By Daniel Parolek with Karen Parolek

This guest blog is an excerpt from Chapter 3 of Missing Middle Housing: Thinking Big and Building Small to Respond to Today’s Housing Crisis by Daniel Parolek. Copyright © 2020 Daniel Parolek. Reproduced by permission of Island Press, Washington, D.C.

At one end, it’s imperative we increase the supply of subsidized housing for households with lower incomes, particularly those that make at or below 60 percent of average median income (AMI). These households do not make enough to pay the true cost of building housing, so the market will not be able to meet the need for this sector without subsidy. For many families the availability of subsidized housing can be the only bulwark against being extremely housing-cost burdened or even homeless.

However, absent a massive influx of government (likely federal) spending on housing subsidies, the market must be part of any realistic supply-side solution to the housing crisis, and the supply simply has not kept up with the growing demand. The reasons for this, as addressed elsewhere in this book, include a zoning paradigm that drastically limits where and what type of new housing can be built, and resistance from existing residents (known as NIMBYs, or, “not in my backyard”). Fortunately, a growing number of planners and policy makers at the local and state levels are recognizing the dire need for more housing supply, especially in jobs- and transit-rich areas, and are proposing policies to remove barriers to delivery.

Sharing Land Costs and Building Smaller Units

Missing Middle Housing delivers multiple units on the same- size lot as a single-family home, therefore allowing distribution of land cost across multiple units, making them inherently more affordable. Even though they have multiple units, the scale of the buildings can be thoughtfully regulated with maximum widths, depths, and heights, or with floor-area-ratio standards. The units are often smaller than conventional single-family housing, thus making them less expensive to build.

The economic benefits of Missing Middle Housing are only possible in areas where land is not already zoned for large, multiunit buildings, which will drive land prices up to the point that Missing Middle Housing will not be economically viable regardless of how many units can be integrated into a Missing Middle type.

In every market, based on real estate values, the number of units in a building or project needed to deliver units that are affordable by design will be different and should be carefully considered. In some markets a fourplex may deliver the desired target of affordability, and in other markets it may take eight units on the same-size lot to effectively hit affordability targets.

The impact of parking on affordability is large. This illustration shows how much more space is required to fit a fourplex on a site when two parking spaces are required per unit versus one without parking. This additional cost of land is directly passed along to renters or buyers.

Opportunities for Additional Income, Ownership, and Building Equity

Missing Middle Housing has added bonuses. While it helps contribute affordable-housing solutions, it can also put ownership within reach of more households and provide local business opportunities. Federal home loans can be used for buildings up to four units, which means a homeowner can qualify to purchase a Missing Middle Housing building that could contain their own, more affordable unit, plus up to three additional units, which can provide additional rental income to help subsidize their housing cost.

Historically, Missing Middle types provided lower-income households an opportunity to attain higher-quality living, to build equity, and to move up the social ladder. One such example was in Chicago in the early 1900s, where many two-flat and three-flat building types were built that provided Bohemian immigrants, with some diligent saving and hard work, to earn enough money to buy one of these two-flat buildings and move out of the crowded tenements. This was a great step up from the tenements. The primary reason this was possible for them was that the rent generated from the second and sometimes third units helped them pay their mortgage. Often times, after having spent time in the two flat and saved even more money, many of these households then moved onto Chicago’s highly desirable bungalow neighborhoods.

The biggest challenge with this opportunity is the potential buyer or builder having or finding the capital to fund the construction loan for a new building or for a down payment to purchase an existing building. But much can be learned from these examples about how Missing Middle types can be used today to creatively deliver attainable housing options.

Small, incremental Missing Middle infill is also an excellent business opportunity for a small local business, and I often recommend that community-development corporations or local banks consider supporting or even incubating these small businesses. This could lead to a groundswell of incremental Missing Middle Housing development, contributing large numbers of affordable, locally owned housing units. It’s the development version of a successful fundraising strategy: making big change through lots of small contributions. It also puts the power to make that change in the hands of the many rather than only a few. Finally, it empowers locals to build equity and benefit from improvements to a neighborhood and broader community.

Community Land Trusts

A Powerful Affordability Housing Solution To Have In Your Toolbox

Missing Middle Housing is a proven, affordable-by-design housing solution that meets the growing demand for walkable neighborhood living and the need for housing choices at a broad range of price points. It provides a “missing middle” option between subsidized housing at one end and market-rate mid-to-high-rise housing at the other, but does so at a small, neighborhood scale or within house form. The Missing Middle types can also be utilized creatively in subsidized projects to deliver neighborhood-focused affordable-housing options. Therefore, Missing Middle should be a tool in every city’s affordable-housing toolbox.

Notes

1. National Low Income Housing Coalition, “Out of Reach 2019,” https://reports.nlihc.org/oor.

2. Angie Schmitt, “How Much of Your Rent Covers the Hidden Cost of Parking?” Streetsblog USA, June 2, 2015, https://usa.streetsblog.org/2015/06/02/how-much-of-your-rent-covers-the-hidden-cost-of-parking/

3. News Release from the Bureau of Labor Statistics, “Consumer Expenditures 2018,” September 10, 2019, https://www.bls.gov/news.release/pdf/cesan.pdf.

4. City of Decatur, Georgia, “Decatur Affordable Housing Policy Feasibility Analysis,”  http://www.decaturhousing.org/City%20of%20Decatur-Affordable%20Housing%20Policy%20Analysis%205-26-16.pdf.

5. Emmeus Davis, John and Rick Jacobus, The City-CLT Partnership: Municipal Support for Community Land Trusts (Lincoln Institute of Land Policy, 2008).

6. Dan Whisenhunt, “Decatur Considering Lottery for Affordable Housing Project,” Decaturish.com, Oct 19, 2016, https://decaturish.com/2016/10/decatur-considering-lottery-for-affordable-housing-project/