Balancing the Math!

Economics, Social Justice, Urban Design

In general terms, the equation* to figuring out what the market rate housing rents are is to find the average local wage, times it employment opportunities, divided by the number of housing units available (*this is not a real math equation, it is assembling the elements that determine how the market place sets rents). While this equation is too simple, the basic point is that the rents rise in economically hot housing market cities because our growing upper-class wages are booming while the number of units available are limited. Higher wages times higher employment in cities that constrain new housing development equates to hot economic markets and higher rents.

Wages have somewhat stagnating for the shrinking middle class since the Great Recession. And those who are able to are willing pay more and compete for access to the ‘good life’ in a city that has great amenities, such as arts, parks, rivers (Austin and Denver), nice weather, beaches, bays (Miami and San Diego), and those cities with a lot of jobs and amenities (Bay Area, Seattle, and Los Angeles). This amenity factor still fits with the simple equation above as those cities offering jobs and amenities are too few and far between. And those few safe, amenity and job rich places are unwilling to build enough housing to meet market demand. As people continue to look for places to spend their valuable time to inhabit, wealthy cities will have those neighborhoods that remain expensive for a variety of reasons, while a similar neighborhood in the same city, only a few miles away, will remain stagnant or declining economically and socially.

Cities have a spectrum of economic value, from high to low, in context. Every city has a limited number of housing units available in high economically valued and amenity-filled neighborhoods to be rented by those few high wage workers who are in high demand and making significantly higher wages (+$200k/year). While the majority of a city’s middle class workers (+$60k/year) live in middle to lower economically stable and amenity-less neighborhoods. These new higher wages jobs drive up the rent in those few end-of-the-economic-spectrum high-demand neighborhoods and spill over into the edges of the middle class neighborhoods driving up rents and creating scarcity of middle-income housing (if more is not being built).

The most socially just urban design solution is to enable and build more housing and jobs with amenities in more neighborhoods rather than allowing for higher wage earns compete for those few amenity-filled neighborhoods scattered throughout most cities currently experiencing job growth. Importantly, these wages, number of units, employment opportunities and the need for more housing production issues are only relevant for stagnant cities and towns across the United States Rust Belt and Midwest states. Which moves us into social equity and justice issues with displacement in these high growth cities and neighborhoods. Local people who are displaced from their long-standing homes is the unjust effect of gentrification as values increases. While increased investment in an area has positive outcomes, gentrification associated with displacement of long-term residents deny citizens the ability to benefit from new investments in housing, healthy food access, or transit infrastructure.

To physically improve economically stagnant neighborhoods, with value generated from economic development and raise incomes, some manageable level of gentrification, minus displacement, is needed to improve and rebuild schools, parks, and market-rate development opportunities. Adding to this conversation is how work and shopping is physically changing in our neighborhoods, making 1960’s economic development models obsolete and new ways of building our neighborhoods and economies are making a huge difference in adding housing in older, pre-auto dominated neighborhoods. The auto-dominated suburban sprawl areas are in need of different tools to retrofit them. Conversely, in growing economic value markets, some manageable level of economic stagnation is necessary to enable more people to participate in the local jobs and amenities, such as subsidized housing, rent controls, and taxes.

San Francisco is an expensive because it is affluent with a growing population and no land made easily available for development. Enabling and building more housing would stabilize or reduce rents as it adds supply to the inherent demand. New amenities, new design housing design models, and new neighborhood patterns are emerging. And with enough new housing to reduce prices and mollify its globally hot market rates for housing, the quality of the city’s urban design will make a difference in how San Francisco attracts new wage earners and retains its aging and long-standing citizens.

Understanding this need to update its codes and design expectations, Seattle, Portland, and Denver have stabilized rents by building more housing. Using new zoning tools to allow for more housing in existing neighborhoods, these cities successfully changed their conventional zoning to a more form-based code type in anticipation of their 21st century development needs for mixed-use, walkable new urbanism. Form-Based Codes, or Objective Design Standards, prioritize where a building fits in its neighborhood context over the singular building’s primary land use. These cities reversed their once decimated social and physical fabric of their downtowns and historic neighborhoods by connecting and enabling isolated and segregated pods of development into well-connected and economically stable neighborhoods. And striking that balance between stagnant and hot economic markets.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s