By Jean Simonian
One of the enduring claims among upzoning proponents in Bloomington has been that adding more multiplex houses to neighborhoods will improve affordability by adding less expensive options to the housing supply. When we examine this claim pragmatically, it quickly falls apart. But it has never gone away.
So here’s an experiment you can try, to test the “theory” for yourself, especially if you live in or near a currently proposed R4 zone where the highest levels of density would be allowed.
Go to Elevate, the county GIS map.
Search to identify the address of a rental property nearby. You will want to focus your efforts on rental properties for two reasons: Rental properties are those most likely to be duplexed if the ordinance becomes law; and Zillow “Zestimates” are far more accurate for rental properties than for owner-occupied houses because they have a verifiable income producing history.
Then look up the history of that address on the real estate marketing site Zillow.
On the Zillow page for the address chosen, choose “Home value” (default), and scroll down to the text just below the “Zestimate range.” You will see in small print, “Zestimate history and details.” Click and a variety of tools will become available: Graphs charting values over time, percent changes in value over time, etc.
Following these steps, I compiled some data regarding three rental houses bordering my campus-adjacent property, all of us in a proposed R4 zone:
Property #1: 970 sq. ft. 2 bed 2 bath; current rent: $1700/month
- Nov 2017 Value: $168.8K baseline
- Aug 2019 Value: $249.3K Plan Commission hearings begin
- Sept 2019 Value: $248.2K end of Plan Commission hearings — conditional approval of plexes recommended
- Dec 2019 Value: $248.8K End of Council hearings — defeated: no plexes allowed in neighborhoods
- Sept 2020 Value: $ 248.2K Release of expanded R4 zoning map
- Feb 2021 Value: $295.3K Announcement of rollback upzoning map (locations cited are still R4)
- Mar 2021 Value: $321.4K Plan Commission Hearings
- Apr 2021 Value: $333.4K Plan Commission recommends by-right approval of plexes
Property #2 800 sq. ft. 2 bed 1 bath; current rent: $1200/month
- Nov 2016 Value: $137.5K baseline
- Aug 2019 Value: $144.9K
- Sept 2019 Value: $145.6K
- Dec 2019 Value: $148.8K
- Sept 2020 Value: $174.2K
- Feb 2021 Value: $177.9K
- Mar 2021 Value: $172.9K
- Apr 2021 Value: $179.6K
Property #3: 1680 sq. ft. 3 bed 2 bath; current rent: $2200/month
- Nov 2016 Value: $232K baseline
- Aug 2019 Value: $277.8K
- Sept 2019 Value: $279.9K
- Dec 2019 Value: $274.5K
- Sept 2020 Value: $303.5K
- Feb 2021 Value: $318.6K
- Mar 2021 Value: $326K
- Apr 2021 Value: $337.9K
What we can see here is not simply a pattern of rising values over time which would come as no surprise. Rather, we see a predictable and sharp rise in values in real time correlating to the decisions reached by the Plan Commission and City Council.
This is predictable because research by the Joint Center for Housing Studies of Harvard University has demonstrated that upzoning results in an increase of land values, and land value is the biggest contributor to property value.
This is great news for current investors in rental property in Bloomington. But for owner occupants whose taxes will rise, and for those who rent (whose monthly rents will rise to cover the landlord’s tax increase), it’s not so good.
Notice, if you look at Dec 2019, when the Council defeated the plex amendment, and no R4 was as yet determined, that no property that gained value lost that newly acquired value and reverted to values pre-August 2019 (Plan Commission hearings). This suggests that the coordinated effort of City administration, Planning, and Plan Commission to engage in a process that proposes increased density increases values irrespective of whether the legislation passes or fails.
Think about the ramifications of this. If the City’s intention is to increase property values, and thus assessed values and, in turn, tax revenue, the administration has only to conduct the discussion on upzoning. It doesn’t even have to win the argument.
It’s also important to note that traditionally, it has always been less expensive to live in Bloomington for those who can buy property, rather than rent. And over the course of a 30-year mortgage, this should still be true. But for those who can afford to buy, knowing they may only be in Bloomington for a few years — not enough time to build ownership equity — this faster than normal manipulated rise in values will change the equation.
Here’s an example based on Property #1:
As this property’s value rises, the difference between a new mortgage payment and a rental payment narrows. Average rental price growth in Bloomington for the last 20 years is @ 2.88% per year. This house can be expected to rent for $1750/month at the lease renewal, an increase of $50/month. Assuming mortgage rates remain stable, and the property value rises if the Council allows plexes to stand in R4, the rental payment will become less expensive than a new mortgage payment would be.
This property’s likely increase in value by summer to $350,000 would lead to a mortgage payment, including property taxes and insurance and private mortgage insurance based upon a 10% down payment, of $1790/month compared to $1750/month rent.
Whether this is good news or bad news is debatable. It would probably discourage some parents from short-term buying of houses for their student children — transactions that tend to raise the selling prices of houses generally. But it also may make buying that much more difficult a hurdle for those trying to move from rental to longer-term ownership.
Either way, it’s an experiment with unknown consequences. Planning should employ tools that lead to stable results. To “experiment” with our housing policies is just irresponsible.
The Dissident Democrat 