Where Are All the Apartments for Families?

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Cities are finally starting to build more housing — but not for people with kids.

Roughly 40 percent of American millennials have four-year college degrees, and if there’s one thing these highly educated young people have liked to do over the last 15 years, it’s move to big cities.

Researchers find they (well, we) have accounted for more than half the population increase in “close-in” urban neighborhoods in the country’s largest metro areas since 2010, and they credit our migration (and our taxes) with accelerating urban revival. We don’t have to guess as to why: Millennials like diverse, walkable environments with good public transit and bike lanes. They like the rich cultural amenities, including bars, restaurants, and concert venues. And they like the higher-paying work opportunities available.

All this might make you think millennials have moved to cities permanently. But as they get older, the number of urban children has continued to drop. Lower birth rates are part of the story, but economists say the strong correlations with population shifts strongly suggest that “out-migration” of cities explains a big portion of the loss. In other words, millennials now in their mid-30s and 40s with young kids have started decamping for suburbs to raise their families.

Some older adults nod smugly, seeing these suburban migration patterns as proof that there was never any meaningful difference between their preferences and that of millennials at all. Millennials did not start the trend of moving to cities in one’s 20s: Plenty of baby boomers and Gen X moved to urban areas in young adulthood, and then back to the suburbs to raise a family once they coupled up and needed more space.

And certainly some millennial families really do crave the kind of lifestyles found in suburbs: the bigger houses and lawns, the schools, and safety.

But for many other young people looking to start families, the choice to stay in the city or move to the suburbs doesn’t feel much like a choice at all. There simply aren’t many family-oriented housing options in cities, let alone ones young couples could afford.

For years now the shortage of housing, and the dearth of new housing built to accommodate a growing population, has been getting more attention. But only more recently have people started to discuss that, even in places that have loosened their zoning rules and authorized new housing construction, the overwhelming majority of new units are studios or one- and two-bedroom apartments, built with singles, childless couples, and adult roommates in mind.

Advocates for more housing say they’re aware that cities are losing families with kids, even in areas that are adding new units to the market — and they argue that it’s one reason why reforming zoning is only the first step toward building cities that house more people.

“Yes, there’s been a ‘build baby build’ attitude because we’re so far behind, but there are big asterisks and caveats to that,” said Matt Lewis, a spokesperson for California YIMBY, a pro-housing group. “If you just do zoning, you will end up with a whole lot of one- and two-bedrooms.”

Zoning reform is necessary but not sufficient

Housing demand outstrips supply in major cities, leading to rising costs for tenants and prospective homeowners. A top culprit for this scarcity is local zoning laws that bar new construction and empower homeowners who gain financially from restricting new housing to decide whether or not to make room for more neighbors.

Over the last decade, there has been a growing movement to loosen zoning rules to facilitate more construction. And among those few places that have changed their zoning laws, evidence suggests it has helped contain rising rents, largely by reducing competition among individuals for units.

Addressing restrictive zoning is a crucial first step to making cities more affordable, and most communities still haven’t even taken that step.

Orphe Divounguy, a senior economist at Zillow, analyzed the top metropolitan areas sourced from the American Community Survey and found that the most “doubling up” — meaning a family living with another family — occurs in the nation’s most expensive cities, like Los Angeles, Boston, Denver, Seattle, and Washington, DC.

While some might simply prefer these living arrangements, Divounguy observed that nearly 70 percent of families doubling up in these high-cost cities had incomes of $35,000 or less — suggesting their choices to live in closer quarters may be driven by financial need. “We need to build more units,” Divounguy told Vox. “If we had more units then buyers and renters would have more buying power and prices would go down.”

Christopher Leinberger, a longtime land use strategist, agreed that upzoning — altering rules to allow more dense housing in places previously zoned only for single-family homes — is the fundamental prerequisite for creating more family-oriented housing. Without that, he argues, land prices will remain “completely out of whack” and drive up prices.

“A few decades ago, the plot of land itself would be no more than 20 percent of a home’s price,” Leinberger said. “Today it can be up to 50, 60, or 70 percent.”

Higher land prices is also a top reason developers don’t bother building entry-level starter homes anymore, even in areas they’re legally allowed to; the increasingly expensive plot of land can’t justify the expense of building a low-cost affordable house.

Emily Hamilton, the director of the Urbanity Project at the Mercatus Center, echoes Leinberger and Divounguy in saying that liberalizing zoning laws would help expand family-oriented housing. “Freeing homebuilders to serve a wider variety of households at a broad range of incomes is the path to abundant housing,” she wrote recently in Discourse magazine. “It would allow more parents to have shorter commutes, freeing more time to spend with their kids.”

Other regulatory barriers stand in the way of family-oriented housing

The problem is, as housing advocates are learning, upzoning is not enough.

The basic back-of-the-envelope calculations of housing developers in America today are such that if a builder can construct more housing in cities, they will almost always build one- and two-bedroom apartments because smaller units generate more rent per square foot. Developers are, in effect, incentivized to try and pack in as many units as they can.

One option is to pass laws that require developers to include more family-sized units in their portfolio — more three- or four-bedroom places, for example. But housing experts say trying to force developers to build family-oriented housing will probably backfire. “Dictating to developers what their product mix should be is going to be difficult,” said Leinberger. “If you get into the business of legislating that, they’ll just go to some other town.”

So if you’ve fixed your city’s restrictive zoning, now what?

Lewis, of California YIMBY, said they’ve been learning out in the Golden State that the next step is to look at the building codes and other regulatory barriers that influence the types of housing developers choose to build.

“It’s like whack-a-mole,” he said, meaning just when pro-housing advocates think they’ve defeated the last barrier to new construction, new ones come into clearer view. “These are all arcane rules that no one was paying attention to until five-seven years ago.”

One such building code restriction is the requirement that most multifamily buildings have two stairwells. This is a rule rooted in fire safety, though most other countries allow one stairwell and opt for other fire safety strategies instead. One consequence of the double stairwell model is it ends up making architecture more homogenous and inefficient. (This is why most apartment buildings in America have long central hallways, with apartments on either side.)

Housing activists lately have been rallying around “single-staircase” reform, changing building codes to eliminate this requirement for a second stairwell. These reforms will make it easier to use different floorplans and hopefully make it more cost-effective to build family-oriented housing in cities — perhaps a three-bedroom, one-and-a-half bath apartment, with only one bedroom having a walk-in closet.

Lawmakers in Washington state overwhelmingly approved a bill this month to legalize single-stairwell construction, and California legislators are currently pursuing a similar reform.

Other barriers include regulations like minimum lot sizes, “set-back” requirements that give towns power to dictate how far back from the curb a home can be built, and “floor-area ratios” — the ratio of a building’s total floor area to the size of the land on which it’s built.

California Sen. Scott Weiner has been leading the way in his to state to push bills tackling these barriers. “We need to reform zoning, but we also need to end loopholes that make it impossible for our communities to actually build the multifamily housing for which we have already zoned,” he said.

The risk-averse banks also need to be convinced

Unfortunately, adding more homes for families in cities will likely require even more than just making these land-use changes.

Bobby Fijan, a developer who has been trying to build more family-oriented housing in cities, said one of the biggest challenges is convincing American real estate investors that these projects are worthy bets. “I firmly believe it is a chicken and egg problem,” he told Vox.

“Real estate in the US is very conservative, they want to back things in a very standardized way, and they want to look and see heaps of data showing something already works,” he said. “In industries like tech and retail, people are obsessed with the question of ‘what does the customer want?’ That’s not a question that’s really asked in real estate.”

Right now, because the housing supply and demand gap is still so wide, it’s likely that real estate investors will keep backing projects that look like what they’re already building: buildings that cater to childless adults. These are safe bets, with strong track records of delivering returns.

But this doesn’t mean real estate trends can’t change. Fijan has been working to get financing from private equity and is hoping he can build enough “proof points” of successfully profitable family-oriented housing in cities to get the more risk-averse banks to bite in the future.

It’s a gamble that holds a lot of promise. Plenty of young families will still opt for the suburbs’ greener pastures, but many parents would be happy to stay put in their beloved dense cities and raise their kids. To make that a viable option, though, they need somewhere they can actually live.

Source: Vox