“Viewpoints” is a place on Chapelboro where local people are encouraged to share their unique perspectives on issues affecting our community. If you’d like to contribute a column on an issue you’re concerned about, interesting happenings around town, reflections on local life — or anything else — send a submission to viewpoints@wchl.com.
Low Income Residents Need More Market-Rate Apartments
A perspective from Andrew Kane
As a graduate student, my income is below Chapel Hill’s median. I pay almost half my income to my landlord. I expect to be priced out of any new apartments in Chapel Hill under consideration in the Blue Hill District. To help cost-burdened tenants like me, I hope the Town Council continues to allow the development of dense new market-rate apartments in this area as quickly as possible.
Much of the debate on housing in Chapel Hill has been framed as a tradeoff between market-rate apartments and affordable housing. Market-rate apartments are cast as a threat to our town’s residents: they squeeze tenants for cash, drive up nearby rents and property values, and displace current residents.
This narrative is false. People are moving here for jobs that will exist regardless of how many apartments are built. If we allow developers to build hundreds of new homes for them, they will happily live there, support our local businesses, and make Chapel Hill better able to provide social services with their tax dollars.
If we don’t build those homes, the newcomers still need a place to live. And they’ll knock on the doors of existing landlords, driving up rent and driving out residents. These out-priced residents still need housing, and they’ll downgrade to more affordable housing, pushing lower-income residents there out. The most vulnerable tenants get priced out altogether, abandoning our town or going homeless.
But Chapel Hill has been building these apartments for the past decade, and rents are still rising. Doesn’t this mean luxury apartments raise prices? While this idea is intuitively appealing, we are mixing up the causes of unaffordable prices with their effects. People drinking chicken soup are more likely to have a cold, but we wouldn’t conclude chicken soup causes colds. The rents are higher because more people want to live here, and newcomers are going to need housing. The rent therefore increases without new housing, as these newcomers look for places to live. This need for housing causes luxury apartments to be built, which reduces the number of newcomers driving current tenants out, and lowers rents. It’s the need for new housing, not the construction of the apartments to meet that need, that drives up rent.
This misconception about market-rate apartments raising rents is behind the vicious cycle that has gripped San Francisco. For decades, young people flocked to San Francisco for jobs. They needed housing, driving up local rents. But time and time again, residents blocked construction that would have housed the newcomers, and demanded tighter restrictions on building apartments. This misguided policy increased rents still further, fueling more resentment at the very apartments that would have lessened San Francisco’s housing crisis. After 40 years of opposition to market-rate apartments, San Francisco is a byword for widespread homelessness and breathtaking unaffordability.
Let us instead follow the example of Minneapolis, which in 2018 made building market-rate apartments easier there than in almost any other large city in the country. Construction boomed from 2,600 building permits a year to 4,000 after 2018. Did rents skyrocket with all those new high-end apartments? No: Since 2018, rents have fallen, even as Minneapolis’s population grew and inflation raised prices.
Still not convinced? Let’s look at the science on housing. Evan Mast (2019) finds that new luxury apartments are filled by residents of older housing, and that lower-income residents are able to move into the newly vacant homes. Li (2019) finds that large luxury apartment reduce rents and house prices within their vicinity. Pennington (2021) shows that market-rate housing makes rents fall by 2% within 300 feet of the new building. Asquith, Mast, and Reed (2019) find that market-rate apartments reduce nearby rent by 5%. Bratu, Harjunen, Saarimaa (2021) find that market-rate housing reduces rents across the entire city the housing is located in. Diamond and Moretti (2021):demonstrate how high market rate rents disproportionately hurt workers with less than a college degree in expensive areas. Each of these studies is written by researchers at academic institutions with no financial interest in housing development. Each paper uses state-of-the-art methods to rigorously determine how market-rate housing affects nearby rents and displacement. Each paper shows that market-rate apartments lower rents and displacement.
The facts are simply not on the side of our neighbors claiming that market-rate apartments drive out current tenants. The choice for our town is clear: to make Chapel Hill affordable again, we must continue to build market-rate apartments.
Sources:
- Minneapolis Rent: https://streets.mn/2022/05/06/minneapolis-rents-drop/
- Li (2019): https://www.fanniemae.com/research-and-insights/do-new-housing-units-next-door-raise-your-rents
- Asquith, Mast, and Reed (2019): https://research.upjohn.org/up_workingpapers/316/
- Bratu, Harjunen, Saarimaa (2021): https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3929243
- Diamond and Moretti (2021): https://www.nber.org/papers/w29533
- Mast (2019): https://research.upjohn.org/up_workingpapers/307/
- Pennington (2021): https://www.dropbox.com/s/oplls6utgf7z6ih/Pennington_JMP.pdf?dl=0
“Viewpoints” on Chapelboro is a recurring series of community-submitted opinion columns. All thoughts, ideas, opinions and expressions in this series are those of the author, and do not reflect the work or reporting of 97.9 The Hill and Chapelboro.com.
I don’t think you considered how building market rate apartments actually affects the poor. It will not get homeless people into their own place, will not provide steady rent for low income individuals and families, and will deepen the class difference between owners and renters disposing of any real possibility of upward mobility. Renters pay the mortgage but don’t get the equity. Luxury housing says Chapel Hill wants residents with money to move in and low income folks to look elsewhere. Affordable housing-public housing- says Chapel Hill recognizes that housing is a human right and people that make their town run deserve to be able to afford to live here. Subsidizing homeownership, preventing investors from buying out housing stock and gentrifying neighborhoods is a start. And frankly, if you’ve never had to eat out of a McDonald’s trash can or sleep at bus stop, you shouldn’t be advising on housing policy.
Hi JD,
Even if your intentions are good, policies you advocate for will still kick poor people out of their homes. You should do some homework to argue for your position if you really want to help low-income residents. You need to be able to point to where, exactly, the residents living in market rate apartments will live if they don’t get built. You can’t wish them into not existing; they are going to live somewhere. The point of the article is that when we build them new places to live, we keep them from living in a current resident’s location. It’s just a physical truth that building more apartments gives more people housing. And you need to argue why the science I provide in the article is wrong.
Telling people not to have an opinion on an issue because they’re not the worst-affected is also not productive. I might not be homeless, but I live in Chapel Hill, and I have a right to argue my case.
Andrew (the author), thank you for a well reasoned and well written article. You understand how markets work and how the pricing mechanism, if left alone from meddling governments, will ensure housing for both rich and poor.
Every attempt by governments to “control rents” or “provide affordable housing” results in a shortage of housing. The Bronx in New York was a great place to live until the city decided to “control rents.” Once landlords realized they couldn’t pay for repairs or upkeep because they were forbidden from charging market rates for housing, those same landlords let their properties decay over the decades.
JD’s comment indicates the socialist approach, which always results in shortages. Any so-called right (“housing is a human right” and “they deserve to be able to afford to live here”) that has to be paid for by someone else isn’t a right. No one has a “right” to something they haven’t earned to buy themselves a nicer place to live. JD’s solution is to enslave me (take my earnings) to pay for something he/she hasn’t earned. What is slavery, other than taking someone’s earnings without their consent? JD might be going through tough times, but that never gives him/her the right to demand that I pay for his tough times.
Hi Dale,
You hit the nail on the head: housing isn’t free. And banning market-rate housing doesn’t construct affordable homes, it just forces the same number of people to compete for a smaller number of homes. As I point out in the article, the least affordable place in the country (San Francisco) is full of people who mistakenly think banning market-rate apartments creates more affordable housing. And rent control doesn’t fix the problem, because you need more homes to house more people.
Where you and I might disagree is on public housing. If the town of Chapel Hill wants to buy an underused piece of land and build affordable housing on it, I think that’s a great way to help. Unfortunately many of our neighbors bring up building affordable housing only to block market-rate apartments, as we’re seeing with the American Legion property, which tells you all you need to know about how much they care about affordable housing vs blocking development.