Monday, June 13, 2011

NIMBYism Impacts Investors, Residents; Takes Toll On Local Economy, Illustrates Law Of Unintended Consequences

I saw a piece on Inman News over the weekend, which was inspired by Builder magazine. No matter which headline you use, the resulting message is the same:

-- There is a cost to NIMBYism, and its impact on housing affordability.

But I want to take it a step farther. The "Not In My Back Yard" trend impacts an area's entire economy. We see it over and over. People who want jobs, or already work in a given area, need affordable housing. Often times that isn't a single family dwelling. So they look to apartments. And not "dive" housing, but upscale apartments. Or mid-range apartments. What they can afford based on the wages they are receiving in a competitive, market economy.

But the focus more and more of some communities is to preclude certain kinds of residential housing, with a perceived eye toward preserving property values. This quite often actually backfires. Call it the law of unintended consequences.

Now, let it be known I am all in favor of good zoning. But many community leaders, or neighborhood rabble-rousers, or even city council people in cities and townships large and small, sometimes take their power and their authority to the limit. Thinking it will get them re-elected, they will jump on the NIMBY bandwagon and prohibit ANY kind of multifamily housing solely because a vocal minority has an issue with said property type. And that "perception" again that apartments -- no matter the quality -- negatively impact their property values.

But what are the results?

Take Naples, Florida for example. I am very familiar with the area, as my family holds investment property in Collier County and has been spending time in this beautiful area of southwest Florida for nearly 40 years. Some years back, a number of areas began some restrictions on construction of apartments, in favor of condominium development. As a result, service workers sorely needed in the area -- teachers, firefighters, hotel and resort staff, and police -- often could not afford to live in the city itself and were forced to reside outside the growing community. There was discussion about making people live in the city as a condition of employment. So what happened? There was intense discussion about increasing the pay of many service workers on the public payroll, helping them earn higher wages that might enable them to live in the service area.

Of course, there was a backlash from the controlling authorities -- the city and county, the local school boards . . . even taxpayers already feeling the financial squeeze of escalating taxes opposed increasing wages. And why? All because a decision had been made to severely restrict new multifamily housing developments. And what do developers do? The single family and condo developers who want to build in Southwest Florida are sitting tight right now because of the economy. Multifamily -- the only commercial real estate market segment that remained strong during our recent recession -- is still off-limits for discussion in much of this area. So the developers with money, who are ready to go, move to other markets -- taking their money with them.

Is there rental housing in the Naples area? Sure. There are a handful of newer buildings that went up before the real estate market crashed, and a number of building conversions that are receiving Section 8 funds. But those are for people who in our economy are the most vulnerable, and earn the least. What about the middle income worker who doesn't want to own, just rent. Well, thanks to the economic downturn, a LOT of newer condominium developments that could not get buyers, or condo sellers who can't find buyers, are renting their units just to cover the note. I see this continuing for some time. But just try to get an apartment complex development approved. It is an uphill battle because of entrenched biases.

In Central Ohio, there are a number of suburbs and bedroom communities -- not all -- but several, that have put severe restrictions on multi-unit housing development. For no other reason than "we don't want it here." Particularly along the northern loop of the Columbus freeway outerbelt. And yet they don't realize that they could be adding to their tax base almost immediately, rather than waiting for the economy to turn around and for housing developers to once again start putting up single family homes. There are MUH developers who, given the right circumstances, will built right now because they know the apartment market is stronger than pretty much any other commercial/investment market segment.

But as I hinted earlier, this impacts the economy of an area. The demand for workers earning moderate wages remains. Yet they often cannot find housing they can afford without driving for miles; NOT an attractive situation to be in when gasoline prices continue to hover near $4 a gallon! This impacts workforce availability.

Worse yet, when a strong, willing and able workforce is not present, potential employers who might consider coming into an area will pass, and go somewhere else. Thereby denying an area of sorely needed new jobs.

In the wealthy Chicago suburb of Winnetka, rental stock has been on the decline and there is a bias against new construction of multifamily housing. The area is becoming more transient with fewer and fewer full time residents giving way to owners who only come out on the weekend or once a month. This is having an impact on the local school system, as fewer and fewer students are enrolled.

In Salisbury, Conn., new hires to the school district cannot find homes they can afford in the city. The city's community fire department and ambulance service are losing firefighters and EMTs because these critically important people cannot afford to live in the city. Many of the individuals who are leaving grew up in the area, and if given a choice would gladly stay as they love the city and their jobs. But with people quitting because they can't afford to live there, there is now discussion of turning over fire and ambulance services to neighboring communities or to the county -- at an increased annual cost of actual service and increases costs to taxpayers. Oh, BTW, that cost to taxpayers? It is expected each taxpayer in Salisbury will face an estimated 36 percent increase in their taxes, primarily through property taxes, should the city need to pay another municipality to provide these fire and emergency ambulance services.

Again, the law of unintended consequences in action. NIMBYism doesn't just cost people the opportunity to live in an area, it costs cities economically.

And finally, I step away from the business side of this discussion to comment about a cultural note. I find fascinating the double-standard that seems to be emerging. Today's progressive, open-minded homeowner will insist that the laws on discrimination are "right on," and our neighborhoods should be open to anyone who wants to live there. I couldn't agree more! Our neighborhoods are far more diverse than ever in history.

BUT ....  (and it is a big but), as the stock of rental and affordable homes decline, and areas seemingly cater to only one kind of resident, the lack of housing diversity is leading to a lack of resident diversity. Are we backsliding???

Food for thought ...

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