My analysis: Rents in Durham increased around $3.07 per month over the last ten years. However, over the last year, they've increased $11.63 per month. This is out of control.

I'm sure there are lovely people who work for DHA. What I've heard from residents of DHA properties who interact with staff multiple times a month those would probably be the exception not expectation.

What levers does the city have to induce more people to accept Section 8 vouchers if and when they decide to rent a property?

Correction Lisa...Section 8 guarantees that the subsidized portion is paid. The tenant is responsible for a portion based on a certain percentage of their income.

The exceptional demand for rental housing is probably driving landlords to market rate rents. This wave is not permanent is largely related to the demographic bubble called the Millennials. There was an expansion of colleges and dorms...now expansion of apartments...eventually they will be purchasing homes (when their income/ debts stabilize). Hopefully in this scenario...rent specials will become more of the norm.

In the mean time, we need to make a measured dent in this situation without overreaching. And any solution will most likely be locally-led versus having significant funds from the Federal or State level.

Rob G's last paragraph above is spot on. Renters = Good Guys and Landlords = Bad Guys in local political discussions. Any proposal to spend money to support for-profit rental housing gets shot down because it would go to landlords. And using the regulatory approach by raising standards on for-profit rentals, while certainly a good thing, means increased costs for the owner, who then raises the rent, etc. etc. Any desire progressives have to improve the for-profit rental situation (with or without section 8) as a way to help low income renters will require getting over our negative emotional reaction to putting money into landlords' property. I'm curious to see if that can happen here.

Disclosure: I rent out my old house in Burch Ave and have done so since moving in with my wife over a dozen years ago (I call it my Rental401(k). If we'd gone section 8 we wouldn't have had the money to put solar panels and other climate-disruption-fighting practices in place, nor money to donate to the local Land Trust. Can't have everything.

@Frank, Rob, The Mgmt.: You know, this is a conversation I've been having with several friends lately.

I know there's a need for the city, DHA, and non-profits to design, build and deliver affordable housing, be it workforce housing, public housing, or housing for veterans, the homeless, etc.

But there will never be enough money to provide affordable housing, at the 60-80% AMI level, for everyone who needs it.

At a friend's house for brunch this week, I learned that Seattle has decided to focus its efforts on the below-60% AMI market, and to provide incentives, regulatory changes, etc. to incentivize the market to deliver workforce housing in the 60-100%+ AMI category.

It would be interesting to think through the models of how we could do something like this in Durham. Most particularly, how can we create a model where private parties -- and not just "big" local or regional/national scale developers and REITs, but even individuals here who might be looking for a local-scale investment -- are able to build and earn a reasonable return on market-rate affordable housing?

We'll have more on this topic in the coming weeks and months, but I'm talking with several folks about putting together a community conversation and charrette on the subject -- what can be done outside the governmental/non-profit space to deliver high-quality, sustainable affordable housing?

Shut up Rann.

See, it can happen.

@Rann: Not to nitpick, by the way (since I'm not sure how much you meant this as an opening to a policy discussion vs. just letting off steam -- shouldn't you be celebrating, anyway?) but this makes for a fun thought experiment! Really, let's do this.

A) If one wants to advocate for progressive taxes to pay for services like housing, why make a progressive property tax system in lieu of a progressive income tax system? Yes, setting aside for a moment that municipalities can't levy income taxes in Durham, if you're talking about any kind of progressive funding mechanism, income > property. Particularly since there aren't many of the kinds of properties you're talking about, to wit:

B) Is it possible to find a single $1.5 million condo that has sold in Durham? I know there are some proposed projects in the works, including a downtown skyscraper. But I'm not aware of any non-detached housing having ever sold for that price in Durham. If one is proposing a "penthouse tax" that will pay for affordable housing by levying a high tax rate on non-existent sales, one is not going to raise a lot of money.

C) Let's spitball what you could get out a broader tax. The only person I know of who tracked luxury home sales, Jay Zenner, hasn't updated his blog in a while. His last report, from 2010, noted that an average 30 homes sold over $700,000 per year in Durham. However, in 2010, only one home sold for over $1 million. At the time, Durham had 19% of the home market in the Triangle but 8% of the > $700k market, reflecting relative affordability next to Wake/Orange. (http://durhamluxre.com/2010/12/16/year-end-report-on-durhams-luxury-home-sales/). Of course -- 2010 is when we were still in the doldrums of the recession and housing bust, even if our area was less-hit than others. (Note that his multiyear data precedes that to the housing boom.)

So, let's look at Zillow instead. Looking at your price point of $1.5 million and up, I see nothing in downtown, central Durham or north Durham that sold there in their "recently sold" filter. (There are some land sales that included house, and one very unlucky buyer of a tract home for $16.7 million -- that, of course, being a typo.) Hope Valley CC does have five home sales in that price range, and two homes for sale in that price range.

The point of this exercise is, trying to figure out how many houses there are in Durham that are actually in your estimated price range. Given the small number of listings, it's really hard to figure it out. The number you usually here is that people move every seven years, so if you took the annual sales and multiplied by 7, you'd guess the volume. I'm guessing the velocity of these sales is much slower, so just for the sake of argument, let's assume there are 200 homes in the City of Durham at that price point.

Just spitballing here: we have a shortage of workforce housing in this city, we all know that. What does it cost to build a 2 or 3 bedroom, 1 bath unit? That's part of what I'd like to find out; for now, let's estimate about $125,000 or so just to have a number to play with. (That's construction, land, entitlement, and so forth. That number could also be off by a factor of 25% either way, or 50% to 100% on the low side, perhaps.)

If we wanted in one year to add, say, 1,000 more affordable housing units in Durham -- Section 8 units as well as affordable market rate housing -- that's $125 million in construction cost, plus the human effort to administer that activity. That latter number probably adds in a significant burden to the cap-ex, but we won't consider it here.

To garner $125 million in a year from 200 owners of $1.5 million+ single family homes -- since we don't have any $1.5 million condos for sale in Durham -- we'd have to levy each homeowner a one-time tax of $625,000 each to raise that money. Or, if we assumed we could make debt payments on the capital expenditure -- $62,500 each per year. Since one of these homes is probably paying $21,000 per year in property tax right now, we'd be quadrupling their annual tax burden.

Naturally, this is likely to create some distortion in the local housing market.

And more to the point, that's the cost just to add an arbitrary number of 1,000 units. If 2.5 people live in each unit, that benefits less than 1% of the city's population. We probably need 10x that number.

Sure, taxes and sources like Federal grants can help. Of course they can. At the same time: we're most recently talking about one tax credit application per year, that DHA and Self-Help both need, to each generate 100 units of housing.

Yes, that absolutely needs to happen.

But if we can find a way to actually encourage builders -- for-profit as well as not-for-profits -- to construct affordable housing, and find ways to make sure they stay affordable and get into the Section 8 inventory, that's pretty powerful stuff.

Oh, and have the benefit of keeping the units on the tax-rolls, producing property tax revenue every year.

This is actually an interesting and fun conversation to have. (Hey, you. Stop looking at me with that nerd-scorn.) Let's do it IRL, as the kids would say, and see if there's ways we're not thinking of to solve this.

Let's back up to this original description of a progressive property tax system, above:

"...Unless you implement a progressive property tax system so that those who can afford extremely fancy homes (like, say, the recent penthouses that are going for something on the order of $1.5 million...) are forced to pay their actual dues."

A REGRESSIVE system would demand each household pays the same flat amount (say $3000 in property tax) regardless of house value/size. But that's not how our system works. In Durham a house valued at 1,500,000 pays 10 times the property tax of a house valued at $150,000.

Rann, could you clarify your definition of what you think a PROGRESSIVE property tax system is?

I've assumed that when people talk about affordable/workforce/deserving poor housing I've assumed they mean rental.

Imagine what $125k could do to purchase current rentals, fix them to code, and sell them back to the current renters in East Durham. Also, add in a pile of money to fix problems that emerge over the first 10 years of home ownership. Build a land trust. Reform the Durham Housing Authority (again).

Thing is, many people, when given the option to purchase in the areas they've lived forever do not want to. I tried for 5 years to convince neighbors who had rented for more than a decade in Cleveland Holloway, had steady jobs and ok credit to purchase a house in Cleveland Holloway. They patiently listened, but would always insist if they wanted to buy a house, they were going to do it in a nice part of town like S. Durham where it's clean and new.

Poor people are entitled to make choices about where they live too. Affordable housing needs to be spread throughout the city, not concentrated around and in downtown - both for the concentration effect, but also to delight the preferences of those who want to rent or own.

Al, I was thinking the same thing this morning. Downtown probably doesn't appeal to many people with young children. I lived at a rental condo in downtown many years ago. It was great until I realized I really need grass and a garden to be happy. Natalie,
Interesting about people in East Durham not necessarily wanting to stay even if they can be home owners. It makes sense. If you have seen too much crime and still have neighbors and surrounding property that isn't very nice of course you would prefer to move.

@Bullcityrising
There is actually a lot of affordable housing for sale (as opposed to rental property). You mentioned building a house for $125,000. Guess what? Private developers are doing better than that. Look, for example, as this property for sale in Landon Farms (out E. Geer St.):
http://www.fmrealty.com/real-estate/durham/1411-glenbrittle-drive/2023928?rowNum=21&searchID=d3bf7483-6f14-4c28-bf39-3a8b26c7e75f&sortBy=priceDesc&pageSize=20&page=2&displayPhoto=exterior
Is it a great house? Probably not. But it is 1) new and 2) priced at less than $116,000 for three bedrooms and two baths. If you're willing to buy a previously-owned house, you can do better than that. Try this:
http://www.fmrealty.com/real-estate/durham/516-eastway-avenue/1991951?rowNum=3&searchID=38f37fc8-adcd-4304-b7f3-5e0d73d9bee2&sortBy=priceDesc&pageSize=20&page=1&displayPhoto=exterior
It's $95,000 for 3 bedrooms and 2 baths and 1250 square feet. And it's been sitting on the market for 194 days. This house is in Eastway Village, and therein hangs a tale. Eastway Village was built by the City in 2006 as "affordable housing" and neighborhood revitalization. And I will be the first to agree that it looks very nice with brick veneer foundations, front porches, garages in back, and hardiplank siding. But according to someone who should know, the City spent an average of $300,000 per unit on this development. It ought to look nice. Part of the reason for the high cost is that the City tore down the existing bungalows rather than restore them. (This is, of course, the regnant planning model for all City projects, cf. Carpenter Building/Police Department: just tear it all down because thinking about how to incorporate existing structures is too hard and makes our heads hurt.)

Now, of course, the City is doing Southside, building "affordable" housing that costs around $200,000 or so. Millions of City housing dollars are tied up in this project for years to come. It is Eastway Village on a grander scale. Again, it looks nice. But I don't think this is the most efficient use of scarce housing dollars. Let me suggest a couple of lessons:

1) The City ought to stop playing real-estate developer and building houses for resale. It can't do it any more cheaply than the market can. Building houses for $300,000 that can't bring $95,000 a decade later doesn't make sense.

2) The City ought to focus on increasing the supply of decent, affordable rental property. Encouraging renovation of substandard properties is one way. And, as I've previously argued on BullCityRising, lowering the fees that the City charges for building new housing is another way.

@John Martin - These areas were totally off the radar for market developers at the time. Plus those costs include environmental cleanups and disposal of contaminated soils. The markets not touching that!

Eastway Village will appreciate along with the properties from N Hyde Park to Driver St. It is currently happening. I doubt that they will ever sell for $300k (your number) but that was not the point of the city's investment. Also the redevelopment of Alston Avenue which I think will be led by more market forces will be the biggest boost to property values in this area. It will be yet another gentrified community in Durham for better and worse but the city's investment was the catalyst...

@Natalie: Have I told you lately that I love you?

@everyone else: Housing is not the only cost. Moving far from downtown but working near downtown increases transportation and other costs significantly for working families. Having affordable housing and retail supermarkets near downtown is one of the very few to break a cycle of poverty. Of course, good transport helps, but it's not enough.

As for progressive property taxes: In short, if you can afford a $1.5 million penthouse (and whether there are some right now doesn't really matter -- the trend is clear), you can damn well afford to pay a pretty enormous chunk of your income in taxes. I'm certainly an advocate of a top income tax bracket well over 90% (which has historical precedent), and a massive increase in capital gains. As for property: I think that houses that sell for under, say $75k (and yes, there are quite a few -- see, e.g. Old East Durham), should have zero property tax as long as they're owner-occupied. From there on up, I'd advocate increasing marginal taxation rates with pretty darn high maximums. Would that discourage very expensive housing from being built? Hell yes.

The city should spend money fixing the amazing old housing stock we have all over town, not building low-quality housing for way too much money. Both Eastway Village and Southside are far from affordable. With rents now rising in Durham at close to four times the rate they have been for the last decade, it's about damn time a mechanism is found to attenuate that rise.

To put things in perspective...we are willing to subsidize parking downtown but people are concerned about subsidizing affordable housing in "luxury" apartment complexes.

@John M. - I didn't disagree with you. I stated the facts. Facts such as Barnes Ave and Few Gardens Projects where the new Hope VI development is located was a crime- and drug-ridden area. You could attribute the majority of Durham's bad reputation to this area. Matter of fact...Morning Glory used to look like New Jack City aka open market for whatever you wanted to buy. The houses on Barnes Ave looked nothing like the houses on N Hyde Park. Several houses were in a flood zone. Habitat (which mostly builds with city and CDBG funds) was building homes in the other areas where like Gattis St and Walltown where the City also invested lots of dollars with partners such as Self-Help.

Not even Self-Help would touch East Durham...well I will not go that far. They were focusing their efforts in neighborhoods around Duke (Walltown and West End) and they still relied on government funding to make it all happen. From a real estate perspective, it was mostly about location...location...location.

The moral of the story...the market does not even sniff Old East Durham or Golden Belt without the investments made by the city. Oh and your $300k number includes funds from many federal and state sources that included brownfield remediation to make the land safe for habitation. A lot of costs beyond just building the units.

By the way, I am all for restoration when it makes sense and the house is functionally, aesthetically and structurally sound aka good bones.

Why any person of would willingly subject themselves to HUDs rules is beyond me. Public Housing / Urban Renewal / "Negro Removal" destroyed more housing units than it provided. We couldn't undo this debacle fast enough.

This post is very informative. Do you have any update about whether DHA has changed their policy on "upscaling" based on the email you received from Joseph Phillips at the HUD Regional Office for this area. Was the email shared with DHA and did they provide any further comment? Appreciate your assistance.