This past May, ULI Boston released a report, Building for the Middle: Housing Greater Boston’s Workforce, which spotlights a troubling phenomenon—a 25-year decline in the number of middle-income households in Greater Boston, which occurred while the number of low- and high-income households rose significantly.
Prepared with support from ULI’s Terwilliger Center for Housing, the report attributes this imbalance to a lack of affordable housing choices for those who earn too much to qualify for subsidized housing, but far too little to afford market-rate housing. While Building for the Middle focuses specifically on Boston, similar household shifts have occurred in other high-cost markets, and these shifts are starting to become more common even in smaller markets that once were considered relatively affordable.
As ever more U.S. cities have evolved into dynamic places to live and work and play, their successes have not come without consequences: the gap between the haves and the have-nots in many urban areas is growing wider. Recent research from the Pew Research Center shows that between 2000 and 2014, 203 U.S. metropolitan areas experienced a drop in middle-income households, 160 metro areas experienced an increase in lower-income households, and 172 metro areas experienced an increase in upper-income households. And while a number of factors surely contributed to this change, it is a safe bet that a major cause in the higher-priced areas is moderate-income workers’ inability to afford housing in centrally located neighborhoods.
The affordability gap was a main topic of discussion at the Institute’s recent housing conference in Boston, where Building for the Middle was released, and where Governor Charlie Baker of Massachusetts announced a $1 billion–plus plan to increase affordable housing options for working families. The gap was also discussed at the recent 2016 ULI Spring Meeting during a general session moderated by J. Ronald Terwilliger, founder of the Terwilliger Center. The panelists’ take on the challenge: policies at the federal, state, and local levels should emphasize the role that affordable housing plays in boosting economic prospects for the middle class and overall community competitiveness.
As cities compete in the global economy, an adequate supply of housing at different price points is an asset that influences the decisions of workers, businesses, and investors. It is undeniably one of the factors that propelled several “18-hour markets” into the most-favored category for investment and development in our Emerging Trends in Real Estate© 2016 report, which showed cities such as Austin, Texas; Charlotte, North Carolina; and Nashville, Tennessee, edging out San Francisco, New York City, and Washington, D.C.
Not surprisingly, the appeal of these up-and-coming markets is reflected in higher housing costs. Between 2015 and 2016 alone, rent as a percentage of household income rose from 18 percent to more than 26 percent in Austin; from 18 to 27 percent in Charlotte; and from 18 percent to more than 31 percent in Nashville. And, in Dallas—the boomtown that was ranked number one in the Emerging Trends survey, and which is the host city for our 2016 Fall Meeting—that ratio jumped from 16 to 29 percent. This is a pattern indicative of the gentrification that accompanies successful revitalization. But it also is a pattern that threatens to limit the benefits of revitalization to the affluent.
In a number of U.S. markets, the loss of affordable housing resulting from revitalization has been exacerbated by entrenched public policies that have tended to isolate such housing rather than spread it across neighborhoods with residents of varying incomes. It is encouraging to see states and cities looking to change course with approaches that foster more inclusivity and diversity. A case in point: earlier this year, Dallas sought help from a ULI Advisory Services panel on ways to expand the supply of affordable, workforce, and mixed-income housing throughout the Dallas metro area. The panel’s recommendations included advice on creating a revenue source for housing development and an incentives-based inclusionary housing program for developers. But, just as important, the panel urged the city to start with a bold, big plan that lifts up the entire Dallas region by providing greater housing choices for all residents.
Much is to be learned from public and private sector leadership in this area. Some of the best examples are recognized by the Terwilliger Center through its Robert C. Larson Housing Policy Leadership Awards, which recognize exemplary public policies that support affordable and workforce housing development and preservation; and its Jack Kemp Excellence in Affordable and Workforce Housing Awards, which recognize developments that meet affordable and workforce housing needs and expand mixed-income communities. For instance, Arlington County, Virginia, a 2016 Larson finalist, and the Anthem on 12th apartment development in Seattle, a 2016 Kemp finalist, are just two of the many award finalists and winners that are fostering inclusivity with expanded housing options, rather than exclusivity through limited options.
The connection between housing and social equity is a topic that ULI is exploring more closely. In particular, we will be looking at how to manage the positive change brought about by gentrification so that it benefits residents of all incomes. This includes providing greater access to housing as well as jobs, education, health care, and community amenities. Through our work, we’ll be emphasizing the far-reaching economic benefits that result from providing affordable housing options for the workers and residents who sustain communities.
While gentrification is a complex issue, it does not have to be a “haves versus have-nots” issue. What ULI is aiming to demonstrate—by drawing upon best practices and our members’ expertise—is how building for inclusivity means building for success.
