New Geography: Direction of Dallas and Urban Growth

02/22/2019

Should the direction of Dallas urban growth continue to grow north? Does inserting low-income housing in North Dallas create an inclusive urban growth direction for Dallas? Does the direction of Dallas and its current goal of moving low-income wage earners closer to higher wage jobs in North Dallas increase or decrease wealth for low-income families? The SMU/George W. Bush Institute Conference, Policies to Promote Inclusive Urban Growth, was a meaningful conference on the direction of Dallas and cities and gave clues to all these questions.

The information and insights provided built on and went beyond the New Cities Conference held a few years ago in Dallas, the Festival of Ideas Conference in Dallas, and the 2.0 Cities section of talks at the main TED Conference. Cullum Clark, Director of the Bush Institute-SMU Economic Growth Initiative and adjunct professor of Economics, along with Joel Kotkin, Executive Director, Center for Opportunity Urbanism, and Joseph Cahoon, Professor, Director of Folsom Institute of Real Estate, did a remarkable job of curating the speakers and participants along with presenting a preview and summary of the key points of the discussion regarding urban growth and the direction of Dallas. I have always thought that the success of Dallas came from the city pursuing best policies for growth rather than replicating other cities’ best practices for bad policy. This conference reconfirmed this thought.

Here are some of the ideas that resonated with me, provoked questions, or validated my previous ideas about the direction of Dallas and how best to achieve inclusive urban growth.

Middle-Income Neighborhoods are Fragile and Should be the Highest Priority

I have been very aware that all city neighborhoods are fragile. This conference made me even more acutely aware of the fragility of middle income neighborhoods.

Having been raised in Hinsdale, a village west of Chicago, the first session featuring Chicago was of particular interest to me and a good starting point for discussion of cities and the direction of Dallas.

From 1990 to 2010, the number of low-income neighborhoods in Chicago rapidly expanded, high-income neighborhoods expanded and stayed strong, and middle-income neighborhoods almost disappeared. An economic neighborhood map of Chicago was the perfect way to begin the conference. It was the foundation of a subtle theme expressed throughout the day. Middle-income neighborhoods are the most fragile, the most difficult to create, and the most important to a city. It is the middle class neighborhoods that are the lobby for schools, parks, services, and amenities, areas often ignored by those in the poor and rich neighborhoods. Middle income neighborhoods are made up of people that make a city run: shopkeepers, small business owners, tradespeople, school teachers, firemen and police. It is interesting that Chicago is third in the nation behind New York and Seattle for its number of construction cranes, but in my mind still a failing city.

Gentrification

I think the most misunderstood urban concept is gentrification. When I was initiating revitalization of a very distressed Dallas inner city neighborhood, the chairman of the SMU Real Estate Department periodically had graduate students call me as they were working on a paper or a thesis about gentrification in Dallas. They were wanting to identify and interview tenants who were displaced. I offered each graduate student that called $100 if they could find a single displaced tenant in Old East Dallas, the neighborhood in which I was working. I never had to pay $100 because they were unable to find one. Weekly tenants paying $20 per week rent with no deposit and staying an average of two or three weeks with not paying their rent before they moved on to any number of vacancies on the same block or the same neighborhood was an economic and transient environment that did not cause displacement. Over forty years later, there are still some low-income vacant apartments. Further, within a six-block area, there is economic diversity of single-family homes including those over $2 million on Swiss Avenue and under $200,000 in Mount Auburn. There is also a wide variety of small apartment units, duplexes, and fourplex apartment units in the same neighborhood.

Many speakers throughout the conference had many different opinions on gentrification, but they all agreed it was misunderstood as a concept and in some cases did not even exist as reported.

A speaker stated about one city, “Low-income persons were pushed in and pushed out.” It was also pointed out that in one city 100,000 low-income people were added to the city while only 60,000 high-income people were added to the city. The gentrification voices had been able to keep the conversation solely on the 60,000 high-income people added to the city, not the greater 100,000 of low-income people that had been added to the city.

Vicki Been, professor and former New York City Housing Commissioner, mentioned that 100 neighborhoods in New York had a 10% increase in low-income residents and only 60 neighborhoods had an increase in high-income residents.

Detroit and San Francisco have opposite problems. San Francisco has a dearth of low-income housing and Detroit has an overabundance of low-income housing.

The myth of gentrification and emotional appeal of showing concern and discussing gentrification can be seen in comments made by developer Jack Matthews, someone whose preservation and revitalization work I admire greatly. He knows as much about land acquisition, appreciating land prices and city subsidies as anyone in Dallas. Still, he described a heartbreaking story of potential gentrification if an affordable housing developer bought 50 lots around a $10,000 home owned by a little old lady. He said if once he started building $50,000 homes on these 50 lots, her land value might go up $100,000 to $150,000 over ten years, but she would be forced out in two years because of higher taxes and not realize this profit on her land because her taxes would go up so much in two years she would not be able to keep her house 10 years. This is a sad story, but not true.

Direction of Dallas Determines Wealth Creation for Low-Income Families

My experience is that the Dallas Central Appraisal District keeps very close tabs on the increase and value of $10 million homes, but is not near as interested in constantly reappraising $10,000 homes or lots. The Dallas County Appraisal District usually only reevaluates an entire neighborhood every three years or so. This in itself would mean there would be no tax increases for three or four years. Further, if the developer is buying 50 houses and lots in the neighborhood of this little old lady, presumably he would be buying the property at the same price as her $10,000 house. In the event the appraisal district reappraised the properties in the entire neighborhood before three years, they would find 50 comparable sales of $10,000 further submitting the value of her home at $10,000. Even with new $50,000 homes built around her, the appraisal district cannot compare new $50,000 homes to a $10,000 old house and land. If, however, in two years prices of land soared, the state law could not allow more than 10% increases annually in taxes or a 30% increase over three years. In the third or fourth year after the developer started building houses, if the little old lady’s lot was appraised for a much higher price, the most she could pay that year would be tax on a $1,000 increase in property value. Her increase in taxes for the year would be $30. However, since she has a senior citizen exemption, she is only required to pay half of those taxes or $15 per year. Obviously, the little old lady will not have to move out in two years when the taxes have not gone up, or in three to four years when she is required to only pay an extra $15. If her property went up as Jack Matthews hypothesized, to $100-$150,000, her average annual tax increase over 10 years would be less than $50 per year, hardly enough to make her move.

On the other hand, in 10 years, she would have $100,000-$150,000 equity in her house. Her return on 10 years of slightly increased taxes would be 10,000-20,000%.

All middle-income and even many high-income property owners are burdened by added taxes when their property appreciates in value. However, a low-income person benefits the most by rapid appreciation. We should be rooting for the prices of properties to go up for low-income homeowners because it creates wealth for them. Too many policy makers and politicians want property values in low-income neighborhoods to stagnate so low-income people will remain in these low-income neighborhoods. Projecting potential gentrification horror stories about higher taxes forcing little old ladies out of their homes if new housing is built in their deteriorating neighborhoods discourages politicians to promote or builders to build new homes in deteriorated neighborhoods. Sad stories like this make decision-makers even more reluctant to create new middle-income neighborhoods in Dallas that is good for Dallas and creates real wealth for low-income wage earners.

Density

Every session had thought-provoking comments and ideas about density including the following: “Cities cannot densify their way out of problems” and “California has become a renter society.”

One landlord in California does not rent rooms—he rents a fleet of 1,000 minivans with mattresses in the back at $400/month. This reminds me that architect and city councilperson Pedro Aguirre was onto something when he wrote in the 1973 Dallas Housing Report that Dallas needed to lower building codes for low-income housing. He gave as an example the simple metal structures found in Mexico that were better for people than living under bridges. Politicians’ squeamishness about $400/month 1,200 square foot single-family homes with dirty carpet and rotted boards were still probably better housing for a family than a minivan with a mattress.

Many speakers said that adding density itself does not solve urban problems – “Adding crappy density just makes dense crap.”

Speakers suggested that added density needs to be accompanied with green space and other amenities that offset the debilitating effect that density generally adds to a neighborhood.

While not mentioned at the conference, the most important thing to remember about density is that both renters and homeowners would rather live next to a single-family home than another apartment.

Cities are Fragile

San Francisco is choking from a concentration of wealth and homelessness. Detroit is gasping from once being a city of two million people to becoming a city of 800,000 people. Detroit is my favorite example of the fragility of cities. It is also the city I compared Dallas to in my 1976 thesis on the economic incentives to reverse migration and the inner city neighborhood. In the 1950s and 1960s, Detroit was the strongest city in the nation. It had music, industry, banking and philanthropy. Then from 1968 to 1974, Detroit was in such a decline that the city fathers hired an urban economist to propose a way not to revitalize the city but just to stem the decline. During this period Detroit had the highest safety net of social benefits and the highest unemployment rates\ while Dallas had the lowest social safety net benefits and the lowest unemployment. Over the next 40 years, Detroit continued to plummet while Dallas soared.

Rental Society

The popular avant-garde thought is that millennials, the next generation, love living in apartments and in dense cities, not single-family neighborhoods. Single-family zoned neighborhoods are so out of political and urban planning fashion that they are beginning to be outlawed in cities such as Portland and Minneapolis. Even Dallas, with no neighborhood hearings or notices, blanket-zoned every single-family neighborhood in Dallas with ADU/backyard rental house zoning. Joel Kotkin led the thought that was mentioned by several others, that millennials are about to grow up, have families, and seek homes that come with a yard. The growth in the population of the economic elite and hipsters moving to the city is in decline.

Renters don’t accumulate wealth. Renters are transient and don’t contribute to the stability or long-term sociability of a neighborhood. The more low-income renters are pushed to high-income neighborhoods, the further they are moved away from the potential wealth creation of owning a home.

It is interesting that there is so much preoccupation with gentrification and the resulting displacement of people from their longtime neighborhoods. At the same time, the anti- gentrification voices advocate a rental society of moving low-income residents across town to high-income neighborhoods which removes people from their long term neighborhoods. And a rental society is based on the very notion of transience rather than stable long term neighborhoods.

Parking Requirements

Twenty-seven years ago, I wrote an op-ed post in the Dallas Morning News that called for parking requirements in downtown Dallas to be eliminated. I argued that a developer spending $20 million on a building had a better idea of what parking requirements their building needed rather than a $40,000 per year planner. I also suggested that the “mom and pop” owner of a dry cleaner who had seven parking spaces that were mostly empty were unable to expand their business because of a city requirement of additional parking spaces, inhibited the vitality and the economic growth of a city. One was able to see how sacrosanct parking requirements in Dallas and across the country were by the Letter to the Editor that the Dallas City Planning Director wrote to the Dallas Morning News. Her written response to my op-ed was so vicious that the City Manager at the time, John Ware, required her to send me an apology.

How things have changed. It was music to my ears to hear the Santa Monica mayor Rick Cole explained that there are seven parking spaces for every car in Santa Monica. So they recently eliminated all parking requirements in downtown Santa Monica. He used the same argument that owners have a better idea of their parking needs than do planners. Eliminating parking requirements would positively impact the direction of Dallas and its efficient growth.

Wealth Versus Income

Dedrick Asante-Muhammad, Chief of Equity and Inclusion, National Community Reinvestment Coalition, provided an important economic insight. Everyone is focused on income inequality and that blacks make only 65 cents on the dollar of what whites earn. However, the much more disturbing statistic is that the average white family has an average wealth of $110,000 while the average wealth for black families is $4,000. Creating wealth for minorities and low-income persons should be one of the highest priorities of a city. However, almost every current urban policy curtails and diminishes the possibility of wealth creation for minorities and low-income families. Moving low-income families to high-income areas in order them to be close to jobs and higher wages requires they become renters. This is a wealth killer. Density is created by apartments that by definition create transience. Transience is also a wealth killer. The cost of a move from one apartment to another apartment costs more than the total wealth of most of these minority renters. Escalating rent throughout a lifetime is also a wealth killer. Urban planners advocating density and apartments in high-income areas are imprisoning low-income families in a no-wealth state of poverty regardless of their income.

Prissy Standards for Affordable Housing

Politicians, planners, and policy experts predictably call for better housing conditions for low-income persons. The mantra is they should have at least minimum housing standards. The problem is minimum housing standards have been set for middle-income and rich families. I think of the artists, academics, and young professionals who in past decades purchased and moved into substandard, falling-down houses and on weekends cleaned them up and fixed them up. Many low- or middle-income families would prefer a comfortable apartment over a deteriorated house. The deteriorated house, however, provides an opportunity for wealth creation and neighborhood creation. The more low-income people can buy homes in any condition, the better their economic prospects become and the better the prospects for the neighborhood become.

Income Groups Are Becoming Further Segregated

Klaus Desmet of SMU mentioned that income groups in Dallas are growing further apart to the north and to the south. The current vision is to move low-income families to high-income neighborhoods rather than as Cullum Clark suggested in his remarks that jobs should be created in low-income areas.

Urban Restrictions

For centuries urban growth restrictions and policies have been either in favor of more density and less sprawl or less density which has prompted people to move further away from the city center. Highly restrictive and regulated cities are seeing neighboring cities and towns with explode with growth. Planners often propose regulations and politicians pass laws because they sound good without considering any of the obvious consequences.

ADUs/Backyard Rental Houses

There were only passing references to ADUs and how they that might be part of the solution to inclusive urban growth. It is my opinion that ADUs disrupt the very neighborhoods that should be coddled. There are dozens of reasons why ADUs are harmful to neighborhoods. They are also unnecessary when additional apartments and dwelling units can be placed nearby or in areas in need of redevelopment.

Urban Hippocratic Oath: “Do No Harm to Urban Neighborhoods”

This Urban Hippocratic Oath should be the foundation of any urban policy. While no one from the main stage of the conference mentioned this Urban Hippocratic Oath, many said that beautiful neighborhoods and middle-income neighborhoods should be protected to give continuity for the future. Making existing neighborhoods and their success a priority should be a central theme for the future direction of Dallas.

Affordable Housing Subsidies

One of the most interesting points made was that developers need to intentionally add human dignity to their low-income housing projects. A beautiful playground at the front of an affordable housing project saves the school child embarrassment when the school bus drops them off because their classmates think they live in a cool place. Visible amenities and green spaces also make the project more palatable and beneficial to the neighborhood.

Affordable housing developers all agreed that it was very hard to double up on local, state and federal subsidy programs. The red tape on acquiring multiple government subsidies usually exceeds the economic time limit for a project.

An interesting point was made about urban opportunity zones that provide incentives to developers to build in these zones. If a developer receives a $10,000 project subsidy, the sellers of the land quickly recognize this and raise the price of their land $10,000. This leads me to believe that opportunity zones should be large enough that the owners still feel like there is a lottery effect and they cannot immediately raise their prices by the cost of the subsidy.

The conference also included discussion on how much money from the government was going into the pockets of developers to create affordable housing or other projects desired by the city. Dallas is fortunate to have quality, well-intended developers receiving city money. However, this topic reminds me that most of the public corruption in Dallas has centered around housing subsidies for developers. I recall in the 1980s, a key city planner was privately steering zoning in Deep Ellum to benefit one developer in Deep Ellum to the detriment of several hundred other Deep Ellum owners. The city planner, right after the zoning passed, was hired by the developer. Within a year the court by summary judgment overturned the zoning, Dallas passed an ethics law, and the developer was investigated and eventually went to jail for falsely receiving government housing subsidies.

I continue to think there are many ways to provide or encourage affordable housing beyond what is built by developers who receive money from the government. This flow of money from the government to developers that has caused Dallas public officials and housing developers to continue to go to jail since the 1980s. The higher the price of the neighborhood where low-income housing is built, the more government money has to flow to developers. Projects outside of government subsidized housing also has the benefit of possibly being more interesting and less disruptive.

One of the affordable housing developers at the conference encouraged an architect who was in the audience to design and build interesting one-off affordable homes. This was a comment and idea I very much appreciated.

Alternatives to Government Paying Developers

The government will always be paying developers to build low-income housing. However, there are alternative ways to provide low-income housing. For decades in Dallas, there has been an abundance of very inexpensive homes. Many of these homes were inherited from family members and then torn down because they were in bad shape and there was not a marketplace to match up these homes with potential buyers.

Over 20 years ago I wrote an op-ed published in the Dallas Morning News that suggested the creation of a database of every home valued under $10,000 owned by an absentee owner. In today’s economy, now the price of these tracked homes might need to be adjusted to homes valued under $50,000. Nonprofits and churches could create a list of potential homeowners who live in the zip codes of these inexpensive homes and help match up these potential homeowners with these inexpensive homes. Professionals, like accountants, attorneys, and real estate agents that help build Habitat for Humanity houses might help identify and coordinate owner financing from some of these absentee owners who own these inexpensive homes. The churches and nonprofits might also help the home buyers fix up the home. I have seen firsthand the positive result of a church coordinating owner financing on a $10,000 home 50 years ago. My next door neighbor purchased such a home, continues to live in the home, and has subsequently had four generations of children also periodically live in the home that is surrounded by renovated homes in a historic district.

Building one-off affordable homes is another approach. Dallas has many people interested in affordable housing and investing in Dallas. Here are some exciting possibilities of how this could be accomplished.

1) Architects, either by themselves or teaming up with a friend, design, build, and invest in a single affordable home or duplex for low-income families. While interesting architecture for an affordable home might not be practical for an affordable housing development company, it could be a great project for an individual and make a great impact on the aesthetics of the neighborhood. Besides individuals making a philanthropic contribution, because Dallas is an economically vibrant city, it could possibly even be a good economic investment.

2) Individual investors, not reporting to shareholders, could renovate a home or two or adapt a small commercial building for affordable homes. This one-off building of affordable homes would also provide low-income families and the individual investors with personal interaction that would be mutually beneficial. Banks, as Pegasus Bank in Dallas has done, might invest in an affordable home to fix up and rent out to a family, or invest in small apartments and specifically rent to low-income working families.

3) For decades there have been small clubs or groups of friends investing in stocks. Why not have affordable home clubs? Small investments from club members could be pooled to buy and fix up a single family home to rent or sell specifically to a low-income family.

4) High-end homebuilders might hire the architect of their expensive spec homes to design a small affordable home that the homebuilder rents out or sells to a low-income family.

The city, rather than subsidizing developers, would invest in specific neighborhoods where these one-off projects might thrive. New curbs, sidewalks, streets, streetlights, and mowing overgrown vacant lots could create a pleasant environment for both low-income families and middle-income families and be a place where people would like to invest in or donate to affordable homes.

The Dallas Advantage

Dallas has a great advantage over any other city because it is economically thriving and it has an abundance of cheap underused land. Currently, city politicians and city planners are looking to throw away that advantage and direct affordable housing to the most expensive land and neighborhoods.

Inspired Idea

I have been involved in successfully revitalizing a neighborhood. As a result, I understand the steps and dynamics needed for revitalization efforts to be a success. Most of these initiatives can be easily replicated in southern Dallas. However, I remain puzzled by neighborhoods that are made up of mostly vacant land or have housing without much potential emotional or aesthetic appeal. Recently, the solution came to me when I read about cities like Minneapolis and Portland that are beginning to do away with single-family zoning. When Dallas joined this anti-single-family zoning hysteria by blanket-zoning the entire city for backyard rental houses, deliberately diluting single family neighborhoods, the solution came to me for these architecturally uninteresting neighborhoods in South Dallas.

The solution is for some of the distressed neighborhoods in southern Dallas to offer precisely what is being banished in the other neighborhoods across the city: protected single-family neighborhoods. Specified southern Dallas neighborhoods could be a safe haven for single-family homes. The property owners in these neighborhoods could place 50-year deed restrictions on a critical mass of contiguous land that restricts the lots to strictly single-family homes. Even if the city changed the zoning from single-family, the deed restrictions would let the homeowners and future homeowners know their single-family neighborhood would always be protected from multi-family intrusions.

Rather than these neighborhoods being perceived as distressed, they would be the beacon for long term stability and the security of protected neighborhoods. These once distressed areas might become some of the most desirable places in Dallas. People moving into Dallas from high-density cities would find these neighborhoods with single-family homes and yards charming, quiet, and relaxed for their families. We need to remember renters and homeowners both prefer to live next door to a single-family home rather than a multi-family apartment. The city could also support the effort of single-family deed-restricted neighborhoods by providing new sidewalks, curbs and streetlights.

Conclusion

Dallas has outperformed other cities because it did not copy best practices of bad policies. Dallas should continue to create the best policies that allow the city to thrive with inclusive urban growth.

This piece originally appeared on Dallas Architecture Blog.

Douglas Newby is a real estate broker who initiated the largest the largest rezoning in Dallas – 2,000 properties primarily in use as multi family rental properties to single family zoning. In 1979, in Dallas he created the first Restoration House of the Year Award, and for the Dallas Chapter of the AIA organized a city wide survey of architect designed and Significant homes. His TEDx talk is Homes That Make Us Happy. His website is: ArchitecturallySignificantHomes.com. Blog is DallasArchitectureBlog.com

Photo: (From Left) Cullum Clark, Henry Cisneros, Peter L. Scher and Joel Kotkin, part of a panel at the Policies to Promote Inclusive Urban Growth conference.