The Missing Middle: Middle Income Housing Needs

The “Missing Middle” is a phrase that refers to people who make too much to qualify for public assistance but too little to afford much of the available housing. More precisely, it’s often defined as those earning 80-120% of the area median income. Those who fall in this category tend to be hard-working middle-class families, which can include police officers, teachers, retail managers, and public officials.

As an example, in costly California, apartments rents have jumped more than 20% in the past year, which is only continuing to send people packing up and moving out of state.

The Density Issue

Many areas have low density zoning that may have worked when the area was initially settled, but that makes development more challenging in places with growing populations. For example, as the nation grew westward and the car was invented cities such as Houston and Los Angeles were built around the automobile. Sprawling communities developed as driving was considered a luxury. Today however, it’s often viewed as a hassle, because of population growth and traffic.

With low density zoning, only so many people can legally live in popular areas such as downtown. With limited supply and high demand, people are forced to either pay higher prices to live in a desirable area, or live further away and commute.

The classic solution to this issue is increasing density. Assuming regulations permit higher density living, this includes the use of more duplexes, triplexes, townhomes, condos, and apartment complexes (both big and small). It may also mean communal living, such as finding roommates to share a large house or living in a smaller apartment with community amenities. Think of a dorm or hostel with a shared living room, kitchen, or office space at the end of the hall.

Many people are also moving towards adding space on their existing lots by adding accessory dwelling units or ADUs. These are smaller structures separate from or attached to the main house, such as a cottage or a converted shed or garage. Often these spaces may be 300-600 square feet and are typically used for guests such as in-laws or friends, college students home on summer break, or rented out full-time as a supplement to one’s income.

Reducing Parking Restrictions

Building spaces to park our vehicles is expensive in multiple ways. To provide an appropriate parking structure, first the land must be purchased. Even compact cars take up a lot of room. Second, when the land is used to park vehicles, it can’t be used to provide additional housing units, which is the primary source of revenue for property owners. Third, the cost of building a multi-story garage, creating underground parking, or even just covered parking can be very expensive. These expenses can easily add hundreds of dollars per month to the cost of an apartment unit.

Community Land Trusts

A Community Land Trust entails a nonprofit organization purchasing land and dedicating it to long-term affordable housing use. The trust receives public funding or private donations that it uses to purchase and develop the land. Once constructed, the building may be deed restricted to lower or moderate-income tenants who rent the property.

Alternatively, a ground lease may be used wherein the lessee is financially responsible for the costs of development, acquiring the property at a reduced rate, and has the legal right to occupy the property for an extended period of time, often several decades. Eventually however, the rights return to the trust and any buildings erected become the property of the trust, which it can then sell or rent to another party.

Bond Programs

Public-private partnerships or joint powers authorities issue bonds on behalf of the local government. The money from the bonds is then used to purchase property at a low interest rate. Because the government is involved, property taxes are not paid. The money saved is then passed on to tenants in the form of lower rent.

Concerns

There is certainly some criticism about these programs. For example, people have argued that there are sometimes more affordable properties available that don’t require public funding or the lack of property taxes. Additionally, neighbors are often reluctant to allow higher levels of density in their communities, preferring instead to retain the charm and current appeal of their home town.

Another concern is the administrative time spent overseeing these programs, such as raising private funds, finding a developer that the City deems reliable and dependable enough to work with, processing applications, and reviewing tenant and homebuyer income eligibility.

Summary

Unfortunately, housing in many areas of the country and many of our most desirable cities is becoming increasingly unaffordable for many people. Some will sacrifice such as by commuting longer distances or having less income available for non-housing related expenses. Others will relocate to other cities and states.

While we may think of places like California as having a major housing affordability crisis, we can’t ignore the impact in other places like Arizona, Texas, Nevada, and Colorado where people from more expensive areas are relocating to. As more people relocate, these places will experience more demand for housing and unless they increase their housing supply, prices there too will begin to increase.