Density's effect on affordable housing varies

ULI formed a group of land-use experts to examine the relationship between density and housing affordability.

The group found that market conditions, demographics and the availability of land and development incentives all determine how much density will affect housing affordability.

The consensus of the group: More dense construction doesn’t automatically translate into more affordable units unless other steps are taken to ensure that less-expensive housing is included.

“Density is one tool in the production of affordable housing,” said Nicolas Retsinas, director of the Joint Center for Housing Studies at Harvard University, in a news release. Retsinas served as chairman of the group.

“It is not a hammer, but a precision tool that can help” increase the stock of affordable housing, he added.

The group also noted that rising land and transportation costs are shifting growth patterns away from sprawl and toward greater density.

While cities in the United States remain among the least dense in the world, compact development is gaining more acceptance in the traditionally lower-density suburban areas, due primarily to increasing support for land conservation.

This movement, combined with the dense development occurring in land-constrained center cities and inner-ring suburbs, has created an environment in which density will steadily increase throughout urban areas.

“As the population grows, so does the need for greater density,” said John K. McIlwain, ULI’s senior resident fellow for housing.

“The more densely we build, the more sustainable our cities will become.”

In terms of owner-occupied housing, forum participants noted the need for a new definition of affordability: specifically, one that includes such factors as costs associated with transportation in addition to the standard measurement of principal, interest, taxes and insurance.

“We need to rethink what goes into the affordability factor,” said Susan M. Wachter, Richard B. Worley professor of financial management and professor of real estate and finance at The Wharton School of the University of Pennsylvania. “The percentage of income people are spending on transportation and commuting is rising dramatically” and influencing where people choose to live, she said.

Forum attendees examined the feasibility of using density to create affordable housing in four different types of markets: weak, strong, high-density urban and low-density suburban. Among their views:

• Weak markets. Although demand for affordable housing tends to be less tight in weak markets, denser design that includes lower-cost units can serve as part of a larger market revival strategy. Less-expensive land and greater land availability present unique opportunities not possible in other markets.

• Strong markets. The dire shortage of developable land makes redevelopment the only way to create housing of any price, and high land costs make the creation of affordable housing virtually impossible without substantial government subsidies and development incentives.

• High-density urban markets. In these markets, most housing construction tends to be expensive condominiums, with many upscale redevelopment projects resulting in gentrification that can push out existing residents.

Preservation of existing affordable units in these neighborhoods is a major challenge, again requiring strong support from the public sector.

• Low-density urban markets. Obsolete malls and other “dead” commercial space offer opportunities for denser development that includes affordable units. Mixed-use projects including housing and retail space are a promising option, providing a way of bringing jobs and housing closer together.

The Urban Land Institute is a nonprofit education and research institute supported by its members.

Its mission is to provide responsible leadership in the use of land in order to enhance the total environment.