The vacant lot at Lexington Parkway and University Avenue has been for sale for well over 10 years now, and as far as I can tell it’s been empty since at least the mid-1960s. (Fun fact: 10 years before that, it was the site of Lexington Park, home of the Saint Paul Saints, then a Brooklyn Dodgers farm club.)
Most winters, the 2-acre site is used for snow storage, as dump trucks and plows slowly erect a massive snow pile dozens of feet in the air. In the spring, it begins to slowly melt, forming a crystalline substance that persists well into late May.
All that might change this year, as a new development proposal has surfaced that would build more than 200 apartments. The catch? They’d be “market-rate” units, the first built in the area in many generations. And they’d be priced significantly higher than the working-class homes and apartments on the blocks nearby.
The proposal has sparked a lot of pushback in the surrounding Lex-Ham, Rondo, and Frogtown neighborhoods over what the building would do to affordability in the area.
“You think about the work we’ve done as far as the light rail [where] property values have been going up,” explained Tia Williams, who works on anti-displacement projects for the Frogtown Neighborhood Association (FNA). “Then you think about luxury apartments going up on Lexington. They will displace people.”
Williams’ concerns reflect the increasing housing shortage in St. Paul and the region as a whole. The lack of affordable homes has hit especially hard in the neighborhoods around the proposed site, with areas like Frogtown and Hamline-Midway seeing some of the steepest price increases in the city. In an era with rising inequality and a lack of housing, the impacts of new housing have become a big focus for housing researchers over the past few years.
When you dig into the literature on market-rate housing effects, it becomes devilishly difficult to find convincing evidence one way or the other. It turns out that measuring the impacts of new housing depends a lot on geographic scale, the time frame, the local economy, and (most important) which group within society you are talking about. The more you study the issue, the more complex it can seem, though recent work by researchers in Minneapolis might point to some concrete answers in places like Frogtown and Rondo.
The concept of ‘filtering’
One of the big debates in housing literature is the role that “filtering” plays in the housing market. Filtering involves the different segments of homes — everything from high-end luxury housing down to the most affordable homes for people living at 30% (or below) of the Area Median Income (AMI). (In the Twin Cities, the regional AMI for a family of four is $100K; for St. Paul and Minneapolis specifically, averages are far lower.) Filtering is the idea that, over time, homes and apartments can “filter” up or down between these different segments as they age. In other words, yesterday’s state-of-the-art ranch home is tomorrow’s affordable starter home, as styles change and roofs and walls get older.
“Filtering is a process that takes about a generation,” explained Ed Goetz, the director of the Center for Urban and Regional Affairs (CURA) at the University of Minnesota. “Although the theory suggests that if you add units at the top end, every exiting unit will sort of take a notch downward. That just may not happen immediately, nor is there [a guarantee] that, if it does happen, it would happen in the same neighborhood or in the same geographical area.”
In theory, filtering means that there is a “trickle-down” effect: that building more housing, for any segment of the market, will eventually help with affordability for everyone else.
But there are a few catches to the simple rule of supply and demand. The first is that the amount and degree of filtering varies greatly depending on what city you’re talking about. In markets like San Francisco, with extreme housing costs, most homes actually “filter up” as they age, thanks to the huge dearth of housing.
[image_credit]SSRN[/image_credit][image_caption]A recent study by researchers at Freddie Mac shows that Minneapolis has a relatively fluid housing market, where homes do relatively well in “filtering” between market segments.[/image_caption]The other big problem is that most (if not all) of the effects of building new market-rate housing benefit the middle and upper tiers of the housing market. Meanwhile, almost nothing helps people at the bottom, those folks struggling to find housing priced at or below 30% of the AMI. And in areas like Lex-Ham, Frogtown, and Rondo, those are the people most at risk.
Study looked at 15 years in Minneapolis
Recently, a working paper by CURA’s Tony Damiano looked at new market-rate construction in Minneapolis over the last 15 years. Damiano found that new market-rate units had a mixed effect on nearby (1/5 of a mile) rents: While they helped keep prices lower for renters at the top end of the market, new units raised prices for people at the bottom.
“[On average] new market-rate units’ rents in buildings were about 77% higher than average rents in existing buildings,” explained Damiano. “[While] those units compete directly with existing higher-quality housing in that neighborhood, at the bottom of the market, those units aren’t as good of a substitute for those high-quality units.”
Damiano’s research contradicts some other recent studies that have found that new market-rate construction lowers relative rents in other cities around the country. The difference, according to Damiano, is that his research disaggregated the market segments, seeing how new construction impacted different renters.
“We split up the effect by market segment, [and] we have a pretty good mix of older and newer buildings to test,” explained Damiano, a graduate research assistant at CURA. “What we’re finding is that rents at the upper end of the market see a slight decline in rent, but buildings at the bottom of the market show higher rents on average.”
According to the CURA paper, new market construction drives up costs in nearby areas for the people who are most vulnerable. On average in Minneapolis, this resulted in rents that were about 6% higher than they would have been otherwise. For Damiano, that difference is critically important.
“The goal needs to be thinking about all of this stuff holistically and not about one policy or one set of policies by itself,” he explained. “We need new housing to keep up with growth and a big chunk of that is going to be market-rate. I definitely think that it would do more harm than good to put a moratorium on market-rate housing. But we need to be cognizant. We need to think holistically about encouraging growth while putting in policies that protect low-income and vulnerable communities.”
Housing Catch-22
When it comes to housing, there’s always a catch. While neither Goetz nor Damiano thinks that no market-rate housing should be built, they insist that other policies need to be in place to protect those at the bottom of the market — like the many of people in St. Paul’s Rondo and Lex-Ham neighborhoods.
What does that mean for the vacant lot on Lexington?
[image_credit]Alatus[/image_credit][image_caption]A rendering of the proposed "Lexington Project."[/image_caption]
The most recent proposal would have put 250 units of new market-rate mixed-use housing on the lot, along with a handful (6-15) of subsidized affordable homes, as well as a commercial space that Osmundson calls an “incubator” for small businesses in the area.
“We’re keenly aware of a lot of the issues,” he explained. “One of the things that has been difficult is this [term] luxury housing, or workforce housing, or affordable housing — all those housing monikers that get used. In order for this project to work, we cannot underwrite rents at rates close to what a project over at Allianz Field will be charging. We can’t charge rents close to what Vintage on Selby is charging. In order to make this financially viable, and also create an appealing community, we have to be $200 or more in chunk rental pricing less than a lot of our market comps.”
In other words, in an area that hasn’t seen a new market-rate project in a half century, it’s very difficult to get the financing together for new homes on a vacant lot.
One thing is for sure: Whether the lot is developed this year, or whether it stays a snow pile for another decade, housing prices and home values will continue to go up in the area. That means that, either way the project falls, folks at the Frogtown Neighborhood Association will still have to struggle to prevent displacement.
“We’re trying to strike a balance with people,” said Williams, who works often at the nearby FNA office on Dale Street. “We want development, but with no displacement. Yes, let’s develop; yes, but don’t displacement people. And rent control is long past due.”
State Fair parking sure is taking a hit this week.
MTC Park and Ride.
Take the bus!
Tax-increment financing agreements exacerbate the affordability disparity. When a big new project on a site that previously had low taxable value gets TIF status, existing developed properties have to pay more in property taxes than the new one does until that TIF agreement expires. Typically that’s quite a few years. The renters in the new development in effect get subsidized by the residents in older buildings, many of them lower-income, until the agreement has been fully amortized.
Yeah, IMO the effect of TIF is pretty diffuse. The effects mentioned here are much more localized.
But yes I find TIF to be sometimes problematic, especially since the districts last so long afterward.
They aren’t proposing TIF for this market rate development, are they?
No, no TIF. There is, however, a grant from the met council for building along transit corridors. The reasonable (IMO) part of the opposition to this is that a project getting any public money should have a higher percentage of affordable units.
But the idea that market rate units on a lot that has been empty for decades itself constitutes displacement is absurd. As you say, new units in an empty lot will relieve some of the increasing demand pressure on rents in the area.
That neighborhood is gentrifying quickly. I know a number of people who have purchased homes nearby and are pouring money into renovations.
No.
1. I’ve been taking the bus to the fair every year I’ve lived here, and I don’t live nearby, so walking isn’t a realistic option. Don’t really understand why people would drive, given the parking hassles I’ve seen and read about.
2. The snow pile has powers we couldn’t have imagined a century ago. What Bill’s article tells me is that “filtering” really IS pretty analogous to “trickle down” in economic terms. In other words, if you’re in the bottom half, it basically doesn’t work.
If I had a simple solution to the issue I’d be a very wealthy guy right now, but I don’t. The market (I’d argue that there is nothing even approaching a “free” market in housing) has demonstrated over and over again that it is (choose one) incapable or incompetent when it comes to real estate prices. The area’s long, long history (and continued practice) of both economic and racial segregation and/or discrimination is a sizable boat anchor around the neck of most policies that try to solve the issue of housing supply, and especially of housing equity.
Zoning decisions of decades ago are still having repercussions today, even when – especially when – the times and the economy have changed dramatically. There’s no incentive – zero – for the real estate industry to try to keep “market rate” prices under control, since incomes largely depend upon the prices of the units sold, not the number of units sold.
For the same dollars that currently go into my payment for a modest, 1950s house in a less-than-stylish neighborhood, but which includes both insurance and real estate taxes, I can get HALF the square footage, no yard, no parking, and the certainty that I’ll never get out alive in case there’s a fire in a new, hip apartment building in NE Minneapolis. It’s insane.
For whatever reason, we mostly talk about filtering in one direction. But it can and does go in both directions, which is part of what is happening with higher rents on existing units – growing value for older buildings. That upward filtering is also very hard on exiting renters.
The odds of perishing in a fire in a modern multi-unit building, with fire sprinklers, is very, very low. Much lower than the odds of perishing by fire (or smoke) in your current single family home (presuming it lacks fire sprinklers.)
As Bill points out, the local guys he talked to have reached conclusions on that contradict other studies, as well as real-world examples in places like Boston and D.C.
Filtering often gets associated with supply side economics, which is understandable since the solution in both cases is adding supply. The distinction is that while people can and will accumulate an unlimited supply of money if possible, they are very unlikely to own or rent more than one housing unit. If I move into a fancy apartment, I am unlikely to keep the old one and keep it empty. If you build enough new apartments, there will be a sufficient supply of old ones to keep prices down.
The question is then: why not just build affordable housing? And the answer is that housing is very expensive to build. You can’t add nearly enough housing by publicly funding construction. And for-profit developers can’t make money unless the units are at a certain price point. You can incentivize builders to include affordable housing with tax increment financing and other subsidies. You can adopt inclusionary zoning, which requires that any building over a certain size include a percentage of affordable units. This runs the risk of discouraging projects altogether, so you have to strike a balance.
Under any of these methods, the best we are going to get is mostly market rate housing, which we hope will create some filtering, and a small portion of new affordable housing. The alternative is no housing, which will exacerbate the problem since its the housing supply lagging behind the demand which has created the problem in the first place.
You make good points. A recent study did point out for MN to consider out of the box policies vs the usual. Why not a push for the govt also to subsidize or give low cost loans/downpayments to those in the middle to purchase small single stand alone homes or for builders to build small homes so as to free up some of the housing stock for others? And having businesses keep up with the cost of living so government is not subsidizing housing?
Those nearby rents going up ARE displacement. That’s people who can afford to pay more bidding out existing tenants. A new market rate project on an empty lot is a way to try to take some of that pressure off.
Which is good, because that pressure isn’t going away. The light rail is a big investment/amenity is these areas, after decades of disinvestment.
It’s interesting that the article starts out “The catch? They’d be “market-rate”” units…..” So a market rate building, replacing an empty lot is “a catch”. No one is proposing to tear down affordable housing and replace it with this building, and in fact this development includes some subsidized units. While as noted this is a difficult area to predict there is some research that suggests rents around these buildings don’t increase and may actually decrease (https://appam.confex.com/appam/2018/webprogram/Paper25811.html). As we look at the need for the core cities to increase density and accomodate more residents, a new 200+ market rate unit building isn’t “a catch”, it’s a success.
Yes, I read two of Mr. Mast’s papers (though not the one you link to) for this article. It’s good work and makes a great point about the need for more housing in general. The key difference though is not whether new market-rate housing lowers rents in general, but specifically: does it lower rents for people at the bottom third of the market? Of course not.
Can you really say of course not? You seem to be getting everything from Goetz and Damiano, even though you admit that their work contradicts others. The more I read about these guys, the more they seem like NIMBYs looking for a ways to justify their opposition to building anything.
Goetz and CURA are involved with the opposition to this project, which is something you probably should have mentioned instead of treating their opinions as objective.
As a social science PhD myself, I treat any claim to objectivity with a great deal of skepticism, and that goes for the Upjohn Institute and CURA alike. Tony’s working paper slides are here (https://www.tonydamiano.com/project/new-con/). Diving into methodology and data is indeed what I try to do with this column.
For years now, though, I’ve been trying to reconcile the claim that increasing housing supply with new market/high-end housing helps *everyone* with the persistent claims by community members (especially POC) that increasing supply with new market/high-end housing does not help them. At the same time, the housing shortage is bad for most everyone in the city, especially the poor, and doing nothing seems also unacceptable.
This column (and I’d guess CURA’s work) is an attempt to get at the root of that tension. IMO, the NIMBY / YIMBY dichotomy does nobody any favors, at least not outside of California.
You missed my point about objectivity. The piece starts out talking about this particular dispute at the Lexington site, and then switches over to some “experts” about more general issues. What you omit is that these guys are working with the opposition on this specific project. I’m not worried about your objectivity in your observations. My concern is their lack of objectivity.
Goetz and Damiano are not traditional NIMBYs in that they at least purport to be concerned about affordable housing and not just neighborhood property values. But for all their claims about needing more housing, they (or their work, at least) keeps popping up in opposition to new housing projects.
Does filtering not make its way down to the bottom tier? Possibly. I expect the answer depends on how much housing is added. Whether enough of a dent is put in the housing shortage. As was pointed out, there is no filtering in San Francisco because the housing demand massively exceeds the supply. Damiano says he goes back 15 years, but 15 years ago there was still a huge deficit in the amount of housing that was being added here. Essentially he is saying that a supply-based solution failed in an era where it wasn’t even tried.
As to this specific project, what is the answer then? Besides “no?” Everyone seems to agree that we need more housing, but just not THIS housing. So build nothing? This neighborhood is gentrifying quickly irrespective of this project. In fact, the rising property values in the neighborhood is why the project is viable. Its kind of a chicken and the egg idea – is it the new housing that’s driving up values? Or is it the rising values that attract the projects?
We are relying on private development and counting on filtering (and squeezing out a few affordable units through subsidies and IZ) because its the only way to get enough housing built. Housing is too expensive to build much of any other way.
If this project doesn’t get built, at some point the value of the property will reach the point where someone will build housing without an affordable component. As far as I know there aren’t any significant variances here, and there wouldn’t be a legal basis for the City to stop it.
I think you might be surprised that we agree. Personally, I think this is a good project (though many neighbors do not). On top of that, I don’t think the folks at CURA are opposed to this project.
Their point, as I understand it, is to be aware of short-term local impacts that a project like this would have on vulnerable renters, and to do things to protect or help them. There’s a bunch of options on that front, and Minneapolis recent renter protections (https://www.minnpost.com/cityscape/2019/06/minneapolis-renters-input-informs-new-housing-stability-proposals/) are a good example of how to start this. But everyone agrees — even neighbors — that we need is to build more housing, especially on long-vacant land, and that the status quo is not working for most people.
I am not surprised that you and I agree – I have always enjoyed your writing very much. This piece just seemed a little off to me.
I am not sure about Goetz and Damiano and CURA, though. They seem to be caught up in the developers-are-bad-guys way of thinking, when the reality that developers are, well, maybe not good guys, but a necessary component of solving the affordable housing problem.
I am sure you saw the stories in the Strib today. The first was about how rents are rising quickly, but less in the city where more housing is being built, and more in the suburbs where it hasn’t been.
http://m.startribune.com/average-monthly-rent-in-the-twin-cities-was-on-the-rise-last-year/567893782/
The more interesting and relevant piece was this one, where an affordable, older apartment complex is kicking all its tenants out and renovating to attract higher-paying tenants. This happened in a big complex in Richfield a couple of years ago too, and I’m sure elsewhere as well. This is the inevitable result of not adding enough (and/or blocking) market-rate housing. More people competing for housing makes it worthwhile for old buildings to upgrade.
There is going to be market-rate housing added no matter what. The question is whether its going to be built new in vacant lots, or whether its going be added by displacing people in affordable housing. This Frogtown group has it completely backwards. Building a new market-rate building is not displacement. NOT building it is displacement. If you don’t build it, people somewhere else will be displaced.
http://m.startribune.com/new-landlord-forces-out-tenants-in-new-brighton-raising-issues-about-renter-s-rights/567411272/
Another good piece.
https://www.nytimes.com/2020/02/13/business/economy/housing-crisis-conor-dougherty-golden-gates.html?fbclid=IwAR3moHt_SqbYfXStFExwQcM-e5GzGx0Wnsu73LO4X4hY0gKPLiXUjebrjns
The idea that adding housing is the problem is absurd. Damiano is a clown.
If you can measure the nearby effect, would it be possible to directly allocate a portion of the tax revenue generated by the new development toward helping the vulnerable people affected by it?
I’m disappointed that this article focused so heavily on the short-term irrelevant concept of filtering, and ignored the very immediate reality of [not an academic term] buffering.
People move around as they go through life, sometimes choosing a cheap run-down studio, or a nicer two-bedroom with a roommate, or a longer-term place when you have kids, or (maybe maybe not) moving to something smaller if kids move out. Ideally, it’s like a game of musical chairs where there are always 3 more chairs than players.
When communities grow – and the Twin Cities grew by more than 250,000 over the last decade – without growing the number of homes more, you’ve changed your game of musical chairs. 8 people join that game but there’s only one more chair. Suddenly, the biggest, fastest (and in a housing scenario wealthiest) players grab the chairs first, pushing the folks who were there earlier out of the game.
Adding new homes (market rate or affordable) is like adding chairs. People generally move because their family gets bigger or smaller, or because they found something enough nicer than where they were it’s worth the pain of moving. These new chair-homes may or may not be affordable, but if there is someone local who’d like to live there, when they move there they are freeing up a chair-home for someone else to move up into. It also means that if someone new moves to the neighborhood, they can do that without pushing someone else out. They provide a buffer that protects current residents — today. It’s not some generation-in-the-future filtering benefit. It’s someone with heat and a roof today.
As Goetz and Damiano point out, this doesn’t solve all the affordable housing challenges. I’d add that all the other critical solutions can’t succeed if we don’t have enough homes to go around.
(There’s a short video detailing the musical chairs example here https://www.sightline.org/2017/10/31/video-cruel-musical-chairs-why-is-rent-so-high/)
Buffering (if we should call it that) does appear in one of the Mast studies. People move up and down into nicer and less nice neighborhoods and homes, and so these “segments” of the housing supply are fluid in that sense. What I tried to do here was to focus narrowly on that key question of the impact on the bottom-tier of housing. It’s just my guess, but those folks don’t buffer much. What do we do about that?
CORRECTION:
I had a small brain cramp while writing my comment yesterday: “For the same dollars that currently go into my payment for a modest, 1950s house in a less-than-stylish neighborhood, but which includes both insurance and real estate taxes, I can get HALF the square footage, no yard, no parking, and the certainty that I’ll never get out alive in case there’s a fire in a new, hip apartment building in NE Minneapolis. It’s insane.”
What I should have written, to be accurate, was: “For TWICE the dollars that currently go into my payment for a modest, 1950s house in a less-than-stylish neighborhood, but which includes both insurance and real estate taxes, I can get HALF the square footage, no yard, no parking, and the certainty that I’ll never get out alive in case there’s a fire in a new, hip apartment building in NE Minneapolis. It’s insane.”
It’s still insane, and the cost is twice what I wrote yesterday.
Many people want to live in new apartments with new appliances near transit and not own 1950s houses. Renting anything these days is become quite expensive, as is buying a modest 1950s home. I don’t much care for judging how and where people care to live.
See also: https://www.minnpost.com/cityscape/2019/05/amid-a-national-tidying-trend-new-interest-in-micro-apartments/
Ray, are you comparing apples to apples?
It’s not a good comparison between current rents and your P & I payments of you bought your current home five or ten or fifteen years ago.
But in any case, even at twice the price, you’d be much less at risk of death by fire in that hip new apartment in Nordeast than in your current non-sprinkled home.
The NY Times covered this issue this week as well: https://www.nytimes.com/2020/02/14/upshot/luxury-apartments-poor-neighborhoods.html
That’s just the same guys in another article.
Correct. It’s another overview of the literature by an excellent urban journalist.
So this lot has been vacant for decades….an eyesore. A private developer is willing to put in a really nice building to provide a place to live in the city and to increase the tax base significantly from nothing for years….I would think St Paul would jump at this apartment development. If they let this one slip, maybe the housing market goes down in 2020 and they are again left with an eyesore. This is a supply and demand equation. I am positive that the developer did their research and there is a demand for market-rate housing in this neighborhood….there is a demand for it. Why not allow the market to dictate that and add the housing? If there is a shortage of “affordable housing” St Paul and Mayor Carter should put resources into that. Do not block the addition of a nice apartment building to fill a vacant lot, that may help to turn that neighborhood around so more units get built in the future.
Everything you say is correct. The problem is that the neighborhood activists have bought into a nonsense idea that adding housing that adding housing is going to exacerbate the increasing rents in their gentrifying neighborhood, rather than adding supply to the overheated demand.
At some point the market will be such that the parcel will be developed without subsidies and without any affordable housing at all.
Well, as the NYT article suggested: More places to live is a good thing no matter how you look at it. And the folks that move into the new places are leaving open other places, and so on and so on. Folks keep screaming about “affordable housing” not sure what that means, Section 8 subsidies for single family homes with $300 a month utility bills? Or anti-gentrification proposals so that we can cordon off sections of the cities for low income folks? Its complicated.
The fork in my eye intimation by the collection of opinions here is that there are a ton of variables affecting housing of any kind coming on board. All these variables have their own desired course of action. Perhaps it is truly outside the realm of logic to think that anyone of these variables should control the destiny of the promise of a secure and safe home. Can government, business, contractors and all the forces that bring people to emigrate or immigrate and age acting apart solve this problem. I think not. Massive social planning for housing is stuck in the ditch. Until it is freed the wheels will continue to spin digging the hole even deeper. Struggling through with frosted coated glasses of minutia will only delay solutions.
One of the problem with these economic analysis are that they sometimes (maybe even often) rely on inherently flawed premise. The concept of “filtering” in this analysis is simply a supply-side rationale pretending to be an objective factor in an economic formula. The fact that housing doesn’t depreciate like other products simply renders the assumption behind “filtering” nearly incoherent.
We bought our house for $85k in 1994, the house next door which is nearly identical just sold for $250+… these houses are 25 years older than they were when WE bought them, and it’s been 60 years since they were built.
Even with multi-family units I hate to tell you this but the new construction isn’t necessarily “better” than the old construction. Does anyone know how this anodized aluminum facing will hold up over time compared with the brick and mortar used 100 years ago? I’ve been watching these things go up and they’re still framing with wood up to five stories with means these “new” units will be just as creaky and noisy as older units, and they’re not any larger. A one bedroom or two bedroom is still a one or two bedroom. Some of the units have even used metal studs witch are much less noise cancelling then wood.
Unless you’re looking at high end housing builders build as cheap as they can.
Meanwhile this study simply confirms what most of us noticed long ago… gentrification never lowers housing costs and new construction adjacent to older housing raises prices, it doesn’t lower them. Unless a city gives free reign to slum lords, landlords will maintain properties and raise rents because they’re in it for the money. The age of the building is irrelevant compared to it’s proximity to amenities or trendy location, and new construction converts hum-drum neighborhoods into new trendy locations.
If we could build our way out of affordable housing crises simply by building new housing that would have happened long ago… it hasn’t, ergo supply and demand doesn’t function in this scenario, and “filtering” is not a reliable factor limiting or reducing housing costs.
Its bizarre that you say that supply and demand doesn’t apply when almost everything you write demonstrates supply and demand. The value of your house tripling in 25 years despite being 25 years older? That’s a function of the supply and demand in your Minneapolis (or wherever in the metro you live) neighborhood. Put that identical house in Worthington or some part of Minnesota where the population is declining and you couldn’t get your $85k back.
Landlords raising rent and behaving like slumlords? Only possible in a tight housing market. Only possible with limited options for renters. And you know what will help? Adding options – building more housing. Its not the new housing that makes rents go up. Its that there still isn’t enough new housing. Its that the demand still far outstrips the supply, as has been the case for a long time. Addressing the problem by building more housong wasn’t tried long ago, because it wasn’t allowed to. There were artificial (zoning laws) restrictions placed on adding housing. Cities have figured out this is the solution and are changing policies to finally allow it to happen.
This study, which Bill notes is in contrast to others, doesn’t prove anything you say it does. It doesn’t even claim tondonso. The only point it is making is that filtering – which unquestionably happens – doesn’t reach the lowest tier of the housing market.
Pat, if the financial crises didn’t teach you that real estate prices aren’t driven by mere population growth as apposed to manipulation I’m afraid I can’t help you.
Yes, real estate loses it’s value when a population collapses for some reason, but population growth alone doesn’t explain why the house next door sold for $250k two years ago and $350 two weeks ago. How much do you think the population jumped in the last two years? And by the way, we haven’t all been sitting around watching our houses double and triple in value while no one builds any new housing anywhere, we’ve been building constantly for decades, and we’re in the middle of building boom right now, yet prices go up, not down. The claim that we just need to build more is just doubling down on supply side magical thinking.
Listen, it’s simple- if you’ve got a formula that will predict how much our homes an apartments will increase or decrease in value for every 1000 people who move in or out of the Twin Cities irrespective of how many new units we build I’m sure we’d all love to see that formula. In the mean time it’s more than safe to assume that simplistic supply and demand principles don’t predict outcomes in this scenario.
Anyone who predicts that real estate will lose it’s value simply because we build more housing, or because existing housing gets older once it’s built, is obviously looking at a different universe than the one we currently live in.
Ok, I see the problem here. You state that we have been building constantly for decades. Except that isn’t true at all.
For decades, the supply of housing has not kept up with the demand. And much of that was due to artificial constraints like zoning codes. It is only very recently that cities have begun to recognize the problem and have moved to remove those constraints (i.e. Minneapolis 2040) and to aggressively build more housing.
Population growth is the primary driver of supply and demand in the housing sector, but its not everything. The strength of the economy and the buying power of housing consumers is part of the equation.
Its difficult to predict how much adding housing will decrease costs, but we know that it will, which is why Minneapolis and other cities are doing it. Its not magic – its economics and data. But understanding that means getting the basic facts right. And the basis for your opinion is that we have building for decades and it hasn’t helped is an outright falsehood. Your entire (mis) understanding is based on your ignorance of the undisputed facts at the heart of the issue.
I apologize if I’m duplicating someone else’s comment but I would point out that the extent to which the CURA study is contrary to other studies might be due to more rigorous methodology. A lot of these “filtering” projections may flow of out industry sponsored studies, notice that no matter what, more development seems to be recommendation.
Just think back over the years to all of the bogus “predictions” that flow out of the local association of realtors; remember a couple years ago when they were telling people they better sell now while the selling was good because prices were going to drop? And then during the Great Recession they kept predicting prices would recover in six months. And even THEN we didn’t get affordable housing out the recession because banks sat on foreclosed property waiting for prices to recover. Whatever.
“Might be due.” “May flow out of.”
I get that you don’t care about facts – that’s clear from your other comment about how we have been building for decades – but you could actually look instead of just assuming.
And again, the examples you raise actually reinforce the idea of supply and demand. The market fluctuates. There is less buying power in a recession. That doesn’t change the fact that the scarcity of available housing drives higher prices.
Pat, I don’t know about you but I’ve lived here my entire life and we’ve never stopped building homes in the Twin Cities. In the 80’s and 90’s it was suburban sprawl in the exoburbs, and by the turn of the century and the rise of the housing crises it’s changed to urban in-fill. If you want to take a drive with me sometime from Apple Valley to Uptown and the U of M, I can show all the housing that’s been built and tell you when it was built. The idea that we stopped building or that development has been blocked is simply daft.
Sure, you can call your perspective “economics” if you want, but it’s faith based economics, not evidence based economics. You are and have been predicting depreciating property values in the twin cities and that hasn’t happened for decades. Housing prices in the Twin Cities have been increasing for decades, although at unsteady paces.
You don’t have a supply and demand formula to predict housing prices because none exists, yet you claim to be the guy with the data and the “facts”. It’s not just “difficult” to predict when housing prices will fall, it’s impossible, that’s why your predictions fail to manifest, not because evil locals and their government keep thwarting the magical markets with their rules and objections.
Everything you keep claiming is patently false. Housing prices in the Twin Cities have been climbing for decades. We HAVE been building for decades. Older housing does NOT lose it’s value as predicted by filtering theories. I can’t stop anyone from making these faith based predictions, but I can note that these predictions have failed to produce affordable housing, or even recognize the affordable housing crises.
Look, half of these projects are sold as revitalization projects- do you really predict that revitalized neighborhoods will be cheaper to live in? Gentrification is a real thing, and we’ve been watching it for decades.