Housing affordability crisis made worse by oversupply of expensive condo HOA homes

By Deborah Goonan, Independent American Communities

Can we make housing more affordable in U.S. cities simply by building more homes? Home builder lobbies and research think tanks, such as Urban Land Institute, say, yes. The only way to make housing more affordable, is to increase supply.

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But opponents of new development argue that decades of development planning has only created more density, less livable cities, and housing that’s more expensive than ever.

Who’s right? Who’s wrong?

Both…and neither.

Read on for a brief explanation.

 

What kind of housing do we need, and how much of it?

Yes, we need to build more housing, but only at price points that most people can actually afford.

Case in point, consider an example from Hawaii, the Howard Hughes Corporation’s Ward Village in Kakaako. According to an article in Civil Beat, the master planned, mixed-use condominium village is currently bustling during day time work hours. But it’s a ‘ghost town’ at night and on weekends.

It turns out that most of Ward Village’s multi-million dollar condos are vacant. They’re owned by investors who don’t live in their units, and don’t rent them out either. At night, the Ward Village condo tower stands ominously dark, only a few units showing signs of life.

Obviously, that’s not helping the homeless, the working class, or even middle class households in Kakaako. But the ripple effects of overdevelopment of luxury housing spread beyond housing consumers.

The Village’s high end shops and cafés languish after normal workday hours, because too few people actually live nearby. Not surprisingly, business owners aren’t renewing their leases, saying they cannot justify the high rent with such limited foot traffic.

Soon, the commercial center of the Village may be a ‘ghost-town,’ too.

Over-development epidemic

Kakaako is just one example of what happens when a city government allows developers to create an oversupply of luxury housing and high-end commercial development. New York City, MiamiToronto, and Vancouver are experiencing the same problems — cities stuck with huge numbers of expensive condos and homes sitting vacant, because most residents cannot afford to buy or rent them.

The common sense solution: governments should put a stop to all new construction of housing and commercial properties serving domestic and foreign investors in upper income tiers.

 

Builders construction workers
(Pixabay.com free image)

Should we relax zoning? Where should we build more housing?

This is a huge sticking point, because most local zoning, as well as existing development plans, don’t allow more affordable housing options such as small bungalows, expandable starter-home cottages, or apartment buildings.

But, please, let’s not ignore the elephant in the room. HOA-governed communities, through their Covenants and Restrictions, often dictate minimum dwelling sizes. (For example, at least 1,800 square feet) HOAs also tend to prohibit new development or conversion of existing housing to two-to-four dwelling structures.

And it’s nearly impossible for homeowners to change the governing documents to give property owners more rights and options for the land they own. Most amendments to Covenants require at least a super-majority of all owners to vote in favor of new rules.

Something else to consider. With so many urban and suburban developers holding onto acres of land bound by decade-or-longer development rights, the supply of buildable land is severely limited — usually where it’s most needed.

That’s pushing cities and counties to consider development proposals on former industrial or shopping mall sites, or in undeveloped areas beyond existing suburbs.

How about some better solutions?

Local government should press developers to finish building out existing condominium, townhouse, and planned community projects, before they issue new permits for entirely-new development plans.

Also essential: local and state governments must find workable compromises that allow new construction of small detached homes and small multifamily housing, without over-crowding existing neighborhoods.

And it isn’t right to bury single family homeowners with high taxes or code enforcement fines, in an effort to force them out of established neighborhoods.

It’s happening in towns all over the United States, including Charlestown, IN, where the mayor wants a developer to tear down old single family homes and build brand new, denser housing.

Nine times out of ten, new housing is more expensive than the older homes it replaces, displacing residents most in need of affordable housing. Tearing down old neighborhoods to make way for new ones only increases the need for affordable housing.

 

Painter-why-sky-rules-regulation
(Pixabay.com free image)

Is less regulation the answer to affordability?

Maybe, maybe not.

The trick is, reducing state and local regulation of new construction, without putting home buyers and housing consumers at risk of living in shoddily-constructed, poor-sited housing.

For example, local governments need to ensure that residents’ homes aren’t threatened by landslides, severe erosion, poor drainage, flooding, and environmental contamination.

On the other hand, local and state government shouldn’t be mandating politically expedient or ideological “solutions” that favor certain industrial sectors and service providers, at the expense of homeowners. For instance, it isn’t fair or cost-effective to mandate solar energy for all new homes in California.

Government shouldn’t “green building” mandates for products that aren’t time-tested, and that don’t offer a good return on investment. It isn’t government’s job to create new captive home builder markets for some companies, but not others.

Home buyers should be able to choose among several money-saving options in a competitive market.

 

Think outside the HOA box

Most importantly, local governments and state laws must encourage avoidance of developer-initiated and HOA-controlled common ownership housing communities.

Development plans that mandate homeowners associations, and so-called “affordable” condominium and cooperative associations don’t help build strong, resilient communities.

On the contrary, HOA communities tend to be over-sized and over-regulated by the HOA. The homes tend to be over-priced, especially in poorly-maintained communities with unstable property values.

Even in well-managed communities (which are relatively rare), condo, co-op, and homeowners’ association fees, result in higher cost of ownership, compared to similar non-HOA-governed housing.

Rents in HOA-governed communities are often higher, too, especially when the owner-landlord passes the costs of rising HOA and condo fees to tenants.

Even worse, if the market won’t bear higher rents, an owner-landlord is left with low profit margins, barely breaking even on carrying costs, even as the condition of the community deteriorates.

 

More isn’t always better

When it comes to housing, increasing the supply of homes won’t necessarily increase affordability.

Policymakers need to consider other important factors that affect affordability. Consumers need a variety of housing options, greater freedom to make the best use of the space they call home, and the ability to avoid the extra costs and risks of HOA-governed, common interest communities. ♦

 

News Sources:

Kakaako’s Empty Condos: ‘At Night, It’s A Ghost Town Down Here’
Stewart Yerton / June 10, 2019
Ben Carson takes aim at red tape blamed for soaring housing costs (Fox News, report by Fred Lucas, June 10, 2019)