Housing Variety as a Path to Neighborhood Stability

In my last post, I introduced the idea that neighborhoods are more stable if the housing isn’t all of the same type.  I argued that homeowners are more willing to make investments in expansions, remodels, and even maintenance tasks such as painting if their chances of later recovering their costs aren’t inhibited by comparison with nearby homes that are nearly identical but unimproved.

Among the urbanist ideas I’ve introduced to people, the concept that neighborhoods need variety to thrive is the one that many find most puzzling.  Many have a mental image of 1990s subdivisions where they’ve always dreamed of living and where the rows of little differentiated stucco McMansions are doing just fine.

But twenty years is an inadequate time over which to judge the stability of a neighborhood.  I’ll instead ask those people to go back further in time and to consider two types of neighborhoods that co-exist in many towns.  The first is the neighborhoods that were built before 1930 and almost always include a variety of housing types.  The second is the neighborhoods that were built in the 1950s and late 1940s, in the first flush of the Levittown model for accommodating the post-World War II housing boom and are largely composed of what Malvina Reynolds called “little boxes made of ticky-tacky”.

In most towns, the older neighborhoods are doing just fine.  At any one time, a couple of the homes on a block might be showing their age, but then a young couple with energy or a older couple with savings will snap up the property and, with confidence in their investment, happily bring it up to match or to exceed the surrounding homes.  (Admittedly, the typical location of these neighborhoods in the more walkable parts of town is also a factor in their vitality.) 

My wife and I live in a house that was built in 1920 in a neighborhood that was developed in 1914 and observe that regeneration process constantly going on around us.

Indeed, in many communities, the concern isn’t the upkeep of the pre-1930 developments, but how to keep the pace of gentrification under control.

Conversely, the 1940s and 1950s neighborhoods, even if still mostly neat and tidy, aren’t showing the same robustness.  Perhaps the only improvements being made are the conversions of garages into spare bedrooms, modifications that are often illegal and will need to be unwound before the homes can be sold.  Nor are buyers with energy or deep pockets attracted to invest in those neighborhoods.  The neighborhoods may still be reasonable places to live, but they’re not progressing in a good direction.

And there is no reason to argue that the 1990s developments that some may admire aren’t on the same glide path, fifty years further out from the same crash landing, as the 1940s subdivisions which we now find unappealing.

There are ways to build more differentiated subdivisions, but first let’s look at why we moved from the 1920s model of land development to the 1950s model.

There were several factors that came together in the years immediately following World War II.  First, there was pent-up demand after the economic malaise of the 1930s and the commitment of all resources toward the military during the war years.  The generation of returning soldiers eager to resume their lives also added to the pressure for housing.

Furthermore, several economic reforms of the 1930s, including tax deduction for mortgage interest, which had only modest effect when first implemented, became significant drivers for new housing after the war.

To meet the new demand, builders found ways to apply the assembly line model pioneered by Henry Ford to the home-building business.  But assembly lines work best when the output is nearly identical, so there were financial reasons for homes to look alike.

Lastly, we began asking more of developers, a progression that continues today.  While a developer a century ago might have gotten by with a two-inch water main (good luck in the case of fire) and an expectation that the homebuilder would install a septic system at his own cost, we now require developers to build water systems capable of suppressing fires, to connect to municipal sewer systems, to bury all electrical, gas, and communication lines, and to contribute to the cost of infrastructure improvements elsewhere in the community.

Developers have shown that they can still make a profit with the greater requirements, but a primary strategy employed to stay profitable is to build homes efficiently and to sell them quickly, both of which require homes that are similar in style and details.  (A secret of housing development is that absorption rate is critical to profitability.  Holding a built home, or even an improved lot, for several years can wring all profit out of the development effort.  So building and marketing homes to a limited demographic segment that can be targeted effectively is a proven financial strategy.)

Obviously, I’m not suggesting that we should return to the days of two-inch water mains and septic fields because they would result in better neighborhoods for our ancestors.  But at the same time we should recognize that putting more financial demands on developers results in “little boxes made of ticky-tacky”.  If that isn’t the built environment we wish to leave to our children, it’s incumbent on us to change the rules.

(While it’s true that some developers try to ignore the incentives that we’re inadvertently created and to build projects that they think will better meet community needs, but for many it’s only a path to bankruptcy.  Whether building homes, toaster ovens, or toothpicks, employing suboptimal strategies is rarely a path to financial success.  Smarter regulation, not reliance on benevolence, is the only reasonable path to better outcomes.)

So, how do we incentivize better outcomes?  I’ll offer three possibilities, although none of them are easy or universally applicable.

First, the Pittsburgh reader who asked the question that triggered this topic writes that he grew up in a neighborhood that was a builders’ showcase of 55 years ago.  The lots were improved and individual builders were then solicited to build their best homes in exchange for marketing benefits.  The reader confirms that the neighborhood has stood up well over time, better than other nearby monolithic neighborhoods.

Second, in his book “The Last Harvest”, Witold Rybczynski tells of a greenfield development near Philadelphia where the local authorities required a certain number of the homes to be built by a home builder other than the developer.  The goal was to broaden the demographic span of the project.  But facilitating an agreement between the builders wasn’t easy.  Early in the process, the intention was to have three builders for the project, but when the third builder opted out, unhappy with his prospects in the deal, and no replacement could be found, the authorities let the development proceed with only two builders.

Lastly, smaller projects help.  Twenty homes of similar style and vintage have a less stultifying effect than two hundred similar homes.  But our entitlement processes actually encourage larger projects.  The costs of conforming to local regulations and CEQA aren’t proportional to project size.  The two-hundred-home development would have less than ten times the entitlement cost of the twenty-home development, so the larger project has lower entitlement costs per home and therefore more potential profit.

The same problem applies to more walkable urban projects.  Economies of scale in both entitlement and construction argue for ten-acre walkable projects, even if long-term city financial health argues for ten one-acre projects.

Over fifty years ago, Jane Jacobs made her case for “fine-grained development”.  She was absolutely right, but we’ve only moved away from her ideal in the years since she expressed it.

A few years back, I was involved in an entitlement process that showed the difficulties of trying to break the monolithic mold.  Next time, I’ll tell the story.

As always, your questions or comments will be appreciated.  Please comment below or email me.  And thanks for reading. - Dave Alden (davealden53@comcast.net)

One Way to Put a Neighborhood on the Skids

I’ve previously told two stories about an evening tour through Pittsburgh this past spring.  The driver was an old friend who had grown up there.  The evening began with a pub chat that led to insights about the costs to run a city.  Later in the evening, my friend and I strolled through a plaza I likened to Middle Earth.

My friend had put together a good route.  But our time was limited.  The sun sets early during April evenings in eastern Pennsylvania.  My friend showed me places that made me wish I had a week to kick around the city, riding the new subway, checking out the museums, wandering the college campuses, and enjoying the neighborhoods undergoing an urban rebirth.

But that extended visit must await another trip.  For now, I’ll conclude my thoughts on the Pittsburgh visit with my best answer to a question that my friend posed, a question that has been haunting my urbanist thoughts since then.

As my friend told the story (and he is encouraged to correct me in the comments below if I’ve made too many misstatements), in his youth he and his brother would often spend summer Saturdays with their grandparents in an urban neighborhood a few miles from downtown Pittsburgh.  One of their parents would drop the boys at the nearby high school where the pool was open to the public.  (I saw the high school.  It remains a dignified presence that adds value to its surroundings.)

After a swim, the boys would walk a couple of blocks to their grandparents’ house.  From there, the grandparents would take them shopping, on foot, in the retail area that served the neighborhood.  With a bit of cash slipped to them by the grandparents, the boys could even make a purchase or two.  It was a comfortable urban experience that left my friend with memories he still treasures.

After telling me the story, my friend drove down the street where his grandparents had lived.  The row house that had been their home was gone, razed along with all but one of its fellow row houses. Most of the rubble had been hauled away, but some remained and was gradually being covered by the creeping vegetation on the now vacant lots.

Nor were there healthy buildings on the opposing side of the street.  Many of the doors into what appeared to have light manufacturing plants were covered in plywood, graffiti was everywhere, and there were few signs of economic activity.  The few people to be seen also seemed burdened with despair.

My friend then showed me a parallel street only a short block away.  Although the small single-family homes seemed of the same vintage as the first street, these homes were nicely maintained and showed pride of ownership.  It wasn’t an upper-end neighborhood, but it seemed friendly, comfortable, and stable.  It gave a very different feeling from the first street.

My friend then posed a question.  Why had the two streets evolved in such dramatically directions?

The simple and most truthful answer is I don’t know.  An evening drive-by couldn’t begin to provide the facts to understand the history.  Perhaps there had been a fire that started the first neighborhood on a decline that couldn’t be arrested.

Or perhaps many of the homeowners had worked in the same Pittsburgh factory, a factory that had become a victim of Pittsburgh’s difficult years, and the resulting widespread unemployment had undermined the neighborhood.

Or perhaps crime, particularly the drug trade, had gotten its hands around the throat of the first neighborhood with a grip that had strangled the life from the street.

Any of those was possible.

But I offered another possibility, one that I’ve often noted as I’ve looked with a critical eye at land development practices.  The first neighborhood was monolithic, from the now mostly departed row houses on one side of the street to the plain brick walls of light industry on the other.  The second neighborhood was more differentiated.  Although the homes all seemed to date from a similar era, they seemed to have been constructed by multiple builders.  The sizes, architectural styles, and footprints had a pleasant variation.  Each home had its own character.

Something happens when homes have little differentiation.  They’re all compared to each other.  Their values are expected to track each other.  Perhaps one home was trashed by former homeowners while another homeowner has done an extensive kitchen and bathroom remodel.  But appraisers rarely incorporate the full value of the differing conditions, lenders won’t loan on the difference, and buyers are loathe to invest in the difference for fear that they won’t later find a buyer willing to pay for the difference.

If a homeowner’s long-range financial planning includes extracting the value of improvements made to a home, then the homeowner is disincentivized from making improvements.  And if all the neighbors are disincentivized from doing periodic updates, then the only possible direction for the neighborhood is downhill.

I certainly don’t know if the monolithic nature of the first neighborhood was the reason for its decline.  There’s a good chance that it was something else that I couldn’t discern from a car window.  But the possibility I offer is consistent with the facts I could see and has impacted other neighborhoods elsewhere.

This effect on neighborhood stability has numerous implications on urban and suburban neighborhoods.  I’ll explore some of those in my next post.

(Given our expedited progress on our Pittsburgh tour, I wasn’t able to collect any photos of the two neighborhoods, but have found photos from my archives of North Bay neighborhoods that illustrated greater and lesser degrees of differentiation.)

As always, your questions or comments will be appreciated.  Please comment below or email me.  And thanks for reading. - Dave Alden (davealden53@comcast.net)