By David M. Greenwald
Davis, CA – In the midst of an interesting debate on housing, one commenter this week put forth the proposition that the city should in effect turn its affordable housing policy on its head and push for 85 percent affordable housing projects if not fully 100 percent.
While we certainly have a number of examples locally of land dedication sites, building large scale affordable housing would be extremely difficult and time-consuming. While the state has passed some affordable housing measures, unless it goes back to the days of RDA (Redevelopment Agency), which to date has not gotten a lot of traction in the legislature, it would be difficult to see a funding mechanism for large scale affordable housing.
Moreover, even under RDA, the city’s affordable housing policy was 65 percent market rate to 35 percent affordable.
Implicit in this discussion is the notion that market-rate housing is not a useful production of housing. Having subsidized affordable housing is helpful to create a more diverse pool of housing, but it really would not fix some of the problems with the housing market.
For one thing, many housing advocates talk about the need to address the “missing middle,” the kinds of market rate housing that can serve middle income people—duplexes, fourplexes, and the like which serve as a middle between the traditional detached single-family homes and the denser apartment buildings that serve as the core of affordable housing projects and housing for lower income families and working class people.
I came across a study out of the Lewis Center at UCLA by Shane Phillips, et al., which was published in February 2021 and found that, contrary to some claims, “market-rate housing makes nearby housing more affordable across the income distribution of rental units.”
There is an interesting and growing debate among housing advocates over “the neighborhood-level impacts of market-rate housing development.”
On one side of this debate is the notion that “unsubsidized homes—whose price often places them beyond the reach of lower- and middle-income households—make nearby housing more affordable by increasing availability and relieving pressure on the existing housing stock.”
This is known as the “supply effect.”
On the other side are those who argue that this “new housing only attracts more wealthy households, brings new amenities to the neighborhood (including the housing itself), and sends a signal to existing landlords that they should raise their rents.”
Many argue that this effect actually makes housing less affordable.
Researchers have long believed that “building new market-rate housing helps stabilize housing prices at the metro area level” and the authors here note, “The question of neighborhood-level impacts of market-rate development has been hotly debated but under-studied.”
Here the researchers examine six working papers on the impact of new market-rate development on neighborhood rents and they find that five of them find that market-rate housing makes nearby housing more affordable across the income distribution, while the sixth finds mixed results.
The authors conclude: “These findings point to local benefits from market-rate development, but they should not be interpreted as an endorsement of market-rate development regardless of the project or neighborhood context.”
Instead they argue: “Housing production should still be prioritized in higher-resource communities where the risk of displacement and other potential harms is lower, and complementary policies such as tenant protections and direct public investments remain essential.”
Nonetheless, “the neighborhood-level benefits of market-rate development are promising and indicate an important role for both market and non-market solutions to the housing crisis.”
This finding reinforces my inclination that market rate housing and increasing the overall supply of housing acts as a release valve to relieve pressure on the existing housing stock to provide for the entire range of housing needs.
That said, I am not opposed to communities such as Davis prioritizing both subsidized affordable housing and also the missing middle to provide starter homes for middle income families who can then buy into the market and use that to upscale to larger homes.
While I largely agree with those who argue that Davis probably can’t build sufficient housing to alleviate its demand problem, at the same time, the stagnant market is not helping those attempting to buy into the market and certainly not helping to bring in more families with children—and that’s to the overall detriment of the community.