By Chris Sturbaum
Real estate is like mathematics. It is like science. You make single family zoned property eligible for conversion into multi-unit housing — now it represents multiple rental streams from the same footprint, and its value increases. This action alone prices many homes out of the range of potential homeowners.
Then increased rental ownership slowly makes the area less attractive to existing homeowners who move elsewhere, selling out to new investors. In our area that means homemakers will be moving to Ellettsville or the surrounding counties. From these new locations, they will incidentally have longer commutes to work, using more fossil fuel.
Rental conversion is the new Gentrification. Think of it as “Rentrification.”
Rentrification results in displacement of local single family tenants as well, pricing out many new homebuyers and leading to the loss of naturally occurring affordable housing. The upzoning of a single family neighborhood instantly changes the value of existing rental property and previously single family homes can now be modified or demolished for denser, market rate rentals.
These are well understood laws of real estate economics. But the city’s presentations explaining its plan to impose new multi-plex housing on Bloomington’s core neighborhoods make it clear that the administration is in deep denial of these fundamental principles.
In 2019, during the Plan Commission and City Council hearings on the Unified Development Ordinance, Real Estate Deniers continually suggested that adding density in single family neighborhoods would automatically create more affordable housing in Bloomington. Despite the fact that market rate rentals are always competing with the student market in Bloomington, there is a faith based belief that taking homeownership opportunities from local citizens and creating investment opportunities for absentee landlords will have a positive local impact.
Many density advocates have backed off this simplistic application of supply and demand theory, admitting that this upzoning has nothing to do with affordable housing and is intended to simply increase workforce housing for middle class millennials in Bloomington. That would at least be in line with Real Estate Science. The effect would be to turn core neighborhoods into denser rental neighborhoods, oriented toward young people.
Ironically when those young renters look to buy a house later to raise a family, these wonderful neighborhoods will be less desirable and less affordable, and the young families will find themselves competing directly with rental investors for a home in Bloomington. Hello Ellettsville, Greene County and commuting.
It may be that the current radical upzoning proposal (which, under the UDO definition of an R4 zone would allow up to an eight-plex in what have been single family zones) simply is an opening bid, and what the city really wants is for neighbors to accept new duplexes in the core. If that’s the case, there is really no need for this upzoning. Accessory Dwelling Units, both inside or outside the owner’s house, are already permitted by right.
Allowing a homeowner to add a small apartment to their home can actually help with affordability while respecting local home ownership. The catch, for investors, is the requirement that the owner live in one of the units. A true duplex would not have that requirement, but it would be an open invitation to out-of-town investors.
Conversions to duplexes would have negative consequences to the single family neighborhood, and allowing triplexes and quads will inevitably result in demolitions, displacement and market rentals for workforce/student housing. Would it create opportunities for development of affordable housing? Not without local, state and federal subsidy. Without subsidy, the free market simply cannot create low income affordable housing.
Proposition 40, a statewide upzoning effort in California, has been met with an outcry from lower income citizens calling out the displacement this will cause in their neighborhoods. Some YIMBYs (Yes In My Backyarders) are starting to realize that upzoning alone, without affordability covenants or requirements (which are remedies available under California law but not in Indiana), will not result in affordable housing.
So…simply upzone? Let the market solve Bloomington’s affordable housing dilemma and support its commitment to addressing climate change? A “Magic Bullet” ? Not so simple. Not so fast…