Urban centers find innovative solutions for housing their middle class.
|Rendering © TF Cornerstone
|Arquitectonica’s forthcoming 606 West 57th Street (at right) in New York. The 40-story building will have 1,028 units, 224 of which will be affordable. The rendering depicts Bjarke Ingels’s future Pyramid building in the background.
It's a well-known story by now: in the wake of a shift toward city living, and as housing prices continue to rise and wages stagnate, middle-class Americans are being squeezed out of urban centers. The problem is not isolated to high-cost cities. A New York Times analysis found that median rent is more than 30 percent of the median income in 90 U.S. municipalities, surpassing the federal government's benchmark indicating when a household becomes “burdened.” Nationwide, half of renting households spend a third of their gross income on rent, while their median income hovered at $32,500 in 2012 (as compared to $50,500 for all households)—approaching its lowest level in nearly 20 years, according to the Joint Center for Housing Studies at Harvard University. To combat this trend, staving off an exodus of the workforce and addressing growing income inequality, a number of cities are experimenting with a range of innovative ideas to create affordable housing.
A mix of forces is driving up housing prices in top markets. Urban populations are growing as young millennials and retiring baby boomers move to cities, while wealthy foreigners see American real estate as a safe place to invest. Add to this the fact that land and construction costs are high at a time when federal funds are dwindling, making it difficult to finance affordable developments.
Some argue that the problem is a question of supply and demand. Facing a greater need for density, cities are loosening zoning regulations, but housing advocates urge caution, worrying that an unfettered market could translate to an overabundance of luxury options without enough of the kind of housing these places need.
With no one-size-fits-all solution, cities must decide where to build housing, how to finance it, who to build it for, and how to preserve what exists. With 46.5 million Americans living in poverty—the largest number in more than half a century—the urgent needs of the poor dwarf those of the middle class. Yet without a range of housing choices, high-cost cities could lose their working class and professionals to cheaper markets. “Cities need a mix of housing types. They have people doing different jobs with a range of salaries,” points out Henry Cisneros, the former housing secretary.
Affordable housing, from a policy perspective, refers to housing that includes a public subsidy, frequently in the form of tax breaks or zoning variances. For some low-income residents, Section 8 housing vouchers travel with them, subsidizing rent. In public housing, government builds and often operates the development, generally for low-income residents. Increasingly, cities are offering developers subsidies to build affordable units for middle-, moderate- and lower-income residents, within market-rate developments, known as inclusionary zoning. Potential residents enter a lottery for a chance at an apartment with rent limited to 30 percent of their gross income.
Cities rely on a federal formula known as area median income (AMI) to determine housing eligibility. In New York, for example, the AMI for a family of four living in the greater metro area is $85,900, with units available for families earning a fraction of that up to around $150,000 a year, although income limits vary depending on the specific project. The federal government has more stringent caps, limiting federal dollars to low- and moderate-income. While some advocates for the middle class would like to see more housing at the upper end of the spectrum, others bristle at the idea of subsidizing housing for people who, by national standards, are considered wealthy, while homeless families continue to live in shelters. “There is a very real question as to whether or not policy efforts should go toward subsidizing affordable housing for people making $200,000 a year,” says Barika Williams, deputy director of the New York advocacy group Association for Neighborhood and Housing Development.
To meet the needs of the poor and still build housing that benefits a city's teachers, plumbers, and, increasingly, its doctors and lawyers, takes creative thinking and a commitment from city planners, designers, and developers. A glance at three cities shows different ways to tackle the issue.
New York City: A Bold Agenda
Last year, New York ushered in a new mayor who promised to address mounting income inequality, the focus of a debate that reached a fever pitch this summer when a developer finalized plans for a so-called “poor door” separating low-income rental tenants from luxury condominium owners in the same mixed-income building.
New York has a long history of building middle-class housing, but many units have vanished as programs phase out. Mayor Bill de Blasio's agenda calls for creating or preserving 200,000 affordable units over the next decade, with nearly 60 percent of these intended for low-income households. The $41.4 billion plan—including $8.2 billion in city funds—proposes tax breaks for developers and zoning changes to allow for somewhat larger buildings. In exchange for greater density, developers would be required to set aside units for low- and moderate-income households. The plan reaches out to the city's poorest residents—those earning less than $25,150 a year—while also providing some housing for middle-income families earning up to $138,435 annually.
Some of de Blasio's critics argue that the city is too generous with tax breaks for developers who stand to make huge profits, claiming that they could include more middle- and upper-middle-income units in luxury developments without a public subsidy, since those units generate significant rental income. “Developers are lucky if they get to build in Manhattan,” says New York City Council member Helen Rosenthal. Just getting a chance to build in New York, she says, should be incentive enough to provide affordable units.
Last spring, Ms. Rosenthal got to test her theory. The developer TF Cornerstone needed City Council approval to build a 1,028-unit rental building that included 216 affordable units in the Hell's Kitchen neighborhood, in Rosenthal's district. Before delivering her vote, Rosenthal required that the developer set aside four additional units for households earning 200 percent of AMI and another four for those earning 230 percent of AMI or $192,970 a year —with no additional subsidy. “Helen had a lot of leverage over us,” says Jon McMillan, director of planning for TF Cornerstone. Nevertheless, he continued, “This middle-income stuff is maybe something you could actually squeeze out of a developer without giving an additional subsidy.” Ultimately, TF Cornerstone agreed to the deal because families in the highest income bracket would pay $4,824 a month for a two-bedroom apartment, rivaling market rate, which was $4,817 for a Manhattan two-bedroom in July, according to realty company Douglas Elliman. The 40-story building, by Arquitectonica, will open in 2017.
San Francisco: Tech Boom and the Housing Crunch
San Francisco has some of the most progressive housing policies in the country, with mandatory inclusionary zoning and 200,000 rent-controlled apartments, accounting for more than half of the city's stock. Yet it is the most expensive city in the country for housing. Of the homes for sale, only 14 percent are within reach of the middle class, according to online residential brokerage Trulia. “There is a dire shortage of housing that is in any way accessible to anyone in the middle class,” says Tim Colen, executive director of the San Francisco Housing Action Coalition. “What we're seeing is a hollowing out of the middle.”
The demand has been exacerbated by the tech boom, with an influx of high-earning professionals driving up prices in a market with severe housing shortages—with an average of a mere 1,500 units built a year. Chartered buses shuttling tech employees from the city to Silicon Valley have become a potent symbol of gentrification. Even low-end market-rate developments target young professionals, like a 160-unit building of micro apartments rising in the Mid-Market area, across from Twitter's headquarters. Rents start at $1,840 a month for a 274-square-foot studio, or $6.71 per square foot, which is higher than the city's average $4.06 per square foot. Many housing advocates and developers argue simply for increasing supply: more housing, even luxury towers, will eventually drive down prices, they say. But the city's complicated approval process makes it difficult for developers to build. Some believe that the rules should be loosened.
Not everyone agrees that just making it easier to put shovels in the ground will solve the city's housing problems. Instead, many contend that the public sector should play an active role in shaping what kind of housing is built and for whom. “Do you want a market that is targeted solely at singles or couples who are very high-income? Do you think that creates a sustainable city?” asks Noel Poyo, executive director of the advocacy group National Association for Latino Community Asset Builders (NALCAB).
In June, Mayor Edwin Lee introduced a $94 million plan to make 30,000 new or rehabilitated homes available by 2020. At least a third of them would be set aside for low- and middle-income families. Last spring, the city Board of Supervisors approved legislation to legalize in-law apartments in basements and garages of single-family homes, potentially adding thousands of units to the market.
San Antonio: Vision for a New Downtown
Every year, 26 million tourists stream into downtown San Antonio, strolling the city's River Walk. But until recently, the area, with 53,000 workers and numerous hotels, was desolate by dinnertime. Downtown has long served as the city's unofficial divider, with white, wealthier residents gravitating to the northern suburbs and poorer minorities living to the south. As the city sprawls outward, new housing engulfs inexpensive, undeveloped areas. “We're blessed with plenty of land,” says John Kenny, executive director of the San Antonio Housing Trust. “But that's also the curse, because developers tend to spread out where the land is cheapest.”
To draw young professionals and empty nesters back to the center, Mayor Julian Castro laid out a 10-year vision in 2010 to improve housing, retail, and culture. Providing developers with a mix of tax incentives, loans, and grants, the plan called for adding 7,500 housing units by 2020, tripling the neighborhood's stock. “The market pressures are not such that you've got developers running bananas [to build], willy-nilly,” says NALCAB's Poyo. “There is real opportunity to bring everybody along.”
So far, $574 million in private and public investment has delivered 3,589 new housing units, with 15 percent of them set aside as affordable housing. Market rent starts at $1,650 a month for a 1,000-square-foot apartment. (Mayor Castro's efforts propelled him to the national stage, and President Obama appointed him as housing secretary this year.) One recent project is Cevallos Lofts, designed by Alamo Architects, which opened in 2012 with 252 units. Only 10 percent of the apartments are market-rate, while the rest target a mix of income levels, up to 200 percent of AMI. “You can't have the heroes of the public sector unable to live where they work,” says Daniel B. Markson, a senior vice president of development for the NRP Group, the developer.
Ultimately, skyrocketing housing costs threaten the stability of the middle class; as urban centers grapple with this reality, many will see their landscapes reshaped and their demographics altered. While smaller cities like San Antonio do not face the same crunch that top markets do, they too walk a fine line as they try to provide quality housing for their poor and moderate-income populations while still encouraging economically diverse neighborhoods. “We are up against some really big economic forces,” says Gabriel Metcalf, executive director of SPUR, an urban policy think tank. “If this were easy, we would have solved it a long time ago.”
The New York Times.