Thursday, June 12, 2014

Housing Affordability and the New Geography of Jobs

Housing affordability is about income, not supply constraints, at Pacific Standard magazine.

Theme: Economic divergence of innovation.

Subject Article: "Bill Witte on Housing Affordability: A Supply and Demand Problem."

Other Links: 1. "Race, Jobs, and Gentrification."
2. "The Planning Report: Insider's Guide to Planning & Infrastructure."
3. "The Case For Investing In California Businesses."

Postscript: From Toronto Life, "Stuck in Condoland":

She got the unit pre-construction for less than $300,000, which was a steal, because really she’d purchased much more than space: she bought the dream Toronto and its developers have been selling throughout this decade-long boom. She was single in the city, blonde and svelte, with a well-paying career-track job and, soon, a condo on the edge of clubland. Toronto would be at her feet and at her service. ...

... Shannon and Paul bought into the New Toronto brand: the vertical city of luxury living, cultural experience, Momofuku food and trendy boutiques. That’s how the lifestyle is marketed by politicians and developers alike, and it’s incredibly appealing to young adults in all their forms: staid professionals, graduating millennials, hipsters. ...

... Condos are the only affordable option when the average detached Toronto home costs $965,670. The reason prices have shot so high is because no one is building new detached or semi-detached homes for the city’s emerging glut of new families. For developers, the payoff of condo construction far outstrips that of detached housing. The lack of supply explains why every empty nester’s house—even a dilapidated gut-job reno that reeks of cat pee—sparks a bidding war when it goes to market. ...

... Condo developers generally boost their profits by selling smaller units and more of them. There’s also a tax incentive: provincial and municipal land-transfer tax rates are higher for units valued at more than $400,000, so that price has become a kind of magic number for developers and buyers alike: $399,900 is a de facto maximum price point, discouraging the construction of larger units that would cost more. The dependency on pre-construction sales also skews the market. Developers minimize their risk by selling as many units as they can before they ever put a shovel in the ground—70 to 80 per cent of units must be sold before a lender will provide construction financing. Smaller units sell fast on launch weekend to eager young first-timers. But buyers of larger condos generally prefer to see the unit before they buy it, which means developers must carry the cost and the risk of those unsold units until construction is complete, sometimes years later.

Greater density informs greater dislocation, income inequality, and segregation. It's not a solution for gentrification. It is one of the causes of gentrification.

1 comment:

Allen said...

I'd be curious to know how many Toronto residents are looking to leave for places like Kitchener, Peterborough, Hamilton or even London, Windsor or Ottawa just to be able to afford a house.