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The Feasibility of Constructing
Two- or Three-Family
Owner-Occupied Housing
in Single-Family Neighborhoods

as an Infill Strategy

Leonard J. Vilicic
1997

 

 

 

 

 

 

 

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_-—-—--— ‘—

ABSTRACT

THE FEASIBILITY OF CONSTRUCTING TWO- OR THREE-FAMILY OWNER-OCCUPIED
HOUSING IN SINGLE-FAMILY NEIGHBORHOODS AS AN INFILL STRATEGY.

by

Leonard J. Vilicic

Prior to the Great Depression and WW II, two- and three—family owner-occupied housing served a
vital need by providing affordable housing at a time when single-family housing was prohibitively expensive
and tenement housing was deplorable. Afterward, national housing policy focused on promoting single-
family housing, which became artificially inexpensive because of cheap land, federal subsidization, and a
booming economy. Multi—family housing, particularly large rental complexes, became an investment option.
Small rental properties have since comprised a decreasing share of the housing market, resulting in a loss of
housing options. Changing demographics, and current problems of sprawl and unaffordable housing, point
to a need to revive theses alternate forms of housing.

By analyzing data from the Property Owners and Managers Survey, which was conducted by HUD
and the Census Bureau in 1995, this paper argues that a two- or three-family owner-occupied house can be
built within single-family neighborhood, without the supposed decrease in property value, service quality, or
neighborhood quality of life. Smaller rental properties provide numerous advantages over large rental
properties, not the least of which is providing more affordable housing. The paper discusses ways in which
the two- or three-family house can become part of the urban landscape. The paper concludes with a market

forecast for two- and three-family housing in Lansing, Michigan.

THE FEASIBILITY OF CONSTRUCTING TWO- OR THREE-FAMILY
OWNER-OCCUPIED HOUSING IN SINGLE-FAMILY NEIGHBORHOODS
AS AN INFILL STRATEGY

BY

Leonard J. Vilicic

A PLAN B PAPER

Submitted to
Michigan State University
in partial fulfillment of the requirements
for the degree of

MASTER OF URBAN AND REGIONAL PLANNING

Department of Geography
Urban and Regional Planning Program

1997

To my wife, 206, who believed in me enough to
agree to selling our mic-family house in New Jersey
to move to Michigan in pursuit of my dreams; and

to my son, Samuel, who spent too many weekends
without me, which made the ones we spent together

all the better.

 

ACKNOWLEDGMENTS

 

This paper would not have been possible without the objective and critical support of my
advisor, Professor John T. Metzger. He pointed out the gaps in my research, kept my biases in
check by playing devil’s advocate, caught those sentences that made sense in my head but were
senseless on paper, and encouraged my pursuit of the exceptional.

No researcher should be without a sounding board, and mine was William Charles “Bud”
Knickerbocker, Jr. Our extensive discussions helped shape and strengthen my conviction in equity
planning and social justice, both of which are important aspects of this research.

Finally, this paper would not have happened at all were it not for the tremendous help of
the Urban Planning Program Administrator, Dawn Brown. It seemed at times as if she worked

magic so that I would be able to complete my graduate education.

Thank you all.

Photographs by Leonard J. Vilicic

THE FEASIBILITY OF CONSTRUCTING TWO- OR THREE-FAMILY OWNER-OCCUPIED HOUSING IN SINGLE-FAMILY
NEIGHBORHOODS AS AN INFILL STRATEGY

 

TABLE OF CONTENTS

 

, «I. j .1” ' . _ r'
(0 [I41 «11-00 cgl C {1th - 'M * 3‘
LIST OF TABLES ' -‘

 

LIST OF FIGURES

 

INTRODUCTION

 

WHY RENTAL HOUSING IS NEEDED

 

WHY 2 AND 3 FAMILY RENTAL HOUSING IS NEEDED

 

A HISTORY OF 2 AND 3 FAMILY HOUSING
ORIGINS OF TWO- AND THREE-FAMILY HOUSING

 

DEMSE OF TWO- AND THREE-FAMILY HOUSING

 

BENEFITS OF 2 AND 3 FAMILY HOUSING
HOUSHVG OPTIONS
OIVNERAS OCCUPANT
AFFORDABILITY
MARKET CONTROL VERSUS RENT CONTROL
COA/fl’ACT DEVELOPMENT
SOCIAL INTEGRATION

COMMUNITY CONCERNS
DECREASE 1N PROPERTY VALUES
DECREASE IN SERVICE QUALITY
DECREASE IN NEIGHBORHOOD QUALITY OF LIFE

OVERCOMING REGULATORY BARRIERS
ERECTTNG THE EXCLUSIVE SINGLE-FAMILY ZONE
REDEPTNING THE RESIDENTIAL NEIGHBORHOOD
SETTING THE STAGE FOR CHANGE
THE TOOLS OF CHANGE
ENSURING OWNER-OCCUPANCY
STEPSIN THE RIGHTDIRECITON

INFILL HOUSING
MARKETING
FINANCING

A DESIGN CRITERION
LANSING, MICHIGAN: A MARKET FORECAST FOR 2 AND 3 FAMILY HOUSING
CONCLUSION

 

BIBLIOGRAPHY

 

APPENDIX

 

92

 

104
108

 

LEONARD 1. VlLlClC 1 SPRING 1997

THE FEASIBILITY OF CONSTRUCTING TWO- OR THREE-FAMILY OWNER-OCCUPIED HOUSING IN SINGLE-FAMILY
EIGHBORHOODS AS AN INFILL STRATEGY

 

LIST OF TABLES

 

Table 1: Homeownership Rates, United States and Michigan, 1984-1996

 

 

Table 2: National Homeownership Rates by Age, 1973-1995

Table 3: National Income and Housing Costs, 1975-1995

 

Table 4: Year Existing Rental Structure Built, Percent of Total for Each Structure Type

 

Table 5: Percent of Each Structure Type Built per Year

 

Table 6: Number and Percent Of Total Units per Year by Structure Type, 1940-1990

 

Table 7: Comparative Costs of Homeownership (in dollars)

 

Table 8: Comparative Tax Benefits of Homeownership (in dollars)

 

Table 9: Monthly Rent per Unit, Percent Distribution for Each Structure Type

 

Table 10: Rent Change from Previous Tenant, Percent Distribution for Each Structure Type

 

Table 11: Number of Times to Court in Last 2 Years, Percent Distribution for Each Structure Type

 

10

10

11

14

15

16

29

3O

36

Table 12: Number of Times Eviction Procedures Started in Last 2 Years, Percent Distribution for Each Structure Type

 

Table 13: Changes in Neighborhood Property Values Last Year, Percent Distribution

 

36

39

Table 14: Types of Undesirable or Disruptive Behavior in Last 2 Years, Percent of Total for Each Structure Type _42

Table 15: Characteristics of Disruptive Tenants, Percent of Total for Each Structure Type

 

Table 16: Turnover Rate in Last 12 Months, Percent Distribution for Each Structure Type

 

Table 17: Reasons for Acquisition of Property, Percent of Total by Structure Type

 

Table 18: Population, Michigan, Ingham County, and Lansing

 

Table 19: Population Cohorts, Michigan and Lansing, 1980-2000

 

 

Table 20: Households (HI-I), Michigan and Lansing, 1980-2000

 

Table 21: Income, Michigan and Lansing, 1989

Table 22; Families Below Poverty, Percent

 

 

Table 23: Employment Trends, Michigan and Ingham County

Table 24: Employment Projections, Michigan and Ingham County

 

43

44

69

92

93

94

95

95

96

98

 

LEONARD I . VILICIC 2 SPRING 1997

THE FEASIBILITY OP CONSTRUCTING TWO- OR THREE-FAMILY OWNER-OCCUPIED HOUSING IN SINGLE-FAMILY

NEIGHBORHOODS AS AN INFILL STRATEGY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Table 25: Unemployment Rate, Michigan and Lansing 98
Table 26: Ingham County Commuting Patterns, 1990 99
Table 27: Housing Units (HU), Lansing, 1980-2000 100
Table 28: Housing Projection, Lansing 101
Table 29: Building Permit Authorizations, Lansing and Ingham County, 1978-1994 102
Table 30: Units in Structure, Lansing 1990 102
Table A1: Year Structure Built 114
Table A2: New Privately Owned Housing Units Completed, 1968-1995 115
Table A3: Profits Last Year 116
Table A4: Current Maintenance Program 117
Table A5: Length of Lease 118
Table A6: Monthly Rent per Unit 119
Table A7: Rent Change from Previous Tenant 120
Table A8: Number of Times to Court in Last 2 Years 121
Table A9: Number of Times Eviction Procedures Started in Last 2 Years 122
Table A10: Primary Method of Screening Tenants 123
Table A11: Changes in Neighborhood Property Values Last Year 124
Table A12: Types of Undesirable or Disruptive Behavior in Last 2 Years 125
Table A13: Characteristics of Disruptive Tenants 126
Table A14: Turnover Rate in Last 12 Months 127
Table A15: Percentage of Rent Delinquent Tenants at Property in Last 2 Years 128
Table A16: Reasons for Acquisition of Property 129
Table A17: Main Reason for Acquisition of PrOperty 130
Table A18: Housing Data, Michigan, Ingham County, Lansing 131
LEONARD]. VlLlCIC 3 SPRING 1997

THE FEASIBILITY OF CONSTRUCTING TWO- OR THREE-FAMILY OWNER-OCCUPIED HOUSING IN SINGLE-FAMILY
NEIGHBORHOODS AS AN INFILL STRATEGY

 

LIST OF FIGURES

 

Figure 1: New Privately Owned Housing Units Completed by Structure Type, 1968-1995, Percent of Total __

Figure 2: Profits Last Year, Percent Distribution for Each Structure Type

 

Figure 3: Length of Lease, Percent Distribution for Each Structure Type

 

figure 4: Rent Delinquency Rate at Property in Last 2 Years, Percent Distribution for Each Structure Type __

 

Figure 5: Effect of Elements on Siting of Structure

24

26

45

85

 

LEONARD I. VILICIC 4 SPRING 1997

THE FEASIBILITY OP CONSTRUCTING TWO- OR THREE-FAMILY OWNER-OCCUPIED HOUSING IN SINGLE-FAMILY
NEIGHBORHOODS AS AN INFILL STRATEGY

 

INTRODUCTION

 

Homeownership is an important goal in this country, offered to as many people as possible.
However, the high cost Of homeownership continues to prevent many people, whom a generation ago could
have afforded homeownership, from realizing that goal. Various government programs and financing
mechanisms have been created to aid people in the purchase of their homes. But what if a property
generated income for the owner, thereby reducing his or her expense and making the property more
affordable? Two- and three-family, owner-occupied housing could allow more people to own homes more
affordably, at less cost to government.

Young people are increasingly unable to afford to live in the suburban communities in which they
were raised. Homeownership requires huge up-front costs and continual maintenance costs. This requires a
relatively high income, which many young people do not have. The same holds true for elderly people on
fixed incomes. In some older single-family neighborhoods, many houses are illegally occupied by two or
more families. This practice points to a need for a change in the zoning ordinances to accommodate housing
needs.

Today’s families are smaller than they were a generation ago, having declined from 3358 persons in
1970 to 3.17 persons in 1990. Single-person households have increased from 17.1% in 1970 to 24.6% in
1990. Single-parent households have increased from 12.9% in 1970 to 28.1% in 1990. (Pollak 1994) The
divorce rate remains high at 4.6 divorces per 1,000 population. (NCHS 1997) These figures point to a need
for smaller housing. Despite these demographic trends, high numbers of large single-family houses meant
for large families continue to be built. The median new home size grew from 1,385 square feet in 1970 to
1,920 square feet in 1992 (USDHUD 1995, 3-5)

A one-floor apartment in a two- Or three-family house is large enough for a small family, but not so
large that space is underutilized. A two- or three-family house permits peOple to live closer to one another.

It puts a renter together with an owner, which has the social benefit of mixing people of different economic

 

LEONARD I. VlLlClC 5 SPRING 1997

THE FEASIBILITY OF CONSTRUCTING TWO- OR THREE-FAMILY OWNER-OCCUPIED HOUSING IN SINGLE-FAMILY
NEIGHBORHOODS AS AN INFILL STRATEGY

means. A two- or three-family house can keep families living in the same community by providing
affordable housing. It can also keep families in the same—but separate——house.

The purpose of this research is to determine if the two- or three-family owner-occupied/ rental
structure is a viable new construction alternative that can revitalize declining single-family neighborhoods,
and can potentially be integrated within new single-family developments. It will begin by examining why
rental housing remains a necessary component of housing, and how rental housing and ownership housing
have changed over the past century, resulting in the loss of housing Options.

Next, it will explore the history of two- and three-family housing, and the benefits of this type of
housing. As the evidence will show, this kind of arrangement was common, and readily accepted, in the
m—of-rhe—century streetcar suburbs of the NortheaSt. For various reasons, it was discarded in the late
19205. Yet two-and three-family housing—in terms of social, economic, and environmental costs—may
have been a more efficient method of housing, leading to heterogeneous neighborhoods, affordability, and
compactness.

Homeowners tend to have concerns about allowing rental housing into their communities. The next
section will address these concerns about changes in prOperty values, service quality, and neighborhood
quality of life. In all instances, the evidence indicates that these concerns are unfounded. Two- and three-
family housing has no apparent effect on property values, service quality, or neighborhood quality of life.
Nevertheless, people’s concerns are what become translated into political action. The next section will
discuss the regulatory barriers that prevent integrating housing types, and how they may be Overcome.
Zoning has been the foremOSt regulatory obstacle, and will be explored in depth.

Infill development is increasingly important as our society strugles to come to terms with a desire
for growth and a desire to protect the natural world. A section will explore what infill is and how two- and
three-family housing can be an aspect of it. Good ideas require marketing and financing. The next sections
will discuss the potential buyers of two- and three-family housing, and the financial mechanisms that can

allow them to buy these houses. This is followed by a section on what these houses should look like. It is

 

LEONARD I. VILICIC 6 SPRING 1997

THE FEASIBILITY OF CONSTRUCTING TWO- OR THREE-FAMILY OWNER-OCCUPIED HOUSING IN SINGLE-FAMILY
NEIGHBORHOODS AS AN INFILL STRATEGY

based on the traditional decker model of two- and three-family housing, rather than the side-by-side duplex
or triplex.

A final section explores the housing market of Lansing, Michigan. It is the state capital, has a large
student population, and is currently experiencing downtown revitalization. For these reasons, it is an ideal
place to apply the ideas presented.

NO study has been completed to determine the viability of constructing two- Or three-family owner-
occupied structures to revitalize declining single-family neighborhoods. Typically, the debate on housing
focuses on such issues as increasing homeownership for the poor (in single-family detached housing),
creating rental housing in high-density multi-family zones, letting tenants purchase public housing, and
reducing regulations to decrease the costs of new housing. Even the Neo-traditionalists and New Urbanists
tend to put forth many of their ideas in the context of single-family housing.

Logically, there should be no reason why a two- Or three-family house cannot be built on a vacant lOt
in a single-family neighborhood. The overall density would hardly be affected. Affordable housing would be
created for those unable to afford a single-family house, namely the young just leaving the home of parents,
and the elderly who can no longer afford to maintain an “empty nest.” Often, neither group desires to leave
their community, but economic reality forces them to, because of the barriers that prohibit them from staying
where they would rather be.

This paper analyzes some of the results of the PrOperty Owners and Managers Survey (POMS),
which was conducted by the US. Bureau of the Census between November 1995 and June 1996. (U .8.
Census 1997) Its purpose was to provide data on the characteristics of the nation’s rental property and their
owners. Information was gathered concerning maintenance, management practices, tenant policy, financial
aspects of rental property ownership, and Owner characteristics. The survey was divided into single-family
rental properties and multi-family rental properties. Because single-family residences are generally built for

owner-occupancy rather than for rent, they are not considered in this study.

 

LEONARD J. VILICIC 7 SPRING 1997

THE FEASIBILITY OF CONSTRUCTING TWO- OR THREE-FAMILY OWNER-OCCUPIED HOUSING IN SINGLE-FAMILY
NEIGHBORHOODS AS AN INFILL STRATEGY

The POMS included units that were privately owned rental units in the 1993 American Housing
Survey (AHS) and were still rental at the time of the POMS. “A unit was considered rental if it was either
rented for cash rent, occupied by someone Other than the owner without payment of cash rent, or vacant but
available for rent.” (US. Census 1997) The POMS excluded from its survey public housing, military
housing, owner-occupied housing, housing that was vacant but for sale, housing that was vacant but not
available for sale or rent, second homes, housing that was rental but is no longer, and housing that became
rental after the AHS. That the POMS did not include owner-occupied housing limits the data’s applicability
to this study, but generalizations concerning owner-occupied housing can still be inferred because of the

differences among the structure categories.1

 

1 The POMS divided multi-family properties into the following structure type categories: 2-units; 3 - 4 units; 5 - 9 units; 10 - 19
units; 20 - 49 units; and 50 + units.

 

LEONARD I. VILICIC 8 SPRING 1997

THE FEASIBILITY OF CONSTRUCTING TWO- OR. THREE-FAMILY OWNER-OCCUPIED HOUSING IN SINGLE-FAMILY
IVEIGHBORHOODS AS AN INFILL STRATEGY

 

WHY RENTAL HOUSING IS NEEDED

 

Currently, homeownership is being promoted by HUD with strong support by the Clinton
Administration. (U SDHUD 1995) It is being done through various programs, including “Homeownership
Zones,” for which HUD recently appropriated $90.8 million to boost homeownership rates in six blighted
inner-city areas.1 (U SDHUD 1997c) The program targets new and rehabilitated single-family housing. The
belief is that homeownership creates personal financial security, strengthens families and creates good
citizenship, results in a commitment to community, and promotes economic growth. (U SDHUD 1995, 1-1)
To an extent, this is all true.

However, many scholars have criticized the promotion of homeownership. In Shelter Poi/cry, Stone
(1993) demonstrates that a surprising number of people are living in shelter poverty, meaning that after they
pay for housing (If they can even do so), they cannot afford the other basic necessities of life. This is true of
43% of all renters and 23% of all homeowners, among both low and middle-income groups.

Another point often disregarded is that even if people can afford the downpayment and the
continuing carrying costs (mortgage, interest, taxes, insurance, utilities), the costs of emergency maintenance
and repair can bankrupt people. Most peOple living at the edge do nor have the liquid capital necessary for
these contingencies. (Meyer 1994, 569)2

A third point is that many of these people have limited and unpredictable income. They may be
employed this year, but next year they may not be, which means that they cannot know when they may have
to move, or if they will be able to continue paying off a mortgage. Promoting homeownership for these
people assumes that they will always be able to afford it. (Meyer 1994, 571)

More revealing is that, overall, homeownership has never surpassed the two-thirds mark. Nationally,

the homeownership rate peaked in 1980 at 65.6 %. Table 1 below shows the homeownership rate trend

 

1 Baltimore, Bufl'alo, Cleveland, Louisville, Philadelphia, and Sacramento.

2 This also points to a need for affordable home improvement financing.

 

LEONARD J. VILICIC 9 SPRING -1997

THE FEASIBILITY OP CONSTRUCTING TWO- OR THREE-FAMILY OWNER-OCCUPIED HOUSING IN SINGLE—FAMILY
NEIGHBORHOODS AS AN INFILL STRATEGY

from 1984 to 1996 for the United States and Michigan. The rate has fallen slightly, and only recently has it
approached the 1980 peak. What this may be sugesting is that approximately a two-thirds homeownership
rate is the saturation point, there will always at least one-third who rent. The Midwest, of which Michigan is
a part, has always had the highest homeownership rates, most likely because this region typically has the

lowest home prices. (Joint Center 1996, 32)

Table 1: Homeowners/21]) Rater, United S tater and Miebigan, 1984- 7 996

 

1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996

United States 64.5 63.9 63.8 64.0 63.8 63.9 63.9 64.1 64.1 64.0 64.0 64.7 65.4
Michigan 72.7 70.7 70.9 71.7 72.5 73.2 72.3 70.6 70.6 72.3 72.0 722 73.3

 

 

 

 

 

Seem: Bureau of the Census, Housing Vacancy Survey

The homeownership rate has not been equal among age cohorts. There has been a divergence, as
the younger cohorts have experienced lower ownership rates and the older cohorts have experienced
increasing ownership rates, as shown in Table 2. It is the younger cohorts, because of generally lower

incomes, that have the least ability to purchase houses.

Table 2: National Homeowners/n) Rate: by Age, 1973-7 995

 

 

1973 1976 1980 1983 1987 1989 1991 1993 1995

 

 

30 to 34 60 2 62.4 61.1 55. 7 53.2 53.6 51.3 50.6 53.1
35 to 39 68.5 69.0 70.8 65.8 63 8 63.9 62.4 62.6 62.3
19.19. 4.4 72.9 73.9 74.2 74.2 70. 6 470.8 69.1 68.4 68.3

 

 

 

 

 

S om: JOint Center for Housing Studies, Harvard University, Tb: State qftbe Nation’: Housirig 7996.

Another factor that will, at least for the future, always guarantee a certain amount of renters is that
incomes have remained stagnant while home prices and rents have been increasing. Table 3 shows monthly
incomes for Owners and renters, compared to home prices and gross rents. All values are in constant 1989

dollars.

 

LEONARD J. VlLlClC 10 SPRING 1997

THE FEASIBILITY 01'" CONSTRUCTING TWO- OR THREE-FAMILY OWNER-OCCUPIED HOUSING IN SINGLE-FAMILY
NEIGHBORHOODS AS AN INFILL STRATEGY

Table 3: National Income and Housing Costs, 7975-7 995

 

monthly income

Av elite "

86,950 "
90,757

1W88, 473

“we! .2 WW1 EWVR‘E'EENE .w
{.96.- $545.;- ' 993?: ' ...-v.41? - .- .l-.
4'( ‘t . . £55?“ g 3

.;:-:.," :35:
" .?=:-":-'.":-tv' 4'3"":
\ .95.": s). 'etsisa}?;45::’l.

£3.

.. ..,.
{fin-53:
"4' HI

I
434.3553

.7
.' :5.

€533?" W: '5“- ../.;...":_' .‘z' -' , .- : .- . .
:'-';..;..,:: ' 9', -.- ‘ -':;~:-f-'..~.;:g~$§;> ' -
-.-'a-. - ANNIE-1R5 543244315 ”#45'44344' .4

o .

... no” .-

. .'l-
'6 v”:

.' .-. ."
I fig? ’4'. Z". ..4 '. ' . I
‘ 2-. .4'":. ".a' '434-5'4a .I’:"'."~4P 2444444! '- “$3445 ' ' ”’3'“ ' ' '-'4:\

2,348 1,468

v.53...” ...... Ag. xiv."- . .
if? .5.-$3}_ {- £4? 3' 44‘
”he" <'~ {iii-z...

{fi' .-.-. -" -- z ‘1.-

.- .- _ m- - .I' a. ;

V“ .93" ";"’- 4.33:1 :2 313244-33- cv'e- £§§gfi$§<fié

462 RE» A: . -

3:5 ..I'

S om JOtnt. Center fOr Housing Studies Harvard University, The State qftbe .
Naa'on' .r Homing 7996.

 

Who make up this one-third that will always rent? In an analysis of a survey conducted by the
National Association of Realtors, Varady and Lipman (1994) have identified six “clusters” of renters to
determine likely target groups for homeownership programs. The clusters do not imply permanency, since
families pass through various life—cycle stages, and may move between owning and renting, though some
clusters have more permanency than others.

The first cluster, families moving up the housing ladder, comprise 17% of all renters. They are
usually young families, of which 37% have school-age children. About two-thirds expect to buy on the next

move, and half are currently saving to do so. They are making progress towards ownership but are

discouraged by high costs.

LEONARD ]. VILICIC 11 SPRING 1997

THE FEASIBILITY OF CONSTRUCTING TWO- OR THREE-FAMILY OWNER-OCCUPIED HOUSING IN SINGLE-FAMILY
’ NEIGHBORHOODS AS AN INFILL STRATEGY

Lifestyle renters, who make up 21% of renters, tend to be older, averaging age 56. They rent
because they do not want the cost, trouble, or responsibility of ownership, and consider ownership a poor
investment. Three-quarters are not interested in owning at this stage in life.

A third cluster, college graduates starting out, comprise 26% of renters. They are upwardly mobile
white-collar workers at the earliest stage of the life cycle. Though they have the highest average income
($38,373) of the rental groups, the highest proportion with both spouses working (21%), and an interest in
owning, most plan to move two or more times within the next five years. This is because work tends to be
temporary and they rent to be able to move quickly.

The fourth cluster, black renters, make up 15% of all renters. Socio-economically, they are almost as
well off as cluster 1, but they trail considerably in the progress toward ownership. They have a higher cost
burden than the first cluster (monthly rent divided by income, 44% versus 26%), and have the highest
proportion of single parents (34%). Discrimination is a likely reason for being shut out of the housing
market.

A fifth cluster is the elderly life cycle renters, comprising 10% of renters. They are at the post-child
stage (average age 61), 83% owned their last location, and 100% owned at one time during their lives. They
are “over-housed” and moved because they do not need the space. They have achieved the highest
congruence between housing needs and lifestyle.

Struggling blue-collar workers make up the final cluster with 11%. The average age is 33, and 90%
cite affordability as the largest obstacle to homeownership. This cluster has the highest proportion of young
singles, and the lowest average income ($25,423). Their future is the most uncertain in the face of the
restructuring economy. Nearly all of them want to own, but nearly half are not ready, and most are prone to
move 54% will move twice in next ten years).

Though the Varady and Lipman analysis was done to determine who will likely buy a house, and
who should be targeted for homeownership programs, it can be used conversely to determine who will likely

rent. According to Varady and Lipman, 32% of renters prefer to rent because they expect to move

 

LEONARD I. VILlCIC 12 SPRING 1997

THE FEASIBILITY OF CONSTRUCTING Two- on THREE-FAMILY OWNER-OCCUPIED HOUSING IN SINGLE-FAMILY
NEIGHBORHOODS AS AN INFILL STRATEGY

frequently, they would rather avoid the responsibilities of homeownership, or they find that renting is more
affordable. (1994) Regardless of whether people wish to remain renters or not, the fact is that there will
always be a need for rental housing, and what is increasingly lacking for renters are housing choices. The

next section covers briefly the reasons for this decline in options, and shows the extent of it.

 

LEONARD I. Vmcxc 13 SPRING 1997

THE FEASIBILITY OP CONSTRUCTING 1170- OR THREE-FAMILY OWNER-OCCUPIED HOUSING IN SINGLE-FAMILY
NEIGHBORHOODS AS AN INFILL STRATEGY

 

WHY 2 AND 3 FAMILY RENTAL HOUSING IS NEEDED

 

Over the last century, rental housing has undergone some major transfonnations. At the close of the
19th century, it was the slum tenements that caused enormous alarm. The majority of peOple could not be
housed affordably in single-family houses. The small apartment house became the acceptable compromise
between single-family housing and large tenements. The strict building and fire codes being enacted in cities
across the nation prevented large unit structures from being erected; they became too expensive to build.
Unfortunately, the codes became so strict that eventually the small structures could not be built profitably.

(Jackson 1985)

Table 4: Year Earning Rental Stratum Bailt, Pemnt qf Total for Barb Structure ije

 

TYPE OF MULTI FAMILY PROPERTY
Total US. 2 units 3 - 4 units 5 - 9 units 10 - 19 units 20 - 49 units 50 + units
100.00. 100.00 100. 00 100.00 100.00

.................................. 3,, "5w. 4' ”-4" ..
a; ..A .:--. 3359 i\¢“~"¢‘+”1~‘3$‘ -
. .' -.'°'.-- - ..r
~:‘-"4_"°:-:- 55:5: ':54 ..i'vvfixfiyx‘f‘
-' . '-. 3:4.“
:/

 

 

 

 

 

 

 

 

   

      
    
    
 
 

 

 

 

Total

"AA-‘3’ We .~A< 23:; -:
I v-.,: :4}:-Y.1'-:;; ‘
#3.? 11.5.5; “‘5‘?! .5

(+5

    
   
  

          
  

  

' - -‘\ :z...
J'a-z'v x'. ::"1¢~¢.<¢e'£~‘v~ $32: 1

1980-1984
1970-1979

.-.I~ vat-v <~4 I 112-4535! ‘1 “'5'

weft} 4’55?" :' WEE“ '3 .... -'- .' -

ii! I \9 VJ" ég‘fi‘}: 33"" 5,3,9. 1" . . .... I.Z-Z 91:9“; 3::

1m x; gfisa: -1§2:! ~:- "*5“ If T... ------ “a“ ’
1940- 1949 5.32

1930- 1939 4. 75 10.10

4:!- _, 43"?“ ...,f ._. ., .; : 5 ................. 8%,. ............... :5 . .

  
  

      

.
fi‘?
.5": 2% 45%.
.-.-:1;v .1434 .5“
..‘SV

. . '-..~;.'?' .314 :‘ 1.;.'f ......... fies-'42: . 555154.53" text-:1-
not reported 5.06 7.81 7 64 6.3 8 1.85
5m. US. Bureau of the Census, Property Owners and Managers Survey, Multi Family Properties, Table 8.

 

As Table 4 shows, the greatest portion of small apartment structures in existence today was built
before 1940, whereas the greatest portion of large apartment complexes was built after 1960. One reason for
this was that after World War II single-family housing was built in huge quantities. With FHA insurance,
VA loans, and the FNMA secondary mortgage market, the government’s policy was to get people into their
own housing as inexpensively as possible. (Jackson 1985') Wth the support of zoning, housing options

became increasingly limited between the single-family districts and the new apartment complexes being built

 

LEONARD I. VILICIC 14 SPRING 1997

THE FEASIBILITY OF CONSTRUCTING TVO- OR THREE-FAMILY OWNER-OCCUPIED HOUSING IN SINGLE-FAMILY

NEIGHBORHOODS AS AN INFILL STRATEGY

Both fon'ns were less expensive to build and more profitable than small apartment structures. Rising wages,

cheap land, and low interest rates kept housing inexpensive. (Husock 1990)

The bulk of all rental units in existence today, about 24%, were built in the 19705. Two-thirds of

that were in 50+ unit structures, whereas only 6.75% were in 2-unit structures. The trend for 2-unit

construction has been steadily declining. Of all 2-unit structures standing today, 19.24% were built in 1919

or earlier, and only 2.65% have been built since 1990. By contrast, only 11% of all 50+ unit structures were

built before 1960. Of the 3-4 unit structures, 61% were built before 1960.

Table 5: Percent of Earl) Structure TJpe Built per Year

 

Total US.

TYPE OF MULTI FAMLY PROPERTY

 

3-4units 5-9units 10-19units 20-49units 50+units

 

 

 

.% fiffiffi ‘Ifflflffi’

5"§5 ". .' 2'24 5". .. "
VIE-34¢» PVVII$§S "

100.00

”100. 00

 

 

 

 

 

 

 

aW713

5°43

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14:-"1??- 63.4} 434., 55-2 .-.

#:ych; .259 .- ¢:¢;ean:, .v .3 a v.53;

. ; ~ <55V1'xv:.5\
A,” : AV}\-2§" . ' “fie?
v ‘.
¢xr\5¢/\@J g)

’33:. ‘s
“5.4 ‘Ffi'fiksfi 44%? 4535:"

'.«w .z 595;” we. -.:.r. .s u syg. .;.;.;.;.- ._ “.3,- .'.-- ;.; e ; - ;.-.- ' ;.-.-.- - . .- ' -.- .- - -.- - -. .v.-. ' - - . .- a??? -.-.
‘9 ‘5 <9" 4,55% I fl 1 I, . .5." ¢.>‘-/-. 5:." ($.53.
’ 5,. 5 $2335. '55 "559,".-

.4395'45555 MI. "v

_ 5.: 32%-'35:, 31'.
.w 3 .31; *5 3“”‘3 fig
fl, .- ‘V'wx it W "
I a -

 

l l I I If... I I ~ .g'.’
i-‘.-¢"‘{ ' - 53' I. 19:55:"

’51:.
Z<x\"“ " - -. -. 155-.-. 55-3551
.: .32.- Aita‘m.

SmlU. 8: Bureau Of the Census, Property Owners and Managers Survey, Multi Family Properties Table 85:1

Table 5 shows the percent of each structure type built per year. The 50+ unit structure has become

the norm since the 19605, when it captured 53% of the multi-family rental construction market. Though

most units were built in the 19705, it was in the 1985-1989 period that 50+ unit structures captured 71% of

the rental construction market, probably to take advantage of the low-income housing tax credits created by

the 1986 tax reform1 One more noticeable trend is that after 1990, 2-to-4 unit construction increased its

market share of rental housing construction, whereas 20+ unit construction lost some market share.

 

1 This analysis assumes that each type of structure has the same life expectancy, and any demolition has occurred equally across all

WP”.

 

LEONARD]. VtLtClc

15 Spnmc 1997

THE FEASIBILITY OF CONSTRUCTING TWO- OR THREE-FAMILY OWNER-OCCUPIED HOUSING IN SINGLE-FAMILY
NEIGHBORHOODS AS AN INFILL. STRATEGY

As a percent of the total housing units available, 2-to-4 unit structures have been steadily declining
since 1940, decreasing from 15.3% in 1940 to 9.7% in 1990, despite a peak of 18.9% of total housing units
in the census year of 1950 (T able 6). Overall, however, the absolute number of 2-to—4 unit structures has
been increasing, except for a loss of 1,123,318 units between 1950 and 1960. This was the decade
immediately following the passage of the 1949 Housing Act, which began the period of urban renewal and
slum clearance. (Hays 1995) It is likely that many old 2-to-4 unit structures were demolished during this
time. Even forty years after slum clearance, though, the 2-to-4 unit structures built before 1919 still account

for the largest proportion of all 2-to-4 unit structures (see Table 4).

Table 6: Number and Percent of Total Units per Year by Stmctxre Type, 7940-1990

 

  

._.
5'-
.
J:'-:s .'
_.

5.- .5.:1
" M '.'.°‘$;?5fé;1?'$.j-<_§‘§5~

   
   

 
  
 

   
 

   

 
 
 
  

 
 
 

    

  

.-.-1. ,‘3: -9'" - , -- 3:533: .555 -:3'{:F'~_.
..‘éfff‘. £39545. .::‘ ‘ .;, " 3‘ 33:53:53.. .‘<~:’ 4:”. W53 (11.53.34. ..5” '-'- .
1950 45, 983, 398 29,1 15, 698 2,798, 632 8,676,183 5,077,667 315,218
.%“ 100. 00% 63. 32% 6. 09% 18. 87% 11. 04%? “.0 69%
. .. __ ‘ ,.,.,..:’._.;._.,.,,_:,’.,u_ .- . . .. .. . ffiifififi: : . 4.. __, 3% £9 _. .. 004:.
‘ < 16:251.,” ‘9‘." 53'... Va} *3? . 3:533 1‘” ‘

    

' ' 23-" 3. 555' ' " ' " ‘ " a . --' ‘3"55355555-‘1515'4'3 $533.3»? ‘4;/%? xiii'axfi'vmfi
1970 67 699,357 44 800 684 1,989,867 9,006,950 9, 828, 969 2 ,0,72 887
°/o 100. 00°/o .. {66.18‘1/0 . .. 2.94%- 13. 30°/o 14. 52°/o 3. 06%

.4" )335‘ 5.x? .‘fh\ 5:95-54 :::J._.;.' 4. . . . .: -.-.;._ :.-. '45: ‘34:}: 4{$\::r{4hw v. '4. ;.- .4557 -.'.’-. :3": 3.0 “4.; 3 M4.- :25‘. 3552:». ’5 :31}: :63?’ r ’4'): 4c?
fi<lfim¥3 ~ ‘3 : :_.:4€:. . . .: _ . ._. ', ‘:Z _ 4&2 {51:25:32 45555 %g . . .- 2.454425!- 5:: _ -5‘ 4 : 33$: 4:;11324 ." .
I I . I é.‘ C

   
    

 
    

  

1333:}, A544, 4‘53: '5}; :::.-::.‘51':?...' 3"} $31.13;. (4'1:- 53‘3'55"5' 5-:-:?.- 5R5; 5534.45345333133 “1’55! ' ""9313.
33.515. 3",“ ... - ,. - ' .~ ”$535“ 5'11... $34; (3'. iii-1‘ 5. MW f 153%??? ”g . ' "
("51934 :235-"35" :55: Miz'ii'f: "-48:13 1545554533555 .5 45355533.;555-853?:$$-’.-§8§:5$33332':

1990 102,263 678 60,383, 409 5,378,24 9,876, 407 58,104, 610 8,521,009
°/o 100.00% 59.05% 5.26% 9.66% 17.70% 8.33%

 

Sam-e: Bureau of the Census, Census of Housing

This loss of housing choice has been quietly happening, even as scholars and politicians lament the
loss of affordable housing. The results of this loss are higher housing costs and greater segregation, as
homeowners separate themselves from renters. As Gilderbloom and Appelbaum (1988) point out, the
beneficiaries of this housing policy have been the professional landlords (owners of 5 or more units), who
typically charge higher rents than amateur landlords (owners of 4 or fewer units). The section on the benefits
of two and three-family housing will explore the reasons why more small apartment buildings would help
overcome some of these problems. The next section, however, explores the history of two- and three-family

housing, the factors that created it ,and the factors that undermined it.

 

LEONARD I. VlLlClC '16 SPRING 1 997

THE FEASIBILITY OF CONSTRUCTING TWO- OR THREE-FAMILY OWNER-OCCUPIED HOUSING IN SINGLE-FAMILY
NEIGHBORHOODS AS AN INFILL STRATEGY

 

A HISTORY OF 2 AND 3 FAMILY HOUSING

 

ORIGINS OF TWO- AND THREE-FAMILY HOUSING

In his book Built in Boston, Douglas Tucci describes apartment living as a new fashion for the upper
class in the late 19th Century. The first apartments were called hotels, although they were distinct from
commercial hotels, which catered to transients. The “hotel” apartment encouraged permanent tenancy. It
was characterized by a single tenement occupying an entire floor, rather than several floors in a single house.
(Tucci 1978)

In the streetcar suburbs of Boston, the apartment “hotel” manifested as a “mo-suite” apartment
house. Most often, single- and two-family houses were built simultaneously on the same block, and were
often indistinguishable from each other. An important characteristic was that the apartment house had no
windowless walls, and that it conformed to the context of the neighborhood. The side-by-side duplexes1
failed in this era because they have only three exterior walls. The fourth wall was a common wall or a
hallway, which, in the streetcar suburb, was second rate. By dividing the house horizontally instead of
vertically, light and air entered on all four sides. (1' ucci 1978)

At the end of the nineteenth century, housing refonn legislation restricted the construction of
tenements, while the street car allowed the expanding middle-class population to move out of the central city
into the suburbs. (Jackson 1985) The two-family house gave way to four— and six-family houses. Four-story
multi-family apartments were greatly opposed, not because they were apartments, but because often they
clashed in the neighborhood. (1" ucci 1978) This encouraged builders to develop an alternative form of low-
cost housing. The three-decker became an acceptable compromise in the streetcar suburbs. They provided

more housing than single-family housing, yet fit in with the character of the suburb (light and air on four

 

1 The side-by-side duplex became the standard after W.W.II, and today is the image that comes to most people’s minds when
referring to two-family housing.

 

LEONARD]. VlLlClC 17 SPRING 1997

THE FEASIBILITY OF CONSTR UCTINC TWO- on THREE-FAMILY OWNER-OCCUPIED HOUSING IN SINGLE-FAMILY
NEIGHBORHOODS AS AN INFILL STRATEGY

sides for each unit). Triple-deckers are characterized by frame-built construction with the narrow side facing
the street, flat roofs, open porches on the back, and one apartment per floor. (Elving 1975)

Between 1880 and 1930, approximately 16,000 three-deckers were constructed in Boston. Assuming
an average family of four, they would have housed 192,000 people. In Worcester, where 6,000 three-deckers
were built in the same time period, it is estimated that the three-deckers housed about a third of the city’s
100,000 residents as recently as 1972. (Husock 1990)

The early two-suite apartments and three-decker houses equally suited upper-class and lower-class
living. It was never a question of owning versus renting, or single-family living being superior to apartment
living. It was always a matter of the neighborhood environment and the quality of the house itself, in terms
of spaciousness, interior finish, and privacy. Early apartment houses kept the same standards as single-family
houses. Separate baths were required for servants, the kitchen was connected to the dining room by way of a
china pantry, and no room could be accessed by going through another room. Even at the lower middle-
class level, three-deckers had many amenities for their low rent ($20-25/mon), such as hard wood floors, a
parlor, two bedrooms, a dining room, a kitchen with set tubs and attached water heater, a hot air fumace, and
electricity. (I'ucci 1978)

The problem of private access for each apartment—an important aspect of suburban living—was
solved by using multiple stairwells that cut through the floors vertically, though the first floor suffered from
less usable space. Typically, the owner would occupy the second floor. The expense of constructing the
staircases (twice as many as in single-family home) was one reason why these houses initially catered to the
upper class. Because the middle-class two-family house cost only half as much to build as its upper-class
cousin, compromises were made, such as smaller size and common rear staircases. (Tucci 1978)

As with any housing type, there are high quality and low quality structures. Unfortunately, many
threedeckers were cheaply built for the lower classes, and that fact helped to discredit their viability as a
housing option. However, the frequent charges of prOtesters—that they deteriorated rapidly, were fire

hazards, and required continual maintenance—were equally valid of any wooden house. The charge that

 

LEONARD J. VILICIC 18 SPRING 1997

THE FEASIBILITY OP CONSTRUCTING TWO- OR THREE-FAMILY OWNER-OCCUPIED HOUSING IN SINGLE-FAMILY
NEIGHBORHOODS AS AN INFILL STRATEGY

they decreased land values was never substantiated, and one protester asserted that they fumed land values
to the point of making single-family houses prohibitively expensive. (1' ucci 1978)

Proponents, however, claimed triple-deckers supplied low- and middle-income housing better than
other housing options. According to Lloyd Rodwin, “the free-standing triple-decker was probably the most
economical building ever devised which provided light and air on four sides for each family, a large private
balcony, and private access to the ground, not to mention the opportunity for small ownership and

investment and the economy of owner maintenance.”2 (quoted in Elving 1975, 10)

DEMISE OF TWO- AND THREE-FAMILY HOUSING

In “The National Movement to Halt the Spread of Multifamily Housing, 1890-1926,” Kenneth Barr
explains that the reformers wanted to prohibit apartments, rather than just regulate them. Howard Husock
reaches a similar conclusion in “Rediscovering the Three-Decker House.”

Beginning in the 18405, health officials in New York began lobbying for building codes. Their
efforts were unsuccessful until the epidemics of the 18605, which spurred New York, as well as Boston and
Chicago, to introduce building codes. (Barr 1992)

In the 18905, tenement house reform became a national issue. Various studies claimed that
tenements had higher rates of death, disease, alcoholism, and crime rates. An equal number of studies
showed this was not true, but the housing reformers conveniently ignored those studies. (Barr 1992)

The reform movement was also sparked by an anti-immigrant sentiment} A majority of the three-
deckers were built by immigrants. Prescott F. Hall, chair of the Town Improvement Committee of the
Brookline (Mass) Civic Society, led the attack by writing “The Menace of the Three Decker” in 1916. In it,
he described a process by which the immigrants borrow workingmen’s money to build cheap houses.

(Husock 1990) Regardless of the quality of the housing, die immigrants—despite their lower wages—came

 

2 Rodwin, Lloyd. 1961. Homing demnom’r ngms. Boston: Harvard University Press.

3 Of note is that zoning arose hand-in—hand with the passage of the Immigrant Act of 1924, which fixed quotas. (Perin 1977, 194)
See the section, “Overcoming Regulatory Barriers,” for an in-depth analysis of zoning.

 

LEONARD J. VlLlClC 19 SPRING 1997

THE FEASIBILITY OP CONSTRUCTING TWO- OR THREE-FAMILY OWNER-OCCUPIED HOUSING IN SINGLE-FAMILY
NEIGHBORHOODS AS AN INFILL STRATEGY

to the United States with the skills to build them, consequently owned them and rented apartments in them,
and thus had homeownership rates equal to or higher than more affluent native-white Americans. (Jackson
1985, 126)

Although some reformers advocated better tenement housing, most were against them completely,
regardless of quality. The reformers considered apartments an evil. They claimed that apartment living led
to indulgent, immoral life-styles. A declining homeownership rate was perceived as a sign that tenancy was
threatening the social order. Multi-family housing prevented people from investing in single-family housing,
and this needed to be prohibited to promote homeownership and maintain land values. (Barr 1992)

Their solution was the promotion of suburban homeownership, advocated through tax exemptions,
a single tax on land values and not on improvements, and municipal construction. Some critics, however,
questioned homeownership for the working classes. (Barr 1992)

The only way reformers could legally prevent multi-family housing was to attack it as a nuisance or
unsafe. Excessive fire code restrictions were used to prevent the construction of multi-family housing.
Height regulations, meant to allow in more light, were enacted to further prevent their construction. Courts
upheld both as proper uses of government power to ensure health and safety. These positions were
spearheaded by the National Housing Association, led by Lawrence Veiller. He effectively persuaded
legislators and planners of the need to prohibit apartment houses. (Barr 1992)

There were critics who argued that these kinds of restrictions increased rents, making housing
unaffordable to the lower classes. They also pointed out that even the middle-class could hardly afford
homeownership in single-family houses. (Barr 1992)

These restrictions led to zoning, particularly exclusive single-family districts. The reasoning was that
a neighborhood made up of economically homogenous people supposedly promoted greater civic interest.
(Barr 1992) Single-family zoning was supported by the lending institutions, which made a practice of
favoring single-family housing on me grounds that “single-family zoning was a prerequisite for ensuring the

security of loans on single-family dwellings.” (Barr 1992, 44) In this country, the relationship that an owner

 

LEONARD 1. Vince 20 SPRING 1997

THE FEASIBILITY OF CONSTRUCTING TWO- OR THREE-FAMILY OWNER-OCCUPIED HOUSING IN SINGLE-FAMILY
NEIGHBORHOODS AS AN INFILL STRATEGY

has with a banker (through a mortgage) is considered superior to the relationship that a tenant has with a
landlord, because, even though the owner is indebted, the owner is deemed credit-worthy. (Perin 1977)

Despite this, apartment living, because of the various urban conveniences, continued to be popular.
In the late 19205, apartments accounted for 48% of new construction in cities with populations over 25,000.
(Barr 1992) The New jersey Supreme Court ruled against apartment exclusion because apartments provided
conveniences to people who otherwise could not have them, and stated that a four-story building hardly
endangered the public health or safety. The Ohio Supreme Court made a similar ruling, stating that
apartment living taught people to be considerate of each other more so than people living in private houses.

The final blow to apartment houses came with the famous Euclid u. Ambler decision‘ by the US.
Supreme Court in 1926. The decision did more than constitutionally uphold zoning a5 a reasonable use of
police power. The decision made exclusive single-family districts legal, by stating that apartments intrude in
every way possible, from creating too much noise to blocking out light. According to Perin, “the apartment
house, presumably to be occupied by families along with other household types, is classified 4.: a [mines or
tmde, paper/y excluded firm m‘a’eritz’al sztIic'LS.” [italics in original] (1977, 47) The passage of a new zoning law in
Boston in 1924 put an end to the construction of triple-deckers. Very few were built after that, and by the
end of the 19205 none were built at all. (Elving 1975, 46) Thereafter, single-family districts became the
predominant form of residential housing construction.

Was this necessarily a good thing for American society? 15 there something about two-or three-
family housing that makes it a viable housing option, if not for most, then at least for some? The next

section explores the benefits that a two -or three-family house can offer to an owner, a renter, and society.

 

4 Village q/Eydié Ohio I). Ambler Rea/y Co., 272 US. 365,47 S.CL 114, 71 L.Ed 303 (1926)

 

LEONARD J. VILICIC 21 SPRING 1997

THE FEASIBILITY OF CONSTRUCTING TWO- OR THREE-FAMILY OWNER-OCCUPIED HOUSING IN SINGLE-FAMILY
NEIGHBORHOODS AS AN INFILL STRATEGY

 

BENEFITS OF 2 AND 3 FAMILY HOUSING

 

This section explores the reasons why more two- or three-family housing should be constructed.
Briefly, it covers the benefits of expanding housing options, the owner as occupant, affordability for the
owner and the renter, market control versus rent control, compact residential development, and social

integration.

HOUSING OPTIONS

The main housing goal of the Bush and Clinton Administrations has been the expansion of
homeownership. One method for expanding homeownership that has been recognized by HUD is
constructing small rental properties. Because of zoning restrictions, local development standards, lending
and appraisal guidelines, local government concerns regarding absentee ownership, and market preferences,
these pr0perties generally have not been built, though the rental income would enable low- and moderate
income people to purchase homes (U SDHUD 1995).

Figure 1 on the following page shows the percentage of new houses that have been built each year
from 1968 through 1995, by structure type. The housing options for approximately 95% of Americans have
been either a single-family house or an apartment in a dense multi-family structure of five or more units, with
little in between. The very poor are typically further limited to subsidized or public housing. The reason this
has not mattered too much until recently is that housing built following W.W.II was comparatively
inexpensive. Interest rates were low, die federal government insured mortgages, incomes steadily increased,
and land was inexpensive. This masked the problem of limited housing options. (Husock 1990) It is only
now, with current affordability problems, that a lack of housing options has become so acute. Increasing the
number of two- and three-family houses can be one way to give more housing options to buyers who either
do not need, or cannot afford, a single-family house, and to renters who do not want to live in an apartment

building.

 

LEONARD J. VlLlClC 22 SPRING 1997

THE FEASIBILITY OF CONSTRUCTING TWO- OR THREE-FAMILY OWNER-OCCUPIED HOUSING IN SINGLE-FAMILY
NEIGHBORHOODS AS AN INFILL STRATEGY

Fzgm 7: New Privately Owned Housing Unit: Completed by Stmetm ije, 7968-7 995, Perrent of Total

 

 

100%

 

90%

80% m
/

:‘K / I

 

 

 

 

 

 

 

 

 

 

 

 

 

 

E W + TOTAL
8 50% +1 UNIT
E + 2 UNITS
40* 3.4K: Hf? +3/4 UNITS
—0— 5+ UNITS

 

 

 

 

 

30% L1 L J/LNJ/
,0,, \ .A HHL"

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

10%
0% r I r
8 O N V \D a O N fl' 0 w G N V‘
I\ l\ l\ [\ I\ no no G co co 0‘ G G
Os OK at O\ O\ as as O\ O\ 0‘ o O O\ OK
I— F" '— l“ '- r-I '— p-n '— '— y—a '— 1" pi

 

 

 

Same: US. Department of Housing and Urban Development, Office of Policy Development and Research

Infill development offers opportunities to create more housing options for people. Today, families
are smaller, comprised of parents who both work, single parents, singles, or people who want to work at
home. The working dad/ domestic mom family accounts for only 14% of all families. This diversity of
interests and living styles is not well served by the standard single-family subdivision typical of the 1950’s
(Greenbelt Alliance 1997), and still built ad nauseam. Many housing choices can be built, including two- or

three-family housing.

OWNER AS OCCUPANT

Politicians and economists frequently talk about the small business person or the entrepreneur as
being the backbone of the free enterprise system. Entrepreneurship is chanted like a mantra in this country.
It stems from the frontier attitude that founded this country, harking back to the days when people set out to

make it on their own. It is a part of the be-your-own-boss philosophy.

 

LEONARD J. VlLlClC 23 SPRING 1997

THE FEASIBILITY OF CONSTR UCTING TWO- OR THREE-FAMILY OWNER-OCCUPIED HOUSING IN SINGLE-FAMILY
NEIGHBORHOODS AS AN INFILL STRATEGY

According to Husock (1990), the three-decker encouraged entrepreneurship. This applies equally to
the two—family. A person who would otherwise not be inclined to start his or her own business may decide
to invest in a two-family house. Owning a two- or three-family house is much like a business; the apartment
is the product and the rent is a source of income. This is in line with our society’s philosophy of promoting
homeownership, namely that the wealth of the country is distributed among many people rather than a few.

This, more than any other reason, is why homeownership is so important to this country.

Figure 2: Profit: LASI Year, Percent Distribution for Eat/J Stmmm T)?»

 

 

 

+ yes, made a profit
-I— no, broke even
+110, had a loss
—O—don't know or not sure

—¢—notreported

 

 

 

 

 

 

 

 

 

a; :3 :2 i."- .-!—’. 32 2'2

3 § § 5 5 § §

s ~ 2* r s: s +

E- re In é 8' 8
Type of Multi-Family Property

 

 

Same: US. Bureau of the Census, Property Owners and Managers Survey, Multi Family Properties, Table 41.

As pointed out by Gilderbloom and Appelbaum, however, most rental housing today is owned by
relatively few people (1988, 58), which raises the issue of equity. This phenomenon has been facilitated by
the propensity to build large-scale rental properties for investors rather than small-scale properties for owner-
occupants. Figure 2 shows the profit earned by owners of rental property. The smaller rental properties had
a lower likelihood of profit and greater likelihood of a loss. The POMS did not include owner-occupied

units in the survey. Also, owners of larger rental properties are less divulging of monetary information.1 It is

 

1 Generally, all the financial questions of the POMS follow the pattem of large-scale owners knowing less or reporting less than
small-scale owners.

 

LEONARD I. VlLlClC 24 SPRING 1997

THE FEASIBILITY OF CONSTRUCTING TWO- OR THREE-FAMILY OWNER-OCCUPIED HOUSING IN SINGLE-FAMILY
NEIGHBORHOODS AS AN INFILL STRATEGY

likely that owner-occupants had even less profit. According to a study of Orange, New Jersey in 1982,
average rent for 4V2 rooms was $325 if one unit was owner-occupied, whereas a similar unit rented for $450
if no unit was owner-occupied (Gilderbloom and Appelbaum 1988, 65). By promoting single-family housing
over all other types, followed by large-scale rental structures, this country has created the illusion of
spreading wealth around, yet has continued to keep wealth in the hands of a few.

One distinctive advantage of the owner being an occupant is that the house will be better maintained
over a house that is used purely as a business investment by an absentee landlord. The house is more than
an investment; it is also home. To satisfy their own living needs, owners invest to fix up a house even if
value does not increase (Elving 1975, 175). Typically, therefore, repairs will be made prompdy.2
Maintenance costs are low, because the owner usually does most of the repairs. Owner-occupants generally
maintain their buildings better because living on the site makes them immediately aware of problems;
homeowner pride generates more care; and they are willing to underwrite maintenance and modernization to
keep good tenants. (Elving 1975, 349)

It is assumed that new construction would not have the maintenance requirements of existing
housing. However, all new housing eventually has need of maintenance. Elving (1975, 192—206) describes
four types of owner-occupants, and the maintenance behavior of each type. The modem'aerr are young, who
are looking for a permanent home and neighborhood, and will invest in renovating a house to modern
standards, usually as quickly as possible after purchase. They only charge tenants for improvement within
the tenants’ apartments, leaving other expenses to themselves. The fzxm tend to be middle-aged, and make
sure the house is structurally safe and the mechanicals are always working, but do not invest in modernizing.
Their resources are more limited, so things are done over a longer period of time. The home is an

investment for retirement. The decorator is concerned with appearances, such as new paint, new cabinet

 

2 According to the responses of the POMS, Multi-Family Properties, Table 39 (see Table A4 in the appendix), most owners repair
immediately, thong: no hard evidence was explored to validate the claims. The author’ s personal experience in the housing field
agrees with the responses insofar as non-owner-occupied small houses are generally less maintained than large-unit structures.
Ownerboccupied houses, however, are maintained by their owners well or poorly, regardless if the property is single-family or
multiple-family; it depends on the nature of the owner, as well as the availability of affordable home improvement financing.

 

LEONARD J. VILICIc 25 SPRING 1997

THE FEASIBILITY OF CONSTRUCTING TWO- OR THREE-FAMILY OWNER-OCCUPIED HOUSING IN SINGLE-FAMILY
NEIGHBORHOODS AS AN INFILL STRATEGY

doors, new lighting fixtures. Major repairs are done only when necessary. A person looking to save to move -
on to more expensive housing fits here, as do resident investors. The mender fixes things only when
absolutely necessary, and only to a level to make it functional again, such as to continually repair leaks in the
roof rather than replace it. People of very limited incomes fit this category, as well as elderly people. There
are also the apathetic menders who have little experience or desire to maintain a house.3

These kinds of houses and their owners are what keeps housing costs affordable to moderate-
income renter households. The owner is basically subsidizing rent in the hopes of appreciating value, but
also because the house is his or her home and would be maintained anyway. (Elving 1975, 208)

Another distinctive advantage is that the owner—occupant is looking for long-term income, rather
than the highest net return. The owner, therefore, looks for a more permanent tenant, and will take the time
to find one. (Gilderbloom and Appelbaum 1988, 93) This is because owner-occupants must live with the
tenants, so “establishing good relationships with tenants is more important than getting the highest possible
rents.” (Elving 1975, 175) Also, owner-occupants are consumers and suppliers of housing; the first role,
however, is their primary motive. They therefore are careful about to whom they choose to rent, and will

keep rents low and relationships informal to keep good tenants. (Elving 1975, 343)

Figure 3: IArIgt/J of LeaSe, Pertertt Dz'Strz'oatz'orz for Each Struettere Type

 

    

60.00
50.00
E 40.00 I< 1 year or monthly
3 30 00 .1 year
E ° 1,. Enolease required
20.00 :15 Irent free
10.00 ..
E as a r .12 °.~ .42 a a s a g a
I3 3 5 m 5 to § 2 5 $2 5 in §
N Type of Multi-Family Property

 

 

Some: US. Bureau of the Census, Property Owners and Managers Survey, Multi Family Properties, Table 16.

 

3 It should be pointed out that the same kinds of behavior exist among single-family owners.

 

LEONARD J. VlLlClC 26 SPRING 1997

 

THE FEASIBILITY OF CONSTRUCTING TWO- OR THREE-FAMILY OWNER-OCCUPIED HOUSING IN SINGLE-FAMILY
NEIGHBORHOODS AS AN INFILL STRATEGY

This informal relationship can be seen in Figure 3 on the previous page, which shows die length of
leases required by owners. For owners requiring leases of 1 month or less than 1 year, all groups are close to
the average of 36%. At 54%, the majority of owners of large-scale structures require leases for 1 year,
whereas only 33% of 2—unit owners require 1 year leases. The biggest difference occurs in structures that do
not require leases at all. Of all 2-unit owners, 29% do not require leases, whereas only 1.6% of 50+ unit
owners do not require leases. This is probably because of the greater informality—and trust—that exists

between landlords and tenants in small-scale structures.

AFFORDABILITY

The affordability of two- or three-family houses applies to both the renter and the owner. This part
will explore both in turn.

For a person looking to purchase a home, a two-or three-family house often carries less out—of-
pocket expenses than would a single-family house. The most obvious reason is that the rent helps pay the
mortgage. In a study of the Boston triple-decker housing market, the majority of owners bought triple-
deckers instead of other housing because that was all they could afford; the rental income afforded them the
opportunity to become homeowners. (Elving 1975, 166) Another reason is the tax benefits of being able to
deduct certain expenses for the rental unit.

Table 7 on the following page compares the costs of owning a single-family house versus a three-
family house. Both houses were listed during the same week in a Boston newspaper. The single-family has
six rooms. The diree-family has two six-room floors and one seven-room floor. From the owner's
perspective, a two- Or three-family house is much more affordable than a single-family house. This is
because much of the expense is covered by the rent. As can be seen, the owner of the three-family house has
a lower monthly cost by nearly $500, and therefore does not require as high a salary as the owner of the
single-family house ($43, 640 vs. $62,240). Of course, the more expensive house requires a larger down-
payment, which is the greatest deterrent to home purchasing. However, many new financing options are

available to homebuyers, such as lower down-payment requirements, lower loan-to-value ratios, adjustable

 

LEONARD I. VILICIc 27 SPRING 1997

THE FEASIBILITY OF CONSTRUCTING TWO- OR THREE-FAMILY OWNER-OCCUPIED HOUSING IN SINGLE-FAMILY
NEIGHBORHOODS AS AN INFILL STRATEGY

rate mortgages, graduated-payment mortgages, and interest rate buydowns by the lender or developer. A

welcome policy change would be to extend these programs to two- and three-family houses.

Table 7: Comparative Cost: of Homeommbip (in dollars)

‘5» we We», .. . ,_. ,, 3m, ,5 4M ea. ,.
. .. 5"": ”(if TEETH? " If -.=-"'j """ “$33“: gig-‘3’ 53;":
. . .. _., v w- - r 5. , , _.. . Cd... . .
Fa: : .33: 3:5 $215.5 ':i: 2:5... ...” ""w'» {if ' ' 3.: :.. ': " "t . "A. ,-.%§%fl
Mortgage Principal (1 2%: 30 yr.) ,

....... M39911? Payment (P3110981 and mterest)
are? ' '

- -. .-j: 's:§-:-:-:~'~‘-_.. 3AM», -: snows:-
' .. ;.:" . . . .

‘05"
.
‘I

3i: .

. ;-.":'- :I- :IDII- I - .I I ’:..:.:t : : . .n - .:. .:':>. t: . . ...-.5! ‘K\}%V(‘grfu<‘w‘¢5 ’9'? 'IE§E?':(
, . _ ., ' ,. . ' . .. :-. ., .- ,. . ' . '- "‘ .i .' ' .,: .. .' ; 5:: $4.35} fits-34$
_ . ' ..... .. .. .2 i “3+: ..... :N.. -""-'_Z';'_. 5,1" __.I I. 3" _ . . __._ _ I. .5., ”(3: {5.3.5.55 )o'g\
-.' ,. _ ,. , A,» 33352: . ,R i? .:- 3‘“? in- M g P
...... .,- ;,. WW, .....si‘i} WNW ASS-=2 -.’.- fight-'5} Ahard‘it? "-’

/unit)‘ Avc‘av‘.
.......................................................... 3 Cost

' 5v. 3;; ‘ ' " °- 5,}.- g); . . "5:5: '-:;'~=o-;-.,;,: : ..’<-.“~”-?-‘ we gage-yaw Ilsa,
. . 5. o: '. ‘. ' - :- :
. 5" C, ..'.. -.:.'; .. " ;.: ..... ; . '.;.' '.'.'.-. ' 2!“: . . "_ .... "' ’ . . . -... " ' a" ._ 1'?
{3 oéi'vfi‘fi'fl’mi' «3. -: , , _ __ ' '- - -:;:,- 2 ' ,
fig. fife-.Vgc- 445:,

 

Soim'e: Husock 1990

Besides a lower monthly carrying cost, the owner of the three-family house enjoys tax deductions for
depreciation and repairs. Table 8 shows the tax benefits of owning a three-family house. It is obvious that

the three-family house confers many financial advantages over that of the single-family house, making it an

attractive investment to someone of modest means.

Table 8: Comparative Tax Benefit: ofHomeoameerip (in dollar:)

Sin le-Famil House Three-Farm] Hous

. ...: l ...... §$¢ ATP-#5:??- (“V/\f‘fi' : .5. - . .
595%? E§§vherw4
5.49555... 4 ’1 -- ’

.. Afri’difi «55:.
HERE“

I
:5:-
5'».

Deductible Property Taxes

Deductible Annual Repairs
Deductible Depreciation (30 yr, straight line)
.. s

r$v,.- “A. <.;.v- M's“?
-C-4 31;”... 1"“
it: IC:.:I
gating?!” h,

(«5;wa "- 5 .0 s\;' e. 's
lea-Was, >
Amara-h5- . . v.

I C I.
... . ..
rot-c5?- " : -

' v

 

555‘

Sam.- .Husoclr 1990

Owners of small rental properties, particularly if owner-occupied, are likely to pass on the benefits of
these lower costs to their tenants as lower rents. Gilderbloom and Appelbaum (1988) and Elving (1975)
point out that an owner-occupant frequently rents to relatives or friends, and will keep an apartment vacant

until a suitable tenant is found. Owner-occupants forgo rent increases to keep good tenants, and tend to

 

LEONARD ]. VILIcIc 28 SPRING 1997

THE FEASIBILITY OF CONSTRUCTING TWO- OR THREE-FAMILY OWNER-OCCUPIED HOUSING IN SINGLE-FAMILY
NEIGHBORHOODS AS AN INFILL STRATEGY

increase rent only when fixed costs, such as taxes, increase. Though this does not make standard economical
sense, over the long run, the owner saves on the expense of repairs by destructive tenants, evictions, or
vacancy. (Elving 1975) This kind of attitude promotes stable, moderate-priced housing, though it ends up
costing the owner. However, given the choice, these owners would not accept subsidies if it meant giving up

control of tenant selection or relationship. (Elving 1975, 179-180)

Table 9: Montbly Rent per Unit, Percent Distribution for Barb Smotm ije,

TYPE OF MULTI FAMILY PROPERTY
Total US. 2 units 3 - 4 units 5 - 9 units 10-19 units 20-49 units 50 + units
otal 1 1 1 100.00 1 1 1
than $100 0.00 . 0.1
$100 to $199 ' . 1.1

$400 to $499 1 . . . 20

to $599 21.31

to $899
$900 to $999

4.70 8. 4 4.1 4
Same: US. Bureau of the Census, Property Owners and Managers Survey, Multi Family Properties, Table 20.

 

Table 9 shows monthly rent per unit. A greater percentage of 2-unit structures has lower rents,
while the 50+ unit structures have higher rents. The least expensive rents can be found in the 2—unit
structures, in which 19.7% of 2-unit structures are less than $299, compared to only 5.9% of units in 50+
unit structures. Also, the 2-unit structures have the highest percentage of rent-free units. This table
represents what the “professional” landlord charges (the POMS did not include owner-occupied units in the
survey). Owner-occupants, who make up the bulk of amateur landlords, tend to keep rents below market.
These numbers indicate that renting today is less expensive than owning, and smaller-unit structures are more

affordable than larger-unit structures.

 

LEONARD J. VILICIC 29 SPRING 1997

THE FEASIBILITY OF C ONSTRUCTING TWO- OR THREE-FAMILY OWNER-OCCUPIED HOUSING IN SINGLE-FAMILY
NEIGHBORHOODS AS AN INFILL STRATEGY

Table 70: Rent Cbangefiam Previous Tenant, Permit Distribution for Ear/I Structure Tye

 

 

 

 

 

 

 

 

TYPE OF MULTI FAMILY PROPERTY
TOtal US. 2 units 3 - 4 units 5 - 9 units 10-19 units 2049 units 50 4' units
Total 100.00 100.00 100.00 100.00 100.00 100.00 100.00
rent increased 39.53 30.51 31.47 33.57 34.54 38.67 46.76
rent decreased 4.71 6.28 5.64 4.03 3.11 4.44 4.40
no change 47.23 53.54 55.09 55.24 54.54 48.51 40.05
no previous tenant 3.82 7.31 4.21 3.77 3.55 3.27 0.28
not reported 4.71 2.36 3.56 3.39 4.25 5.11 6.02

 

 

 

 

 

 

5m U.S. Bureau of the Census, Property Owners and Managers Survey, Multi Family Properties, Table 15.

A related aspect to monthly rent is what happens to that rent when there is a change in tenancy.
Table 10 shows the rent change from the previous tenant. When there is an occupancy change, the small-
unit structure owners tend to increase rent 31% of the time, compared to large-unit structure owners, who
raise rent 47% of the time for new tenants in 50+ unit structures. A similar, reverse pattern is observed for
new tenants paying lower rents. New tenants are more likely to pay less than previous tenants in small-unit
structures than in large-unit structures. This pattern is likely because large-unit structures are run more as a
business than the small-unit structures, and thus have high overhead expenses in the way of managers,
maintenance people, etc.

These numbers fall in line with the findings of Elving (1975), who concludes that “a majority of
triple—decker owners do not act to maximize economic returns” (17), contrary to prevailing economic thought
about investment. Also, many long-term owner-occupants of small rental structures have either paid off their
mortgage, or are long-term owners making relatively low monthly payments, which helps keep rents modest.
(Gilderbloom and Appelbaum 1988)

There are possibly other economic benefits as well. A two- or three-family house only requires one
water and gas main, and one sewer hook-up, which reduces initial infrastructure costs. A builder has fewer
per-unit construction costs because of economies of scale. And quite often, a landlord provides a common
laundry facility, which reduces the living expenses for tenants. Of course, higher construction costs because

of more stringent building code requirements may offset these savings.

 

LEONARD I. VILICIC 30 SPRING 1997

THE FEASIBILITY OF CONSTRUCTING TWO- OR THREE-FAMILY OWNER-OCCUPIED HOUSING IN SINGLE-FAMILY
NEIGHBORHOODS AS AN INFILL STRATEGY

MARKET CONTROL VERSUS RENT CONTROL

Gilderbloom and Appelbaum (1988) have found that rents within an area (if it is not rent-controlled)
are generally regulated by owners with large rental holdings. Through landlord associations, rents are set
within an area according to people’s incomes and the current demand, and owners often set rent levels so
that no owner is charging rent differently for an equivalent unit. This happens because small landlords
cannot afford to have vacant units, and will charge lower rents if it means covering the bills. Large landlords,
on the other hand, have die capacity to have vacant units, and will not lower the rents for those units lest
everyone else to whom they rent demands the same low rent. Thus, large landlords have more control over
rents in an area than small landlords. (Gilderbloom and Appelbaum 1988)

Tenants’ groups have sought to use rent control to gain some power over landlords, and restore a
balance to what they can afford to pay and what landlords are charging. Three types of rent control laws are
in use. We»: rent contra! puts a cap on what landlords can charge, regardless of whether or not landlords
can maintain a return on their investment. Moderate rent amtrol attempts to balance tenant interests in
affordable rents with landlord interests in fair-market return. It controls how much rent can increase yearly,
typically in line with the increase in the Consumer Price Index (CPI), and is often tied to code inspections.
Moderate rent controls also allow leniency for hardship, new construction, and vacancy decontrol. The
overall effect of moderate rent control is rent stabilization. Strung rent contml caps rent increases at one-half to
one—third of the CPI, which studies have shown are in line with landlords’ actual costs. It is intended to keep
landlords’ profits steady over time, instead of increasing over time. (Gilderbloom and Appelbaum 1988)

According to Tucker (1991), rent control keeps rents artificially low in the belief that it will keep
housing costs down. Price controls, according to economic theory, create shortages because people tend to
stay in place longer in rent-controlled areas, which makes the uncontrolled housing market artificially
expensive. Owners of rental properties can then no longer afford to maintain their buildings, particularly
when they are forced to comply with rent regulations. The result is disrepair and eventual abandonment.

On the other hand, certain conditions in a free market can cause abandonment. According to

Elving, a lack of housing demand can prompt disinvestment, leading to abandonment. This happms because

 

LEONARD I. VlLlClC 31 SPRING 1997

THE FEASIBILITY OF CONSTRUCTING TWO- OR THREE-FAMILY OWNER-OCCUPIED HOUSING IN SINGLE-FAMILY
NEIGHBORHOODS AS AN INFILL STRATEGY

the number of tenant applicants drops or the ability to pay rent diminishes. The owners cut maintenance to
recoup lost income, and eventually give up and walk away. (Elving 1975, 285-286) Elving further states that
“abandonment is usually preceded by a period of absentee management.” (1975, 297) This supports the
argument to have two- or three-family housing be owner-occupied.

Gilderbloom and Appelbaum (1988) contend that most of the debate surrounding rent control has
focused on restrictive rent control. Numerous studies examined by them have shown that moderate rent
control has had no significant effect on multifamily construction levels, maintenance and capital
improvements, abandonment and demolition, or prOperty valuation and a city’s tax base. They conclude that
rent levels are similar between non-rent controlled cities and cities with moderate rent control, with the rent-
controlled cities being slightly higher (due to pressure that forced the rent control). Further, rent increase
rates are similar. Strong rent control laws have had the effect of redistributing income from landlords to
tenants.

The debate on rent control is overblown, however. Currently, only New York, New Jersey,
California, and the District of Columbia have rent control laws.4 Many other states have laws that “actually
preempt or restrict the enactment of rent control.” (Ceraso 1995) In regard to owner-occupied two- or three-
family housing, rent control is mixed. New Jersey, for example, excludes owner-occupied two- or three-
family houses from rent control laws. In San Francisco, however, the passage of Proposition I in 1994
recently brought owner-occupied 24 unit dwellings under rent control. (San Francisco... 1997)

Regardless of whether or not rent control is in effect, its impact on owner-occupied two— or three-
family housing is minor. Owner-occupants of two— and three-family houses are protecting more than their
personal investment; they live there. They cannot afford to price themselves out of the market, hoping
someone may come along to fill their vacancy. The rent they receive pays the bills. Therefore, they charge

rents comparable to, and often lower than, die market rate anyway. (Robinson 1992)

 

‘ Maryland and Connecticut have very limited rent control. In Maryland, only Takoma Park, a DC. suburb, has rent control. In
Connecticut, some jurisdictions have Fair Rent Commissions, a system generally not considered rent control (Ceraso 1995)

 

LEONARD J. VlLlClC 32 SPRING 1997

THE FEASIBILITY OF CONSTRUCTING TWO- OR THREE-FAMILY OWNER-OCCUPIED HOUSING IN SINGLE-FAMILY
NEIGHBORHOODS AS AN INFILL STRATEGY

According to Gilderbloom and Appelbaum (1988), rent levels are conventionally believed to be
dependent on vacancy rates. Generally, a vacancy rate of 5% or lower indicates a housing shortage, resulting
in a tight market, and thus rents will be higher. Vacancy rates above 5% indicate a loose market, and rents
will generally be lower. This assumption is “shared by government officials, builders, bankers, landlords, and
tenant activists.” (1988, 52) The courts also use this number to determine the validity of rent control laws.
Their own study concluded, however, that a vacancy rate as high as 10% can still be competitive, and that
although low vacancy rates are associated widi high rents, high vacancy rates are not necessarily associated
with low rents. (1988, 106)

It appears, then, that the best policy to keep rents affordable would be to allow the construction of
more small rental houses, preferably to be owner—occupied, and fewer large rental structures. This would
diminish the control that large landlords have over rents, increase homeownership for moderate-income

peOple, and possibly lessen the need for rent control.

COMPACT DEVELOPMENT

Compact development has societal and environmental benefits. Sprawl development and single-use
zones, which have defined land use in this country for the past three-quarters of a century, have been cited
for causing traffic congestion, long commutes, environmental degradation, inner—city blight, loss of a sense of
community, high property taxes, and unaffordable housing. (Downs 1994)

Compact development can reduce further sprawl. This has die benefit of maintaining agricultural
land and forest land. Keeping people closer will reduce commuting, thus reducing air pollution, and the
various ills it creates. It can also bring people into closer contact with each other, creating safer
neighborhoods.

The simplest way to achieve compact development is to double or triple the permitted densities.
The common reason for our sprawling suburbs is that cities are “crowded.” According to Daniel Stokols
(1972), however, density is not crowding. Crowding is caused by social interference, restriction of

movement, and the arousal of competitive feelings. Density may lead to crowding if there is little

 

LEONARD I. VlLlClC 33 SPRING 1997

THE FEASIBILITY OF CONSTRUCTING TWO- OR THREE-FAMILY OWNER-OCCUPIED HOUSING IN SINGLE-FAMILY
NEIGHBORHOODS AS AN INFILL. STRATEGY

coordination and cooperation. It is possible for people to feel crowded in sprawling, monotonous suburbs
defined by residential subdivisions and commercial parks connected by collector roads.S

A related concept to density is intensity, which refers to the level of use of the land. There is no
exact definition of residential intensity of use, though Gellen (1985, 82) suggests it can be defined as the
number of occupants per unit. Intensity can possibly be regulated by the number of bedrooms per lot. The
National Association of Homebuilders considers intensity to be a more relevant measure than the standard
units-per—acre measure, because higher density units are often smaller than conventional units. Small families
would occupy these kinds of units, resulting in fewer school children and lower traffic generation. (NAHB
1986, 14) Current demographics show that families are smaller, so it would make sense to consider intensity

of use over density.

SOCIAL INTEGRATION

Perin (1977, 83) sums up the general philosophy that has supported single-use zones: “Among
neighbors and in neighborhoods conflict will generally be avoided by not mixing income groups, housing
types, tenure forms, or land-use activities.” The single-family detached house has been the agreed upon form
for achieving the least social conflict (Perin 1977), just as homeownership of single-family homes had been
promoted by business leaders at the turn of the century as a means to prevent solidarity among the working
class to avoid potential class conflict (Le. workers’ strikes) (Edel, Sclar, Lauria 1984). Perin adds that “people
who ‘live among their own’ or prefer to be among ‘like-minded people’ are making use of strategies that can,
sensibly, lessen the effort and time it takes to work out many intrinsic conflicts of social life” (85). This kind
of thinking has governed land use for three-quarters of a century, though some are challenging it and argue
that it is to the detriment of this country (see, for example, Kunstler 1994).

Mosfly, it is private property that has created this kind of disassociated land use pattern.

(Krueckeberg 1995) Within large cities, where there are fewer individual owners and separate dwelling units,

 

5 Kunstler explores these ideas in Tbe Gem/J} ofNowbere. The proposed solution is a return to higher densities and mixed use, not
the further reducu'on in density that is commonly occurring.

 

LEONARD I. VlLlClC 34 SPRING 1997

THE FEASIBILITY OF CONSTRUCTING TWO- OR THREE-FAMILY OWNER-OCCUPIED HOUSING IN SINGLE-FAMILY
NEIGHBORHOODS AS AN INFILL STRATEGY

and higher proportions of renters, people live with less territorial isolation and in closer quarters. They are
“less likely to be able to avoid one another or choose the time when they will see one another, so they have
to know more rules in order to handle the higher levels of actual and potential contact” (Perin 1977, 89).
This kind of nIle-making and rule-knowing accounts for the urban sophisticate of the city, and the ignorance
of these kinds of rules accounts for the social fears common in small-town America. Suburbia has replaced
rules with walls and time, the walls so as not to hear or see one another, and time so as not to have to spend
it negotiating with one another. (Perin 1977, 105)

These two counter philosophies go back to the original settlements of four hundred years ago. The
prevailing political-economic theory then was that people must be allowed to profit from their labor, or else
they would not labor. Community stock was seen as charity and provided no incentive. This was carried
over into one’s home—the reward for one’s hard work. A counter argument, provided by Robart Cushman,
was that fine houses led to the debilitation of society. If a person was not content that another had a house
as fair as his own, then that man was not capable of living in society. (Con 1979) Of course, it has been the
first philosophy that became dominant.

How does two- or three-family housing relate to societal rule-making and community? Because
different families occupy the same building, owner and tenant must learn to live by agreed-upon rules of
behavior. Typically, a lease provides written expectations for both the tenant and the landlord", though as
shown before (see Figure 3), 29% of owners of two-family houses do not use leases. In actuality, the lease
protects either party should differences arise that necessitate court resolution. The following two tables (see
Table 11 and Table 12, following page) show how often owners go to court to settle differences with their
tenants.

By far, owners of large-unit structures go to court more often than owners of small-unit structures
(I able 11), decreasing steadily from 78% of 2-unit owners who newrgo to court to 25% of 50+ unit owners

who emerge to court, as plaintiff. Hardly ever do prOperty owners end up in court as defendants, with all

 

6 Most states have rental laws that also protect the interests of tenants.

 

LEONARD J. VlLlClC 35 SPRING 1997

THE FEASIBILITY OP CONSTRUCTING TWO- OR THREE-FAMILY OWNER-OCCUPIED HOUSING IN SINGLE-FAMILY
NEIGHBORHOODS AS AN INFILL STRATEGY

groups close to the average of 80% never going. A full third of 50+ unit owners goes to court more than 5

times per year. This pattern is similar for die number of times an owner starts an eviction procedure.

Table 77: Number of Time: to Cam in Lart 2 YearS, Percent DiStribIm'an for Earl) Structure Type

 

TYPE OF MULTI FAMILY PROPERTY
Total U.S. 2 units 13- 4units [ 5 - 9 unitslro - 19 units 120-49 units] so +units
Management as Plaintiff

 

 

 

 

 

   
      

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Total 100.00 100. 00 100. 00 100.00 100.00 100.00 100.00
Somme: U.S. Bureau of the Census, Property Owners and Managers Survey, Multi Family Properties, Table 62.

   
 

\‘5

Table 12: N ember of Time: Battier: Pmeedm: Started in Last 2 Years, Pen-eat DiStn'butz'ou for Barb
S mam Type

 

TYPE OF MULTI FAMILY PROPERTY
T Otal U.S. 2 units 3 - 4 units 5 - 9 units 10 - 19 units 20 - 49 units 50 + units
Total 100.00 100.00?100.00 10000810000 1oo.oo
. :1, $1,, .. . .. 5... ..:. :1 .; 2;»: 12.2221 . .._
22292 22' 221719.39“ 1?. :22 1181121? 11212.21 ..-'. 3. .. 413$ .. 1111212.: s W... ....
twice 7 90 2.86 5 31' 9. 53 12.25 11.28 8.43

3to Stimes ”1.1 94 -~.--1-‘ :00" 1 3.84 6.91 13. 64 17.14 17.15

 

 

 

 

 

 

 

 

 

 

 
 
  

  
 
 

   

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50811? US. Bureau of the Census, Property Owners and Managers Survey, Multi Family PrOperties, Table 63.

Table 12 shows that 75% of 2-unit properties never start an eviction procedure, compared to 14% of
50+ unit owners. Additionally, 45% of 50+ unit owners began eviction procedures more than 5 times in the

last 2 years, compared to less than 1% of 2-unit owners.

 

LEONARD ]. VlLlClC 36 SPRING 1997

THE FEASIBILITY OF CONSTRUCTING TWO- OR THREE-FAMILY OWNER-OCCUPIED HOUSING IN SINGLE-FAMILY
NEIGHBORHOODS AS AN INFILL STRATEGY

There are several possible explanations for this. First, larger owners can afford to go to court more
Often than smaller owners. However, small claims courts (which handle landlord-tenant disputes) do not
cost much, so this would not seem to explain the difference. Second, court actions take time, which many
smaller landlords may not have, and thus try to avoid. Third, the fear of law suits forces small landlords to
settle differences outside of court. If this were true, though, a much higher percentage of small landlords
would use leases, which is not the case (see Figure 3). Fourth, it could be that tenants of small-unit rental
properties leave when problems arise that cannot be resolved. However, due turnover rate in these properties
is the lowest among rental property types (see Table 16 in “Community Concerns”), so this does not seem
likely.

Perhaps, then, the reason is that tenants in small-unit houses are of a higher quality and cause fewer
problems to begin with (see “Community Concerns”). They understand better the relationships and rules
necessary for harmonious living. It could be that living in these two- and three-family houses elicits better
social behavior than does living in large rental complexes. The subject of this paper is not whether higher
quality tenants choose small-unit housing or small-unit housing produces higher quality tenants. However,
the differences exist, and small—unit properties come out more favorably than large-unit properties. Most
definitely, owners of smaller properties take the time to resolve problems before they end up in court.7

Another social integration benefit is that two- or three-family owner-occupied housing holds the
prospect of mixing people of different means, something that single-use zoning has tried to prevent. The
differences are generally not much,8 but the relationship between landlord and tenant produces a sense of
upward mobility. (Tucker 1991, 61)

There is the inherent social advantage that exists to having people live under the same roof. People

have someone else nearby to whom they can turn in emergencies. Living under the same roof may also help

 

7 POMS Table 49 shows that 27% of 2-unit owners rely on personal interviews for screening tenants, compared to 6% of 50+ unit
owners. Conversely, 13% of 2-unit owners rely on credit checks, compared to 30% of 50+ unit owners. This indicates that
small-unit owners tend to rely more on character than coin. See appendix for table.

3 According to William Tucker, “wealthy tenants have wealthy landlords, middle-class tenants have middle-class landlords, and poor
tenants have poor landlords” (Tucker 1991, 28).

 

LEONARD J. VlLlClC 37 SPRING 1997

THE FEASIBILITY OP CONSTRUCTING TWO- OR THREE-FAMILY OWNER-OCCUPIED HOUSING IN SINGLE-FAMILY
NEIGHBORHOOD: AS AN INFILL STRATEGY

i reinforce social norms, and there is a reduced risk of burglary because more peOple are around. (Husock
1990)

Two- or three-family housing can also mix families of different generations. Grown children are
staying home longer because of the larger income-to-rent gap than previous generations. Pollak (1994, 523)
points out that communities can be “enriched by the presence of people of all ages.” The presence of the
elderly among children creates within the children a more caring attitude toward the aged, which will have an
effect on future policy. Having a range of generations within a community can stabilize the fluctuating
demand for community services, reduce nursing home placements, and reduce the need for specialized
services such as meals and transportation.

Two- and three-family housing has also served a socialization function for new immigrants, such as
in Chicago, New York, and Boston. Owners often rent to relatives or friends they wish to bring into the
country. This aids in the socialization and assimilation of immigrants. (Metzger 1997)

Despite the advantages that two- and three-family housing can bestow upon society, they remain but
a fraction of new construction. Further, because such a great number are now nearly a century old, they are
in danger of disappearing to near extinction. The benefit argument may be convincing, but it takes more to
change the institutional behavior that has also been around for nearly a century. Most people would agree
that building community is a worthy goal, yet either because of ignorance or fear, refuse to allow the changes
necessary to achieve it.

The next section explores various community concerns about rental housing. It will show that the
concerns are based on misconceptions about rental housing and renters, and offer evidence that the concerns
are unfounded. However, the concerns are real enough to the people who have them, and only by

understanding these concerns can they be properly addressed in regard to policy formulation.

 

LEONARD I. VILICIC 38 SPRING 1997

THE FEASIBILITY OF CONSTRUCTING TWO- OR THREEvFAMILY OWNER-OCCUPIED HOUSING IN SINGLE-FAMILY
NEIGHBORHOODS AS AN INFILL STRATEGY

 

COMMUNITY CONCERNS

 

DECREASE IN PROPERTY VALUES

The specter of declining property values is one of the primary reasons people fear neighborhood
change. They want their values to increase or at least stay the same. Rental properties are often perceived as
contributing to decreasing property values. People view any change as detrimental to the quality of their
neighborhood and as having a negative impact on property values. Without doubt, mere is some truth in this
argument. The stereotypical example is the landfill that destroys the value of a neighborhood. But there is a
difference between introducing such vastly incompatible uses into a neighborhood and introducing a slightly
different kind of housing.

Table 13 shows the effect of rental properties on surrounding property values, as perceived by the
owners of rental prOperty. All structure groups are close to the average in every category. Generally,
property values increased in 24.4% of neighborhoods, decreased in 12.7% of neighborhoods, and remained
the same in 40.2% of neighborhoods. The actual change in property values, and whether these changes
occurred because of the presence of rental property, is impossible to determine with this data. However, the

data does suggest that rental properties have little impact on neighborhood property values.

Table 7 3: Change: in Neighbor/mod Property Value: Last Year, Percent Distribution

 

 

 

 

 

 

 

TYPE OF MULTI FAMILY PROPERTY
Total U.S. 2 units 34 units 5-9 units 10-19 units 20-49 units 50 + units
Tatal 100.00 100.00 100.00 100.00 100.00 100.00 100.00
values increased 24.39 21.60 20.08 19.25 21.50 25.47 27.65
values decreased 12.72 16.03 21.52 19.18 15.40 12.02 7.77
values remained the same 40.16 44.39 42.93 40.47 36.14 38.61 38.97
don't know or not sure 17.54 13.57 11.41 14.23 19.86 18.55 20.50
not reported 5.20 4.40 4.06 6.87 7.09 5.34 5.10

 

 

 

 

 

 

 

Sm: U.S. Bureau of the Census, Property Owners and Managers Survey, Multi Family Properties, Table 43.

The data is based on subjective responses, not on any statistical measurement. This may explain why

owners of 20+ unit structures have a higher percentage of value increase and a lower percentage of value

 

LEONARD J. VILICIC 39 SPRING 1997

THE FEASIBILITY OF CONSTRUCTING TWO- OR THREE-FAMILY OWNER-OCCUPIED HOUSING IN SINGLE-FAMILY
NEIGHBORHOOD: AS AN INFILL STRATEGY

decrease—they have a greater interest in increasing property value, and so would feel that property values in
their neighborhoods are increasing.

Goetz et. a]. (1996) offer a more precise illustration of the impact of rental property on
neighborhood property values. They cite numerous studies showing that public housing has no impact, or a
positive impact, on neighboring property values in white, middle-class, inner-city, and suburban
neighborhoods. In St. Louis, Missouri, two of three neighborhoods felt no impact, and the third had an
insignificant positive effect on property values, after public housing was built. Thirteen subsequent studies
showed negative impacts in only two instances. In New York State, a study of 33 cities showed that the
existence of public housing had no impact on the private housing industry, nor of the deterioration,
demolition, or vacancy rate of the private market. A recent study in San Francisco reached similar
conclusions. Another recent study in St. Paul, Minnesota concluded slight, significant negative impacts on
property values, most significant at one-quarter mile. (Goetz et. a1. 1996, 12)

Goetz et. al.’s (1996) own study of non-profit subsidized housing on neighborhood property values
in Minnesota shows that neighboring property values actually increase at the rate of $0.86 per foot the nearer
to the subsidized housing. Conversely, public housing and privately owned, publicly subsidized housing
yield a decrease in neighboring property values at the rate of -$0.42 per foot and -$0.82 per foot respectively
the nearer the property. Suggested reasons are that the Community Development Corporations (CDC’s)
have high resident involvement for a project to succeed (residents are often board members) and they are
involved in the planning of the project. Second, the CDCfs remain responsive to the residents. This is in
contrast to private owners, who use public housing subsidies for tax benefits. They generally have no
concern beyond profit. Public housing has been consistently underfunded, which has led to deterioration
and the negative image of public housing. (Goetz et. a1. 1996, 52-53)

Although no study has been done to determine the impact of new two-or three-family owner-

occupied rental housing on neighboring property values, it is reasonable to conclude that if non-profit

 

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subsidized housing has a slight positive impact on property value, then two-or three-family owner-occupied

housing will also have a positive impact on neighboring property values.

DECREASE IN SERVICE QUALITY

Another reason people fear neighborhood change is that the quality of services they receive may
diminish. The most common reason residents resist infill is lack of infrastructure capacity—residents fear
traffic congestion and sewer backups. Infill can be encouraged by strengthening neighborhood qualities. A
municipality can make infrastructure improvements and condition residents to the idea of infill, usually
through the development of neighborhood plans. (Smart 1985, 30)

Beyond that, one must consider logically how much impact a small residence has on an entire
neighborhood. Consider a neighborhood that has 50 lots, 48 of which have single-family houses and the
other 2 lots are vacant and awaiting development. Typically, the current residents would want single-family
houses to fill those lots. This raises the issue of intensity of land use mentioned earlier. Suppose single-
family houses are built and sold to families, one a family of four having 2 parents and 2 grown children, the
other a family consisting of a brother and a sister and their spouses. The neighborhood has an increase of 8
adults, all of whom have cars.

Now suppose that instead 2 two-family houses are built. The first is bought by an older couple who
rent to a young family of 2 parents and one toddler. The second is bought by a single middle-age mother of
two children, who rents to her parents. The neighborhood has an increase of 10 people—7 adults and 3
children. Each elderly couple has one car, the young family has one car, and the single mother has one car,
for a total of4 cars.

In the first scenario, 2 housing units have been added to the neighborhood. There are no children in
school, but there may be in the future should either of the young couples have children. The grown children
most likely have friends that will add to the neighborhood traffic and noise. In the second scenario, 4

housing units have been added to the neighborhood. There are 2 children who attend school and one that

 

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will eventually. The density in the second scenario is higher, but the overall intensity of the land use is

similar to the first scenario.

DECREASE IN NEIGHBORHOOD QUALITY OF LIFE

There is the belief in this country that tenants are second class citizens who are less hard-working,
less reliable, and generally more unruly than homeowners. (Perin 1977) Allowing tenants into owner-
occupied single-family neighborhoods is believed to deteriorate the quality of the neighborhood. Rarely do
studies focus on the factors that may cause tenants to fit these stereotypical beliefs in the first place. Should
society focus on income redistribution so that more people can afford to buy homes? Various programs exist
to aid in the purchase of homes, though no serious effort will ever be made in our “free” society. Do tenants
behave differently in different living environments? Should society focus on accepting that there will always
be tenants and instead find ways to distribute them better throughout “mainstream” society? That is the

focus here, to show that there is a way to bring tenants into the mainstream wid'lout the associated negatives.

Table 14: ijes of Undesirable or Dimptive Behavior in Lac! 2 Years, Pment of Total fir Ear/I Stratum

 

 

Type
TYPE OF MULTI FAMILY PROPERTY
Total U.S. 2 units 3 - 4 units 5 - 9 units 1049 units 20-49 units 50 + units

 

“fith Disruptive Behavior , 73.36 744.75 . 62.51 , 64.38 773.01 81.65 85.45

 

vandalism to outside of
buildings or to grounds ‘ .

 

 

 

 

 

 

 

 

 

 

 

 

Smut: U. S. Bureau Of the Census, Property Owners and Managers Survey, Multi Family Properties Table 59
NOTE: Items listed add to more than totals because of multiple responses

 

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Residents fear that allowing tenants into a neighborhood will increase the incidence of undesirable
behavior. Table 14 on the previous page shows the percentage of housing types that have different kinds of
undesirable behavior. In all cases, the percentage of units with undesirable behavior increases as the number
of units in a structure increases. Overall, there is a general increase of undesirable behavior from 45% in 2-
unit structures to 85% in 50+ unit structures. The most common problem is loud or dismptive behavior.
Theft increases from 13% to 67%, violence increases from 11% to 45%, and drug usage increases from 9%

to 44%. Thus, smaller-unit structures are safer than larger-unit structures.

Table 75: Cbaracteristier of Dimrptiue TenaatS, Percent of Total for Eacb Structure T‘)pe

 

TYPE OF MULTI FAMILY PROPERTY

 

 

 

Total U.S. 2 units 3-4 units 5-9 units 10-19 units 20-49 units 50 + units

 

fruimyoung adult Or -
stuth households . 10.45 4.08 8.33 _ 7.31 p . .. _. 12.16 1266 12.93

 

from households with

visitors unwelcome to

 

 

 

tenants 43.17 22.38 28.13 33.80 40.46 47.00 55.29

 

 

 

 

 

 

 

 

Sm: U.S. Bureau of the Census, Property Owners and Managers Survey, Multi Family Properties, Table 61.
NOTE: Items will not sum to totals because of multiple responses

Table 15 shows the characteristics of disruptive tenants. Most commonly, disruptive tenants have

visitors unwelcome to the management, whereas least commonly, disruptive tenants are Section 8 tenants and

 

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tenants of overcrowded households. In a 2—unit structure, the most common disruptive tenant is
unemployed. What form this disruptive behavior takes is not known, because there is no cross-reference to
the previous table.

Another common fear is that tenants bring instability to a neighborhood because of their greater
transiency,1 which indirecdy would lead to an increase in the undesirable behaviors just described. As shown
in Table 16, tumover rates tend to increase as the units per structure increases. Of 2-unit structures, 55.8%
had no tumover, decreasing to only 1.3% of 50+ unit structures with no turnover. Though the tumover rate
is generally low for 2-unit structures, it increases to 10% in the 50% or more turnover rate category. It is not
possible to explain why those 10% have such a high tumover, but it is likely that these units are dilapidated

or in blighted neighborhoods.

Table 76: Turnover Rate in Ian 72 Mont/IS, Percent DiStribution for Eacb Structure Type

 

TYPE OF MULTI FAMILY PROPERTY
TOtal U. S. 2 units 3 - 4 units 5 - 9 units 10-19 units 20-49 units 50 + units

Total 100. 00 100.00 100. 00 100.00 100.00 100.00 100. 00

 

 

 

 

 

 

don' t know
not reported 7.95
Sourre: U.S. Bureau of the Census, Property Owners and Managers Survey, Multi Family Properties, Table 23.

 

 

 

 

 

 

 

 

 

 

Although little data exists specifically for turnover rates of owner-occupied two-and three-family
houses, it is reasonable to assume that the rates would be as low, as pointed out by Elving. “Absentee owners
reported more vacancies and rent losses due to vacancies than resident owners. This may reflect the

tendency of absentee owners to have more turnover in their buildings than residents.” (1975, 134)

 

1 The 1990 census indicates that 9.4% of owners moved within the 15 months prior to the decennial census, compared to 41.6% of
renters. (U.S. Bureau of the Census)

 

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Tenants of smaller-unit structures are more financially stable, as can be seen in Figure 4 on the next
page, which shows the percentage of rent delinquent tenants at a property in the last 2 years. Generally,
structures with more units have a higher percentage of delinquent tenants, increasing from 36% of 2-unit
structures with rent delinquent tenants to 87% of 50+ unit structures with rent delinquent tenants. Of the
rental property owners having a 1-to-9% delinquency rate, fewer delinquencies occur in the smaller structures
than in the larger structures, increasing steadily from 3% to 50%. The same pattern occurs for the properties
with a 10%-to-24°/o delinquency rate. The unusual occurrence is that the properties having a delinquency
rate of 25%-or-more increases to 12% for the 2—unit structures, and to 20% for the 3-4 unit structures. The
findings for the turnover rate help explain this (see Table 16). For some reason, a percentage of 2-unit
structures cannot retain tenants, probably because the properties are in terrible condition and the landlords

continue to neglect them.

Figure 4: Rent Delinquent) Rate at Proper-9r in Lott 2 YearS, Percent Distribution for Eacb Structure Type

 

70.00 Rent Delinquency Rate
60.00 none
I 1 to 9 percent
50.00 E! 1 0 to 24 percent
.25 percent or more
5 40.00
E

9.. 30.00
20.00

10.00

 

Total US. 2 units 3 ~ 4 units 5 - 9 units 10 - 19 units 20 ~49 units 50 + units
Type of Multi-Family Property

 

 

Same: U.S. Bureau of the Census, Property Owners and Managers Survey, Multi Family Properties, Table 55.

Neighborhood quality is an important determinant of the condition of the housing stock. It is
generally believed that owners of single-family homes have an incentive to upkeep their property and thus

maintain value, whereas owners of rental housing only have an incentive to earn a profit. Thus, as

 

LEONARD J. VlLlClC 45 SPRING 1997

 

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maintenance costs outweigh profits, disinvestment will occur, followed by a deterioration of the rental units.
(Kolodny 1981 ; O’Mara et. a1. 1984) This has the impact of bringing down the quality and value of the
neighborhood as a whole. However, owner-occupants of two-or three-family houses have a vested interest
in maintaining their prOperties. They live there, and would maintain a property the same as any owner-
occupant. (Elving 1975)

Why, then, did this nation turn away from the smaller rental structures in favor of the larger rental
structures? That is beyond the scope of this paper, though the simple answer is that this country opted for
the single-family house as the housing of choice, and rental housing became nothing more than another
investment option. It is clear from the data and argument presented that smaller rental structures would
serve many communities better than large rental structures. The next section will offer ways to overcome the
legal barriers that have been erected to prevent the inclusion of two- and three-family housing within single-

family zones.

 

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OVERCOMING REGULATORY BARRIERS

 

There are many obstacles preventing the construction of two- and three-family housing within
single-family neighborhoods. The previous section discussed the cultural forces that prevent construction,
which translate into the political actions that prevent construction. These are encoded in zoning ordinances
and building codes, the legal regulatory barriers that prevent flieir construction. Finally, there are the market
forces, governed by financing practices, which will be covered in a later section. For now, this section will

deal with the legal barriers.

ERECTING THE EXCLUSIVE SINGLE-FAMILY ZONE

Zoning is a land use system by which municipalities divide land uses into different use districts,
generally residential, commercial, and industrial. Zoning further regulates intensity of use by setting density
limits to control population density and the load on municipal services and infrastructure. Finally, zoning
regulates building bulk through setbacks, height restrictions, and lot coverage to control accessibility to air,
light, and open space.

The original purpose of zoning was to stabilize and protect property values. As industrial cities grew
in an unregulated market, demand for more intense land use increased land speculation and conflicts. Single-
family houses had the least productive value and, as intrusion by other uses occurred, were at risk of
depreciation, social disruption, and deterioration. Likewise, industrial uses were often at risk of injunction
from a nuisance settlement. This was because, prior to zoning, land use was controlled to an extent by
nuisance law and restriCtive covenants, and the courts were left to settle conflicts. By applying the police
power of ensuring public safety, health, and welfare, the legislature assumed the power to regulate land use.

Bulk restrictions were upheld by the courts because of the obvious relation to public health and
safety, namely the lack of fire fighting technology to deal with high-rise structures, and the overloaded

capacity of streets caused by congestion. (Gellen 1985)

 

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Regulating land use districts proved more difficult to justify, because land use is zoned in two ways.
The first is separating land uses because of physical incompatibilities, such as separating an oil refinery from
a residential neighborhood. No one would argue that this should not be done. The second is separating land
uses according to taste and preference, such as separating single-family detached housing from other types of
housing. This necessitates a value judgment about the proper ordering of land use and bestowing more
status upon one over the other. (Mandelker 1971, 32)

In Euclid v. Arnblefl, the U.S. Supreme Court wrestled with both problems. Backed by a long history
of nuisance law, the Court easily found the first justification of separation valid—that incompatible land uses
can be zoned. It had difficulty justifying the second. Why should an apartment—a residential use—-be
excluded from a residential neighborhood? In this, the Court used a value judgment that justified the
exclusion. (Mandelker 1971) The Court was persuaded by the argument that society would benefit by
protecting family life,2 encouraging homeownership, and maintaining a stable. local tax base. (Gellen 1985)

According to Gellen, “[o]nce courts had legitimized this broader conception of the public welfare . . .
municipalities began to define a set of residential norms based on the family life cycle and to separate out
residential districts not by density so much as building-type and life-style.” (1985, 108) This was because of
the difficulty of actually measuring and enforcing density standards. Municipalities instead zoned according
to building type and units per acre. The assumption is that one family will occupy one unit. This would be a
valid way to regulate density, provided that all housing units had the same number of occupants, and that
multi-family buildings sat on the same size lots as single-family houses. In reality, there is no one-to-one

relationship between family size, dwelling unit size, and lot size. (Gellen 1985)

 

1 Village 45.464 Obie ,_ Ambler Realty Co., 272 U.S. 365, 47 S.Ct. 114, 71 LEd. 303 (1926)

2 According to a Nermmk special edition on the family in America (Winter/ Spring 1990), the nuclear family of Dad going to work
and Mom staying home with the children thrived only from 1860 to 1920 among middle-class whites, peaking about 1890.
Minorities and immigrants did not fit this model at all. (Shaffer and Anundsen 1993). This corresponds with the height of the
progressive reform movement, and explains why such importance was placed upon the single-family home. The reformers were
protecting their way of life. Why then does this notion still endure when demographics indicate this pattern has not been true for
over two decades?

 

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This shift from zoning by area type (residential, commercial, industrial) to zoning by building type
(single-family, two-family, multi-family) was supported by the persuasive reasoning that children needed the
safety and comfort of clean, orderly neighborhoods of families wid'I similar interests to grow into moral and
righteous citizens. Keeping children away from all the “evil” influences of apartment and city life was judged
to be in the interest of the public welfare. (Gellen 1985)3

Along widI this belief came the notion that families needed to own their homes to provide stability
to a community. VVIde-spread homeownership was seen as a public goal, and only exclusive single-family
zoning could allow property values to be protected.4 Property rights had not yet developed to the point of
recognizing separate air rights—which is how condominiums are divided—so ownership of a house meant a
single-family house on a piece of land. (Gellen 1985)

It was stated in the section, “A History of 2 and 3 Family Housing,” that Euclid affirmed the validity
of exclusive single-family districts. That was a simplification. A more critical interpretation needs to be

made, particularly in reference to two-family dwellings. To see why, it is necessary to quote Euclid at lenng:

[I]he segregation of residential business, and industrial buildings will make it easier to provide fire
apparatus suitable for the character and intensity of the development in each section; that it will
increase the safety and security of borne fife, greatly tend to prevent street accidents, especially to
children, by reducing traffic and resulting confusion in residential SectionS, decrease noise and other
conditions which produce or intensify nervous disorders, preserve a more favorable environment in
which to rear children, etc. With particular reference to apartment houses, it is pointed out that the
development of detacbed bouSe section: is greatly retarded by the coming of apartment houses, which has
sometimes resulted in destroying the entire section for private bourepurporer, that in such sections very
often the apartment house is a mere parasite, constructed in order to take advantage of the open
spaces and attractive surroundings created by the residential cbaracter oftbe dirtrict. Moreover, the
coming of one apartment house is followed by odIers, interfering by their height and bulk with the
free circulation of air and monopolizing the rays of the sun which otherwise would fall upon the
mailer barrier, and bringing, as their necessary accompaniments, the disturbing noises incident to
increased traffic and business, and the occupation, by means of moving and parked automobiles, of
larger portions of the street, thus detracting from their safety and depriving children of die privilege
of quiet and open spaces for play, enjoyed by those in more favored localities—until, finally, the
rea'dential c/Jaracter of tbe neigbborbood and its desirability as a place of detacbed residence: are utterly

 

3 Kunstler (1994) argues, however, that it is this rigid separation of uses that prevent: children from learning how to interact, be
independent, and learn the moral distinctions necessary to live in a modern society.

‘ A necessary factor for lenders.

 

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destroyed. Under these circumstances, apartment houses, which in a diffeer environment would

be not only entirely unobjectionable but highly desirable, come very near to being nuisances.

[emphasis added]5

Several points need to be made. First, apartment buildings at that time were tall, bulky, and prone to
fire. This was what was trying to be prevented. The Court also assumed that apartments would necessarily
bring more traffic and on-street parking. It did nOt consider that the zoning could have required various
setbacks, height restrictions, and off-street parking requirements as a condition of allowing apartments.‘
Thus, other types of apartment structures were zoned “apartment” radter than “residential.” Second, the
Court did not specify what constituted a residential neighborhood. Was it only a single-family detached
neighborhood, exclusive of all other uses, or was it something else? All reference is to “residential sections,”

3, (C

“residential character, private house purposes,” and the like. Because the residential zone being direatened
in Eucb'd was a single-family zone, it was, and has been since, interpreted by politicians and planners that the
single-family zone was what the Court had in mind. Also, the Court made implicit, general value judgments
about the lifestyle of apartment dwellers, in effect allowing zoning to be used as a social control and not
merely as a land use control. (Mandelker 1971)

A more defining ruling in regard to two-family dwellings, cited by the Court in Eucb’d, is in Miller a.
Board of Pubb'c Works.7 Though that case persuasively defended single-family zoning on the principles of
protecting the welfare of the American family, it recognized that two-family houses were architecturally
comparable to single-family houses, did not add any burden to civil services, and did not change the
character of a neighborhood devoted to residential purposes. (Gellen 1985, 118) Unfortunately, dais aspect

of die ruling was forsaken in favor of what zoning advocates wanted—the validation of single-family

neighborhoods—and in that regard the decision served them well.

 

5 Village ofEudid Obio n. Ambler Realty Co., 272 U.S. 365, 47 SCI. 114, 71 LEd 303 (1926)

6 “The dificulty, of course, is that apartment development of this kind was simply not known, or in its infancy, when the Euclid
opinion was written.” (Mandelker 1971, 36)

7 Miller v. mama; Works, 195 Cal 477, 234 P. 381 (1925)

 

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One final legality—die presumption of legislative validity—stamped exclusive single-family zoning
in the psyche of America. Prior to Euclid, the courts were suspicious of any use of the police power that
might infringe on the life, liberty, and property of citizens, and required municipalities to prove the
reasonableness of zoning ordinances. In Euclrd, the Court stated, “[i]f the validity of the legislative
classification for zoning purposes be fairly debatable, the legislative judgment must be allowed to control.”‘3
After Euclid, courts presumed that the legislative act of zoning was in the interests of the public, and shifted
to affected parties die burden to prove an ordinance arbitrary or unreasonable. The courts no longer
attempted “to articulate a rational basis for single-family zoning”, but accepted single-family zoning to be

self-evident (Gellen 1985, 119)

REDEFINING THE RESIDENTIAL NEIGHBORHOOD

Zoning evolved from being a legislative tool to regulate land use to being a political process to
regulate land use. (Babcock 1966) Once dus happened, zoning itself was no longer questioned, but only the
finer details of the process of zoning and the effects on property rights. Consequently, it is not the exclusive
single-family zoning ordinance itself that needs to be overcome. It is the political process that needs to be
reckoned with, of which the zoning ordinance is, in actuality, but a legal record. The zoning ordinance is
defined in this manner because it is the decisions, after the town meetings and VOtes have occurred, that are
transfonned into and become the essence of a zoning ordinance. Ultimately, changing the desires of the
participants will effect a change in the zoning ordinance.

What change is being sought? Zones exist to allow two- and three-family houses to be built, yet
two- and three-family houses are not built to tbe extent of the land allowed to them, generally because of
market and political forces. If all the land zoned as two—family were built out with two-family houses, there

would be many more of these houses, but the numbers show an obvious lack of them.9 The land zoned for

 

3 Village quuaé'd Obio u. Ambler Realty Co., 272 U.S. 365, 47 S.Ct. 114, 71 LEd. 303 (1926)

9 See previous sections.

 

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two— and three-family housing is, to a great extent, underutilized.10 This is not to say a problem does not
exist in die other direction. Many single-family neighborhoods contain illegal rental apartments. (Gellen
1985)

Herein lies the crux of the residential zoning matter—the absolute separation of housing types even
where market forces and human behavior dictate odieiwise. Babcock sums it thus: “The unstated
consequence of the ‘principle’ of exclusive use districts . . . was that it underscored the differences between
uses and discouraged a search for a way to recognize and express in die law the similarities. between different
uses.” (1966, 130)

Absolute physical separation of residential land use is relatively recent. Even though the courts
legally recognize separating single-family houses from other kinds of houses, most neighborhoods at the time
of Euclid included a mix of single- and two-family houses. Except among the wealthy, exclusive single-family
districts were uncommon until the 19405. This ambiguity of what constituted a residential neighborhood is
what frustrated the courts in the early days of zoning (Gellen 1985), and frustrates community planners and
activists today.

Following WW II, subdivision regulations played a more crucial role than zoning in the creation of
single-family neighborhoods. Pent-up housing demand, coupled with inexpensive land, federal programs
that encouraged single-family homeownership, and a U.S. economy experiencing unchallenged growth,
allowed the creation of a housing production system exemplified by Levittown. Oackson 1985) The “cookie-
cutter” subdivision and the real estate development process were able to put millions of people into homes
inexpensively. By the 19705, however, wages began to stagnate as the rest of the world’s economy caught up
with the U.S., and single-use sprawl growd'I was seen as causing many environmental and social ills.
(Cald'Iorpe 1993) Perhaps subdivision regulations, along with zoning, need to be reformed to permit an

integration of residential uses.

 

1° Take a drive in any two-family zone, count up all the single-family houses, and you will get an idea of the extent of the problem.

 

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Defining a residential neighborhood as a specific dwelling type at a certain number of units per acre
considerably limits who can live where. In general, renters must live apart from owners, and the less well to-
do must live apart from the more well to-do. However, if a residential neighborhood is simply defined as a
place where people live, options can be expanded. A neighborhood of different dwelling types can allow

different types of residents, much as they did at the turn of the century.

SETTING THE STAGE FOR CHANGE

Consensus building is the best way to achieve change. If all players (residents, elected officials,
planners, deveIOpers, lenders) agree upon a set of goals and policies, change becomes possible. These goals
are typically set down in a master plan. Although the plan does not have the force of law, even after it is
adopted by the municipality, many states now require any zoning ordinances to be consistent widt the master
plan.11 Particular to the creation of mixed residential neighborhoods are the following set of goals that
should be included within such a document.

WW. Foremost, a municipality should have a policy of allowing a
range of housing types to be integrated throughout a neighborhood. A mixture of housing types within a
neighborhood would create a more diverse living environment.

Waning. The neighborhood planning process raises awareness of the
various issues involved in mixed housing environments, typically by enlisting the active participation from a
variety of members in a community. The neighborhood plan thus has a greater chance of being
implemented, because people are more committed to something in which they helped to create. Having a
neighborhood plan can also ease the approval process and lend support to a developer whose project is

atypical. (Smart 1985, 28)

 

11 Florida is a leading example for enforcing the “consistency doctrine.” (Callies, Freilich, and Roberts 1994, 379) State zoning
enabling legislation typically requires zoning to be “in accordance with a comprehensive plan.” In zoning cases, courts often rely
upon a plan to determine legislative intent, though many courts continue to find a plan within the zoning ordinance. (Mandelker
1993)

 

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Went. Higher density infill development can reduce the

pressure for fringe growth and make better use of existing infrastructure and municipal services. Allowing
higher densities can make infill development financially attractive, and a wider range of housing types can
improve marketability. Many municipalities often have policies to encourage infill, but lack the means to
implement those policies. Various strategies that municipalities can use include: identifying and providing to
developers information on infill sites; encouraging neighborhood support; improving services and
infrastructure in infdl areas; providing tax incentives; creating apprOpriate zoning and zoning incentives;
improving regulatory requirements and procedures; and providing flexibility in requirements for building
location and site so that difficult sites can be developed. (Smart 1985)

WWW. Infill projects often remain on the drawing
board because lenders deem them too risky. This is particularly true when rental housing is proposed. In the
cities, restrictive and racially discriminatory lending practices hampers reinvestment. (U SDHUDAC 1991, 6)
Municipalities can enforce Community Reinvestment Act (CRA) requirements, set up a grant or loan fund to
help finance infill projects, and link funds to an educational program for buyers of two- or three-family
houses.

WWW. Municipalities need to assess the current
conditions of infrastructure and services. Are they being used to the capacity for which they were designed,
or are they undemtilized? Likewise, how much upgrading may be necessary to make areas attractive?
Municipalities should also project demand and need.

Wm. According to Richard Babcock, “the danger of the spread of
infectious disease, the loss of light and air, the increase in fire hazards and crime, strike one (in retrospect) as
a tad overblown today.” (quOIed in Husock 1990, 59) In Boston, it requires at least five variances—
including one to permit construction of a multi-family house—to build a new three-family where one once
stood. (Husock 1990) Also, horizontal and vertical levels of government regulation of land use build a maze

of duplication and uneven standards that slow the building process. (U SDHU DAC 1991, 8) Yesterday’s

 

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codes are no longer valid today, and yet they control the majority of new construction. Municipalities need
to eliminate outdated, redundant codes and ordinances, and adOpt new standards that will allow the building
industry to make use of new materials and techniques.

WEBM- How much review is necessary to ensure
the construction of a livable house? Municipalities need to streamline the permitting process. Slow
pennitting procedures, intended to ensure the health and safety of the public, are excessively burdensome,
and add to the costs of new housing. (U SDHUDAC 1991, 5) This is particularly important for small
developers working on scattered sites; delays can raise costs considerably, or even halt a desirable project.
(Smart 1985, 34) For a developer, it is important to find a person within city hall who can help maneuver a
project d'nrough the system. It also helps if the developer has city plans or neighborhood plans that
emphasize infill, reinvestment, and revitalization. (Smart 1985, 27)

The plan is an important first step because it sets a policy for what the municipality desires. By
having a plan in place, the proper legislative tools can than be chosen to implement the plan. Since the basic
issue being dealt with is infilling developed single-family zones, the tools would necessarily involve zoning
ordinances. This could include anything from minor tinkering through zoning variances all the way to a full-
scale rewriting of the ordinances.

A furdner important aspect of the plan is that it helps form a legally defensible basis for the tools
chosen. Private property rights are one of the founding principles in America, and one of the purposes of
zoning was to aid in the protection of those rights. When a person purchases a home in a particular zone, he
or she has certain expectations because it is in that zone. Any threat to dnose expectations becomes the
object of close scrutiny. Having a plan with which property owners are in ageement can obviate costly legal

battles.

THE TOOLS OF CHANGE

Ever since zoning was created, it has had its critics and supporters. It has been modified and

expanded upon, but never seriously challenged as a way of managing land use. Zoning serves a purpose—it

 

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brings a semblance of order to land use development. Whedner zoning is good or bad is not the issue,
because it will probably be around for a long time. The aim then is to apply zoning tools to the idea
presented here—allowing two- or three-family housing to be built within single-family neighborhoods.

Several zoning techniques exist that could accomplish this, and they will be discussed in turn.
Briefly, they are: the zoning amendment, the variance, the special exception, inclusionary zoning, .
performance zoning, zoning by building envelope, and overlay zoning.

Wm. An owner can request a rezoning from single—family to two- or three-
family. A rezoning may be granted if doing so serves a public need and a public purpose. A public need
would exist if dnere were a housing shortage, particularly affordable housing. The public purpose would be
to create more diverse neighborhoods, or to revitalize a declining neighborhood. Bodn of these can be shown
in the context of the plan. The zoning amendment process has no specified criteria, and usually is based
upon the policy of the comprehensive plan, equal protection, due process, changes in the physical
environmernt, or changes in the zoning policy. (Mandelker 1971)

Rezoning carries the risk of being challenged for “spot” zoning, which is a “zoning map amendment
that rezones a tract of land from a less intensive to a more intensive use district.” (Mandelker 1993, 248)
Courts dislike spot zoning because of the potential for abuse. A court may find the rezoning invalid if the
site is small and inconsistent with the surrounding area. It may also find a rezoning invalid if it benefits the
owner and harms the neighbors. It is necessary to establish in a plan the intent to allow neighborhood
change so that the rezoning is not arbitrary.

Since the actual use of the land is not changing, but only becoming—possibly—more intensive,
rezoning can potentially work. A municipality may want to rezone all infill parcels to permit two- or direc-
family houses as-of-right, instead of rezoning each parcel piecemeal. This would be less arbitrary and more
consistent widn the plan. One of the criteria that Maryland courts use to support apartment rezonings in
neighborhoods is that a mere increase in traffic and school population is not gounds for a denial, unless the

rezoning created an obvious traffic hazard. Q/Iandelker 1971, 95)

 

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W. A municipality can grant a variance from the specifics of a zoning ordinance,
generally for unique lots that cannot be developed if the zoning ordinance were stricdy followed. There are
two kinds of variances. A are variance permits uses other than those prescribed in the zoning ordinance, such
as building a two-family house in a single-family zone. An area variance permits a change in the standards of
the pennitted use, such as building on an undersized lot. The owner requesting a variance must show
hardship in three ways: that the property cannot yield a reasonable return if used only for the purpose in the
ordinance; that the property has unique conditions not general to the surrounding neighborhood; and that the
new use will not alter the basic character of the area.

Many courts do not allow use variances, holding that a change in use requires an amendment
Courts will also not accept policy reasons for a variance, such as the claim that a housing shortage justifies a
variance for an apartment in a single-family neighborhood. (Mandelker 1993) This is not to say that a
variance could not be used to permit a two-family house in a single-family zone; it would just be difficult to
prove the hardship. In a declining or depressed area widn many illegal apartments, it may be possible to show
that the property has no value as a single-family lot. In this instance, though, the municipality should rezone
the area.

The variance is more useful after a lot has been rezoned to allow a two- or three-family house.
Often, municipalities require larger lots for two- or three-family houses than for single-family houses. Height
and setback variances may be necessary to fit a house on the lot, as well as variances for parking
requirements. A useful tool may be zero lot-line zoning, which can allow a house to fit on a smaller lot.

Wm. Also called a conditional use or special use, the special exception in a zoning
ordinance is a use that is pennitted depending upon certain conditions being met. The use is somed'ning that
is essentially compatible widn surrounding uses, but the municipality desires to retain discretion over where
and how such use will be permitted. No proof of hardship is necessary; only the conditions specified in the

ordinance must be met.

 

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According to Crawford, “the purpose of the exception is to alleviate the rigidity of the zoning
ordinance for the convenience of the community and advance the public welfare, and that the permit should
not be denied unless some very good reason can be advanced why the particular use would be harmful at the
location where it is sought to be established.” (1979, 47) In general, courts will reverse a denied permit for a
special use, because if the zone were designed to permit these conditional uses, it stands to reason that the
use, if conditions are met, will be compatible. (Mandelker 1993, 279)

The special exception does not permit something as-of-right, d‘nough it can be effective at allowing
two- or three-family housing to be built in single-family neighborhoods, particularly if linked to a plan that
stresses this kind of development.

MW. Lack of affordable housing has been a pressing issue for the past two decades.
Zoning has been largely to blame by its use of exclusionary zoning, such as minimum lot size and minimum
house size requirements. (Callies, Freilich, and Roberts199‘4)‘ Zoning was meant to prevent incompatible
land uses from occupying the same area. Instead, it has evolved to be used as a tool to screen new
development to ensure that property values do not decline. The result is that school teachers, fire fighters,
young families, and the elderly are all regulated out. Subdivision ordinances require developers to provide
off-site amenities (e.g., parks, libraries, recreational facilities) dnat add to the cost of new housing.

(U SDHUDAC 1991, 4) Inclusionary zoning requirements have been used to correct past inequities.12

For the most part, inclusionary zoning policies have applied to large-scale development. One
common technique used is a mandatory set-aside, which requires a developer to include a minimum
percentage of units for low- to moderate-income people. In exchange, the developer is pennitted to build at
higher densities. Set-asides may be possible with infill development if a developer is doing scattered-site
development all at once.

Od'ner inclusionary zoning techniques include the aforementioned density bonus, relaxing site

development requirements, fees in-lieu—of to fund affordable housing, off-site provision of affordable

 

12 New jersey, Pennsylvania, and Califomia are leading examples.

 

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housing, and dedication of land, on-site or off-site. (Mandelker 1993) Of these techniques, the first three
would be the most adaptable to infill development, unless the infill project was of a large enough scale, or
encompassed many scattered sites.

For a municipality that is required by law to provide a fair share of affordable housing (as in New
Jersey), the two- or three-family house can be a compromise solution for the community that absolutely does
not want apartment structures. Relaxing site requirements along with bonus densities and fees indieu—of
could provide housing to people of moderate incomes, if not low incomes.

There are many legal issues raised by requiring a developer to provide affordable housing. Does
inclusionary zoning violate equal protection and substantive due process? (Mandelker 1993) Does it exceed
the police power, amounting to a taking without compensation? Who gets to buy the affordable housing,
and how is it determined? (Callies, Freilich, and Roberts 1994) Finally, should added requirements be placed
on a developer who is already taking a risk on infill development?

Wing. Performance zoning is a technique that focuses on the end result of
development, rad'ner than on particular detailed requirements to achieve that end. This permits greater
flexibility in urban design and mix. Though typically applied to industrial areas, performance zoning can
work in residential areas. Largo, Florida is one municipality that only uses performance zoning. The focus is
on the larger issue of housing people and controlling storm water run-off. Five residential performance
zones “differ only by the maximum density permitted. Intensity of use is controlled by limits on floor area
ratio and the percentage of site that can be under impervious cover. There are no limitations on the type of

housing, side yard and rear yard setback, and building height.” (Levy 1991, 125)

Mun-mm

 

This technique offers geat possibility for allowing two- or three-family housing widnin single-family
neighborhoods. For example, assume a standard residential zone allows 4 units per acre, and that the zone is
nearly deveIOped to capacity. If the zone were changed to an 8 unit per acre performance zone, a vacant lot

could be developed with a two- or diree-family house without much impact on the existing infrastructure.

 

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WM. As proposed by Gellen (1985), dnis technique seeks to regulate
intensity of use instead of population density. It would control bulk, height, yard setbacks, and parking

requirements only. There would be no restrictions on how many dwelling units are put within the structure,
od'ner than to require minimum dwelling unit size based on minimum standards for adequate healdn and
safety. Intensity would be controlled by a floor-area ratio, which would govern the amount of off-street
parking required—for example, one space per 500 square feet of living space.

Zoning by building envelope is another type of performance zoning technique, and may be
particularly useful for infill develOpment in which the goal may be to maintain the character of a
neighborhood. For example, if a neighborhood consisted of colonials or Victorians, the ordinance can be
written so that a new strucrure must conform to dnat basic bulk and height of the existing structures, wid'nout
specifying how many actual dwelling units are in that structure.

Wing. An overlay zone combines the use and structure requirements of different zones
into one. Rather than rezoning a neighborhood, a municipality may want to overlay an infill zone. It may
permit all infill sites to be developed to a certain density, or it may permit up to a certain number of two- to
three-family structures widnin a single-family neighborhood (e.g., so many per block, per zone, or per square
mile). A planning report for Albuquerque, New Mexico suggests overlaying an urban infill zone. Infill sites
in the zone would be given special incentives. A staff person would be assigned to assist mm the site
planning, approval process, review, cost minimizing, and locating sources of public financial assistance.

(Smart 1935,34)

ENSURING OWNER-OCCUPANCY

A common concern of residents is that of an absentee landlord owning a house in their
neighborhood. The house would become run-down and invite undesirable people. The section “Benefits of
2 and 3 Family Housing” discussed the benefits of having these houses be owner-occupied. Given the
nature of property rights in dnis country, can the owner of one of these houses be required to reside in it?

Land use controls are upheld because they regulate the use of the land, not the urea (l°ollak 1994)

 

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Gellen (1985) suggests that as a condition for permitting accessory apartment conversions, a
municipality can require that the owner live at the property. This would be done d'nrough a deed restriction
on the property. As noted before, deed restrictions (covenants) were common before the advent of zoning to
regulate land use.13 In the case of converting part of a single-family house to an accessory apartment, the
covenant would work. If the owner sold the house or moved out while wishing io retain ownership, the
municipality could then require that the accessory apartment be removed. In essence, this is a form of
contract zoning, and not a covenant between private parties.

According to a typical real estate definition, a covenant is a “written agreement or restriction on the
use of land or promising certain acts. Homeowner Associations often enforce restrictive covenants
governing architectural controls and maintenance responsibilities. However, land could be subject to
restrictive covenants even if there is no homeowner's association.” (Sykes 1997) As such, d'ne deed restriction
falls under the purview of contract law. According to Random House, a contract is “an ageement between
two or more parties for the doing or not doing of something specified,” and “an ageement enforceable by
law.”14 It stands to reason, then, that if the owner would agee to sign a contract requiring owner-occupancy,
it would be enforceable.

Who would be the other party of such a contract? Although municipalities have been using contract
zoning widn developers for some time, dnis could not be an extension of that use. Should a municipality
become involved, the legal issues of equal protection and due process are brought into question. Conuact
zoning raises the issue of a state bargaining away its audnority because it “violates the statutory provision dnat
requires uniform land use regulations within zoning districts.” (Mandelker 1993, 288)

One precedent for owner-occupancy requirements by govemment is the FHA mortgage insurance
program. FHA will only insure home purchases for principal residence use. (U SDHUD 1997a) Another

precedent has been the section 810 Urban Homesteading Progam of the Housing and Community

 

13 In Houston, the only major U.S. city that does not use zoning, covenants are use to regulate land use. (Perin 1977)

14 Random House Unabridged Dictionary, Second Edition.

 

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Development Act of 1974. With the stipulation that they would rehabilitate the house, purchasers were
required to occupy their houses for three years. The Housing and Urban-Rural Recovery Act of 1983
increased the requirement to five years. This requirement, however, was tied to a subsidy that helped people
to buy diese abandoned houses inexpensively. (Chandler 1988)

A better choice for the other party would be a neighborhood homeowners’ association, since it is die
other homeowners that have a concern about maintaining the quality of their neighborhood. Homeowners’
associations have a history dating to 1844, and make use of covenants to control and protect their property
interests. (Bookout 1990) The association is a private entity, and therefore could be a party to a deed
restriction requiring owner-occupancy.

There are unanswered questions. Considering the cost of purchasing a house, could not the market
achieve the same goal? How marketable would a house be that had such a restriction? Should the restriction
run with the land, or should each successive owner renegouate the terms? Would an owner—occupancy
restriction need an escape clause, such as job relocation or military service?

Some final thoughts. A possibility is to have the covenant tied to any subsidy that may have been
used to get the house built, such as if the house were built by a CDC. Also, it may not hold up in court that
the prOperty must be owner-occupied, but it may hold up that only one apartment (if a two-family) or two
apartments (if a three—family) could be rented. This would be closer to regulating the use of the property,

and not the user. In effect, the owner would need to live there (not many people can support two houses).

STEPS IN THE RIGHT DIRECTION

Many communities are already reversing their thinking about what constitutes a residential
neighborhood. New Urbanist and Neo-traditionalist planning attempt to undo the damage caused by single-
use only zoning by changing zoning ordinances to allow more flexibility in the location of different kinds of
residential structures.

Based on findings that second units are a valuable source of affordable housing and provide income

to homeowners, California authorized and required municipalities to adopt ordinances to allow second units

 

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to be built on lots in single- and multi-family neighborhoods. The second unit may be attached or detached
if standards are met. (LULZD 1995)

In Kentucky, new zoning regulations may designate “urban residential zones” in areas where a
majority of houses have a distinctive architectural style and character that was in use before 1926. Within
these zones, land use may be regulated structure by structure, which would permit a mix of uses. The only

restriction is a requirement to maintain the architectural style. (LULZD 1996)

With the rise of housing costs, increasing traffic congestion in the suburbs, increasing amenability to
mixed land use, and trends toward smaller families and non-family households, a municipality can combine
these zoning techniques in a workable strategy to achieve a mix of residential building types within a
neighborhood. But people resist change when it is next door, even if they agree to it in principle. The next
section explores infill housing, what it is, why it is important, and what prevents it from occurring.
Understanding this can help lead to overcoming concerns that many people have about change in their

neighborhoods.

 

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INFILL HOUSING

 

A city or an urban area is a dynamic system that changes over time. Infill development is one of the
ways in which change occurs, and can be defined as “building homes, businesses and public facilities on
unused and underutilized lands nn'tbz'n mining urban area.” (Greenbelt Alliance 19971) It is a vital technique to
make cities environmentally and socially sustainable while accomtnodating growth. (Greenbelt Alliance 1997)

Land for infill development comes from two main sources. The first are the vacant lots that—
because of a lack of access to public services, particular environmental or physical limitations, or a general
unattractiveness to the market—have been passed over when development first occurred. The second are
the developed sites that, because of disaster, abandonment, or re-subdivision of existing property, are
available for redevelopment. (RERC 1982; Smart 1985) According to a mid-19805 study, the median infill
lot size is 6,000 sq. ft. in a city and 20,000 sq. ft. in the suburbs. Individuals own 55%, businesses and
institutions own 30%, and local governments own 15%. (Smart 1985)

Generally, infill does not produce affordable housing, because higher development costs offset any
savings from higher density allowances or existing infrastructure. In fact, infill developers are few in number
because of the low profitability of infill. Unless inde housing is subsidized (most affordable housing is
anyway), infill attracts middle- or upper-income people. (Smart 1985) Infill development, therefore, can
achieve the goal of social scientists and politicians to bring the middle class back into the cities.

Infill is often as costly as new fringe development for several reasons. Difficult physical
characteristics, such as steep grading or poor drainage, will increase development costs even though
construction techniques can overcome these hindrances. Infill land typically costs more than fringe land.
Permits and approvals, as well as delays in obtaining them, can cost more for infill sites. If a site was
previously developed, clean-up must be done. Poor access to a site may require new streets and
infrastructure. Finally, new services may be required because a site is under-served or may have poorly

located utility lines. (Smart 1985)

 

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Despite these costs, there are many trends occurring that encourage, and in some instances require,
infill development. First, denser development can reduce traffic congestion because it can bring home and
work closer together, and make mass transit more feasible. (Greenbelt Alliance 1997) However, the
reduction in traffic congestion can only happen if there is a concurrent expansion of mass transit use and
pedestrian and bicycle use. Otherwise, traffic congestion will worsen. Also, energy can be saved because of
improved transportation, and because attached housing requires less energy to heat.

Second, local governments have limited capability to expand infrastructure at the fringe because the
cost of infrastructure and land preparation is increasingly high. Infill can lower public expenditures by
maximizing the use of existing services. Infill generates more taxes, but only marginally costs more in
services. This would benefit older urban areas, because the suburban expansion following WW II eroded
much of their tax base.

Third, concern for the environment has created a growing political obstacle to fringe development
because of pressure to preserve open space, environmentally sensitive lands, and agricultural lands. An infill
policy can help protect and enhance the natural environment, and revitalize'older neighborhoods, especially if
rehabilitation is occurring.

Finally, centrally located office employment has been increasing, and there are fewer child-oriented
households with an increasing desire for accessibility to urban amenities. (Smart 1985; RERC 1982)

The essential conditions for successful inde are a proximity to downtown employment,
transportation, and shopping, cultural, recreational, and other facilities; evidence of successful rehabilitation
or redevelopment projects; new techniques that overcome previous site limitations; and a minimum of crime,
pollution, or service problems. (Smart 1985)

Even if positive conditions exist, however, there are obstacles that can prevent infill from occurring.
Most commonly, residents resist infill because of a perceived lack of infrastructure capacity. They fear traffic
congestion and sewer backups. Their concerns include neighborhood incompatibility, insufficient parking,

overloaded municipal services, and increased taxes. Residents also resist to protect property values.

 

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Additionally, the threat of displacement concerns renters. A municipality can make infrastructure
improvements and condition residents to the idea of infill, usually through the development of a
neighborhood plan. (Smart 1985)

Local regulations, such as inappropriate zoning or excessive setback requirements and building
codes, are a major obstacle. Infill projects present complexities and raise issues that push the limits of the
current review system, which was designed to handle large scale development or simple renovation projects.
Infill projects require special reviews, extra public hearings, and additional zoning variances, all of which
delay a project and increase costs. (Smart 1985)

Other obstacles include title problems and determining property ownership, prohibitively expensive
sites, undervalued tax assessment of a vacant site that reduces pressure to develop it, historical context
conflicts, undersized or odd-shaped sites, and difficulty in obtaining financing. (Smart 1985)

Most would agree that homeownership is important for stabilizing a neighborhood. Two- and three-
family owner-occupied housing can be an important part of infill development because it creates more
homeowners and housing for renters, who otherwise might be displaced by single-family housing
development. In areas with low homeownership rates and lower resident incomes, two- and three-family
housing makes the most sense for infill. Neither single-family houses, which lower-income residents often
cannot afford, nor high-density rental housing, which bleeds wealth out of a community, can “rebuild” a
neighborhood alone.

Today, the potential for infill development is high. The neighborhood life—cycle theory, which states
that a neighborhood experiences periods of growth, stability, and eventual decay, is being proven wrong by
communities with citizens who are not willing to give up on their neighborhoods. Community Development
Corporations have demonstrated the benefits of rebuilding neighborhoods that were considered hopeless.
Municipalities are realizing that growth at the fringe is costly both economically and politically.

Infill housing can be built. It just requires a bit more work, waiting for the right market conditions,

and maybe accepting lower profits. Large developers, who have the financial capabilities to take risks on

 

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infill, prefer to develop huge tracts to achieve economies of scale. On the Other hand, small developers
generally prefer to build high-end houses to make up for small volume. Municipalities must choose whether
to front some initial costs for infill development, or pay higher costs1 over the long run by allowing sprawl
development to continue. (Greenbelt Alliance 1997)

Expanding the production of two- and three-family housing may require that people become
socialized to accept it as an alternative. A marketing campaign would best accomplish this. But to whom
should these houses be marketed? The next section explores the reasons that people would buy two-or

three-family houses, and identifies those potential buyers.

 

1 Building and maintaining new roads, sewers, schools, fire stations, and the costs of air pollution, increased traffic congestion, and
the loss of open space.

 

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MARKETING

 

Single-family detached houses hold the allure of nearly complete individualism and privacy.
Attached single-family condominiums offer all the benefits of ownership without the hassle of any
maintenance outside the actual living space. By contrast, a two- or three-family house requires a higher level
of responsibility, in terms of maintenance and social interaction. Who would buy a two- or three-family
house? Does a market exist for this type of housing, or can some untapped market be created if the option
were provided? This section will identify first, why someone would want to purchase a two- or three-family
house, and second, who are the potential buyers of two- and three-family houses.

There are several reasons why someone would want to purchase a two- or three-family house. First
among them would be as a residence. As pointed out previously, a two- or three-family house is a more
affordable option to homebuyers because the rental income helps support the mortgage. The house provides
the tax benefits available to all homeowners, plus the tax benefits of the business expenses for the rental
unit(s).

A reason why peOple buy any type of home is to build equity as retirement security. After a
mortgage is paid off, the owner lives “rent free,” excepting maintenance costs and property taxes. A two- or
three-family house offers these benefits along with an income stream from the rental unit(s), which can
augment the fixed incomes of social security and a pension.

Another reason why someone would want a two- or three-family home is to keep their family close
together. Throughout the world, the extended family has been an important aspect of social life, though
much less so in this country since the promotion of the single-family detached home and the nuclear family a
century ago. (Hayden 1984; Shaffer and Amundsen 1993) For many, though, the extended family continues
to play an important role in their lives. A two- or three-family house can provide the means to let families

remain close, to let elderly parents be cared for by their children, to let grandparents provide care for children

 

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whose parents bOth work, or to offset the high cost of housing by sharing costs and responsibilities among
family members.

Odiers may want a two- or three-family house because dtey can no longer afford the expense of a
single-family house, due to a loss of income. They may still desire, however, to retain ownership status.
Finally, there are those who like to manage, or are naturally entrepreneurial, and see a two-or three-family
house as a way to express that ability.

Table 17 shows the reasons why people buy two- and three-family houses. The first set of columns
shows the overall reasons from a multiple-response question; the second set of columns shows the main
reason from a single-response question. Numbers are a percentage of the total. It must be stressed that this
data was based on a survey that did not include owner-occupants. The table indicates reasons similar to
those above; the properties were bought mainly as a residence, for the rental income, and for retirement

security.

Table 77: RIdSOIISfOf AcqniSz'tion of Pmpery, Percent of Total [9 Strut-time Tm

TYPE OF MULTI FAMILY PROPERTY
overall reasons main reason
2 units 3 - 4 units 2 units 3 - 4 units
* 1
or Gift) ** 93.69

for income from rents
for ' '

as future security

Inheritance or Gift
Source: U.S. Bureau of the Census, Property Owners and Managers Survey, Multi Family Properties, Tables 77 8t 78
NOTE: Items will not sum to totals because of multiple responses
NOTE: Includes not reported on method of acquisition

 

 

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Changing demographics such as the increase in non-traditional families, the rise of a service-based
economy, the increase in higher income households in cities, and the growth of adult-oriented residential
areas, create opportunities for infill. (Smart 1985, 50) According to Smart (1985, 24), two principal groups
comprise the residential infill development market. The first group, the empty nesters, seek low-
maintenance, high-quality housing, security, and convenient location. In his research on accessory apartment
conversions, however, Gellen (1985) has found that empty-nesters are unlikely to give up the space and
privacy to which they have grown accustomed in their single-family homes. Though older couples may have
the time required to maintain a two- or three-family house, it is therefore doubtful that they would make up a
significant percentage of this market given the added burden of the rental unit(s). This reasoning, however,
disregards the fact that many older couples have the equity available to buy one of these houses, and possibly
rent to their grown children.

The other group Smart identifies are the young professional singles or couples, who seek convenient
locations and will sacrifice luxury and convenient parking for low price, and will opt for interesting
architectural features over square foorage. (1985, 24) According to Gellen (1985, 96), young adults represent
the largest share of the home-buying market. They are the least able to purchase homes because of the great
expense and their lower buying power. Young families are also smaller than they were a generation or two
ago, and do not necessarily require the greater space afforded by single-family houses. Few single parents,
and even working couples, have the time to maintain a large house and care for children. (Gellen 1985, 181)
Having a tenant who can help with maintenance in exchange for a lower rent can be appealing to someone
who desires homeownership. For these reasons, young couples, single parents, and individuals are thus a
potential market for two- or three-family houses.

There are Other factors to consider as well. Large metropolitan areas, such as New York, Boston,
San Francisco, and Los Angeles, are frequently the first places of residence for immigrants. In Boston,
immigrants have historically filled the triple-decker market (Jackson 1985), and, in New York, immigrants

continue to be the cornerstone of the two- and three-family market (Metzger 1997).

 

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From a policy perspective, government would benefit by promoting two- and three-family housing.
First, predominandy single-family communities often oppose the construction of large apartment complexes,
and yet may be under pressure to include other types of housing options. Two- and three-family homes can
be marketed as a compromise solution to meeting housing requirements.

Second, the aging of the population is increasing the demand for more senior housing, nursing
homes, and hospital bedrooms. Rising health care costs are running into the wall of the federal deficit, of
which the government is under pressure to reduce. Two— and three-family homes can be marketed to people
who desire Other options for their aging parents. This can reduce the demand for the expensive options
previously mentioned. This would also keep seniors involved within a community, and possibly avoid
generational conflict over issues such as school tax increases.

Third, private informal subsidies—in the form of a reciprocity relationship between tenant and
landlord—are much more efficient than public subsidies, which require cost accounting and reimbursement.
(Elving 1975, 280) In a reciprocity relationship, the owner has some maintenance done at a lower cost, and
the tenant pays a lower rent for doing some work. This is an alternative to cash payment, which comes from
the renter, owner, or the property. Because this can reduce the need for government aid, it is in the best
interest of government to promote two- and three-family housing.

In sum, two- and three-family housing can be marketed as an affordable option over single-family
housing that can provide long—term financial security. It can also be marketed to people who need care for
others—young or old——but cannot afford other options. Promoting two- and three-family housing is also a
sound policy for municipalities. It can expand homeownership and still provide affordable rental housing,
and create intergenerational neighborhoods.

The next section will discuss the financing of two- and three-family housing. It will examine the

difficulties in financing this type of housing, and explore some recent innovations.

 

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FINANCING

 

Housing is like any other marketable product. No matter how good an idea may be, it will not fly
unless there is capital to support it, and the capital will not support the idea unless it is marketable to people
who will buy it. But unlike other marketable products, if there is no political will to carry out the idea, it does
nOt matter how much capital exists; the idea still will not fly. The necessary mechanisms exist to finance
two- and three-family houses; what is lacking is the political will to build greater numbers of these houses.
This creates within the real estate industry a perceived greater risk to support the produCt. It has become a
self—sustaining cycle: lenders will not lend because builders will not build because buyers will not buy because
the lenders will not lend. Recognizing this, it has been the purpose of this paper to demonstrate the
feasibility of constructing more two- and three-family houses, of which financing is one of the determining
factors.

The same basic mechanisms that finance single-family houses finance two-and three-family houses.
Indeed, both the FHA and FNMA group one-to—four family houses into one category. (U SDHUD 1997a;
FannieMae 1997) When a single-family house is built, it is generally paid for entirely by the owner-occupant.
The mortgage and all operating costs associated with that house are the responsibility of the owner. Thus, a
lender can easily assess the risk for such a loan. By contrast, multi-family apartment complexes are paid for
by the equity capital of the developer/ investors and by the rental income, which supports the mortgage, the
operating costs, and a profit for the owner/ investor. Rents are calculated so that expenses can be met, and a
certain level of vacancy is calculated into the operating budget so that risk can be determined.

However, a two- or three-family house has the complexity of being occupied by both owner and
renter(s), so one of the issues facing the financing of two- and three-family housing is that of rental income.
Should it be included in the owner’s income for qualifying for a mortgage? Doing so would permit the
housing to be sellable to more people. With an owner-occupied two- or three-family house, as with a single-

family house, the homeowner is ultimately responsible for paying off the mortgage. Since most two- or

 

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three-family owner-occupants count on the rent to meet the mortgage payments, lenders must assess the risk
involved in relying upon rental income as a source to help pay back the mortgage.

This dilemma arose because of the mortgage underwriting procedures created by the FHA. The
FHA appraisers believed that a depression similar to the one in the 19305 would occur every twelve to fifteen
years. This meant that even if the owner of a two-family house retained employment and suffered no loss in
income, the possibility existed that he or she would have difficulty servicing the mortgage once or twice
during the term of die mortgage. Therefore, the two-family house was given a higher riskrating. The FHA
not only charged higher premiums for two-family houses, but also discouraged mixing single-family and two-
family houses in the new subdivisions to minimize the risk of the entire neighborhood. (Gellen 1985, 120)

A survey of mortgage lenders in the Lansing, Michigan metropolitan area1 revealed mat financing is
obtainable for two- and three-family houses. In general, lenders will count the rental income toward the
owner’s income, but at a percentage of the full rent, typically about 75%. The lenders also require the owner
to have a lease with their tenant(s) for them to count the rental income. The appraisal costs for two- and
three-family houses are much higher than for single-family houses, often twice as much. This is because of
the extra work required to evaluate additional units and to find comparables.

Many lenders will originate FHA insured loans, but these are more difficult to obtain because of the
stricter FHA guidelines. One lender will originate FHA loans for twO-family houses, but not three-family
houses. For three-family houses, the FHA requires a cash reserve of at least two months of the proposed
mortgage payment. It also stipulates that the mortgage payment for a three-family house cannot exceed 90%
of the rental income as determined by the appraiser. (Garden State Mortgage 1996) The FHA requires that
the house be the principal residence of the owner (required of any one-to-four family FHA loan) (U SDI-IUD

1997a).

 

1 Phone survey conducted July 1997 by the author. It is important to keep in mind that this is for one local market only. Other
markets can be different, depending on the strength of the two- and three-family market and the local practices of lenders. For
example, a lender used by the author in New Jersey did count the full rental income towards the owner’s income.

 

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As of July 1997, the current maximum mortgage limits for FHA insured loans were $104,329 for a
two-family and $126,103 for a three-family. If the property is located in a high cost area, mortgage limits are
equal to 95% of the area median house price. However, the high cost limits are subject to a ceiling based on
75% of the Freddie Mac Loan limits. Currently, the ceilings are $205,912 for a two-family and $248,887 for
a three-family.2 (U SDHUD 1997b) Because of today’s high construction cosrs, however, these limits may
not be high enough for new construction, so the FHA may not be sufficient in and of itself to serve the
needs of lower income groups without some other form of subsidy.

As for the secondary market, FNMA will buy two- and three-family mortgages. According to one
lender, however, they do this on a limited basis. Other lenders have no difficulty selling these mortgages to
FNMA, and one lender stated that they set up a program prior to originating a mortgage to ensure that
FNMA will purchase it. Currently, FNMA’s mortgage loan limit for two-family houses is $274,550, and for
three-family houses the limit is $331,850. (FannieMae 1996)

A typical development proceeds as follows. The developer acquires or has already acquired
property. The equity capital for this purchase and subsequent construction financing is raised through
personal capital, friends, business associates, other developers, or syndicates. Next, the developer gets a
construction loan, usually from a commercial bank, an S&L, or a mortgage broker. A for-sale project
construction loan is paid off from proceeds of sale. (Bookout 1990, 110-111)

Infill development adds another level of risk to a lender. Unproven marketability, the limited track
record of an infill developer, or a site location in an older, deteriorating neighborhood may make lenders
resistant to infill development. The advantage to the develOper, however, is that infill projects are relatively
small and do n0t tie up a great deal of capital. Therefore, a developer may not need to secure a large amount

of money. (Smart 1985, 39) Small project equity capital is easier to raise, and loans can be made by local

 

2 “Section 214 of the National Housing Act provides that mortgage limits for Alaska, Guam, Hawaii, and the Virgin Islands may be
adjusted up to 150 percent of the new ceilings.” This results in new ceilings for these areas of $308,868 for a two-family and
$373,330 for a three-family. (U SDHUD 1997b)

 

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lenders. By contrast, a large project requires a more formal process, and capital may come from a syndicator.
(Bookout 1990, 138)

One way a developer can reduce the risk to a lender is to pre-sell the housing. This is particularly
advantageous for scattered-site development. The developer can build a few models and then construct the
remaining units after sales contracts are signed by potential buyers. (Smart 1985, 117)

Another way for a developer to reduce the risk to a lender is to erect manufactured units. They offer
economies of scale for scattered-site development, and get the units to market faster than stick-built units.
The main obstacles include ensuring an ordinance exists that allows manufactured housing, and convincing
all parties of the viability of manufactured units. A developer can personalize a manufactured unit through
construction techniques to make it fit a neighborhood. (Smart 1985, 40, 41)

It is likely that the construction of two— or three-family housing on infill sites will require some form
of subsidy or alternative financing mechanism. The assumption is that much infill development will occur
within older, lower-income neighborhoods. These sites typically have low appraisals, which may make it
impossible to develop units at market rates. (Smart 1985, 42) The wise develOper will make full use of these
various sources in order to get a project financed and built.

Until a decade ago, the primary source for subsidy has been the federal government, mainly through
its Section 8 Rental Assistance program, which, through vouchers or certificates, provides the owner with a
guaranteed rent. The other main subsidy has been the Community Development Block Grant program
(CDBG). (Bookout 1993) Unfortunately, CDBG funds are not strictly limited to housing, and many
communities freely used the money for projects such as street beautification. The HOME program was
created by the National Affordable Housing Act of 1990, and provides money for housing directly to state
and local governments and to nonprofit housing producers, who are then free to use the funds to meet
affordable housing needs. (Steinbach 1992)

Many states have attempted to fill the void left by federal cutbacks, primarily by creating state

housing finance agencies. States have the financial capacity for high risk loans, and often issue mortgage

 

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revenue bonds, increasing the supply of below-market funds. (Smart 1985, 42) At the present time, the
Mchigan State Housing Development Authority (MSHDA) does not cover two- or three-family housing.3
This may not be the case with all state housing agencies.

Local government can raise capital through mortgage revenue bonds, general obligation bonds,
capital improvement bonds, and industrial revenue bonds. Tax increment financing can be used as an
incentive. A local government can sell or lease development sites at below-market prices with favorable
terms. It can provide short— or long-term loans for construction, particularly of low- and moderate-income
housing, at below-market interest rates and with special terms. A local government can provide indirect
financial help by providing or funding needed infrastructure improvements, and by offering technical
assistance. Lastly, local governments that own property through owner abandonment and subsequent tax
foreclosure can also auction the property, have a lottery, or sell it for as little as a dollar. (Smart 1985, 42—43)

A growing source of alternative capital is a housing trust fund, which is “a government established
fund, financed from an alternative source (not general revenue), and targeted to low— and moderate-income
housing.” (Comedy 1993, 307) They are used to meet the debt, equity, subsidy, and credit enhancements
necessary for production of new units and loan guarantees. (Rosen 1987, 1) Funding can come from a
number of sources, including development linkages, real estate transfer taxes, deed recording fees, public or
private grants, the sale of urban renewal land, interest on real estate sales escrow accounts, general obligation
bonds, and general revenue. (Connerly 1993)

Housing trust funds are not without drawbacks. The funding has been but a fraction of die federal
budget cuts for housing, and the dependence on real estate taxes and fees makes the fimding reliant on the
strength of the local real estate market. Housing trust funds often lack the capacity to help the poorest,‘ who

have historically been served by federal government programs. Lastly, while the federal government

 

3 Phone interview by the author, May 1997.

4 Both Illinois and Ohio have housing trust funds that help the homeless. Both were created after the Connerly article (1993).

 

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guarantees low-income affordability for forty or more years, housing trust funds have much lower guarantees
of fifteen or twenty years, if they have them at all. (Connerly 1993)

Despite this, housing trust funds offer a few advantages over federal sources of money. First, they
are flexible and responsive to local housing needs, which may be highly specialized. Second, whereas the
focus of federal money has been on the demand-side (as vouchers), housing trust funds focus on the supply-
side (constructing new or rehabilitating existing housing). Third, housing trust funds encourage and use the
participation of citizens and non-profit community based organizations in determining housing needs.
(Connerly 1993)

Housing trust funds are easily replicable, but their wide-spread use is hampered by regional political
attitudes toward low-income housing. Realtors and homebuilders pose a formidable political block against
housing trust funds that use real estate taxes, because they perceive them as hampering the real estate market.
The majority of trust funds are in the Northeast and the West, where low-income housing has always
received consideration. The Midwest and the South resist attempts to use taxes or other sources of public
revenue to finance low-income housing. The key is how they are politically packaged, and the nOtable
exceptions are in Florida and Kentucky. (Connerly 1993, 315)

The Kentucky Housing Corporation (KHC), which operates a housing trust fund, established a
cluster loan program for scattered-site infill development. A minimum of eight sites is required, and this
helps reduce the risk and increase the possibility of high appraisals. (Smart 1985, 42) The KHC loan
program provides below market financing to low and moderate income homebuyers. KHC loans are
orig'nated as either FHA or VA loans. The purchase price may not exceed $73,700, and buyer income is
capped at $34,175 for a single person, plus $1500 for each additional dependent. These guidelines may vary
according to property location and other factors. KHC will also allow buyers to borrow up to 60% of the
downpayment, closing costs and pre-paid escrows. (Hickerson 1996)

The New York City Housing Partnership (NYCHP) is a leader in putting public interests together

with private resources to build affordable housing. The NYCHP is a non-profit intermediary that “induces

 

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builders and lenders to undertake affordable housing projects by assuming all responsibility for dealing with
govemment agencies.” (U SDHUDAC 1991, 8-8) The NY CHIP obtains government funds and approvals for
a project, and ensures that builders will not incur costs for delays. They also involve community-based
organizations in marketing and selling the housing developments.

After many years of experience, the NY CHP has developed certain principles that help achieve the
greatest affordability in housing. First, city-financed development, when tied to city-owned land, is greatly
enhanced by constructing low rise, owner-occupied housing. It requires the least public subsidy and
leverages the greatest private investment. Affordable rental housing requires greater capital and Operating
subsidies to reach a comparable income group. (NY CHP 1994, 21)

Second, owner—occupancy housing is a superior investment of money than rental housing. There is
no need to ensure a return to investor-owners, and the occupants get federal income tax advantages to reduce
their housing costs. Pre-sales can provide credit enhancement at no cost. The secondary market provides
capital on terms unavailable for multifamily rental housing. Before debt service, taxes, and a return on
equity, the cost of operating a two bedroom unit is at least $300 a month, which is twice the cost of low rise,
owner-occupied housing. (NY CH]? 1994, 21)

Third, a two—family attached home with about 2,200 square feet of living space and a basement
provides the best affordability and marketability. The owner benefits from the rental income of a two- or
three-bedroom apartment. The NY CHIP worked with Fannie Mae to develop a program that allows two- and
three-family houses to be purchased with five percent downpayments, the mortgaging of most closing costs,
and counting die full value of rental income. These mortgages performed equal to or slightly better than
conventional mortgages. (NY CHP 1994, 56)

Fourth, the NYCHP houses allow the owners to realize equity on the investment by not excessively
restricting resale profit. This is a necessary incentive to get people to risk their money in redeveloping areas.
Unlike the federal HOME program, which has strict resale restrictions, the NYCHP has an incentive for

people to Stay in continuous ownership. There is a three-year anti-speculation period. The owner pays back

 

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50% of the city lien from the net profit if the property is sold within a 25 year period from initial purchase,
after which no repayment is necessary. For two- and three-family houses, the city does not have any rent
restrictions or tenant income restrictions for rental units. This allows the owner to receive market-rate rents,
which allows for financing at 5% down and an adequate appraisal of the property, making it possible to
obtain a private mortgage. (NYCHP 1994, 57)

The NY CHP has worked out cost comparisons of different kinds of structures and tenure. A
$25,000 public investment in a new, owner-occupied, low rise building will be affordable to a household
earning $22,000 to $30,000 a year. “To accommodate this same group in an owner-occupied elevator
building requires a subsidy of $40,000 to $50,000 per unit. For a rental development, the subsidy required to
reach the same income targets is closer to $40,000 per unit for low rise or $60,000 per unit for elevator
buildings.” (NY CHP 1994, 22

The NY CHP has established affordability restrictions. “At least 90% of homes in a project must be
affordable to purchasers whose annual adjusted gross household income does not exceed die lesser of
$53,000 or 165% of area median income. The public subsidy available to an eligible purchaser may not
exceed die amount necessary to reduce housing payments to 28% of household income.” (NY CHP 1994,
101) The house must be owner-occupied.

One project the NYCHP put together consisted of 114 attached two-family houses in a six-block
area in the South Bronx. The City provided the land at $1,000 per house, plus $10,000 per unit from city
capital budget funds. Another $30,000 per house came from the State Affordable Housing Corporation
finds. The houses were built with a modular component system to reduce costs and to limit vandalism. The
cost per house was $189,000, with a sales price of $149,000. A first-time homebuyer earning $35,000
annually needed $15,000 to purchase a house with a conventional mortgage, and the full rental income value
was applied through Fannie Mae’s enhanced affordability guidelines. The city and state funds converted to a

declining 15 year lien. Homeowners also received a 421b real estate tax abatement. Construction began in

 

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June 1989, Certificate of Occupancy was issued in May 1992, and 100% occupancy was achieved by July
1993.

Another NYCHP project consisted of 14 two-story, semi—attached two-family homes on parts of two
blocks in Queens. This project was designed to use local companies and provide on-the—job training. The
NYCHP held title to die project sites to facilitate builder substitution in case of default. The City provided
the land at $1,000 per house and another $20,000 per house. The State provided $40,000 per house in
Affordable Housing Corporation funds. Another $5,000 per house came from federal UDAG funds. The
houses were frame built on-site. A local church helped market the houses. The final cost was $215,000 per
house and sold for $150,000 each. A first time homebuyer earning $28,000 annually needed $10,000 to
purchase a house. Homebuyers obtained conventional mortgages, and received a 421b real estate tax
abatement. Construction started in May 1991, Certificate of Occupancy was issued in December 1991, and
100% occupancy was achieved by May 1992.

Although this kind of financing has done much to enhance affordability for many people, Stone
(1993) argues that it does not address long-term affordability. A house can enter the speculative market after
repaying a portion of the subsidy—which is free from interest and inflation—so there is very little capital
recapture. Stone advocates stronger resale restrictions and direct capital grant financing instead of debt
financing. A first step was taken in 1987, when Congress authorized the use of direct capital grants to build
public housing, which should keep those units affordable indefinitely. However, the level of construction is
still well below what is needed.

Lenders need to originate loans to stay in business, and the Community Reinvestment Act requires
lenders to do a certain amount of business within their communities. Therefore, unconventional products,
such as two- and three-family housing, can become more important to them. Additionally, lenders need to
look at two- and three-family housing as something that is financially supported by two or three sources of
income, not one. The advantage of two-or three—family owner-occupied housing is that the housing is more

affordable, as the NYCHP demonstrates. The high speculative gain inherent in large multifamily projects

 

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does not exist. Building the housing for affordability may still require government subsidies for construction
and financing, but the final cost of the housing is borne by the owners of the properties, with the benefit of
the rental income to these owners. Since the owner subsidizes the operating costs, the need for government
subsidies is greatly reduced.

The next section describes a design criterion for constructing new two- or three- family housing in
single-family neighborhoods, and is based on the principles that permitted their construction and acceptance
in neighborhoods a century ago. It is in line with the New Urbanist theories that are making inroads into

national housing policy. (U SDHUD 1996a)

 

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A DESIGN CRITERION

 

One of the principles of New Urbanism is that a neighborhood should include a range of housing
types and price levels to allow a diverse mix of people, which could strengthen community bonds
(USDHUD 1996a). An important and often overlooked aspect in this approach is that a neighborhood
include renters as well as owners. It is the thesis of this paper that the best way to achieve this is to
incorporate small rental units within single-family neighborhoods. The advantages are that it would: 1) avoid
lumping all renters together in apartment complexes, thereby making renters a part of a community and
eliminating large pockets of “undesirable” residents; 2) keep families and friends closer together as children
leave home into their first apartment, or as empty nesters move to smaller units but wish to remain in the
same neighborhood; and 3) provide tangible models to renters for the often-touted upward mobility
opportunities upon which this country is founded.

There is a general belief that single-family residential zones are inviolable, and that anything Other
than the same within these zones will destroy the character of the neighborhood and set it on a downward
spiral towards ruin. Before the advent of zoning three-quarters of a century ago, however, land use
development generally was mixed. There were some obvious drawbacks, such as pollution from industry
encroaching upon houses, but technological and legal advances1 would probably have eliminated them
without the need to separate land uses to such a degree. Unfortunately, zoning arose along with these
advances, and since it was less costly and politically amenable to implement, zoning became the end of,
instead of just a means to, development. (Kunstler 1994)

Infill development is unlike large tract development because it must take into account the
surroundings, and whether the surrounding area is uniform or diverse in styles. (Smart 1985, 22) There are
three design approaches used to build new housing units in older neighborhoods. The first is "pirated design,

which seeks to reproduce the existing Styles. This technique offers the highest acceptance of an infill project.
"it—- “a _ _.

 

1 E.g., improved waste treatment, improved transportation, environmental laws.

 

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However, this approach neglects the incremental way in which urban areas grow and change, thus demeaning
the value of the past and present architecture. The second approach is continnzy in dmgn, which respects the
old in the way of scale, design elements, and materials, but also matches contemporary forms and functions.
The third is contracting derign, which seeks to juxtapose with the existing designs. This works best with public,
ceremonial, or symbolic buildings. (Smart 1985, 16-18)

Residential neighborhood groups generally want replica buildings, but most reviewing bodies (which
may be a historical preservation society) are open to any style, provided the building maintains and enhances
a historical district. (Smart 1985, 21) What is equally important in the design of two- or three-family houses
is the context in which the structure will exist and function.

The design of a house impacts two groups of peOple: those who experience it from the outside, or
the neighbors and passersby; and those who experience it from the inside, or the residents. Ideally, die
design will be able to address the concerns and needs of both sets simultaneously. This study has proposed
constructing two- or three-family houses within single-family neighborhoods, so there are certain
expectations from both groups.

The first group, the “outsiders,” live in a single-family neighborhood and generally want it that way.
It has a low- to medium-density character with nothing particularly tall or bulky-looking and plenty of
greenery. They will want the house to fit the neighborhood, to look and feel like a single-family house, and
not an apartment building.

The second group, the “insiders,” also desire the character of a single-family neighborhood. They do
not want the closeness of row houses or the abundance of concrete. They will want the house to feel like a
single-family house as much as possible, with plenty of air and sunshine, and a private yard. It should look
like an apartment as little as possible.

Architecturally, either an up/ down structure or a side-by-side structure can be designed to appear as
a single-family house from the outside. However, the only way a two- or three-family house can feel similar

to a single-family house from the inside is if the apartments are stacked. As has been pointed out by Tucci

 

LEONARD I. VILIcIc 83 SPRING 1997

THE FEASIBILITY OF CONSTRUCTING TWO- OR THREE-FAMILY OWNER-OCCUPIED HOUSING IN SINGLE-FAMILY
NEIGHBORHOODS AS AN INFILL STRATEGY

(1978), it is the only form that will allow light and air to enter from all sides. By contrast, a side-by-side
duplex has one common wall, and a side-by-side triplex has one apartment with only two exposed walls.
This at first does not seem to be much of a loss, but it does have significant drawbacks.

A house is sensitive to its climate in terms of prevailing winds and the rising, setting, and angle of
the sun. Vfith four exposed walls, a house will suffer or benefit from the elements regardless of its position
on a site. When one apartment is stacked atop another, both have the same exposure to the elements. If the
apartments are side-by-side, however, they will have different exposures to the elements, and in many cases
one apartment will bear the brunt of the weather while the other benefits from its position.

For example, suppose a side-by-side is situated on a street running north/ south so dIat its entrances
are facing the street. One apartment will be exposed to the hot summer sun, and the other will be exposed to
the cold winter winds. PrOper landscaping can help alleviate this problem, but trees take a long time to reach
mature height to serve as wind breaks or shade providers, and do not always act in die way they are intended.
If the same house is situated on an east/ west street, one apartment may invariably enjoy better summer
breezes, or get only the afternoon sun while the other gets only the morning sun. For these reasons, it is to
the benefit of the occupants and the neighbors that a two-or three-family house be an up/ down design rather
than a side-by—side design. The diagram (Figure 5) on the following page depicts these aspects.

A more practical reason to use the decker style, particularly for infill development, is that the
structure can fit on a smaller lot, because the short side of the house typically faces the street. For example, a
house that is twenty-four feet wide by forty feet long can fit on a lot that is forty-four feet wide by ninety feet
deep. This includes a fifteen-foot front setback, ten-foot side setbacks, and a backyard that is thirty-five feet

deep by forty-four feet wide. Variances could permit smaller setbacks if necessary.2

 

2 The standard lot at the mm of the 20th century was 25’ by 100’. “With a decker house typically being 22’ wide, this left no setback
on one side and a 3’ alley on the other side Farther out from the central city, an owner often had a “double" lot—the house sat
on one lot and the other lot was a 25’ wide side yard. Planners today have drawn on this arrangement to create what is
commonly called “zero—lot-line” zoning, which makes more useable space available on a smaller lot.

 

LEONARD J. VILIcIc 84 SPRING 1997

THE FEASIBILITY OF CONSTRUCTING TWO- OR THREE-FAMILY OWNER-OCCUPIED HOUSING IN SINGLE-FAMILY
NEIGHBORHOODS AS AN INFILL STRATEGY

Fzgm 5: Eflert ofElementS an Siting of S tfllflflfe

prevailing
winds

......................................

It.
‘5’). Ffih‘fiaENI-N”

 

 

 

 

  

side-by-side duplex

 

two-or three-family decker

 

 

In sum, there are several guidelines for planning and designing infill development, as outlined by
Smart (1985, 25). First, it is important to understand the physical, social, economic, and regulatory contexts
of the site. Second, infill should be sensitive to its surroundings and local residents’ concerns. Third,

contrasting design is justified if it enhances the neighborhood. Fourth, the best design results from well-

 

LEONARD J. VILlClC 85 SPRING 1997

THE FEASIBILITY OF CONSTRUCTING TllVO- OR THREE-FAMILY OWNER-OCCUPIED HOUSING IN SINGLE-FAMILY
NEIGHBORHOODS AS AN INFILL STRATEGY

defined objectives, not from stipulated standards. Fifth, higher density is acceptable if it is unobtrusive and
of superior quality. Sixth, an understanding of the targeted market helps assure that the design meets the
need. Finally, the design should enhance the neighborhood while establishing its own identity.

The following pictorial shows examples of two-family decker structures. The earliest house was
probably built around 1890, and the most recent house was completed in 1995. All houses were originally
built as two-family structures. Although some houses are obviously two-family houses, many of them can

easily be mistaken for single-family houses.

 

.......
.......
.......

l
l

 

.~'

Montclair, New Jersey. This house was built around 1890. Except for the enclosure of the
rear porches, it has remained relatively unchanged (notice the front bay window still has
original lead panes).

 

 

LEONARD]. VlLlClC 86 SPRING 1997

THE FEASIBILITY OF CONSTRUCTING TlVO- OR THREE-FAMILY OWNER-OCCUPIED HOUSING IN SINGLE-FAMILY
NEIGHBORHOODS AS AN INFILL STRATEGY

I
; I

.. 1

5.4 l . _ 8.
III?! ' ‘:IIIIIIIII LE

~-

 

'-«p

I

"I .4 : —
"ski ..I

.“

...-.—

 

 

Clifton, ew Jersey. This house. probably built around 1910, is representative of the “two-
family suite.” The third floor most likely housed servants, and today may act as II third
apartment.

 

......
-

__/

Montclnir, New jersey. Though this house, built around 1915, looks like a single-family
structure, it is a two-family house. The attic has two-foot high exterior walls to allow more
usable space, probably for servants, yet does not appear like a full third floor from the outside.

 

LEONARD I. VlLlClC 87 SPRING 1997

THE FEASIBILITY OF CONSTRUCTING Tll"'O- OR THREE-FAMILY OWNER-OCCUPIED HOUSING IN SINGLE-FAMILY
NEIGHBORHOODS AS AN INFILL STRATEGY

 

 

‘N-‘.
x r- .. r

. 1"“. " VT .. ,

. ‘ ' ‘ ' // '
:7._*‘— ' ._..-. .. - . ‘/" - I
Clifton, New jersey. This is the classic decker two-family house, built in the 1920’s. This one
still has its front porch intact, unlike the two-family on the left. which had its porch removed,
or the one on the right, which had its porch enclosed. Notice the house has a full attic, a
common feature of these structures. Often, the owner will occupy the second floor and
expand living space into the attic, or finish it and rent it.

v

 

.

 
   

 

.' TV"

X; ‘ l. o. '4’ -,

y “is . t

\_ \ . l I
't ‘ ‘ ~

i‘\..
s),

 

 

Montclair, New .lersey. These two-family houses were built in the 19305, and resemble a
typical colonial house.

 

LEONARD J. VILICIC 88 SPRING 1997

THE FEASIBILITY OF CONSTRUCTING TWO- OR THREE-FAMILY OWNER-OCCUPIED HOUSING IN SINGLE-FAMILY
NEIGHBORHOODS .45 AN INFILL STRATEGY

 

Paterson, New jersey. From the late 1930s-early 19405, this two-family house also resembles a
colonial typical Of the times.

 

 

Clifton, New jersey. Built in the 1950s. this two-family appears to be a cape that had its front
and rear dormered to add a second living unit, but it was originally built as a two-family house.
Notice how there is no attic, only a crawl space. This is typical of most houses built after
W.\X/.II.

 

LEONARD]. VILICIC 89 SPRING 1997

THE FEASIBILITY OF CONSTRUCTING Tur/o- OR THREE-FAMILY OWNER-OCCUPIED HOUSING IN SINGLE-FAMILY
NEIGHBORHOODS .45 AN INFILL STRATEGY

 

A

It!!!

 

 

Clifton, New jersey. This odd two-family house was probably built in the late 1960s. Notice
how the front porches are accessible only from within the units, which negates the purpose of
the semi-private space of the front porch—that of allowing informal social interaction with
neighbors. The side door on the right enters into a hallway with stairs that go to the basement
as well as both floors.

 

Clifton, New jersey. Also built in the late 1960s. this two-family house makes use of space
under the house for garages. There is a door just to the left of the garage, which leads to a
basement space, or potentially a third apartment. Notice how the landscaping is brought up to
the first floor level. and contrast that with the next house.

 

LEONARD]. VILICIC 90 SPRING 1997

THE FEASIBILITY OF COI-ISTRUCTING Tll"'O- OR T HREE-FAMILY OIVNER~OCCUPIED HOUSING IN SINGLE-FAMILY
NEIGHBORHOODS AS AN INFILL STRATEGY

,-

W

_ — . ..:.
‘ 192‘ ..' -
.. i "a.

_I .‘ _
1-

~-

 

Clifton NeII jeIseI T his house completed In 1995 is nearlI identical to the one above
Notice how the basement level Is above grade, thus requiring climbing II flight of stairs to enter
the main living space. Also notice how contemporary structures do away with semi- private
space in the front of the house.

As the photographs reveal, two-family houses can be built in a wide variety Of styles that can blend
in with any kind of neighborhood. The next section examines rental housing demand in the city Of Lansing,
Michigan. Lansing is presumably not a unique city in terms of its demographic characteristics. Thus, many

Of the conclusions can be applicable to Other similar cities.

 

LEONARD J. VILICIC 91 SPRING 1997

THE FEASIBILITY OF CONSTRUCTING TWO- OR THREE-FAMILY OWNER-OCCUPIED HOUSING IN SINGLE-FAMILY
NEIGHBORHOODS AS AN INFILL STRATEGY

 

LANSING, MICHIGAN: A MARKET FORECAST FOR 2 AND 3 FAMILY HOUSING

 

The demand for two- and three-family housing is most likely a factor Of the number of renters in an
area that can fill vacancies, rather than the number of potential buyers, because the property will be bought if
it can generate an income. Therefore, this section will examine the factors that affect the demand for rental
housing in Lansing, Michigan, and will make a general forecast for rental housing in Lansing for the year
2000. Among the factors to be examined are changes in local, regional, and state populations, employment
trends, income trends, housing characteristics, financing availability, and a study that sheds light on likely
renters. Lansing was chosen because it is an Older city that is currently experiencing redevelopment. It has a
high rental population because: 1) it is the State Capital (potentially higher levels Of temporary employment);

2) it is the central city of a metropolitan area; and 3) it has a high student population.1

Table 78: Population, Michigan, I ngbatn Gong, and Lansing

 

 

1980.11990 1 rate 2000 L 2000 M

 

 

 

 

 

 

 

 

 

Lansing projection fOr 2000: 128,140 rate: 0.64%
Sam: U. 8. Bureau of the Census, and Michigan Dept of Management and Budget
Notes: 2000 E is an exponential projection

2000 L is a linear projection.

2000 M is a projection from the Michigan Department of Management and Budget.

 

 

Table 18 shows the population trends for Michigan, Ingham County, and Lansing. The overall
growth rate for Michigan from 1980 to 1990 was 0.36%. This is in contrast to Ingham County, which grew
2.32% over the same period, and the City of Lansing, which fell by 2.37% over the same period. These

kinds Of changes make estimating the future population tricky at best. The solution used was to average the

 

1 Lansing Community College, Cooley Law School, and Davenport College are located in Lansing, and Michigan State University is
in East Lansing.

 

LEONARD]. VILIcIc 92 SPRING 1997

 

THE FEASIBILITY OF CONSTRUCTING TWO- OR THREE-FAMILY OWNER-OCCUPIED HOUSING IN SINGLE-FAMILY
NEIGHBORHOODS AS AN INFILL STRATEGY

results Of many projections, which are the results Of ratio shares, linear projections, exponential projections,
and Census projections. The result is a slow population growth for Lansing Of 0.64% between 1990 and
2000, growing from 127,321 to 128,140. This is in line with the figure estimated by the Tri-County Regional
Planning Commission’s2 estimate for 1994 of 127,812, a growth of 0.39%. The state growth is projected to
be 5.3% and the county growth is projected to be 064%, bOth figures of which were determined by the

Michigan Dept. Of Management and Budget.3

Table 79: Population CobortS, Mcbzgan and Lansing, 7980-2000

 

MICHIGAN total under 5 5 to 24 25 to 44 45 to 54 55 to 64 65 + 75 +
1980 9,262,078 684,234 3,323,799 2,545,931 932,692 864,035 911,387 352,962
1990 9,295,297 702,554 2,760,738 2,980,702 948,119 794,723 1,108,461 452,623
2000 9,786,700 739,695 2,906,687 3,138,279 998,242 836,737 1,167,061 476,551

 

 

 

 

 

LANSING total under 5 5 to 24 25 to 44 45 to 54 55 to 64 65 + 75 +
1980 1 30,41 4 1 1 ,21 7 47,845 39,305 10,726 9,91 1 1 1 ,410 4,839
1990 127,321 1 1,702 38,863 45,521 10,437 8,627 12,171 5,083
2000 128,140 11,777 39,113 45,814 10,504 8,682 12,249 5,116

 

 

 

 

Same: U.S. Bureau of the Census

This slow growth is not distributed evenly among the age cohorts, shown in Table 19. The under 5
cohort has grown by 4.3%. There was a 57% growth in the 65 + and 75 + cohorts, which will have a
positive impact on rental housing as this group seeks to move to more manageable dwellings in size and
maintenance effort. This may take the form Of special needs housing as is often the case, or it can take the
form Of two- Or three-family housing as extended family care situations. The 45-54 cohort declined 2.7%
and the 55-64 cohort declined 13.0%. Both of these cohorts represent the move-up buyers, the first group
more so than the second group. Their decline means less of a demand for new single-family trade—ups. The

largest changes occurred in the childhood through young adult cohorts.

 

3 Clinton, Eaton, and Ingham Counties, Michigan

3 A straight split between those projections would give Lansing a growth of 23%, for a year 2000 population of 130,278. The
smaller average was used because it is unlikely, given the history of cities in the U.S., that Lansing itself will attract that many

People-

 

LEONARD J. VILIcIc 93 SPRING 1997

THE FEASIBILITY OP CONSTRUCTING TWO- OR mREE~FAMILY OWNER-OCCUPIED HOUSING IN SINGLE-FAMILY
NEIGHBORHOODS AS AN INFILL STRATEGY

The 2544 cohort grew 15.8% between 1980 and 1990. The upper half of this cohort is in the “baby
boomer” group. They will exert demand for new single-family homes. The younger half of this cohort is in
a highly unsettled job market, which means they will probably change jobs Often. This younger group may
demand rental housing because of the need to be able to move frequently.

The biggest change is the decline of 18.8 °/o in the 5 to 24 cohort. The impact Of this loss will be felt
for many years because of the loss of potential consumers, particularly in the homebuying market, and die

subsequent loss Of new births. This is not to say that as this age group forms families that they will be small,

but that the overall number will be small.

Table 20: Housebold: (HH), Miobigan and Lansing, 1980-2000

 

.“- ‘ z .. . .. 5 = .. g){g‘£§3§:§,:~.?§2§§. __ .- 5 .

:.- ':::=.:=-'.= 3:3: amine“ - . .; ::- We» “as .34.. " -.-
Famfly I-IH 2,404,910 2,439,171 1.42%
Non-family HH 794,920 980,160 23.30%
Female-head HH 361,581 433,466 19.88%
HH liying alone, .. .. .. 671,838 809,449 20.48%

44 «$324; "3445;444:414. ;4~ -' _ - - 24.43;. 4 ,3:3\-,>_"‘- ";-':;;37 3'"-:I-‘- ';-' 4,143 :445-“44 Va‘x/N’k‘fiw‘d‘c x5335» 5:44.99'4': :4 ._44 +3 «44,4; 44:.- 4
~ '2: - _ . -._ .v If}... “._. ., 3» {.IMIfi} his»: <-,3. -3_.- f- ‘3, ems-I. :3,” 45,-<4 , . ,4; 345 4:5,:
‘- 'uud'u- ... ’.Nx N'a'g :NN¢

:4\.».».-.4?:.-:. .‘: .. :».'.- . .4 :..-t‘ .4». :-

9,43%}: '¢2:2:2:.:.\_ .”'-45:2”

2000 E 2000 L
2%! I4+>$§2’<'-'1""'- -

- a ‘3' 4 a“;
v} 4245,?- IIMI. “4:24;; a - I. 554,.
W XS {39,-9.5 -. ‘ 49$” $3}: $45

"ii-{34' .-. ..- -I’<i‘5'ii-i:i'5:-::'I'.-i:i“f 2.4 -.~ 3'2va .444 44.5545: 443-: d"22444:: .w 3.4: ilki‘figfle‘g': ..44
32, 339 -2.82% 30,543

17,1 77 11.82% 21 ,477

Female-head HH 6,833 21.19% 10,036
I-IH living alone 12 .970 13. 65% 16,752

.v .52.- 32:25:“. 4:323???" . :$:.. 7.- .-.~. N: . '.;::.'." . .j -.'.-.::;.-.-:::;::.'.; .: -.- .'.;.:.:.- -.- .- .- . --. . . .- . --. . v,- - a; ' .'{-'.' “vii-q. : .-.-.: .3 \v_.:.} away. .-. :\:. --..-. {he‘s-awe:
. . . ._ . ' _. . . . . .

.(' 2"
35 3:0. ’49.. >~x’/,.\”AI.2M":’
r :23;- .fi‘. :39’3’5 ¢\O\¢¢_:¢\_l ('x'

 

5m.-U.s--Burcau1.of -t.h-.e.” Ccnsus». -:-:-. - . .. .
Notes: 2000 E Is an exponential projection
2000 L is a linear projection

Related to population change is household formation, shown in Table 20. Lansing has followed the
state and national trends toward more, smaller households. A number of factors points toward an increased
demand for rental housing. First, even though population in Lansing declined, the number of total
households grew 2.3%, from 49,516 to 50,635 between 1980 and 1990. Second, the number of persons per
household declined from 2.6 to 2.5. This trend indicates a need for more housing, widi a good proportion of

it being rental housing. The makeup of those households is even more illuminating.

 

LEONARD J. VILIcIc 94 SPRING 1997

THE FEASIBILITY OF CONSTRUCTING Two- on THREE-FAMILY OWNER-OCCUPIED HOUSING IN SINGLE-FAMILY
NEIGHBORHOODS AS AN INFILL STRATEGY

Family households declined by 2.8%, and non-family households grew by 1 1.8%. Additionally,
households headed by females with no husband present increased by 21.2%, and households of persons
living alone increased by 13.6%. This enormous increase in “non-traditional” family types, particularly the
latter two, will exert more demand for rental housing because of the lower buying power of the first group

and the lesser need for large space by the latter group.

Table 21: Income, Michigan and Lansing, 7989

 

Michfl LansinL

 

 

 

 

 

Per capita income 3 14,154 3 12,232
Median household income 5 31,020 5 26,398
Median family income 3 36,652 3 31,576
Median non-family household income 3 16,690 3 18,619

 

Sam: U.S. Bureau of the Census

Income is a significant determinant of housing choice for people. Without sufficient income, peOple
cannot afford to purchase homes. As shown in Table 21, Lansing has lagged behind the state in income per
capita and income per household. This is not particularly unusual; Lansing is a central city, and people with
higher paying jobs tend to buy homes in the suburbs (where the majority of people live in this country).
Non-family households earn considerably less than family households. The non-family household group is
growing the fastest and will exert demand for more rental housing. These income trends are a good indicator
of the need for more rental housing and less ownership housing, and the housing statistics (see Table 27 and

Table A18 in the appendix) show that the ownership rate in Lansing is lower than the county and the state.

Table 22: Familiar Below Poverty, Percent

 

 

1980 1990
Michigan 8.2 10.2
Ingham County 8.4 11.0
Lansing 10.3 16.5

 

 

 

 

 

Sam: U.S. Census Bureau, County and City Datebook

A related factor is the poverty rate , shown in Table 22. In general, the poverty rate has been

increasing at the local and state levels. Of significance is that Lansing’s poverty rate in 1990 was 16.5, which

 

LEONARD J. Vtuc1c 95 SPRING 1997

THE FEASIBILITY OF CONSTRUCTING 1170- on THREE-FAMILY OWNER-OCCUPIED HOUSING IN SINGLE-FAMILY
NEIGHBORHOODS AS AN INFILL STRATEGY

is 61.8% higher than the state’s rate of 10.2. Though it is unfortunate that poverty is increasing, the trend

indicates a need for more rental housing.

Table 23: Emplqyment Trendy, Michigan and 111ng Cont}

 

  
  
  
  

     

   

        

    

   
 

 
     

   
    
    
 
  

    

     
      

 

State of Michigan Ingham County
Indus - ”.1987 1990 1994 1987 1990 1994
(1' *5“ .55. .5 {£5 $5.: . 5555... ".1" ..: . .. .5.; ..:5...:-::::.:_. .:. . 1%}? ”$5" 3555“% $53.83*" [My ....5. .
- ”+695. 6%, ,2: __; ' "‘ ' 4 9:29 5.6;.» '3- ~ ’9“; g;- :. “35%!” xi; -:-‘. flay-em fifdfl .
a: ‘O'IQL‘Nfijgd :34“? IOI3I3I I3..<I°I ' A333? 3I3I "3 I393’\'v «(:3 ”3' I3".- .......... .:.'-'23: 3'9. 3 ‘ .I . I. . 5153'f53fflc3’g ‘.z’i'g<.‘,’:.:6;.a:'.5:{¢_fi3$:1’,3¢3;¢.$I_I.}_ ACID-3'3 3:! %‘%\:':<"A #136; ($53243- ;S‘I'Q33-(Of . ’3 ($¢$.{:, . .’Agié ..Ifi. . . . .
trans, commun., pub. util 152,000 158,000 163,000 7,096 6,2 9 4,043 .
wholesale trade 186,000 202,000 206,000 5,541 6 683 6 413
s 9
retail trade 674,000 748 ,000 765,000 24,809 26,040 28,867 . .
. _V. ’O’Q}k”’ /:3.':{:):.’\" .':-.-<¢?-{33333I3-3$ 2.: .. . ........ . 33:32.39???" .‘Sf_";§c_5% ’..’,-,-- ..- y‘ifizc' ’I- I.»- ,‘rq, 3:. ..'-’35.”, - .. ‘.I ”._‘35.’ ..'-3;
38%? 33$? 3*”4N‘J‘fiv :I-I-iz-y! A‘fifix‘gfifil‘N‘ Vs" 2:55? 915%.? flufwxff'gfégfic’r 4+ '"' 63": 52:3; J51? ’iéi’ééég; 33% XW‘ 29A I 2,3 :5... ".:3'.
.5 ...... 4???»- -<,- w ,5...» .v.. 53¢ ,z' ;:;I
33"":- f? I; A545?) 4+}... (.35?) 12¢ . $2336. .“': ’ '3’ "Cg-:3; ~53">+ flfi’lg) 393-25513; .14I\ 9' #13:.)7/{151' I ‘2: #33; "F342” A .I’I‘ .' 3 '-
‘34’. \_o’:<+_. A)! 5.5:) .I.I. ...:I .:.‘th. ‘:. X. fié’r-S?’ fix 4:}‘9 Ig‘rsh‘.‘ . 3‘5.\ 49"9'6)
:h-io'WNMg'ff'sI 333?.‘4! 35M): ....................... p . A A . ' >1§I$;I:('E:"I’ .I3I .'I‘. A‘°.I \"9‘49 .2'8 ,5. .’4I (kg/$.1. 'ég'f‘mu. I
federal 2, 906 3,059 2,742 1.219 1.174
state and local 551 000 572 000 582,000 45,396 48 080 * 45 335 2.043 1.901
s 9 9 9
[TOTAL 3,735,000 3,965,000 4,149,000 158,378 163,132 169,971 1.000 1.000

 

 

 

 

 

 

75m Michigan Employment Security Commission, and U.S. Bureau of the Census
Notes: Three years are given to show that an industry's growth is not linear.
* figure is from 1993.

Table 23 shows the employment trends for Michigan and Ingham County. Ingham County (Lansing
MSA) has seen a steady decline in manufacturing jobs, whereas the state has fluctuated but held reasonably
steady. Manufacturing jobs, which have been the traditional bread and butter jobs, have experienced a 58%
loss of union membership, indicating a loss of buying power for this sector.4 There has been fairly steady
growth in the wholesale and retail trade industries, and Ingham County has captured a reasonable share of
the growth, more so in retail than in wholesale. The greater proportion of retail jobs are most likely low—
paying jobs. Michigan has seen a steady growth in transportation, communication, and public utilities.
Ingham County, however, has seen a steady decline in these industries, which tend to be higher-paying jobs.
The majority of jobs in the private industries are in services. Ingham County has experienced solid growth,

capturing more than its share in the 19905. However, many of these jobs tend to be at the lower end of the

pay-scale.

 

‘ Private sector union membership in Michigan has decreased from 997,000 in 1979 to 631,502 in 1994 (Michigan Employment
Security Commission).

 

LEONARD J. Vmcnc 96 SPRING 1997

THE FEASIBILITY OF CONSTRUCTING Two- OR THREE-FAMILY OWNER-OCCUPIED HOUSING IN SINGLE-FAMILY
NEIGHBORHOODS AS AN INFILL STRATEGY

Recent actions by three major employers will have an impact on the housing market in Lansing.
First, General Motors’ purchase of the Renaissance Center in Detroit will result in the relocation of most of
its white collar employment out of Lansing. Second, a large portion of state employees have accepted the
state’s early retirement offer, and only one in four of the positions will be filled.5 These two actions can
depress employment and lower the median income for the area. This could reduce the demand for single-
family housing, and increase the demand for Other housing options. The two- or three-family house could
fill some of these housing needs.

The third action is Sparrow Hospital’s major expansion of its facility near downtown and their recent
purchase of St Lawrence Hospital. The first will increase service sector employment, whereas the latter may
reduce employment because of reduced administration. If there is an absolute increase of employment, what
kind of jobs will be created? The downtown expansion is for physician suites, which would increase doctors
and staff—high income and low income jobs. Further, Sparrow has expressed interest in revitalizing and
stabilizing the surrounding neighborhoods by encouraging homeownership. These combined actions present
an Opportunity for two- or three-family housing to be built.

Being the capital city, Lansing has a high proportion of government jobs. With all the supposed
federal cutbacks and deregulation, it is reasonable to assume that state and local government will pick up the
slack, thus creating more state and local jobs. The data, however, does not indicate that this is occurring.
Instead, it appears that the same rates of growth are occurring (and declining, as just pointed out), except that
federal jobs have leveled off. Nonetheless, government employment remains a large sector of Ingham
County’s economy. Public sector membership in unions remains strong at 56.0% of all public workers
(Michigan Employment Security Commission 1996), so there is strong purchasing power among many
government employees. However, many government employment jobs are as permanent as the elected

officials they serve, so this temporary nature may exert a demand for rental housing.

 

5 This is statewide. How many specific jobs in the Lansing metropolitan area will be lost is not known.

 

LEONARD J. VlLlClC 97 SPRING 1997

THE FEASIBILITY OP CONSTRUCTING TWO- OR THREE-FAMILY OWNER-OCCUPIED HOUSING IN SINGLE-FAMILY

NEIGHBORHOODS AS AN INFILL STRATEGY

Table 24 shows the employment projections for Michigan and Ingham County. Ingham County is

projected to lose its share of employment in all industries except F.I.R.E., services, and government. It is

important to note, however, that these are based on simple projections, with no other factors considered.

Recent downtown redevelopment in Lansing may prove these numbers wrong.

Table 24: Employment ijectionr, Michigan and I rig/Jan: Conny

 

           
     
  
     

 
  
      
  
     

   

       
 

 

   
  

  
     
   

 

State of Michigan Ingham County LQ LQ

Industry .2000 2005 «.2000 L 2000 E 2000. L 2000 E
,. I'lffif'} “..'-392?; _....-,-.. . ._.-.-._..... . . y”. .:. . . .5.... . .... -¢::.I:; “‘1’" set-+1} 1;.: '9'“ ..... 7.6in .E
fichflmieé ”..‘“{tir‘i 2;.” . .-.-= -- iii {3, 7"}??‘3”? 3W 85 3;; in; .3-
”‘ - 63 .. L: e 3.... °-‘ *
¢:-:-:-:t<-:-}x<-:'}: -:~:-:-.-:-: '-i-":- .:c-tg .. . ifi’gififw{fzg . I :«H.::' I -; .’:-.7 Efirfi’“?! :-:I. §§.¢}% .:.-:.
trans, commun, pub. util. 174,000 161 900 990:... 2,607 0.14 0.41
wholesale trade 226,000 226,500 7,285 6,154 0.81 0.69
856 ,000". H858, 600 32,925 32, 001K 0. 97 0.94

315” ,-":~': _.-I .- -..~.~_.- .v. ..'. ..:- V £15.43“ ..’-4:? -.-.-._x\- IINJIA?.‘ é}; -II,-s-.I .VII 353,55? I:.\I,- :3; v$\?;.\ If???)
1:3 ' 05 ~_.:- E’Q” :-.‘-:3}'; alt-5., in}. ¢${$’\V3$ g fiffi- h‘fi“’/ f... $‘ $39-$33
éééa- .’: ”3;" .- 5’51““;- 5¢Jrfii 13%. 5° 3:: :1:

g; , ., .- -. 3:33; :43: gm ,,.w<,. 3+. were .{gggggfls -.- v was: 775-: 5‘5:

'4" «..‘: I '51-. -- . ‘ ~."‘-’:-I" :12-5. ”Sexizé-wi‘ifi }:-;-}.<’ : }-:: Kj-JN'A“; %%%}¢ fifths.“

M54 000 5:7, 700 2,578 2,458 1.20 1.08
state and local 613,000 625,800 45,274 42,747 1.86 1.73
TOTAL 4,563,000 4,593,600 181,564 181,696 1.00 1.00

 

 

 

 

 

 

 

Sam: Michigan Employment Security Commission.

Notes: Michigan 2000 is a linear projection from 1987 and 1994.
Michigan 2005 is a projection from the Michigan Employment Security Commission
Ingham County 2000 L is a linear projection from 1987 to 1994.
Ingham County 2000 E is an exponential projection from 1990 to 1994.

Another indicator is the unemployment rate, shown in Table 25. Lansing’s unemployment rate has

tended to be close to the state unemployment rate. Recent trends have been towards a lower unemployment

rate, with an all-time low being reached this past Winter of 1996-1997. The question is whether or not those

jobs have been quality jobs. As Table 23 has shown, most of those jobs have been in services.

Table 25: Unemployment Rate, Michigan and Lansing

 

 

 

 

 

1986 1990 1991 1996
Michigan 8.8 8.2 9.2 5.7
Lansing 8.7 8.4 8.2 3.9

 

Sm: Bureau of the Census, County and City Databook

 

LEONARD J. VILICIC 98

SPRING 1997

THE FEASIBILITY OF CONSTRUCTING Two- on THREE-FAMILY OWNER-OCCUPIED HOUSING IN SINGLE-FAMILY
NEIGHBORHOODS AS AN INFILL STRATEGY

A final employment factor is the commuting pattern of workers, shown in Table 26. In 1990,
1 12,331 workers in Ingham County lived and worked in the same county. There were 20,502 people who
lived in Ingham County but commuted to a different county to work, and there were 56,428 people who
lived in other counties and commuted into Ingham County to work. The result is a net in-commuting of

35,926 workers. This can be viewed as 35,926 potential residents who would need housing.

Table 26: I rig/Jain County Commuting Patterns, 1990

 

 

 

 

 

lives 8: works in same county 112,331
commutes TO different county to work 20,502
commutes FROM different county of residence 56,428
NET in-commuting 35,926

 

Sam: Michigan Employment Security Commission

The ULI 7 996 Real Estate Forecast (ULI 1996) predicts that capital will remain readily available.
Acquisition and refinancing capital availability will continue to be higher than speculative capital availability,
but the rate of growth for speculative financing will be positive, whereas acquisition and refinancing will
decline. This potentially means more capital available for rental housing, which is entirely speculative
development. Lansing is well served by all the major financial institutions in Michigan, including Old Kent,
NBD, Comerica, and Michigan National Bank. It should be noted that the F.I.R.E. industries have grown by
40.6% through the early 19905 in Ingham County, capturing a large share of the state growth.

According to the ULI (1996), the demand for rental housing is expected to be strong, with particular
demand being placed by life-style renters. This is because of job insecurity and low appreciation in single-
family homes, which makes homebuying a risky short-term investment. The deciding factor is whether the
building industry can deliver the product that consumers want. A factor mat could make the supply of rental
housing grow is the potential sunsetting of the Low Income Housing Tax Credit. Although it is not known
whether or not this will occur in 1997, the threat of it happening may motivate builders to build some low-

income rental units.

 

LEONARD I. VILICIC 99 SPRING 1997

THE FEASIBILITY OF CONSTRUCTING TWO- OR THREE-FAMILY OWNER-OCCUPIED HOUSING IN SINGLE-FAMILY

Table 27: Housing Unit: (H U), Lansing. 7980-2000

NEIGHBORHOODS AS AN INFILL STRATEGY

 

 

 

 

 

1980 1990 rate 2000 E 2000 L units E units L

Total housing units (HU) 51,948 53,919 3.79% 55,965 55,890 2,046 1,971
Occupied HU 49,516 50,635 2.26% 51,779 51,754 1,144 1,119
Total vacancy rate, % 4.68 6.09
Owner-occupied HU 28,361 27,737 -220% 27,127 27,113 (610) (624)

% owner-occupied 57.3 54.8 -4.36°/o 524 52.4

homeowner vacancy rate 1.20 1.50

persons per HU 250 2.64
Renter-occupied HU 21,155 22,898 8.24% 24,785 24,641 1,887 1,743

°/o renter-occupied 42.7 45.2 5.85% 47.9 47.6

rental vacancy rate 6.30 6.80

persons per HU 1.93 2.33

 

 

 

 

 

 

Sm: U.S. Bumu of the Census, County and City Databook

Notes: 2000 E is an exponential projection
2000 L is a linear projection
units E are the units needed based on the exponential projection
units L are the units needed based on the linear projection

As has been noted earlier, the population of Lansing decreased, yet the number of households
increased (see Table 20). In 1980, there were 51,948 housing units, of which 49,516 were occupied. In
1990, there were 53,919 housing units (3.8% increase), of which 50,635 were occupied. Of greater
significance is that the ownership rate declined 4.4%, from 57.3% in 1980 to 54.8% in 1990, shown in Table
27. The rental rate increased by 5.8%, from 42.7% to 45.2%. When these numbers are projected out,
approximately 1,800 new rental units will be needed by the year 2000, whereas about 615 owner units will
become vacant or converted to rental housing.

Using another projection technique widely used in the development industry and based on
households (Miles 1996, 336), approximately 4,564 new rental housing units will be needed by the year 2000,
and there will be an oversupply of approximately 4,568 owner-occupied units, as shown in Table 28 on the
following page. It appears that just by projecting the numbers, there will be a demand for rental housing in
Lansing, and a lack of demand for ownership housing. Given these numbers, which even if exaggerated still

indicate this trend, why then does the city not allow, or entice, builders to supply the necessary housing?

 

100

LEONARD I. VlLlClC SPRING 1997

THE FEASIBILITY OF CONSTRUCTING TWO- OR THREE-FAMILY OWNER-OCCUPIED HOUSING IN SINGLE-FAMILY
NEIGHBORHOODS AS AN INFILL STRATEGY

Table 28: Housing Projection, Liming

 

 

total owner renter
1980 population 130,414 74,727 55,687
1990 population 127,321 69,772 57,549
2000 population 128,140 67,145 60,995
$2.33

 

 

 

 
  
  
  

 

household size ”.(1 990)

 

 

"\‘q. ‘4-:\
3:" “xix-“555’ {\si:
\‘t‘has‘h '03:} 33": ‘ ._é
.; :552‘. 333%) NY“?

  
  

 

  
 
  
 
 

 
  
       
  

 

Hag?
-tc-... 9.3. I - 2°
- .’:;s‘r,.+>‘i<4:§++“" ” ‘i ‘ «33* of V“ 24,52 " °>‘-
(5155' lei-5K2.” .(z, I2_.,s_ Rig-62‘s.? ,::!_H..-' .:._ -.,<$‘.§91<<’\"«$'.,.2
- a . Z: ' -:' -:. \_ -3
'\D:.: s? 63:3 .-.\\“3'
-‘-' 3%. 1‘33,

  
  
    
  
 

\ffi"

..:-4.;

 
  

       

  
 

i‘,~"\fi $255.“: a .. .

------- ;.-.-.-....i‘- 54:35:. hf}. --.,.;. ' J. $15.23: 5"; ..:.. ._ _
housing required (differenc of total ) (404) (5,5733; 4,564
er year requirement (+ 10) -40 -558 456

 

1990 population
household size

 

 

 

’4' 3:3? fig-"’48. YV-‘Sr-r .I I =3K‘i-Tti‘3’ iii:- 353'”
22' . r _.;. '

 

est-time to deplete emsung'stoclt
Source: U.S. Bureau of the Census, and Miles, Haney, and Berens, Real Estate
Development Prinafle: and Proms.

The following tables (1' able 29 and Table 30, next page) show data for building permits issued and
the number of units existing as of 1990. Lansing has tended to issue single—family unit permits and higher-
density multi-family structures (Table 29), though of late the trend has been to favor single-family units by
nearly 2 to 1 over all other types.6

Table 30 shows that most owners live in single-family homes. The trend in ownership in Lansing
has been to decrease in number. It is therefore apparent, given that the city is issuing many more single-
family housing construction pennits than the projections indicate are needed, that the City of Lansing is

higily optimistic about increasing homeownership.

 

5 Between 1990 and 1994, 279 single-family units—compared to 155 multi-family units—were permitted

 

LEONARD J. VILICIC 101 Spams 1997

THE FEASIBILITY OP CONSTRUCTING TWO- OR THREE-FAMILY OWNER-OCCUPIED HOUSING IN SINGLE-FAMILY
NEIGHBORHOODS AS AN INFILL STRATEGY

Table 29: Building Permit Autborizations, Lansing and Ingbatn County, 1978-1994

 

Total 2 units 3 to 4 units 5 or more units

     
 

  

  
   
     
 
   

    
   
   

 

     

. . . .w- A ...... ,m, w,
35%; ’3: 2; $521522 '54 ~ - :2 2 .... g 51... " - : “52:23: 2:23;: I2
: .‘:-fig: '\;¢.5\\.d5,.’ ‘a.’ \'S_-.“222.5' 5. :4" : Z I"5¢.I .': - ‘.$ "2"%. 5‘2", i 'Wfifif‘ 2,24: ,.- .:.’?
.13,“ 39‘- $.55" “~55" "iii-- Mi; $542345 .. i525~5:-:Z‘\ @234“ ,1. 25 3‘. .3 :5, 2:,A415a-gg 15:2,,
_.:._.-. .._.-t $255 ~ ._ fig "‘- 29:1,... . ,
..‘ I €§fiffil ‘ '. f ‘ ‘“ 52$: '5?ng i}... :’W 5‘ ' ... $\ ’2" ‘ 7g... '6“? < . $53 Egbfitg 3%,- ‘~' 'I/‘C: '1': i=1
. Mm '.I. a«:.5.=:':.~:5.'.~::2. .-:2-.:'.- 5.45.2 5:222:44“ .53: 25.42:. ..‘$J .':. .-£.I .VWLA'. -----

 

497 2,200 230 1,292 34

633 1,671 65 72.5 24 @583.

...“. . . I? .w ‘- 551$ .:.' szu . 'u' '-::‘ :S‘ .‘V-'- ’ w ¢yI¢~ $V :‘I‘f- we 55:! 5

. :- : :'2» 2: - : .':: :2. 3" “:2”: :2: 2

‘ ' -- ' 5:5 .5 _., .3543" '9‘. ...? 5": .i_ .- ;

. fi‘ffi52.2}:2 ggwfiffx\'lz }_+' I: 0n 8 :éjv‘fi23‘12'x‘232g’ ' 5 ;:-_;$.: .

' :. -.~'. . ’4. "'1" tic-cc 2.». 44:28}:- 545.54%: -:.' .=:'.'°5>.‘-:-:<=:-.=.-..-.'2$:3:-i‘.$‘3: 44:8?“ 2.- 28:-w. .t 42¢A'3.A ':.-:6. 244-3444 ' 5 "' 'I. . .
1984 215 1,452 99 910 32 64
1985 .288 1,697 967 48

5,: .. 53246.8 .55" 5- 2

' . W . V’: r, w): +55; " V, fix‘? I. n '-
. ' ..:.:, _ .}:‘ 2:2 2 9': ii??? {fig}... #0 .. f) @132 $2,395 1;? $5 . ’5) “iii: (Rx/(9 {:’g: 4;: gig. fill/(t " .
fl," " W54”: 3,4342% Mn: M85 <51} @354?- I4? '15:? 24%;, fr}. ' ' ¢}#}.}1>.."4$' 44,453
' 5' 'L‘. n' . 'I:- I ‘5

3422.213: '.; :9 ' ‘ ' “3293-. 43$

  
 

2;; .; -'- - 2;
)K'Cp 2.5;:- I :. 5

.-c: 3);”:- 5'
54%,?

     
 

    

(.‘:, :‘ :'I, \€ :. _. ...'l' ,n... ~‘i' I. 'L .-
’m2";\ ‘2 .. 4:, 9%“? + 0 If". “-55“, Aw §$¢ <- 5f3 . . _
'2.“ 2.552. '.HI‘. ‘5}; €45 ”$75-22 #A{}A2fl5 “2‘32; " 55526222“ W246}? ."‘. I " ' ' ‘ '

1988 "' ”3'17”""HWM2657 59 1,427 fi'z 26 37'
1989 12; 2,215 98 1,425 4

  

    
   
 
 
  

  

 
 

'1’ ..')” .'hN:-' \V n u '0’ "'1 'I 5'. 'f I'M- '.‘o' I. V... V . Va. '-‘ ‘2.- '-‘u' '.‘I.\'f '5"- 'u" '.‘I 'I V ' I V ’ '3‘ ' V - ' ' ° '-' ' ' . u.
"- * 2:1: .45: :2 - 2.; “2:, :=.. :.,:-;, 2'1; -‘Ix15:n:3#?§:sta)§ . 2 3.5588" }" @Wfi' - .
22622. <5 .’2' «'2. 252 ' 2.47! 2. e ' . . . ' 0'10 .
\ .5-2 -. . ‘- ‘ 4’52" 2"»- 5 5 '5 (1' ' I’ -. ..5
;/.? $.35 . .5; 5.3.5, " 5"- ::22$;: :2; 5:52.. .':,‘2;;:;E,: ..... ($63-$13: ‘:f §9$é 5?.$.{§{2$fi . $32.12. ‘4’. '5..- §'\5.2.§} $151221;

,2 2’. 75+ 52 .5.-wow via-225*: «2 313314153? 4):. 5?"? 4, 1.5 w- ._ ,2 .
91:5» , . c -.-,;,- W5...” '5: 551-.2... ,3? 92.329.- 1‘°‘-'- :I t. ’: é.“

. ' ' ' :' .55: '-:’-5:-: . '-:II2"'.-‘" 3"4- ..2' .-;' {"353"- . $2.54? 35:2be ”4:, 2" . ' $2{‘5i'$2\?‘ ’\@%.@ ‘

jot-.55 224' 552’ 4444-. 2.-:-:-..:-: .:-:¢4-.~:I.<>:<~....>.<-:.. .5.‘...<¢>..$:.-:-:..2. 544575.525! {vi-.33 \I}. «2:. v2 4+2. $445:~'$>:~:-‘:-. .5.-o- . .4228 5:. «QM-.2‘ 2.5. A

Q-
1992 1,580 34 1,368 4 36

4 S". 161
1993 125 1,853 46 1,416 2 16 0 10 77 411
0 0

1994 68 1,926 66 1,556 2 32

Scum: U.S. Bureau of the Census, Current Construction Reports
Note: First cohnnn ofesch group is Lansing. second column is Ingham County.

318

Table 30: Unit: in Structure, Taming 1990

 

Units in Structure Total % Owner Occupied Renter Occupied

1, detached 32,716 60.7% 25,715 78.6% 5,703 17.4%
1, attached 3,082 5. 7% 496 16.1% 2,384 77. 4%

 
   
  
   

 

 

      

   

 

 

 

 

 

 

      
   
 
  

IV} FWé-zf/

' ‘ ." 5.: ' .2 5: ..:.-'u .‘:"; . 1. 52'." 1'" .: I . ’. ‘3‘".‘(5f22 '2“ .
3.52,“ ._f. ‘25:, ..:2 2:, win-:5 ,2 . .- .5: . - . . . ‘9‘, ;. . , .' _ \c‘ 21.? . 2 : , _
,. {@fl . $5 . "":. .- .'$. "9 '-' . 3 _ 5;? .. 1.;.!" v ' . .,. . 'I. ‘ .. , ;

   
  

2.6°/o
74 2.0% «:23 ,281
29:13:24,. .
2.553255% ‘16:: .:5‘ . 2.: ' 5:“ 55°: .
f“ : ....
$42-21 é::-?+'$-c"‘¢’*2. .': .334“; .4’5’25 5 2' {322.

607 69.1% 2.20
173 25.7% 472

   
   

-. '- _ 22:5.

‘. . .’3‘2‘ 15.32% 5‘2’255245

other
Scum: U.S. Bureau of the Census

70.2%

What happens when other factors are considered? Varady and Lipman7 (1994) defined three of six

“clusters” of renters who are good candidates for rental housing: the lifestyle renters, college graduates just

 

7 See the section, “Why Rental Housing Is Needed,” for a detailed discussion of their survey.

 

LEONARD I. VILICIC 1 02 SPRING 1 997

THE FEASIBILITY OF CONSTRUCTING Two- on THREE-FAMILY OWNER-OCCUPIED HOUSING IN SINGLE-FAMILY
NEIGHBORHOODS AS AN INFILL STRATEGY

starting out, and elderly life cycle renters. Renting appeals to the very young and the very old.
Homeownership rates rise with age and dip after age 75. The average age of first-time homebuyers is rising,
and the proportion of the age 40-44 cohort who remain renters is increasing. Falling homeownership rates
reflect economic influences, family dissolutions, lifestyle preferences, and Other factors. (V arady and Lipman
1994) Lansing’s trends in demographics and employment fall in line with the assessment of Varady and
Lipman. In particular, Lansing supports a huge college student population, and also has a growing elderly
population.

The redevelopment of Lansing’s downtown was barely underway when the projections used for
portions of this study were done. It is a factor that will affect the rate of population growth, the
employment, and the housing market of Lansing, and will probably create more demand for housing, with a
good percentage of it being rental. The ULI forecast has projected a stronger climate for rental housing than
for ownership housing. However, die ULI feels that rental housing is on a down-cycle because high levels of
new construction in 1995 have reduced demand in 1996 (ULI 1996).

In sum, Lansing will have a greater need for rental housing through the year 2000. The unfortunate
reality, however, is that the city appears to be using what little land it has for single-family development. For
example, a study of Lansing’s Renaissance Zones indicates a desire for low—density single-family housing in
place of dilapidated, two-family housing.

(UP-494—CPP 1997) It has been the purpose of this study to demonstrate that a better solution would be to
allow the construction of two- or three-family housing instead of single-family housing or large multi-family
structures. This analysis has shown that Lansing possesses the conditions conducive to the construction of

two- and three-family housing, which would allow ownership and rental housing simultaneously.

 

LEONARD J. VILICIC 103 SPRING 1997

THE FEASIBILITY OF CONSTR UCTING TWO- OR THREE-FAMILY OWNER-OCCUPIED HOUSING IN SINGLE-FAMILY
NEIGHBORHOODS AS AN INFILL STRATEGY

 

CONCLUSION

 

This paper began with the idea diat it is feasible and desirable to construct two- and three-family
housing within single-family neighborhoods. It presented evidence indicating why housing choices need to
be expanded, the benefits of two- and three-family housing, the concerns people have about rental housing
and neighborhood change, techniques to allow the construction of two-and three-family housing within
single-family neighborhoods, the potential market for this housing, the financing mechanisms available for
this kind of housing, what design criteria this housing should take, and finally, a rental housing forecast Of
Lansing, Michigan to determine a potential market for this kind Of housing.

Two- and three-family housing adequately served the needs of the middle class prior to the Great
Depression and W.W.II, after which the federal government massively subsidized die proliferation of the
single-family house. Two- and three-family houses are still being built, but not nearly at the rates necessary
to reduce housing affordability problems. Most smaller-unit structures were built in die first half of this
century, while most large-unit structures were built in the latter half of this century. Even without rigorous
analysis, this loss Of smaller-unit properties, in which owners and renters live among each other, can be
correlated to the general increase in societal problems.

Tenants in smaller-unit structures tend to pay less and are more stable, in terms Of moving less .
“frequently. This may be due to the greater social similarity between tenant and landlord, which creates more
trust, resulting in fewer leases. This may be why smaller-unit structures have less crime and a lower
percentage of rent delinquent tenants than larger-unit structures, and why owners of smaller-unit structures
go to court much less frequently than larger-unit owners. They work out their problems before problems
escalate.

Much of this can be explained because owners of small-unit structures more frequently occupy their
properties as residences. Owners of small-unit structures tend to rely more on personal interviews when

screening tenants than do large-unit structures. They want to ensure a compatibility because they must live

 

LEONARD]. VlLlClC 104 SPRING 1997

THE FEASIBILITY OF CONSTRUCTING TWO- OR THREE-FAMILY OWNER-OCCUPIED HOUSING IN SINGLE-FAMILY
NEIGHBORHOODS AS AN INFILL. STRATEGY

together. The owner of a large—unit structure is really just filling a vacancy, and as long as the rent is paid,
they are not as concerned with tenant character. This may create lower-quality living environments, because
there are no higher standards against which people can judge diemselves. Peer pressure does exist for adults,
though to a much lesser extent than in past years. Smaller-unit structures have a much greater potential of
creating environments in which good social behavior can be enforced, across adult peers and from adults to
children.

It may be likely that peOple in large rental complexes feel that if they miss the rent, or damage
something, the owner will not be affected because the owner is wealthy. Consequently, these tenants feel no
need for a sense of responsibility. Likewise, tenants in large complexes may feel that they have no control
over their environment, so why bother trying to make anything better. Conversely, tenants who do want
some control over their environment, or want some responsibility, may choose smaller rental properties, such
as two— and three-family houses.

It is time to reconsider housing as more than just a roof, but as part of a larger social environment,
and explore ways in which these better environments can exiSt. The analysis of the POMS demonstrates that
there can be advantages to creating more small-unit structures, beyond the physical amenities that are often
equated with large-unit complexes. These advantages address the social needs of people, which for too long
have been addressed with more money spent in the wrong manner.

Was the U.S. Supreme Court justified in allowing exclusive single-family zones? They based their
decision on the benefits to the public health, safety, and welfare. But if this were absolutely true, then why
did the Court allow higher density housing at all, in any zone? Why were those citizens in single-family
homes given such preferential treatment? What made them so special that they needed a more healthy
mvironment than Others who could not afford to live in such housing? Surely, all citizens are entitled to the
same protection of the law, and zoning is an aspect of law that is meant to protect certain values.

The key is that those citizens were property owners. As has been pointed out, zoning was created

mainly to prOtect prOperty values. The citizens themselves were only a secondary concern. It is this notion

 

LEONARD J. VlLlClC 105 SPRING 1997

THE FEASIBILITY OP CONSTRUCTING TWO- OR THREE-FAMILY OWNER-OCCUPIED HOUSING IN SINGLE-FAMILY
NEIGHBORHOODS AS AN INFILL STRATEGY

of private property being more important than die citizens of the community itself that permitted such a
beast to be created. In this country, shelter—a basic human need—has always been tied to property, and,
unlike food, has never been an entitlement. If one can own property, one can have shelter. If one cannot
own property, then one can rent shelter from someone who does own property. If one cannot rent shelter,
then that person hopefully will have generous friends or relatives, or be one of the lucky few to receive
federal aid.1

The Advisory Commission on Regulatory Barriers to Affordable Housing (U SDHUDAC 1991) has
made several recommendations that can aid in the construction of two- or diree-farnily housing within single-
family neighborhoods. First, HUD and the federal financial regulatory agencies should allow the secondary
markets to expand into other types of housing products. (6-7) Second, HUD should assume a leadership role
and work with federal agencies and private-industry groups, such as the American Bar Association, American
Planning Association, National Association of Home Builders, National Governor’s Association, League of
Cities, and nonprofit groups, to develop consensus-based model building codes, a new model State zoning
enabling act (containing a fair-share component), model impact fee standards, and a model landodevelopment
and subdivision ordinance. (6-13) Third, recognizing that two- and three-family housing was a great source
of affordable housing at the beginning of this century, the Commission recommends that States require
localities to permit, as of right, two- and three-family construction, and to allocate land for such use. (7-13)

Similar recommendations were set forth in Tbe National Homeommbzp Strategy (U SDHUD 1995).
That report further recommended the promotion of mixed-income neighborhoods, the redevelopment of
vacant properties, and fully supporting fair housing practices and homeownership counseling.

Another recommendation is to create economic incentives to encourage the construction Of two- and
three-family housing. Historically, tax policy has been the most effective tool to create demand and
investment in certain types of real estate development. One way is by increasing the deduction for small,

owner-occupied rental property while decreasing the deduction for single-family homes. Additionally,

 

1 The exception to this rule is the pn'son system, which has become a growth industry in this country, and is the most costly
“housing” program in the country. All one has to do to partake of this housing program is to live a dishonest life.

 

LEONARD I. VILICIC 106 SPRING 1997

THE FEASIBILITY OF CONSTRUCTING TWO- OR THREE-FAMILY OWNER-OCCUPIED HOUSING IN SINGLE-FAMILY
NEIGHBORHOODS AS AN INFILL STRATEGY

property tax codes can be revised so that property is taxed by the square foot of land or by the street frontage
Of the lot, both of which would discourage large-lot housing. Currently, the land is taxed minimally while the
improvement is taxed heavily. This also discourages maintenance or renovation, and encourages
abandonment.

Another recommendation is to socialize peOple to the denser living styles of two- and dime-family
housing. Education can change people’s attitudes. Advertising has enormous influence over the buying
attitudes of the American consumer, and could play an important role in changing people’s, attitudes about
- housing types.

A final recommendation is to expand State housing programs into two- and three-family housing. If
MSHDA is the rule and not the exception, this kind of housing is being abandoned by the states. Tax
exempt mortgage revenue bonds require owner-occupancy Of the participants who purchase single-family
houses. This needs to be expanded to include two- and three-family housing.

Will the American people ever give up their penchant for single-family houses? Not in any
foreseeable future. The best that can be done is to make more options available to those who do not want to

live in an apartment building, or cannot afford to live in a single-family house.

 

LEONARD]. VILICIC 107 SPRING 1997

 

THE FEASIBILITY OF CONSTRUCTING TWO- OR THREE-FAMILY OWNER-OCCUPIED HOUSING IN SINGLE-FAMILY
NEIGHBORHOODS AS AN INFILL STRATEGY

 

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. 1997c. HUD Award: .9 90.8 Milb'on in Grant: and Loan Guarantee: to Create HomeonmerS/np Zone: in
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THE FEASIBILITY OF CONSTRUCTING TWO- OR THREE-FAMILY OWNER-OCCUPIED HOUSING IN SINGLE-FAMILY
NEIGHBORHOODS AS AN INFILL STRATEGY

U.S. Department of Housing and Urban Development, Advisory Commission on Regulatory Barriers to
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Varady, David P. and Barbara J. Lipman. 1994. “What are Renters Really Like? Results from a National
Survey.” Homing Poligr Debate 5,4: 491-531.

 

LEONARD J. VlLlClC 112 SPRING 1997

THE FEASIBILITY OF CONSTRUCTING TWO- OR THREE-FAMILY OWNER-OCCUPIED HOUSING IN SINGLE-FAMILY
NEIGHBORHOODS AS AN INFILL STRATEGY

 

APPENDIX

 

The following tables detail the data presented in the paper. The POMS tables and figures that were
presented were shown in percentage format for ease of comparing prOperty types. Following are the raw
numbers that were used to calculate those percentages. The tables were set up on Microsoft Excel 5.0. The
percentage numbers to the right of the raw number represents the percentage for that row’s total. The
percentage numbers below the raw numbers represent the percentage of that column’s tOtal.

Also included are two housing tables. The first shows the raw data used to prepare Figure 1 (New
Privately Owned Housing Units Completed by Structure) on page 24. The second shows a homeownership
rate comparison between Michigan, Ingham County, and Lansing.

All tables are presented in the order in which they appeared or to which a reference was made. Page

numbers are given for ease of cross-referencing the data.

 

LEONARD]. VlLlClC 113 SPRING 1997

THE FEASIBILITY OF CONSTRUCTING TWO- OR THREE-FAMILY OWNER-OCCUPIED HOUSING IN SINGLE-FAMILY

NEIGHBORHOODS AS AN INFILL STRATEGY

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LEONARD J. VlLlCIC

THE FEASIBILITY OP CONSTRUCTING TWO- OR THREE-FAMILY OWNER-OCCUPIED HOUSING IN SINGLE-FAMILY
NEIGHBORHOODS AS AN INFILL STRATEGY

Table AZ: New Privately Owned Housing Units Completed, 1968-1995
(Unit Numbers in Thousands) See Figure 1, page 23
YEAR TOTAIJ 1UNI'l' _ 340an . _. 5+1:an

 

 

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Source: U.S. Department of Housing and Urban Development, Office of Policy Development and Research

 

 

LEONARD I. VILICIc 1 1 5 ' SPRING 1997

THE FEASIBILITY or CONSTRUCTING Two- 03 THREE-FAMILY OWNER-OCCUPIED HOUSING m SINGLE-FAMILY

NEIGHBORHOODS AS AN INFILL STRATEGY

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NEIGHBORHOODS AS AN INFILL STRATEGY

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117

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NEIGHBORHOODS AS AN INFILL STRATEGY

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118 SPRING 1997

LEONARD I. VILICIC

THE FEASIBILITY OP CONSTRUCTING TWO- OR THREE-FAMILY OWNER-OCCUPIED HOUSING IN SINGLE-FAMILY

NEIGHBORHOODS AS AN INFILL STRATEGY

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SPRING 1997

119

LEONARD]. VILICIC

THE FEASIBILITY OF CONSTRUCTING TWO- OR THREE-FAMILY OWNER-OCCUPIED HOUSING IN SINGLE-FAMILY

NEIGHBORHOODS AS AN INFILL STRATEGY

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SPRING 1997

120

LEONARD]. VlLlClC

THE FEASIBILITY OP CONSTRUCTING 7170- OR THREE-FAMILY OWNER-OCCUPIED HOUSING IN SINGLE-FAMILY

NEIGHBORHOODS AS AN INFILL STRATEGY

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SPRING 1997

121

LEONARD I. VILICIC

THE FEASIBILITY or CONSTRUCTING Two- on THREE-FAMILY OWNER-OCCUPIED HOUSING m SINGLE-FAMILY

NEIGHBORHOODS AS AN INFILL STRATEGY

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SPRING 1997

122

LEONARD I. VILICIC

THE FEASIBILITY OF CONSTRUCTING TWO- OR THREE-FAMILY OWNER-OCCUPIED HOUSING IN SINGLE-FAMILY

NEIGHBORHOODS AS AN INFILL STRATEGY

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SPRING 1997

123

LEONARD J. V1uc1c

THE FEASIBILITY OF CONSTRUCTING TWO- OR THREE-FAMILY OWNER-OCCUPIED HOUSING IN SINGLE-FAMILY

NEIGHBORHOODS AS AN INFILL STRATEGY

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SPRING 1997

124

LEONARD I. VlLlCIC

THE FEASIBILITY OP CONSTRUCTING TWO- OR THREE-FAMILY OWNER-OCCUPIED HOUSING IN SINGLE-FAMILY

NEIGHBORHOODS AS AN INFILL. STRATEGY

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SPRING 1997

125

LEONARD]. VILICIC

THE FEASIBILITY OF CONSTRUCTING TWO- OR THREE-FAMILY OWNER-OCCUPIED HOUSING IN SINGLE-FAMILY

NEIGHBORHOODS AS AN INFILL STRATEGY

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SPRING 1997

126

LEONARD J. VILICIC

THE FEASIBILITY OP CONSTRUCTING TWO- OR THREE-FAMILY OWNER-OCCUPIED HOUSING IN SINGLE-FAMILY

NEIGHBORHOODS AS AN INFILL STRATEGY

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SPRING 1997

127

LEONARD J. qucnc

THE FEASIBILITY OF CONSTRUCTING TWO- OR THREE-FAMILY OWNER-OCCUPIED HOUSING IN SINGLE-FAMILY

NEIGHBORHOODS AS AN INFILL STRATEGY

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SPRING 1997

128

LEONARD I. VlLlClC

THE FEASIBILITY OP CONSTRUCTING Two. ox THREE-FAMILY OWNER-OCCUPIED HOUSING IN SINGLE-FAMILY

NEIGHBORHOODS AS AN INFILL. STRATEGY

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SPRING 1997

129

LEONARD I. VlLlClC

THE FEASIBILITY OP CONSTRUCTING 7170- OR THREE-FAMILY OWNER-OCCUPIED HOUSING IN SINGLE-FAMILY

NEIGHBORHOODS AS AN INFILL STRATEGY

 

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SPRING 1997

LEONARD I. VILICIC

THE FEASIBILITY OF CONSTRUCTING TWO- OR THREE-FAMILY OWNER¢OCCUPIED HOUSING IN SINGLE-FAMILY
NEIGHBORHOODS AS AN INFILL STRATEGY

   
   

 

1980

1990

 

rate

Table A18: Housing Data, Michigan, Ingham County, Lansing

2000 E

 

 

   

          

 

 

 

 

 

 

 

 

 

 

 

 

Total housing units (HU) 3,589, 912 3,847, @926 7. 19%fi4,12—4*,484 4,105,940
Occupied HU 3,195,213 3,419,331 7.01% 3,659,169 3,643, 449 239,838 224,118
To_:tal vacancxrateL % 10.99 11.14 _
Owner-occupied HU 2,322,920 2,427,643 4.51% 2,537,087 2,532,366 109,444 104,723
% owner-occupied 72.7 71.0 -234% 69.3 69.3
median value ($) 60,600
homeowner vacancy rate 1.30
kpersons per HU_ 2.80
Renter-occupied HU 877,293 991,688 13.69% 1,127,425 1,111,083 135737—1193 9"5
% renter-occupied 27.3 29.0 6.24% 30.8 30.7
median rent ($) 423
rental vacancy rate 7.20
o-rsons thU 2.3]

Lim— 193 1990 m:-

 

 

   

   

 

 

  

 

 

 

 

 

 

 

 

 

 

Total housing units (I-IU) 99,517 108,542 9.07% 118,385 117,567 9,843
Occupied HU 95,179 102,648 7.85% 110,703 110,117 8,055
Iota] vacancy rate,_% 4.36 5.43
Owner-occupied HU 55,680 59,942 7.65% 64,530 64,204 4,588
% owner-occupied 58.5 58.4 -0.18% 58.3 58.3
median value ($) 39,800 61,800 5528% 95,961 83,800
homeowner vacancy rate
_mns per HU T _
Renter-occupied HU 39,499 42,706 8.12% 46,173 45,913 3,467
% renter-occupied 41.5 41.6 0.25% 41.7 41.7
median rent ($) 422
rental vacancy rate
0 rsons ‘ HU

      

mm- 1988 ,1 1998 rate 2800 m1

 

3,207

 

7,469

 

 

 

 

 

 

Total housing units (HU) 51 ,948 53, 919 3.79% 55, 965 55,890 2,046 1,971
Occupied HU 49,516 50,635 2.26% 51,779 51,754 1,144 1,119
Total vacancy rate, % 4.68 6.09
"Owner-occupied HU 28,361 427,737 220% 2—7,127 —27,113 (610) (624)
% owner-occupied 57.3 54.8 -4.36% 52.4 52.4
median value ($) 33,388 48,400 44.96% 70,162 63,412
homeowner vacancy rate 1.20 150
persons per HU 2.50 2.64
"Renter-occupiecm'u 21,15‘5 22,898 8.24% 2478‘s 24,641 1,887_""—1,74_3
% renter-occupied 42.7 45.2 5.85% 47.9 47.6
median rent ($) 238 399 67.92% 670 560
rental vacancy rate 6.30 680
persons per HU 1.93 2.33

 

 

Source: U.S. Census of the Bureau, County and City Databook
See parenthetical Reference, page 106.
Notes: 2000 E is an exponential projection
2000 L is a linear projection
units E are the units needed based on the exponential projection
units L are the units needed based on the linear projection

 

LEONARD I. VILICIC

131

SPRING 1997

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1293 02656 9149