Opinion: Middle-income housing requires math, not maps


Boulder City Council is meeting on Tuesday to consider how to address the loss of middle-income households in Boulder. To make sense of their material, I needed to make explicit some implicit assumptions and conclusions:
The council’s goal apparently is to try to have Boulder’s income distribution approximate that of the county or state, to keep from becoming more elitist. The proposed solution is to ensure adequate affordable housing for a large segment of the population. Boulder’s housing programs will no longer just be about providing for “low-” and “moderate-” income people; the target population will now include the “middle” — households of 80 percent to 150 percent of Area Median Income (AMI).
So the housing programs will potentially serve the majority of residents. It would not be equitable to use general revenues for funding this middle-income program, since that would be taxing and then subsidizing people in similar financial situations. And because “median” means half above and half below, at least half of the units in any new development would have to be permanently affordable to those below median income, with another significant fraction affordable to the 100-150 percent AMI group. Otherwise, Boulder’s income distribution would become worse, not better.
Over the last 10 years, in spite of very significant economic turmoil, Boulder housing prices have increased at about 5 percent per year on average. But incomes have risen at only 2 percent per year. At these growth rates, existing market-rate, owner-occupied housing that is now reasonably affordable to “the middle” will be only marginally affordable in 10-15 years and unaffordable in not too many more.
According to the preliminary work done by KMA for the city’s impact fee update, the “affordability gap” (the difference between the price and what is affordable) for new townhomes for a household at 100 percent of AMI is over $100,000. This gap only closes for households having significantly higher incomes and/or devoting much higher percentages of their incomes to housing. So, realistically, new market-rate housing will not be affordable to the vast majority of Boulder’s middle-income households.
I used this data because certain critical numbers seemed to be missing from the session materials, like the fraction of income devoted to housing and calculated affordability gaps. Also,the materials contained some apparently contradictory statements, like, “Middle income households can afford 99 percent of city’s rentals, but only 67 percent of attached homes…for sale in 2015…” versus “Purchasing an attached unit is cheaper than renting at market rates.”
Pressure on housing prices from the projected thousands of new, high-paying tech jobs will increase the affordability gap. And there is no guarantee that housing built to be market-rate-affordable won’t end up going to relatively high-income households, upping the price. So, as in other regions with tech booms, just encouraging more market-rate development won’t help.
Also, more housing won’t solve our in-commuting problems. Many local employees will still prefer towns with less expensive, more desirable housing types. And some people moving here will commute to Denver.
Some council members are thinking about annexing the Planning Reserve (several hundred acres northeast of Boulder) and zoning it for housing. But, as I pointed out above, unless the large majority of new housing is permanently affordable, we’ll just have more sprawl and traffic, but no improvement in income distribution. Also, Boulder’s current in-city inclusionary housing policies are completely inadequate to accomplish the goal, requiring only 20 percent of new housing to be permanently affordable, with an inadequate fee-in-lieu requirement for new rental developments.
The planning staff’s latest oxymoron — “gentle infill'” for neighborhoods — doesn’t work either. Adding market rate units to single-family homes will just drive up their prices when they are sold. We’ll get more density, but no better affordability.
One problem is that planners are in the business of doing physical planning for development, but creating and maintaining affordability is actually a financial and economic problem that requires math, not maps. Focusing on figuring out where to build distracts from the critical questions of whether and under what terms. We need policy analysis that includes development of alternative strategies with comparative evaluation in terms of efficiency, effectiveness, equity and externalities, so we don’t just pointlessly sacrifice one value for another.
My sense is that to maintain real economic diversity, the city will have to come up with some very creative financing to allow it to fix prices for a large fraction of Boulder’s existing housing stock so that these units become more affordable over time. It’s not an instant solution, but potentially could make the difference.


Popular Posts

Opinion: Opportunity for the new Boulder City Council

Congratulations to the four new Boulder City Council members! You have a great opportunity to make a contribution to the Boulder community, but it will take a lot of work to do it responsibly; the learning curve is pretty steep. Here are some suggestions for you (and other Council members) that may help improve the process. Read the Charter. It is the document that governs how you, city staff, and board and commission members operate, and how you relate to each other. It defines the limits of your and their power, and can only be amended by a citizen vote. You don’t have to remember every word. But just knowing what’s there makes you more self reliant and less at the mercy of others’ opinions. For example, relative to the recent meeting discussion over diversity, the council does  not  have the power to suspend the rules as to when the mayor is selected. Charter Section 14 specifies, “The mayor shall be chosen by the council from its own number, upon the convening of t...
Read more

Opinion: Is this the end of Boulder as we know it?

Much of what has made Boulder such a great place to live has been the work of people half a century ago. These people recognized what I call the “ ratchet effect ,” that bad development decisions cannot be undone, so policies needed to be put in place to prevent, or at least limit, the damage that a growth-at-all-costs majority of the council could do. These policies include charter limits, like the Blue Line that prevents city water for development from being supplied above a certain altitude, the 55-foot height limit that has prevented high-rise development from cutting off our views, and the open space referendum process that allows a 60-day window for citizens to challenge disposals of open space. Other constraints include the Boulder Valley Comprehensive Plan’s requirement for Planning Board agreement for land-use changes in the area inside the city limits (Area I) and additional agreement by the county commissioners and county Planning Commission for urban development further...
Read more

Policy Documents: Impact Fees and Adequate Public Facilities

I am writing this to correct some of the apparent inaccuracies put forward at the 10/14 CC/PB study session about charging growth for its costs. I do not claim to be an expert in the field, but I have studied it long enough and consulted with enough supposed experts and legal types to understand most of the basics. In addition, I have found that the experts don’t necessarily know everything and won’t necessarily put forward the most appropriate solutions. The fundamental rule, both legal and equitable, is that growth should pay to address its impacts so as to maintain existing levels of service (LOS) for existing residents and businesses. But growth cannot be required to improve levels of service. LOS is measured in all sorts of ways depending on the facility and/or service being measured. For transportation, it could be total VMT, travel time, intersection waits, access to transit, etc. For schools, it might be square footage per pupil, etc. For water, it could be water righ...
Read more