Shifting economies, shifting tenures, and preservation
A home is both a physical space and a tenure configuration. The former is very hard to change, the latter sometimes surprisingly easy, as apartments can be sold off as condominiums:
Another [Boston-area] developer plans to capitalize on a hot condo market by selling off its rental apartments to home buyers.
Of course, the same box built as condo’s can instead be forced to operate as rental:
When the building opened in the late 1980s, the plan was to sell its units as condos, but a local economic downturn killed that plan, so the original developer rented out the condos it couldn’t sell, said Michael Girard, an Apartment Realty broker.
All of this is driven by a combination of …
… demography and market economics:
Meanwhile, the rental market has also been hurt by a local economy creating new jobs at a slow pace. That narrows the pool of renters. One result is developers converting rental apartments into condos.
and interest rates:
Low mortgage rates have made buying condos more affordable, fueling conversions of rental apartment buildings into condos. According to Freddie Mac, a large purchaser of mortgages, the average for a 30-year fixed-rate mortgage was 5.81 percent last week. At those levels, Restifo said, “It can be cheaper to own than to rent.”
Changing tenures does not eliminate homes from the supply – a box before is still a box after – but housing has huge impacts on labor mobility:
Recent European data indicate that countries where a large proportion of the population lives in owner-occupied housing are experiencing higher unemployment rates than countries where the majority of people live in private rental housing, which might suggest that rental housing enhances labor mobility.
Housing diversity also influences labor flexibility, and household formation and expansion:
A tighter regional housing market and higher unemployment rates strongly reduced the probability of setting up home with a partner and slowed departure from the parental home.
A robust housing ecosystem with healthy communities thus has:
- Multiple physical configurations
- Multiple tenure options
- Diversity of configuration and tenure within neighborhoods and metropolitan areas
As a result, among the valid public-policy reasons for new affordable housing production is specifically to create configuration and tenure diversity and options within a large and ever-changing evolutionary complex system. That’s an even stronger argument for preserving existing affordable housing.
