We often find ourselves saying, “Landed is not a panacea.” Our goal in this recitation is to disavow the notion that the housing affordability crisis has a tidy solution. We believe that equity-based down payment financing is a necessary evolution in housing finance and that it has the capacity to bring homeownership within reach for a whole class of individuals – but it is not enough.
As the San Francisco Housing Action Coalition astutely points out, “housing policy that encourages low-density development and a culture intent on preserving the built environment has resulted in an under-supplied, expensive housing market. As a result, the City is suffering from an affordability crisis.”
Whether speaking with school administrators, prospective homebuyers, or concerned community members, we explain that Landed solves just one part of the puzzle – the down payment for households that can afford the monthly cost of homeownership, but cannot manage to save enough for a down payment. While the down payment is the key barrier to homeownership for a lot of folks, down payment support does not make a city’s housing cheaper overall. That is why we urge our supporters to also support a general increase in housing supply.
Jobs and housing
Jobs (and therefore, workers) are arriving in thriving cities faster than new units are being built to house the newcomers. Increased demand for housing, because of new jobs being created, paired with a relatively fixed supply of housing, has driven up prices for all existing housing stock. In other words, the amount of housing has simply not been able to keep up with the number of people who want to live in these cities. If we build more units, all else being equal, housing costs would be expected go down.
In an article published last week, Apartment List noted that the San Francisco metro area added 3.0 jobs per permitted housing unit from 2005 to 2015. Worse still was the San Jose metro area, where 3.2 jobs were added for each unit of housing, over the same period. As would be expected, rent increased by 43% and 57% over that period in San Francisco and San Jose, respectively.
In our hometown of San Francisco, the dismal lack of supply is not a problem limited to housing for low- and moderate-income earners, although, that plight is severe. There is immense demand for every house, apartment, and condo within reasonable commuting distance of Bay Area jobs. In turn, many high-income earners end up in units historically occupied by moderate-income earners, and in turn, moderate-income individuals occupy units previously occupied by low-income earners. To overcome the affordability crisis at scale, we will need a combination of solutions, most notably including the construction of higher density residential housing.
Our alternatives to building more housing look bleak. They include limiting economic opportunity, killing jobs, or making our cities less desirable places to live. The last-standing option – increasing the amount of housing to better accommodate demand from newcomers – might sound conspicuously reasonable. In reality, it is very very hard.
More housing, even if added smartly, will inevitably mean changes to the shape and feel of our communities. Taller buildings will bring more people and businesses. Development that respects the existing community character still means changes to community character, and at least in the short-term, inconveniences such as traffic, more construction noise, and relocations.
It will take collective effort
It will take a collective effort and compromise to overcome the challenges brought by a relatively rapid increase in jobs, population, and wealth arriving in economically growing metropolitan areas. We know Landed can be life changing for individual households, and beneficial for the community at large, but Landed’s down payment program is ultimately only available to certain households that can already afford homeownership on a monthly basis.
Building more housing will mean a lower cost of housing, new amenities, and opportunities for new and existing community members. It should not mean driving current residents out of cities to make way for new residents. We must be cautious and respectful of our forebearers, by ensuring that existing residents see a future for themselves in the communities where they have built their lives.
Making neighborhoods accessible and diverse requires more than just planning onsite affordable units. It requires having robust plans for more diverse housing options and temporary housing while new housing is built. It also requires creative solutions to help existing businesses remain, even as the character of the neighborhood changes and new businesses arrive.
At Landed, we support responsible, planned development for our cities. We believe that more housing options will provide opportunity for a diverse population to join our thriving cities. And by becoming long-term residents, newcomers along with natives will shape a richer, more affordable future.