America is a big place – I would know. For the past three years, I’ve seen about as much of it as anyone could. As Tax Credit Advisor readers are likely aware of by now, I just completed a three-year cross-country journalism tour, living for a month each in 30 cities. During the trip, I also stopped in hundreds of small towns and cities, visited the lower 48 states, and met countless people. I learned a lot about this country’s culture, demographics, politics, and of course, its housing situation. Much of the info I’ve compiled will be useful to affordable housing developers who are building in different areas, or who just want an overview of how America is functioning.
First, I’ll describe the inspiration for the project. Throughout my 20s, I spent time traveling and living off and on in various U.S. cities. I became somewhat of an urban aficionado – one of those people who spent their free time reading about the history and architecture of cities (or walking around to see them firsthand). I used this self-taught knowledge to build a freelance journalism career, landing articles about urban issues across the mainstream media landscape.
By age 30, I decided it was time to chronicle all this research through one last cross-country tour. So I began pitching different magazines about becoming their “roving urban affairs columnist” – aka a guy who reports on different cities from street level, month by month. Forbes and Governing Magazine—and later TCA—signed me on. In the fall of 2015, I left my hometown of Charlottesville, VA, and drove to my first stop, Miami. From there, I traveled roughly clockwise around the country, going through the south, the southwest and up the west coast, with Seattle serving as halftime. Then I headed back east, traversing the Intermountain West, the Great Plains, the Midwest and the Mid-South. The final fifth of the trip was up the east coast, ending in New York City. On Christmas Eve of 2018, I drove from Brooklyn back to Virginia; the road trip was finally over.
I had many takeaways from this tour. Perhaps the main one was seeing America’s demographic shifts firsthand. The U.S. continues to be a fast-growing nation, increasing its population by 20 million since 2010. Our country has also grown more diverse: Asians and Hispanics represent an increasingly larger share of the population. One big swath of the country where this growth and diversity isn’t too evident is rural America. While the overall condition of our rural areas is variegated, two-thirds of counties with under 50,000 populations have declined since 2010. I was amazed when traveling to see just how disperse some parts of the country remain. Throughout the American West, for example, towns are often separated by 50 miles, and barely get FM radio. These towns are full of abandoned homes and mostly-empty, two-block-long Main Streets. But in metropolitan America, it’s another story. Since 2010, 47 of the 50 largest metros have grown. Even in metros, such as Detroit and Baltimore, where the city cores are hollowed out, there’s still significant suburban growth, with much of it butting up against city boundaries.
Growth has been particularly strong in the Sunbelt, which I traversed over the first third of my trip. The net population growth in recent years of the South and West has been over five times that of the Northeast and Midwest. Dallas and Houston are generally the fastest-growing metros in America, adding six-figure populations annually, while other Sunbelt metros, like Miami, Atlanta, Austin and Phoenix, are also routinely among the national leaders.
While the desire for warmer winters has something to do with this, so too does the economic climate. A recent study by Southern Methodist University economist Dean Stansel ranked U.S. metros by their “economic freedom,” calculating things, like tax burden and labor regulations, to determine the role governments have in given areas. Stansel found that the southeastern U.S. had more economic freedom than urbanized northern and coastal areas. Demographers Joel Kotkin and Wendell Cox, using Census Bureau estimates, write that Americans are “relocating to cities, states and regions that are less dense, less heavily taxed and less regulated.”
As I noted for Forbes in 2017, after finishing the Sunbelt portion of my trip, all this growth has created a new sort of society in this part of America.
“While growth remains mild, and cultural norms conservative, in much of the rural Sunbelt, this is no longer remotely the case for many Sunbelt cities…These places are instead the modern U.S. embodiment of urbanization, economic agglomeration, diversity, multiculturalism, globalism and rapid change.”
That said, America’s urbanization has affected almost every major U.S. metro. Every one of them has large professional networks, vast dating pools, globally-inspired cultural amenities, and, depending on one’s skill-set, robust job markets. The downtown revival trend has hit almost every city, and generally spread to outlying neighborhoods. If the population figures aren’t enough, simply visiting a major U.S. metro in 2019 will convince you that these places are the current and future heartbeat of America.
To get more specific about the differences between these metros, though, let’s look at housing. This has overwhelmingly become the nation’s biggest urban issue, especially for my generation – a determinant of where we move, where companies relocate, and what the financial well-being is for millions of households. I’ve found while traveling and writing about the issue that, while every metro is unique in some way, there are three general types of housing markets.
One is the infamous “dynamic inelastic” metros. These are the metros that have strong job markets—and therefore heavy population demands—but that (thanks to the regulatory climates mentioned above) don’t expand their housing supply to meet this demand.
Readers likely know the usual suspects, such as San Francisco, where median metro home prices are $957,000. But among my 30 stops, I would peg ten of them as dynamic inelastic metros. They are on the East and West coasts, except for metro Denver, which has a $405,000 median.
Some of these metros build more housing than others. New York City has perennially been, along with Houston and Dallas, among the national leaders in housing permits, with 50,000 in 2017. This has helped it stabilize prices – but it is still not building enough, especially relative to population. San Francisco, Portland, Boston and San Diego are notoriously NIMBY, permitting 17k, 16k, 14k and 10k housing permits, respectively, in 2017.
For this reason, I’ve come to believe that sending affordable housing subsidies to these areas is irrational, at least if taxpayers want their money to stretch far. Various programs at city, state and federal levels have produced units at exorbitant costs, due to the high land prices, convoluted bureaucracy and obstructionism in these areas. An example is California’s now-shuttered redevelopment agencies, or specific LIHTC projects, such as The Beverly, a building I covered in January. Because of its prime location in downtown Boston, it produced affordable units at $400,000 apiece.
A second housing market type is “stagnant inelastic” metros. These are metros that have relatively slower growth, weaker job markets, high poverty rates and sometimes declining core cities. They have limited new housing in the pipeline, and a lot of old excess inventory in need of repair. They also have the tight regulations and politicized processes found in the coastal cities, but it matters less because of their low demand.
Stagnant inelastic metros, which encompassed nine of my 30 stops, were mostly in the Rustbelt, but include New Orleans and Memphis. One challenge they will have— particularly in the core—is remaining affordable if they do ever revitalize. This is where their existing regulatory climates will hurt.
Take Philadelphia, a city I covered in the November 2018 issue. It embodies this slow-growth, Rustbelt-style metro. But it is increasingly getting transplants from pricier East Coast cities, because it offers their charming urban form at lower cost. Some interior neighborhoods, like Fishtown and Fairmount, have already gentrified, and speculation is rampant throughout South and West Philly.
Yet the city is overwhelmingly zoned for low-density, and there is severe resistance to changing this. It wouldn’t surprise me if, a decade from now, this confluence of demand and restriction makes Philly another exclusive coastal metro, and other stagnant inelastic metros could follow.
The third type of metro is “dynamic elastic” ones. These are true affordable housing success stories, and rebut the idea that supply-side economics don’t apply to the housing market. Dynamic elastic metros are, like the dynamic inelastic ones, growing in population, wealth and jobs. In fact, they often receive the exiles priced out of the latter. But they have lighter regulations and faster approval times – and thus build a lot more housing.
Dynamic elastic metros are spread across the South and Southwest, although Minneapolis, which maintains cheap housing, and recently upzoned its infill neighborhoods, would roughly fit this category. While the dynamic inelastic list has metros that permit housing between the 10k to 17k range annually, the dynamic elastic ones permit much more. In 2017, these included Dallas (62k), Houston (42k), Atlanta (34k), Phoenix (29k), Austin (27k), Charlotte (23k), and Nashville (20k). Because of all the construction—and the fact that these metros developed later—they have a newer and better-quality housing stock. In New York City and San Francisco, around two-thirds of the housing was built before 1960. In Austin and Phoenix, it’s well under 20 percent.
This doesn’t mean everyone in dynamic elastic metros has a perfect housing situation. In the June 2018 issue of TCA, I wrote about how Atlanta, while cheaper than coastal competitors, still has affordability problems, with the working class often settling for the suburbs. My piece bolstered the argument that more liberalized housing policy, while needed, won’t be a panacea that adequately houses every last person. America still needs subsidies, like Section 8, LIHTC and “housing first” stipends for the homeless.
But those subsidies ought to be directed into the dynamic elastic metros. That is where land is cheaper, approvals faster and labor cheaper, because construction workers haven’t been driven away by high home costs. And unlike stagnant inelastic metros, this area of the country is also where jobs are always available. This means that the housing subsidies not only stretch further, but place people in markets where they can actually be self-sustaining.
To give a concrete example: Houston recently ended veteran homelessness in a mere three years. It did this by building a number of large, cost-effective projects, such as Travis Street Plaza, where 192 units went up for $18.2 million (including $11.1 million in LIHTC equity), or $95,000/unit. By comparison, the estimated cost of building affordable housing in California is $425,000/unit.
Hopefully this breakdown of metro America’s different building costs and regulatory climates has been helpful. It certainly has for me, since I may be in a similar situation as some TCA readers.
About midway through my cross-country trip, l launched a media organization called the Market Urbanism Report. It advocates for urban policy reform in America, and is inspired by the info I was gathering while traveling. Now that the trip is done, I will be fundraising full-time, which means I’ll soon move from Virginia to a big city. The one I choose will be inspired by a lot of what I’ve covered above: where can I find affordable, centrally-located housing? If I hire staff, will the city have affordable office space? And will these facilities have modern design and amenities, or creaky floors and old utilities?
The urbanist in me wants to settle for New York or Philly. But the pragmatist in me says that a second-tier metro, like Charlotte or Atlanta, will likely provide these things more affordably, which is crucial in my startup phase. Not coincidentally, many other Americans have recognized this, and moved to such metros to find work or start a business. It’s something that the affordable housing industry—including builders, investors and administrators—should take note of.
[Note: this is an essay I wrote for Tax Credit Advisor about my just-completed 3-year, 30-city cross-country trip. TCA specializes in U.S. housing policy & regulation, and hired me early into the trip to cover housing issues in each city. When the trip ended, they ran this cover story where I summarize what I learned along the way. Enjoy!]
Scott Beyer owns and manages The Market Urbanism Report. He is a roving cross-country journalist who writes regular columns for Forbes, Governing Magazine and HousingOnline.com.
A podcast on Market Urbanism, or the cross between free-market policies and urban issues. We discuss how a liberalized urban approach would lead to more housing, faster transport, improved public services, and better quality of life. Tap to listen.
Market Urbanism Report is sponsored by Panoramic Interests, a progressive developer in San Francisco. Panoramic, which is owned by Patrick Kennedy, specializes in 160 sqft micro-units (called MicroPads) that are built using modular construction materials. Panoramic has long touted these units as a cost-effective way to house San Francisco’s growing homeless population. But Panoramic also builds larger units of between 440-690 sqft. To learn more about Panoramic’s micro-unit model, read MUR’s coverage on the firm in its America’s Progressive Developers series. Or visit Panoramic’s website.
Market Urbanism Report is a media company that advances free-market city policy. We aim for a liberalized approach that produces cheaper housing, faster transport and better quality-of-life.