For Cities, Changing Housing Market is An Opportunity

Tight credit standards and a 20 percent down-payment requirement are delaying homeownership for younger Americans.

Many of the people who are entering the housing market are Millenials like myself, who might normally be trying to buy a first home if the economy was performing better, but instead are deleveraging, paying down our student loan debt and credit cards just like many other Americans.

So it's not that surprising to see that demand for quality rentals is starting to tick up. 

At the GLVCC's Commercial Real Estate event last week, Frank Smith of NAI Summit said that vacancies are lower in the Lehigh Valley than the rest of the United States, and the region's rents also rose in the first quarter of 2011.

But it's not just prices that are nudging young adults toward renting.

Pushing in the same direction is a broader change in housing preferences toward increased demand for housing in walkable neighborhoods. A recent survey by the National Association of Realtors found that 56% of respondents favored walkable, mixed-use neighborhoods over ones that required more driving between home, work and recreation.

The Economist and other popular economics blogs have raised the possibility that rising rents in metro areas will lead to an increase in build-to-rent, followed by a condo boom. 

I think this is important because it bears on a number of issues that are relevant to the Lehigh Valley's economy - affordable housing, open space and the brain drain. 

Affordable housing is a pretty straightforward supply and demand issue. A decrease in vacancies increases rents, so to keep housing affordable you have to build more units.

Since demand is rising in walkable neighborhoods, and housing in these neighborhoods is dense by definition, the only way to add significant capacity is to build up. 

The politics of density is often tough, as people worry about things like parking, "light and air," and the standard NIMBY themes. But the cost of trying to limit density through policies like mandatory parking minimums, caps on building height and maximum lot occupancy is higher rents and .  

A supermajority of voters  about preserving open space, but you can't do that without changing housing patterns, and more specifically, the zoning rules that make it illegal to build dense walkable development. Building upward means less building outward.

Another consequence of limiting density is that it makes your city less like the walkable mixed-use cities that more and more Americans are saying they want to live in. 

Pennsylvania has been lamenting the brain drain effect for years, wondering why the state's graduates leave for urban job centers.

It's the jobs, but it's also the cultural institutions that flourish in these places, which are facilitated in no small part by a built environment that creates more informal networking opportunities.  

The changes in the housing market present a chance at greater economic opportunity for the Lehigh Valley's cities if officials can figure out how to attract more young renters.