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Bending the demand curve

In the quest for housing, can reexamining supply solutions make them work for us instead of against us?

TARGET April-June 2020

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Photos from Unsplash by Tom Rumble, Brandon Griggs, Nong Vang and Henry & Co.

Among the litany of issues facing the country, the COVID-19 pandemic reminds us that adequate provision of housing is more important than ever. For those lucky enough to be able to work from home, the functional demands on domestic environments have exploded: Living rooms and bedrooms have been converted into offices, gyms, classrooms, home theaters, and workshops. If a family member or roommate is sick, makeshift isolation units are devised. Low-income, low-job-security workers fear for their long-term ability to pay for housing. This is especially true in expensive cities such as Boston, New York, and San Francisco, where federal stimulus dollars may not even cover a single month’s rent. Every week, millions more workers lose their jobs, and many increasingly fear eventual eviction. Provision of adequate housing for all—defined by the United Nations as a human right—is becoming simultaneously more important and more uncertain every day.

This, combined with decades-long structural inequality in housing and the more recently recognized national affordability crisis, has led some politicians to begin discussing housing with renewed intensity. Senator Elizabeth Warren, for example, has publicly advocated for affordable housing to be a key element of the pandemic recovery. In a recent interview with Ezra Klein published on Vox, she explained the benefits of accelerating production: Expanding availability will have short-term benefits by providing jobs and long-term benefits by creating a “more stable housing supply that takes a lot of economic pressure off families.”

While society remains in a holding pattern filled with uncertainty, it is likely that housing planning and policy will see some degree of reorientation in the coming months and years. For cities, it will be critical to reexamine a dominant metric of housing that emerged after the last recession: production supply targets.

Before the pandemic

Since the 2008 recession, planning departments in major US metropolitan areas have developed comprehensive plans aimed at a wide range of topics. Frameworks for the development of the city, these blueprints outline broad objectives and challenges without getting into the specifics of implementation. Not surprisingly, housing was identified as a major topic for cities such as New York and Boston, whose comprehensive plan, Boston 2030, called for the production of 69,000 housing units by the year 2030. (New York’s OneNYC called for 300,000 by 2026.)

Both cities have made progress toward these goals. Last fall, Boston announced it had produced 30,000 units while New York City produced about 122,000 by November—significant achievements. Economists and policymakers generally agree that insufficient supply is a major culprit in the affordability crisis, and the web is overflowing with articles touting the benefits of supply-side solutions to the housing crisis. A January 2020 article in The Economist concluded that “only a long-lasting construction boom has any chance of noticeably improving housing affordability.” Is it really this simple?

For expensive cities, supply-side solutions may work better in theory than in practice. Chris Herbert, managing director of the Joint Center for Housing Studies at Harvard University, explains that at the municipal level, establishing production targets is an attempt to instigate a process known as “filtering”—if cities build enough housing at the upper, more expensive end of the spectrum, those units will absorb people who move out of other units. This process continues, and, in theory, housing at the more affordable end of the spectrum becomes available.

There are practical drawbacks to this strategy. “It takes a long time for a new apartment in, for example, Millennium Tower, to have an impact on the price of a home in Dorchester,” Herbert explains. “Filtering is much more effective when it happens at different price points or when developers build an excess of housing at the high end. But we don’t really see that coming through because excess isn’t profitable.” In other words, without other measures to ensure affordability, relying on market-driven increased supply probably won’t have the desired effect.

Filtering seems to leave much to be desired. According to Real Estate Boston, city neighborhoods recorded an average rent increase of 6 percent—twice the national average—between 2019 and 2020. Historically affordable areas have been particularly hard-hit. Roxbury, for instance, saw an annual increase of 23 percent.

Nationally, the affordability challenge appears to have reached a critical tipping point. In the past few years, headlines repeatedly lament a disturbing new trend: Middle-class households can no longer afford homes in many US cities.

Even with supply targets met at the local level, affordability is increasingly elusive to a widening segment of the population. Chrystal Kornegay, executive director of MassHousing, says her agency’s approach to supply is fundamentally rooted in an equity-based approach. “We have been trying to broaden the tools we have to fund different income groups,” she said. “We created workforce housing targets because there were no tools to support people in income ranges that can’t afford market rate. We’re also increasing homeownership for people of color to begin closing the racial homeownership gap.”

Kornegay suggests that supply is a means to an end with more complex outcomes. The Metropolitan Area Planning Council has its “target number of units to be built annually, which is great,” she said. “But the challenge is that it doesn’t talk about which communities get housing.”

Once the conversation is framed in terms of affordability and equity, other important considerations emerge.

Boston has made strides toward its housing production goals. As progress continues, human-oriented measures of progress are also needed.

Measures of success

Herbert identifies three dimensions crucial to the success of housing in cities: affordability, quality, and location. Housing needs to be more affordable to lower- and middle-income residents, the physical building stock needs to be of good quality, and housing should be located in nonexclusionary neighborhoods that provide humane living environments and adequate access to civic services. Of course, increased supply plays a role in all three. But measuring success in these terms requires a broader set of qualitative and quantitative metrics: How should cities evaluate their efforts to address housing?

At the core of this question is a fundamental disparity between how residents and organizations perceive progress toward housing goals. The traditional economics-based view—which often influences policy—tends to regard increased housing supply as a solution to the affordability crisis. But urban residents may correctly equate new supply with increasing unaffordability, especially when it is associated with large-scale luxury market-rate development—giving rise to equity concerns.

Also at the core are where issues related to the physical diversity of housing stock enter the conversation. Elizabeth Christoforetti, who runs the Cambridge-based interdisciplinary design firm Supernormal, said: “We are seeing—or were seeing, before March of 2020—a lack of physical diversity in new supply. What has been coming online postrecession has been of a specific character, often associated with a specific cost: large-scale, luxury rental projects.”

This is especially problematic in neighborhoods that were historically disenfranchised and underdeveloped because of racist planning policies such as red lining. For these areas, the effect of supply in the form of market-rate apartments is financially disruptive at best and devastating to community-based social networks at worst. A new way of thinking is clearly needed.

Matchmaking

Drawing from recent design explorations for a neighborhood plan in the Boston area, Christoforetti advocates for a strategy she calls “matchmaking”: “Recently we were involved with a research effort that involved matching household type—multigenerational or single parent, for example—with a type of housing unit that supported the social infrastructure of that household. There is a financial and a physical aspect of this in that the design of the unit and building type must meet an existing need but must also be financially feasible to the future resident,” she said.

“I think cities can claim success in housing when we can show that we’re increasing this ‘matchmaking’ between people and units, when we’ve increased housing stock that addresses the real needs of our people now and into the future. Considering possibilities such as accessory units and shared spaces points toward potential on both fronts.”

Even without a pandemic, solving the housing crisis is a complicated undertaking. Nuanced measures of progress such as matchmaking, affordability that addresses the full spectrum of need, and various indices of quality seem more suited to the problem. Given the complexity of the issue, many factors should be weighed at once.

It is useful to consider an idea Harvard’s Kennedy School of Government scholars developed known as “reflexive-improvement capability,” which suggests that organizations are more effective problem solvers when they adapt to new information that emerges over time. In cities such as Boston, meeting supply targets for housing has not led to a widespread increase in affordability. The reflexive-improvement capability lens suggests we should reevaluate supply targets as a primary indicator of success.

All this invites reflection on the evolution of process. Measures of progress identified in a comprehensive plan, for example, may be appropriate for its early stages. High-level frameworks imply high-level metrics. But as projects come closer to getting off the ground, everything becomes more nuanced and granular. Sites get chosen, housing is designed, and pro formas are analyzed. The complexity of evaluation should increase as planning becomes reality; assumptions should be challenged and more questions, posed.

Ultimately, reports that boast about achieving supply targets reflect an obvious aspiration: increase affordability. Anxious to show they are making productive efforts toward this goal, cities have encouraged the private sector to help solve the housing problem in the hopes of providing better conditions for residents. But what is crucially needed is a shift in how progress is broadcast and, in turn, how progress is understood by urban residents at large. If the public understands success in terms of humanitarian aspirations around equity, affordability, and quality, subsequent strategies—of which increased production targets is one—will follow. In that world, supply works for us, not the other way around.

“We want to be all in on production,” said Kornegay, “but the question of production on its own is not the same as production where and production for whom.”

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