Howard Husock is vice-president for policy research at the Manhattan Institute, where he is also a contributing editor to City Journal. He is the author of the book America’s Trillion-Dollar Housing Policy Mistake: The Failure of American Housing Policy.
We are accustomed to gauging the housing health of cities through some familiar data points: vacancy rates, new building permits, affordability. But there’s another, under-appreciated measure which explains a great deal about a city’s housing market and, specifically, provides an insight into the ongoing housing “crisis” that plagues some of America’s most prosperous cities, especially New York. Let’s call it churn. You might also call it turnover—the rate at which one household moves out and a new one moves in.
At first glance, a high churn rate might not seem to be a positive. Stable communities and households with deep roots in communities are, in many ways, desirable. But when too many residents stay put for too long, problems arise. For one, housing can be under-utilized—and that poses a problem for potential newcomers. Among the reasons that New York City’s vast public housing system has such a long waiting list—HUD data shows it takes, on average, 99 months before an applicant gets an apartment—is its estimated 25 percent rate of “over-occupancy.” These are chiefly older residents whose children have moved out, living alone in units with multiple bedrooms.
The same is true for New York’s 1.1 million rent-regulated apartments, where, according to a New York University report “about 23 percent of households in stabilized units have lived in their unit for 20 years or more in 2011, compared with only seven percent of households living in market-rate units.” Just as in public housing, empty nesters with no incentive to downsize stand in the way of newcomers. In a city such as New York that has long been a magnet for the young and talented, these newcomers may have to live, dorm-style, with two or more roommates—or give up and return to Cleveland (no disrespect; it’s my home town).
We don’t just have to guess about churn rate based on indirect measures. The American Community Survey regularly asks whether a householder has moved into a unit within the past year, and reports the three-year average of such responses. It turns out that there is great variation among major U.S. cities. New York, indeed, has the lowest churn rate: Housing in the Big Apple turns over nearly twice as slowly as it does, for instance, in Dallas or Atlanta.
What steps should cities take to ensure a steady turnover in their housing? They can start by not copying New York. Rent regulation, public housing without any time limit, and low residential property taxes (in favor of high commercial taxes) all inhibit churn. (Empty-nesters in suburbs often decide to move when property taxes go up and their incomes remain fixed.) Elsewhere, as I’ve written about San Jose, zoning gets in the way of the new construction needed to meet demand: The majority of San Jose is zoned for single-family housing and large parts of the city are off-limits to any development at all.
More construction-friendly zoning need not mean high-rises in low-rise neighborhoods; it can just as well enable two- to four-unit, owner-occupied structures which have historically been part of the ladder of upward mobility for working-class families. In Boston, a city with a relatively high churn rate compared to New York, the city’s most typical housing type is the New England “three-decker,” often occupied by an owner-occupant on one floor with rent-paying tenants on the others, helping to pay the mortgage. It makes sense if the owner, able to save money over time, then turns over the unit to one of the tenants, who have learned to follow a good example. As long ago as 1907, pioneer Boston sociologists Robert Woods and Albert Kennedy praised such housing as the foundation of what they termed a “zone of emergence” for the aspiring poor. Currently, Minneapolis officials are pushing for just this sort of increase in smaller, multi-family buildings in single-family districts. They deserve support—but are encountering NIMBY-ism.
Housing markets in cities with low churn rates such as New York are characterized by residents who, once they get what they consider to be a good deal, have every incentive to cling to it. As the New York housing search website nakedapartments.com has put it: “Rent stabilized apartments are very common but nearly impossible to find because once you land a rent-stabilized apartment, you don’t leave it … With rent-stabilized apartments priced cheaper … it’s understandable why renters don’t leave them. … This limited turnover in the rent-stabilized market puts more price pressure on all other apartments.”
Put another way: Stabilization locks in victory for those lucky enough to have won a game of musical chairs in which the music stops, but doesn’t start again. Notably, New York City’s churn rate has actually been markedly decreasing, falling from 11.43 percent in 2011 to the most recently reported rate of just 7.9 percent.
There’s a larger point to be inferred from discussing housing churn. To thrive, cities, especially older cities, must be friendly to new uses for land and buildings. When old industrial buildings became homes to new start-ups, when former public housing sites become home to Amazon centers, when abandoned train trestles become an overhead park—such are the marks of the living city. As Jane Jacobs wrote, new ideas need old buildings. The opposite is what can be called the frozen city—where housing is designated as “permanently affordable,” where zoning is locked in a previous era, where public housing is inviolate—even if its land could be put to a higher and better use in ways that would create employment for those of low income.
To be sure, embracing churn and change does not mean tenants should be without protection from eviction or that historic buildings or districts should be mindlessly swept away. But if cities expect to avoid and address housing crises, they have to resist regulations that, inadvertently but undoubtedly, discourage turnover. It’s good news, in other words, that California’s state-wide ballot measure that would have potentially expanded rent controls to additional cities and newer housing was defeated in November.
New York City has more public, rent-regulated and otherwise subsidized housing than any other American city, either in absolute numbers or as a percentage of its overall housing, and yet it finds itself in a perennial housing affordability crisis. It doesn’t need to build yet more of the same but, rather, to take its churn out of the freezer.