The headline says it all.
And the rest of the article, by Adam Belz of Minnesota’s StarTribune, is worth the full read as well. It touches on a few Vancouver nerves.
Here’s an excerpt:
A city staffer explained the rising burden of rental prices on poor residents, and gently pushed a central theme of the draft plan — that the city must build more homes in more places — to a group peppered with skeptics.
“If you just let the market promote density, that doesn’t necessarily trickle down to affordable housing,” said Lara Norkus-Crampton, a south Minneapolis resident. “If it was just density that provided affordable housing, then Hong Kong and New York City would be the most affordable places on the planet, and they’re not.”
[This] view cuts to the core of the debate as the city takes public comment on a comprehensive plan that will be finalized before the end of the year. It would be a bold experiment, allowing fourplexes the same size as a large home in every residential neighbourhood, and dramatically loosening restrictions on the height and type of buildings allowed on dozens of transit routes throughout the city as part of an effort to drive down rental prices.
Economists agree that cities can stabilize the cost of housing by loosening zoning to allow more construction in more places. But few cities have done this since the 1950s, and those who study the economics of housing admit both that prices won’t immediately fall in neighbourhoods with new apartments, and that without a regional or even national move to relax single-family zoning laws, the effect of rising density on rents will be difficult to discern in Minneapolis.
“You still see prices that go up,” said Bryce Ward, an economist at the University of Montana. “It just means that they may not have gone up by as much as they would have otherwise.” …
Ward, who has co-authored several papers on zoning and affordability, said the public must understand that opposing density is a choice in favour of either sprawl or high prices.
“If you don’t like to densify and you don’t like sprawl, then the only other option is to just say ‘Sorry. Prices are going to be high,'” he said.
A fourth option, Ward said, would be much larger subsidies for housing or imposing rent control.
Heather Worthington, the city’s director of long-range planning, said the comprehensive plan is about far more than density. Promoting job growth, expanding access to public transit, adding different types of housing in different neighbourhoods and making the city more resilient to climate change are all parts of the plan.
“Building more housing in the city will not drive affordability on its own, but it is necessary as a prerequisite to other affordable housing strategies,” Worthington said.
Other tools include more public housing subsidies, along with better rules and incentives as new units are developed, she said.
“Density can be a dirty word in development, especially in a city where a single-family, 40- to 50-foot lot, has been a fairly dominant development type,” Worthington said. “So, I think pushback is natural.” …
David Albouy, an economist at the University of Illinois, who wrote a 2016 paper on density and affordability, said Becker is right in that the only surefire way to drive down prices is for cities all over a region to build more homes quickly. But he rejects the idea that more units don’t drive down prices. His models estimate that if the population remains constant, every 3 percent increase in the number of housing units results in a 2 percent decline in prices.
“It’s simple supply and demand,” he said. “When people start saying you build more and that shouldn’t bring prices down, that’s a little bit ridiculous.”
But on the neighbourhood level, the benefits of density may not be apparent, said Jenny Schuetz, an economist at the Brookings Institution, because newer housing is usually more expensive than the older housing it replaces, even though the increase in supply relieves pressure on the region as a whole.
“The truth is we’ve never really tried the experiment of just increasing density uniformly across a city, let alone a metropolitan area,” Schuetz said. “It sounds like Minneapolis is going farther than other places.”
Wish this was a message that was more widely shared in Vancouver:
“It’s simple supply and demand,” he said. “When people start saying you build more and that shouldn’t bring prices down, that’s a little bit ridiculous.”
But on the neighbourhood level, the benefits of density may not be apparent, said Jenny Schuetz, an economist at the Brookings Institution, because newer housing is usually more expensive than the older housing it replaces, even though the increase in supply relieves pressure on the region as a whole.
A good analogy I think would be Climate vs Weather … the specific new units are the weather, the overall condition is the climate. New units can be comparatively more stormy/spendy even if the overall condition is less so (ie. Ice storms during global warming … or in this case, heatwaves during what we might hope to be an ice age).
I think other variables like the style of building also come into play
– due to the cost of construction. Planning in Vancouver focusses on density in the downtown core – meaning expensive-to-build concrete highrises.
If planning were to focus on 6 storey wood frame structures across the whole city – i.e. goodbye single family houses – then maybe the cost could be lower (i.e. increase in supply coupled with lower cost of construction, otherwise scarcity of supply might keep the prices high).
In addition, many developers are focussing on the high end market. At first it started with better finishings, granite and marble countertops to differentiate projects, now it’s designer everything, everywhere.
When was the last time you saw a condo with “basic” finishings in the downtown – such as arborite countertops? Maybe in the early 1990s when mine was built?
(and if you are thinking “ewww, who would buy that?” – then maybe you’re part of the problem)
$300 sq ft construction cost is not the problem
$200/sf for light timber vs $300/sf for Concrete makes a tiny bit of a difference … lets do the math for a 1000sf unit … $200,000 vs $300,000 build cost vs a $1,000,000 purchase price … so at best there is a 10% difference in overall cost … except for the fact that residential property sells for a pretty consistent $/sf no matter what the finish, so even ‘saving’ $100k build cost isn’t going to be reflected in the purchase price … especially for the second buyer.
Land is the thing … saving $5k by not having nice countertops will not affordable make … a 0.5% change does not move the affordable needle.
I did say lower construction costs coupled with increase in supply (i.e. more widespread multi-family zoning).
… but as to finishing, $5,000 is still $5,000 and for someone putting together a down payment, that it still, what, a month’s salary after taxes? Ask anyone saving up money for their first home if they would pay $5,000 for a granite countertop, it’s likely they would say “no”. Those expensive finishes are marketing tools aimed at bumping up the price.
… and $100,000 is still, on any wage-earner’s account, a substantial amount of money – on the order of a year’s wages.
So if you can reduce that on the cost side, and increase supply so that the scarcity of supply / land does not become the overriding factor – maybe price will come down too.
It may be nickel and diming to some, but to others, it adds up (especially if you look at it in absolute figures, rather than percentages).
And yet Vancouver has densities yet become wildly unaffordable.
Densified
Vancouver has not densified enough to meet demand is why prices are up .