the ordinance actually hinders development, he said, reasoning that it inhibits competition, and parking rates go up as a result. Owners in turn have less reason to develop lots, and dig in their heels"

Let's deconstruct that a bit: "They are being used, and are thus a boon". That argument is a bit tetchy--if I were to add free parking all over downtown, would that be a boon?

Short answer: 'No'. 

Long answer: Free parking is a subsidy to people who drive to downtown. Which is something that people who take transit, or live downtown don't get. Secondly, downtown real-estate is expensive. Letting someone use it for free is silly. 

But this is market based--why not let someone develop parking lots? The ordinance certainly hinders development of parking lots--that's the point. So, why not let half of downtown become parking lots? Lots of cities do. 

Because it kills walkability. Walking along a parking lot is boring and unpleasant. And downtown isn't just the premier office and retail center for the metro area--it's also the premier entertainment district, tourist destination, and convention center. People who come downtown for a show, to visit Temple Square, and to go to Conventions all wind up walking around downtown SLC. 

Does it actually inhibit competition for parking?

No. The lawyer is very clever--talking as if parking lots were the only option. You'll notice that multi-story parking structures aren't forbidden. Parking structures are the real competition to surface lots.

The Politics of Property Taxes

A quirk in Utah property tax also plays a role. When your property is assessed, it is assessed on the value of the improvements--the stuff on the land, rather than the land itself. (Why this is stupid will have to be a later post). The 'improvements' value of a parking lot is not very much--it's just asphalt over dirt. The value of a parking garage is much much higher, in the millions of dollars. For SLC, it makes financial sense to have anything BUT a parking lot.

And so SLC is holding down the supply of surface parking in the CBD. Which means supply is constricted even as demand rises. Prices are determined by the mis-match between supply and demand, so the cost of parking is going up. As the price of parking rises, the expected ROI on building a parking garage rises as well, so it makes financial sense to build a parking garage. 

Digging in their heels

The last bit is simply silly--if rates go up, owners have MORE reason to develop parking lots. More lots are being developed for the same reason no-one builds high rises in historic districts--it's illegal.

'Smart Lake City' -- Smart Parking Meters.

According to USA-Today, 'Smart' parking meters are coming to town. That town (sadly) is not Salt Lake City, but Charleston North Carolina. To give the article highlights"

Converting from drop-in-a-coin-and-twist-the-dial machines to a new generation of meters.
-Uses smart-card technology
-Pay by cellphone
-Meters linked by wireless networks that can be remotely controlled and alert officers to parking violations
-'Call in' to register for parking.
-$150 apiece
-$7000 to $10,000 for multi-space meters.
-Powered by solar panels.

That last factor is actually a surprisingly big deal.  The installation costs for a parking can exceed the cost of the meter for a normal parking meter. One that requires electrical hookups can be substantially more expensive. While solar panels aren't yet powering whole cities, they are increasingly powering small parts of it.

Too bad the story didn't have more to say about using wireless networks to let drivers know where parking is available. But cities are hurting for money, and parking is a nice source of revenue...