Randy Kraft at WFMZ had a useful piece over the weekend on the increased demand for apartments in the three Lehigh Valley cities. There’s still no data on what the actual rental vacancy rates are, but the article is basically describing a housing shortage. One interesting finding was that the number of rental units has increased in Allentown, even though very few new apartment buildings have been constructed.
This is exactly what you’d expect to see under housing shortage conditions: people seeking out squalid illegal living arrangements in basements and bathrooms by the hundreds, and developers converting single family homes into rentals:
The city has more than 25,000 known rental units, according to David Paulus, director of building standards and safety in Allentown [...]
Paulus recently reported to City Council that the number of rental units increased by nearly 1,000 in the last year. That is a higher-than-average annual increase, said Moore [...]
On Dec. 4, Paulus told City Council: “We have been very successful at finding illegal units. We found over 300 illegal units this year.”
Paulus said more than 400 illegal apartment units were found in 2011. He hopes that number is going down because landlords are getting the word that they can’t put people in basements, attics, garages and other unsafe places.
Basements, attics and garages were not constructed for human habitation, explained Moore.
Now we’ve known for a while that Allentown, and the Lehigh Valley more generally, have a shortage of rental housing because the Philly Fed reported on this last year. Nationally, rents have been rising faster than incomes, and it would be surprising if we didn’t see this trend also playing out in the Lehigh Valley.
The demand for rental housing has been increasing but few new apartment buildings have been constructed, so folks on the low end of the income spectrum are opting to live illegally in bathrooms instead of renting studio and 1 bedroom apartments. Owners of single family homes are seeing a profit opportunity to rent them out, since there is more demand for apartments than single family.
The solution is clear: it’s time to build more apartments in the LV cities.
Increasing the supply of market-rate apartment units will push down the median rent for a 1 bedroom apartment, and allow more people to afford a legal apartment instead of an illegal conversion. Building more apartments will also reduce some of the market pressure to convert single-family homes into rentals, leaving some lower-priced options for people who actually want single-family.
And as more market-rate apartments get built, some higher income renters will trade up for better apartments, and this will free up their old apartments for lower income renters. Over the years, as better apartments get built and this filtering process continues, the average quality of the apartments low-income people can afford will improve.
LVCI thinks that this trend is a problem, but I disagree. Many cities manage to have dynamic, successful economies with a high proportion of renters. In fact, there’s every reason to believe that Allentown’s economy would be stronger with lower rents. Across the country, housing and transportation costs are eating up a larger and larger share of people’s income, and not just poor people, but also moderate-income people.
People who are interested in reducing inequality and raising living standards need to think harder about ways to reduce the prices of people’s big expenses, not just ways to boost paychecks.
I read lots of people who say they’re concerned about whether the service sector jobs created as a result of the NIZ tax district will be good-paying jobs, but that’s only half the issue. The other half is whether the development will increase the cost of living and getting around in Allentown through higher land prices (rents), traffic congestion, etc.
If people get $8-10 an hour working in restaurants, but their housing and transportation costs eat up 60% of their pay, that’s a “bad job”. But if Allentown can bring rents in line with construction costs through policies that promote rental housing construction, and lower transportation costs (how about a free trolley bus loop paid out of a half-mill land tax increase on downtown land?), then maybe combined housing and transportation costs can be held down around 40% of income, freeing up more disposable income for low- and moderate-income residents to spend in the local economy.