Making housing or making money?

by Ted M. Coopman

The severity of the housing crisis in Eugene is largely the result of a virtual halt in building during the implosion of the housing market that sparked the Great Recession and the time it has taken the local housing industry to “rebuild” itself. Builders build based on demand and the opportunity to make a profit. Currently, there is a lot of demand and money to be made – just not in a manner that achieves certain ideological agendas.

Doing something is not always doing the best thing

Some progressive activists and their political allies have used this crisis as an opportunity to push dubious land use “reforms,” expand their power, further their ideological agenda, and silence critics. The result is avoidable delays, ineffective and destructive zoning changes, costly court losses, and contentious and toxic political and social strife.

We do need to change how we approach the production of housing and achieve affordability. The problem is that “we know best” arrogance and a win-at-any-cost mentality or rather making your “opponents” lose at any cost, have undercut the opportunity to have an honest debate on how to achieve the broad community support required to solve our housing challenges.

High on your own supply

Middle housing, a term coined in 2010, refers to duplexes, triplexes, quadplexes, cottage clusters, and townhouses. Constructing middle housing certainly is part of a long-term solution for the current housing crisis. Accessory Dwelling Units (ADUs) also are part of the solution, although with their high per-square-foot cost and lack of economies of scale do not make them conceptually or technically affordable without subsidies.

The push for urban infill as a solution to create more housing in denser walkable neighborhoods and reduce the carbon output (mostly via folks not driving) along with exempting development from any parking requirements (again, to “encourage” people to get rid of their cars) also fails in several ways. The term “infill” is somewhat deceptive. While some infill can be accomplished via splitting lots or adding ADUs, in most cases, and how it is described by city staff and advocates, is “redevelopment” – code for bulldoze and build. Tearing down current housing to build new housing creates problems in affordability, carbon reduction, and the environment.

If you build it, they will bum, or The not-so-great replacement

Urban property that has existing housing, even marginal structures, is the most expensive land. Then you must tear down the existing dwelling, which also costs money. As anyone who has taken on a remodel in the past few years knows, the costs of materials and labor have skyrocketed. When considered, this pushes construction of a new infill fourplex to at least $1 million.

That cost means that rents must be high enough to service the loan and make a profit. Builders build because that is the way they generate income. Under those constraints, units in new fourplexes rent for about $2,500 a month. Not affordable. Certainly, there are folks who can afford that rent but at that price point they do not suffer a lack of housing options, but rather housing choices of where they would prefer to live. For context, average median income (AMI) in Eugene is $64K a year and 30% of that (what is considered “reasonable” rent) is $1,600 a month.

When developers search for infill properties, they look for older smaller marginal dwellings on larger lots because those are the least expensive. Unfortunately, these are the same criteria used by many first-time homebuyers – particularly families. Obviously, developers have better access to funding, so it is far from a fair fight. Most important, in demolishing these homes you are removing what is a naturally occurring (as opposed to subsidized) affordable unit. The structures likely have long since been paid for, so rents are cheaper.

Redevelopment gentrification means replacing those older more affordable homes with much more expensive units. This process has serious economic impacts. This most obvious is the loss of affordable units. Not so obvious is that rents in the surrounding neighborhood are set by the highest rent charged, just like prices for housing are set by the highest sale price (“comps” or comparable properties in realtor parlance).

Redevelopment gentrification works by raising rents near new construction, thus increasing the incentive for more redevelopment. The losers here are renters and first-time homebuyers. The winners are developers, contractors, and realtors.

In addition, local government coffers gain more property tax revenue because newer construction resets the taxation level based on the property and the costs of building. Because Oregon caps increases on property taxes for existing structures, new construction is one of the few ways to significantly raise those taxes.

The result is that redevelopment gentrification creates its own incentives for those making the rules as well as those who facilitate the process. The huge post-war urban renewal effort (1950s-1970s) that leveled low-income urban neighborhoods and downtowns (like Eugene’s) is the classic example.

Climate unfriendly

A new residential structure, whether single family or fourplex, generates between 15 and 100 tons of CO2 depending on size. Tearing down and transporting the remains of the old structure to a landfill adds to that number. In the end, the climate impact of redeveloping a single lot is at a minimum 16 tons, or the carbon footprint per year for the average adult in the U.S.

However, a walkable neighborhood, providing that residents actually ditch their vehicles, does offer net carbon reduction as the typical U.S. car emits about 4.6 metric tons of carbon per year. Realistically though, 92% of households own cars and 59% have 2+ cars. Few Americans are likely to give up their cars even when parking is limited.

An existing structure has long since paid its carbon debt for construction. The cost and climate benefits of renovation far exceed those of new construction. This is particularly true for older homes built with materials that, in many cases, cannot now be sourced at any price.

Therefore, it would seem the biggest bang for the buck on affordable housing and climate is to preserve and upgrade existing housing, particularly existing middle housing.

Unfortunately, this strategy generates little interest for a city government and development-related businesses that stand to gain financially by performing the creation of new construction as the best way to increase the housing supply and reduce costs for buyers and renters.

BS filter or Location, location, location

Filter theory, which is the idea that increasing any housing at any price leads to lower housing everywhere, is simply a lie. There is zero evidence that as any new housing becomes available, people with the means move to it, opening older housing to lower-income people in a conveyor belt of upward mobility.

Filtering does occur in specific housing segments. As was seen in Portland, when you build many new apartment buildings, overall prices drop in apartment buildings.

Housing is not a commodity. Renters and buyers are focused on the best location for the money spent. The experience in rent control in New York City found that renters will stay in older and shabbier buildings in neighborhoods with amenities they value and pocket the money versus moving to a newer “better” unit. Regardless, building townhouses priced at $600K or fourplexes that rent for $2,500+ a month won’t lower prices for existing homes or rentals, particularly in the lower-cost end.

Certainly, evicting tenants and tearing down existing affordable housing to build denser more expensive housing may increase overall inventory, but that strategy won’t reduce costs outside the specific housing segment.

Disaster capitalism or Colonialism with progressive characteristics

Urban renewal/development destroyed downtowns and gave us our current mess here in Eugene. The destruction of 200+ historic buildings over the course of two years in the 1970s initiated the slide of Eugene’s downtown into its current sorry state.

Why do Eugene elites want to double down on that legacy? Follow the money. The only people who benefitted from leveling downtown made huge profits by selling and building.

Realtors, architects, designers, and developers don’t make money from preserving existing affordable housing or even building affordable housing. They make money from the property value add of upzoning and building new market rate housing that caters to professionals who can afford high rents and mortgage payments.

Without government support, new housing never will be affordable. The same mania has driven the destruction of historic lower-income university neighborhoods to make room for highly lucrative student housing towers that funnel money into huge corporate transnationals. While land value capture can bring some public benefit, it won’t stop redevelopment gentrification.

The central argument that we need to build more to lower prices overall ignores basic economic incentives. For-profit developers have no incentive to saturate the market and drive down prices as development costs remain high.

Big little lies

The Equity Office in Austin, TX, hired Dr. Rich Heyman, a University of Texas professor and urban geographer, to study Austin’s HOME (Housing Options for Middle-income Empowerment) Initiative and review more than 25 recently published articles on housing, zoning, and affordability. 

More specifically, he examined climate change, the environment, and transit. The report cited here focuses only on the affordability claims associated with upzoning and the reduction of minimum lot size as strategies for driving down rents and purchase prices. These are the two primary strategies championed by Eugene housing advocates.

Among his findings were the misuse and misapplication to local conditions of faulty or poorly conducted research that lacked useful context. He concluded that recent increases in land and housing prices in Austin resulted from well-known and fundamental dynamics of urban land markets – not zoning or other imposed constraints on supply.

That is, rising housing costs stem directly from market processes, not a distortion of them via zoning, NIMBYism, or other non-market-related factors.

Finally, Heyman found that unzoning and similar interventions are unlikely to achieve the goal of increasing affordability and will, in fact, lead to higher property values throughout Austin, as well as continued gentrification and displacement in lower-income neighborhoods.

Vox populi

The theory that land and housing prices are high, not due to some intrinsic scarcity, but because of regulations was first proposed by Glasesar and Gyourko in 2003. These researchers argued that barriers to building create a “zoning tax” that drives up the cost of housing.

However, other researchers rejected this hypothesis from the onset, citing its departure from well-founded existing research. Yet it became an article of faith for YIMBY activists and a way for planners to woke-wash discredited (and overtly racist and anti-poor) urban renewal strategies.

Reducing or removing regulations also presents opportunities to the unscrupulous and a convenient delusion for well-meaning progressive builders, developers, architects, and industry to “make a difference” while making money. The promise of affordable housing then becomes possible only by destroying affordable housing.

Activists believe they are using the developers, and the developers think they are using the activists, and one of them is sadly deluded.

Yes-And and Yes-But

Social science research often is contradictory because social systems are incredibly complex and the more variables there are the more difficult it is to understand or predict outcomes. The problem is when policy positions become ideological and the fixation on a certain solution is internalized as identity. Policy debates then become a zero-sum game where opposing analysis is seen as a personal attack and those with opposing viewpoints are evil or delusional. The result is bad policy.

The more time and effort spent makes proponents more fully invested in their preferred solutions and hardens their commitment to win at any cost. That mindset contaminated what should have been a thoughtful debate on land use and how to address the increased costs of housing. Some Eugene developers, realtors, planning staff, and politicians were more than happy to feed activists zealotry to silence other viewpoints.

Hip, hip, hypocrisy

My argument is not that “I am right, and others are wrong.” My argument is that the considerable and serious problems with the city’s preferred solutions were not seriously addressed. There was no real debate. Once the “plan” was presented, every element was vociferously defended and legitimate criticism deflected with personal attacks and charges of racism and NIMBYism.

Those critics with the most experience and knowledge were labeled as the “same privileged and self-interested voices” that are always heard, and they needed to be silenced so new voices could be brought forward – voices that lacked any relevant experience or knowledge and solely relied on what planning staff told them.

Those voices stated the obvious – prices are too high and availability too low. It was staff, and private sector interests, who came up with the “solution.”

Those driving the city’s current land use plans always have had the most power, the loudest voices, and their own considerable self-interest. Certainly, there was a lot of money to made by the private sector and political capital to be gained by doubling-down on the latest land use fads.

The idea that city management and staff are truly neutral and have no agenda is as ridiculous as it sounds. Everyone has an agenda and is self-interested, not because they are bad, but because they are people. Denial of that self-interest is the hallmark of a zealot.

Finally, there is the issue of equity – something the city and activists loudly trumpet when it suits them. Wealthy and suburban neighborhoods are largely exempt from grandiose density plans leaving poorer urban neighborhoods to bear the brunt. Urban “renewal” has always depended on improvements that take from the poor.

The difference with so-called progressive housing activists is the hypocrisy that they act to benefit the poor when, in reality, they act to perform righteousness, consolidate power, silence dissent, and benefit themselves ideologically, financially, or both.

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Western Exposure is a semi-regular column that looks at issues and challenges from a West Eugene perspective – a perspective that is often ignored or trivialized by city leadership and influential groups and individuals largely based in south and east Eugene. 

Western Exposure rejects the fauxgressive party line, performative politics, and “unicorn ranching” policy in favor of pragmatism focused on the daily experiences of residents and small businesses in Eugene—and West Eugene in particular.

Ted M. Coopman has been involved in neighborhood issues since 2016 as an elected board member, and now chair, of Jefferson Westside Neighbors and has 30+ years experience as an activist and community organizer. He earned a Ph.D. in Communication (University of Washington) and served on the faculty at San Jose State University from 2007 to 2020.

Ted’s research on social movements, activist use of technology, media law and policy, and online pedagogy has been published and presented internationally and he taught classes ranging from research methodology to global media systems. He and his spouse live in Jefferson Westside with an energetic coltriever and some very demanding and prolific fruit trees.