Actually, NIMBYs, Cities Aren’t Building Enough
While urban development is often characterized as a war between hungry developers and heroic neighborhood activists, the reality is far more complicated. Despite reasonable concerns from NIMBY (“not in my backyard”) residents about the impact of new development — including congestion, reduced parking, environmental damage, and a diminished community aesthetic — expanding a city’s housing supply is often critical to its affordability.
According to a recent study by Paavo Monkkonen and Michael Manville at UCLA, this kind of local opposition is the biggest obstacle to modern housing development — even more so than physical or geographic constraints. Now more than ever, cities have become contested areas for space, with countless low-income residents being pushed out to the urban — and even suburban — peripheries due to competitive demand.
Pressured Real Estate Markets
But not all cities grapple with the same dilemmas. To figure out which areas are struggling to keep up with housing demand, we looked at 2016 data for population growth and housing affordability.
The table below shows the ten large metropolitan areas (those with more than one million residents) with the highest shares of population growth from 2012 to 2016. The list consists mostly of second-tier metros in the Sunbelt, Rustbelt, Texas, and North Carolina. Charlotte ranks highest, with a population growth of 34.8 percent, followed by Nashville and Austin, whose populations grew by more than 12 percent from 2012 to 2016.
Rising housing prices place yet another strain on urban development. One of the most accurate ways to determine a metro’s housing affordability is to look at its median multiple, or ratio of median housing prices to median household income. The following table shows the ten large metros with the least affordable housing markets.
This time, large metros like San Jose, L.A., San Francisco, Miami, and New York top the list. But a few smaller metros, including Seattle, Portland, and Denver, also make the top ten, suggesting that housing affordability is not only the province of dense gateway cities.
To determine which cities are not building fast enough to keep up with demand, we examined the permit codes for multifamily buildings (those with five or more units). This allows us to hone in on developments that are critical to densification and affordability, as opposed to single-family buildings, duplexes, or three- and four-person units.
The following table shows how the fastest-growing metros fare according to four measures of multifamily building permits. On the one hand, metros like San Antonio, Dallas, and Nashville are densifying quite rapidly. From 2013 to 2017, San Antonio’s share of multifamily permits grew by more than 590 percent annually, despite seeing minimal development in years prior. Of the ten fastest-growing large metros, Dallas boasts the highest share of multifamily permits: 43.7 percent, or around 27,000 in total. Austin is close behind with four in ten multifamily permits, but its multifamily permit growth is nearly a third of the rate of its population growth.
On the other hand, much of the permit growth in metros like Houston, Orlando, and Indianapolis stems from single-family buildings as opposed to large-scale construction. Of the ten fastest-growing metros, Columbus boasts the largest share of multifamily permits, but one of the lowest shares of multifamily permits per new resident, suggesting that it, too, has had trouble densifying. Meanwhile, Houston has the lowest multifamily permit growth of any large metro in the U.S., having experienced a decline of 15.3 percent. As of 2017, multifamily permits made up just 13.5 percent of the metro’s total permit share — a sign that Houston may be developing outside of its urban core.
We now turn to development among metros with the least affordable housing markets. Both New York and San Francisco lead the pack in terms of their growth and shares of multifamily permits. Of the ten least affordable metros, New York has the highest share of multifamily permits (73.1 percent) and the sharpest annual multifamily permit growth (25.3 percent). By contrast, Seattle has experienced moderate growth, but has the largest share of multifamily permits per new resident.
Despite being traditionally sprawling and suburban in nature, San Jose boasts nearly seven in ten multifamily permits, and an annual multifamily permit growth of around 10 percent. Like San Francisco, however, San Jose’s total number of multifamily building permits is lackluster: around 5,800, compared to more than 36,000 in New York and around 16,000 in Seattle.
For the most part, the worst overall performances come from three Southern California metros: L.A., Riverside, and San Diego. Although L.A. distributed nearly 19,000 multifamily permits in 2017, the metro saw the slowest growth of multifamily permits from 2013 to 2017. Riverside, on the other hand, witnessed significant growth during this time frame, but ranks last on three out of four metrics. As a predominantly suburban metro, Riverside likely saw an increase in multifamily permit growth due to residents being pushed out of L.A. and other pricier California markets.
Jumpstarting New Development
While there are many ways to quantify the relationship between growth and affordability in cities, our data reveals an interesting pattern: Metros with dense housing supplies are better equipped to handle demand, regardless of their affordability or population growth. This explains why more sprawling metros like L.A., San Diego, Houston, and Orlando struggle to accommodate residents, while dense metros like New York, San Francisco, and Nashville are meeting their citizens’ affordability needs.
So, what can sprawling cities do to jumpstart new development?
According to economist Edward Glaeser, housing prices are higher in cities where the housing supply is highly regulated. Rather than turning to impact fees, exactions, or inclusionary zoning as solutions for making real estate more affordable, cities should consider the long-term benefits of having taxpayers absorb the cost of new construction. While this solution is all but guaranteed to anger local NIMBYs, it may ultimately make cities more inclusive for all residents.
Read the full insight from the Urban Lab here.
STEVEN PEDIGO is the Director of the NYUSPS Urban Lab at the Schack Institute of Real Estate and a Clinical Assistant Professor for Economic Development at the NYU School of Professional Studies. He is also the Director of the Research and Advising for the Creative Class Group, an Associate Partner at Resonance Consultancy (Vancouver/ NYC), and a Senior Advisor for Leland Consulting(Portland). Follow him on twitter @iamstevenpedigo.
ARIA BENDIX is a writer for the NYUSPS Urban Lab at the Schack Institute of Real Estate. Her work has appeared in The Atlantic, CityLab, Bustle, and The Harvard Crimson, among other publications. Follow her on twitter @ariabendix.