Submitted by George Graham
Recently, The New York Times and the Wall Street Journal both published very insightful articles on the cause of the affordable housing crisis in the United States.
The lack of affordable housing is a big issue in Reno and the consensus amongst local politicians, journalists and activists is that it’s mostly the fault of developers and homebuilders. These two articles make it clear that local governments have played a big role in making urban housing more expensive to build by imposing more and more regulations, stricter building codes and more and greater impact fees (this includes local utilities).
The NYT’s article states:
“This mix of good intentions (energy efficiency, tree preservation) and exclusionary ones (aesthetic mandates, minimum lot sizes) has pushed up the cost of building on top of the rising cost of land. Cities have also shifted more of the burden for funding public infrastructure like parks and sewer systems off taxpayers and onto homebuilders. The result today is that a builder who can put up only one home on an expensive piece of land will construct a large, expensive one.”
The WSJ article says:
“Most economists say municipalities need to relax zoning rules and other restrictions to bring down land inflation and build more housing. But these changes are often unpopular with homeowners, who benefit from rising land values and make up around 65% of U.S. households. Adding more housing also often requires costly investments in roads and other infrastructure.”
I develop infill multi-family apartments in Reno, mostly in Midtown, Wells (320 & 597 Grand Canyon Blvd.) and Powning (126 Winter Street) Districts. My projects target young professionals and others seeking new, modern, urban living spaces.
I don’t live in Reno; I live in New York City. That said, affordable housing is a national problem in urban areas all over the country, including my home.
Affordable housing in Reno is a topic I read about in the local press and discuss with both local businesspeople, residents and local politicians. My standard line is: “the best answer to improve housing affordability is to build more housing, period.”
We can look at Northern California as a prime example of what has not worked: restrictive single-family zoning that is designed to reduce density and crowding (or, the NIMBY crowd). After 30+ years of restricting the development of more housing, many municipalities in Northern California are increasing density to add to the housing stock and, you guessed it, improve affordability!
The two articles I reference above both conclude that municipalities, not developers or homebuilders, are more likely the root cause of a lack of affordable housing. Municipalities have reduced affordability by increasing the regulation (requiring excessive onsite parking, excessive design requirements, tree requirements, etc.) and increasing and adding impact fees (sewer, parks, transit, etc.) many of which, as stated in the NYT’s article, were previously paid for mostly by residents.
Let’s look at onsite parking requirements as one example. In Midtown core, 0.5 spaces are required for any size unit. Blocks away, in the Wells District, one space is required for a studio/one-bedroom unit and 1.25 spaces for a two-bedroom unit (which was, until recently, the case in Midtown). Wonder why developers like myself have been building more studios/one-bedroom units? At 320 Grand Canyon Blvd., I’m building 18 one-bedroom units and my site coverage is 25%, more akin to an industrial building. In urban areas such as San Francisco and New York City, site cover is closer to 100%.
(Editor’s note: site coverage is the percentage of a building site that is covered by a building footprint.)
Time is money, so when it takes extra time to go through the planning and building process, developers must charge more rent. Reno’s Planning Department has recently made improvements in this area, but more can be done to reduce the time it takes to put a shovel in the ground.
An area often overlooked is the involvement of local utilities in the development process, specifically NV Energy and Truckee Meadows Water Authority. Utilities impose impact fees that increase a project’s cost and their approval times have a major impact on a project’s timeline. No developer can tell these utilities to speed things up or that their fees are too high!
I agree housing affordability is a major issue in Reno, but it will only be addressed if we are honest about the root causes and all parties–private and public sector–work to address them together.
George Graham is a managing member of Park Real Estate Partners developing multifamily properties principally in infill locations in Reno. His current projects total 185 units in Reno, with three located within Opportunity Zones.
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