The Works

Five Extreme Models to Combat High Rents

Tour Odéon, in Monaco. Credit: Groupe Marzocco

Whether you’re in London, Paris, New York, San Francisco, São Paulo or any bustling, Western metropolis, one thing is likely: Your rent is too damn high. Cities have always struggled with how to house their neediest residents, but in the past few decades, housing costs have reached crisis levels in many of the Western world’s most desirable cities, as those urban areas continue to drive growth and overflow with jobs. In San Francisco, for example, the mayor seems to have run out of ideas to house even the comfortably upper-middle class. In New York, 40 percent of the apartments affordable to lower-income residents vanished over the past decade.

With that in mind, here’s a roundup of five extreme ways to deal with high urban housing costs, from freezing your city in rent-controlled aspic (Stockholm) to letting it explode without bounds (Japan) to giving up on market forces entirely and building public housing for all (Singapore).

Inclusionary Zoning: Monaco

In New York City, a program popularly known as 80/20 gives residential developers tax breaks and a minor density bonus if they reserve 20 percent of new housing units to lease or sell at below-market rates. Many politicians have suggested that 20 percent is not enough, with Bertha Lewis at ACORN even suggesting that we should flip the ratio entirely. So-called inclusionary zoning programs, which tie the construction of market-rate housing to building affordable housing, are a relatively new phenomenon, and no city in the U.S. has managed to deliver any significant number of affordable units through inclusionary zoning.

But one city has made it work: The tiny principality of Monaco. There isn’t much room left for building in the less-than-one-square-mile city-state on the French Riviera, but when a new development comes around it includes — or at least funds — a lot of affordable housing. Citizens are entitled to apartments based on their household size, under a very specific rubric. If you’re a single person who’s unemployed, you get a studio. Grandparents with two gets who occasionally visit get a one-bedroom. Two full-time kids (or joint-custody of the same number) earns you a three-bedroom.

There are a number of reasons why this probably wouldn’t work out in a city like New York. For one, it takes incredibly high housing prices to sustain that ratio of affordable housing — trading New York’s merely expensive new construction for Monaco’s extravagantly expensive new development might allow the former to build more affordable housing, but it would also mean that anyone without obscene wealth or the good fortune to be born there would be shut out of the city.

Secondly, Monaco has seen very little new construction since the “builder prince,” Prince Rainier III, was in charge in the 1960s and ’70s, when the city-state’s ubiquitous concrete blocks were thrown up and new land was created on the water. If Monaco grew at the same rate as a normal city, it’s unclear that there would be enough oligarchs with infinitely deep pockets to pick up €300 million apartments and subsidize luxury housing for Monacans at the same rate as Tour Odéon, the first new high-rise built in the principality in a generation.

With less than a quarter of Monaco’s 37,579 residents having citizenship, the ratio of those who subsidize real estate (drawn to Monaco for its light taxes) to those who consume that subsidized real estate is more than three-to-one. Even if there were enough multimillionaires, would New York really want to invite 25 million of them in and have the federal government forgo taxation in order to subsidize affordable housing for the more than 8 million existing New Yorkers?

HDB flats in Bukit Batok, Singapore. Credit: Mailer Diablo from Wikipedia.

Total Public Housing: Singapore

Singapore may get painted as a free-market urban utopia, but when it comes to housing, the southeast Asian city-state is essentially a communist country: More than 80 percent of all resident Singaporeans live in Housing and Development Board projects. Almost as soon as the city-state won independence after World War II, it started building HDB flats, as they’re known, until public housing became the default arrangement for Singaporeans. Nowadays, public housing plays a crucial role in the social safety net — HDB purchases are incentivized through the Central Provident Fund, a mandatory savings scheme that Singaporeans are allowed to spend buying HDB flats. Young Singaporeans must pay 20 percent of their wages into the savings accounts, with employers throwing in another 16 percent, for a total of 36 percent while you’re young (declining to 11.5 percent once you’re 65 or older) — about the same proportion of total income that people in the U.S. are expected to spend on housing.

The downside of ubiquitous public housing, though, is that it looks like public housing. HDB flats aren’t as bad as the towers-in-the-park that went up in U.S. cities after World War II, but they’re not a whole lot better. HDB buildings tend to hew to the Corbusian form, with parking podiums, bays and lots on the bottom, and relatively useless open space between buildings. Pastel-colored concrete towers proliferate in Singapore’s rail-oriented outlying areas, with none of the architectural diversity or spontaneity that characterizes more market-oriented residential neighborhoods. In Hong Kong, which also has a high percentage of public housing, the public housing high-rises are cookie-cutter replications of different “types,” with names that seem straight out of an Agenda 21 conspiracy theory, like “New Harmony 1” and “Trident 2 (35-Story).” Retail is segregated from housing, and while the towers are relatively dense, Jane Jacobs would surely not approve.

Urban sprawl, looking west from Tokyo Tower. Chris 73 on Wikipedia.

Unregulated Density: Japan

Japan, the undisputed king of urbanization with the most populous urban area on earth, has found a particularly laissez-faire solution to high housing prices: Let anyone build pretty much anything wherever they’d like. From the days of the Tokugawa shogunate, when fires were accepted as a fact of life and no special planning effort was made to prevent them, to the 20th century when small factories were allowed to proliferate in residential neighborhoods, Japanese planners have acted with a light touch, restricting building heights in the densest areas but otherwise letting cities sprawl as far as the (now mostly private) commuter railways would take them.

While Japan’s early 20th century railway history was not as laissez-faire as in, say, the U.S. or U.K., it has since privatized its state-owned intercity and commuter lines in the three main metropolitan regions (Tokyo, Nagoya and Osaka) and is edging toward privatization for the largest inner-city subway networks. Japanese railways are some of the most impressive on earth (see, for example, this mesmerizingly comprehensive map of greater Tokyo’s rail networks) and are continually improving. Without that level of efficiency, it’s hard to see how any city could have grown to be as large as Tokyo.

And while Tokyo is not a cheap city, it’s cheaper than any megacity in the English-speaking world, and getting cheaper as it continues to grow. Wendell Cox’s Demographia found housing in Japan’s two megacities to be more affordable than in any other city he studied (all in the Anglosphere). Given its population, it has managed to remain affordable for the 40 million people who make their home the greater Tokyo area. While the region is indeed sprawling and controls on greenfield growth are not strict, the lack of massively subsidized road infrastructure leads development to be relatively compact — the rail-oriented sprawl is much denser than many of the leafier parts of, say, eastern Queens in New York.

There are, however, some downsides. The light touch of land use regulators led to an environmental crisis in the postwar years, as people living near toxic sites were poisoned by industrial chemicals like cadmium and mercury, and fell ill with what became known as the Big Four pollution diseases. The worst excesses have been reined in with stricter separation of polluting industry and housing, though with an essential ingredient of Japanese urban success — the freedom to build relatively dense homes and commercial buildings — remaining intact.

Then there are commute times. Though the railways will get you anywhere you need to go within the greater Tokyo and Osaka areas, the expanses are so vast that it might take you a while. The average commute in those two metro regions is well over an hour each way.

Interchange of I-10 and I-45, northwest of downtown Houston. Credit: Dhanix on Wikipedia.

Unregulated Sprawl: Houston

If you like the idea of free-market development but find Tokyo and Osaka too dense, there’s always the Houstonian model: No zoning code, or really any restrictions on development at all — so long as you include copious amounts of parking and don’t depend on much of a transit network.

Houston’s city charter has a provision that requires any zoning code to be put to a citywide vote, and so far there have been three referenda, and none have succeeded in zoning the city. (The last one, in 1993, failed with support from 48 percent of voters who showed up. Low-income and affluent voters opposed the imposition of a zoning code, while the middle class was weakly in favor.)

Which isn’t to say there are no sprawl-inducing land use regulations in Houston. The city still has parking minimums, and they can be quite onerous. Most new towers are erected beside or on top of a massive parking podium, and the city’s townhouses (only truly legalized in 1998) all face the street with parking garages. Apartments, for example, require 1.25 parking spaces per bedroom — more than even Houston’s fellow Sunbelt cities.

These rules are, on net, far less restrictive than zoning codes in other cities, and as a result Houston has stayed cheap and continues its explosive growth. (If you’re the type of person who doesn’t want strip clubs opening next to your churches and skyscrapers next to your single-family homes, Houston may not be the place for you.) The city had 782,009 housing units as of the 2000 Census, and 892,646 in 2010 — a housing stock growth of of 14.1 percent, compared to a 9.7 percent national population growth over the same period.

All of this growth rides on the back of a network of subsidized freeways and a paltry (but growing, albeit in the wrong direction) transit network. Herein lies the downside: Environmentally degrading sprawl and unending expanses of concrete ribbons.

A street in Norrmalm, Stockholm. Credit: Georgios Karamanis on Flickr.

Rent Control: Stockholm

The rent control model is common in European cities, and one of its most zealous practitioners is Sweden. In the capital, new housing construction has fallen desperately short of demand for years, and a strict system of rent controls is the only thing keeping rents in Stockholm from skyrocketing. For longtime inhabitants of a city, rent control is great — it keeps rent low without any direct cost to the government. But the system is not kind to those new to the city. If you’re a Swedish citizen, you can put your name on any number of waiting lists for apartments, and after a few years — one source says seven on average — you can get a cheap apartment in Stockholm.

Faced with such long lead times, others have turned to the black market for housing, either by signing unregulated sub-leases or outright buying someone’s rent-controlled lease. Illegal subleases by rent-controlled tenants at market rates are quite common, as is being asked to pay illegal key money to sign a contract. (The Wall Street Journal says a lease can run you half a million kronor, or $76,800, in the hottest neighborhoods, while other sources put the number at a quarter of that.)

The rent control model’s biggest victims are newcomers to the city, or who can’t inherit their parents’ apartment. Even those lucky genetic lottery winners, trapped in a gilded cage of rent control, don’t emerge totally unscathed, as one told the New York Times, “The only reservation that I have is that I never had the choice to go anywhere else.”

The Works is made possible with the support of the Surdna Foundation.

Stephen J. Smith is a reporter based in New York. He has written about transportation, infrastructure and real estate for a variety of publications including New York Yimby, where he is currently an editor, Next City, City Lab and the New York Observer.

Tags: affordable housingreal estatethe workshoustonpublic housingsprawltokyosingaporeosakastockholm