The basic lesson of intensification that government officials and activists don't understand: intensification happens first in high value areas, not low value areas

Illustration from The House Book by Keith DuQuette, showing the intensification of land use as you move from suburban areas to the center city.

Where do I begin?  

This comes up because of the Chicago Sun-Times article, "City’s test of additional dwelling units finds most takers in gentrified wards."  From the article:

This involved allowing additional dwelling units, or ADUs, typically basement or attic apartments or coach houses. The program carries many restrictions, but planners wanted to see if adding a unit here and there would introduce lower rents in expensive neighborhoods, help families or small landlords make extra income and encourage multi-generational housing that’s typically rent-free. Some units are called “granny flats.”

The affordability argument assumes that because of the size and location of the units, rented units would command a lower price than the neighborhood standard.

The city’s Housing Department ran the data and found, at this early stage, the program is working in some ways but is challenged in others. It might just be adding expensive units in already expensive neighborhoods.

Also see "The nature of high value ("strong") residential real estate markets," 2017.

I always say that the first big lesson I have from involvement in DC urban revitalization was that you needed to have plans before they were needed, not after, because once the velocity of development has been unleashed, you can't catch up.

But the second would be that development happens in the high value areas first, because that that's where the most demand is, the most willingness to pay higher rents, and where the most profit is for the seller or landlord.

"Nobody goes there anymore. It's too crowded."
-- Yogi Berra 

I think I figured that out before I read Harvey Molotch's paper (later expanded into the book Urban Fortunes) "City as a Growth Machine: Toward a Political Economy of Place," where the abstract reads:

A city and, more generally, any locality, is conceived as the areal expression of the interests of some land-based elite. Such an elite is seen to profit through the increasing intensification of the land use of the area in which its members hold a common interest. An elite competes with other land-based elites in an effort to have growth-inducing resources invested within its own area as opposed to that of another. Governmental authority, at the local and nonlocal levels, is utilized to assist in achieving this growth at the expense of competing localities. Conditions of community life are largely a consequence of the social, economic, and political forces embodied in this growth machine.

But Molotch explains very well why what happens (intensification) happens.  Intensification makes more money for everybody, especially when it's built in the most desirable places.

New Urban Transect

Relatedly, I once had a conversation with the retail and private equity finance innovator Herbert Haft about creating a coffee shop, and he said that it costs about the same to build and operate a business regardless of where you are located, so you might as well open where you are more likely to make more money ("Herbert Haft, 84; Built and Lost a Business Empire," Los Angeles Times). 

Which is why at a recent community meeting on housing in Salt Lake City, where the city is aiming to open up the single family zoning category to duplexes, triplexes, and quads ("How communities can change the playbook to expand housing options," Salt Lake City), I challenged the statement by a planner, who said that if that happens, it will happen on the Westside first--which is home to more people of color and lower income households--because the properties cost less.

I said, "no.  It will happen in the high value areas first etc."  He was very surprised.

From the Smart Transportation Guidebook.

This jumps off a comment made on an entry about Minneapolis expanding its SFH zones to duplexes ("A short point about why eliminating single family zoning won't result in a rise in "affordable housing" (any time soon) ") where the person made the point that the push for expanding beyond SFH there was driven by people wanting to live in the more desirable areas of Minneapolis, and there "not being enough housing there."

Minneapolis has a false scarcity, in that housing advocates driving the push for density have fixated on densifying a few mature, desirable built out neighborhoods, while ignoring hundreds and hundreds of vacant lots on the other side of town. No one wants to appear to be behind the “G” word, but as this article points out the economics of the redevelopment of premium neighborhoods preclude helping to solve the affordable housing crunch.

It's a similar process to that of the original development of city centers (Downtowns).  Land value was high because of location.  To maximize the value of the property and location, buildings were built taller, and took up as much of the lot as possible.  That's why smaller communities have less intensely developed centers.

And why in some places, proximity to transit has little value premium, so creating transit oriented development is very difficult, time intensive, and requires subsidy ("From the files: transit planning in Baltimore," originally written 2010).

Or how in low income areas, revitalization/intensification is expensive and can take decades and requires scads of subsidy ("Weak markets are really really really hard to develop: Baltimore's Poppleton (... State Center; Park Heights; etc.) neighborhood," 2019, ("Blaming Walmart for Skyland's failure is misdirected," 2016,"For the first time, Skyland Town Center's revitalization might have a chance: creating a community focused retail destination," 2018).

1. The first lesson in urban revitalization is that strong markets are a lot easier in which to spur revitalization than weak markets.

2. It's all relative when it comes to strong and weak markets within communities.

3. Most developers only do development in weak markets once most of the development capacity in the strong markets has been absorbed.

ADUs aren't cheap to build, at least a couple hundred thousand dollars, especially if you have to put in utilities, in particular water and sewer.  That takes a long time to pay off.  So if you're going to make the choice to do it for profit, people with greater resources are going to be the first movers.

Note there is an ADU initiative in Guadalupe, a Hispanic neighborhood of Austin, Texas, focused on supporting extended family living ("As housing costs and economic segregation increase, Austin's granny flats proliferate," Architect's Newspaper).  But it's not so much about lower cost housing, except on a relative basis.

-- Alley Flat Initiative, Guadalupe Neighborhood Development Corporation

If a city like Chicago wants to add accessory dwelling units in lower income areas, especially as a lower cost housing option, they're going to have to provide serious subsidy and other forms of assistance.

-- "Strategies to Help Homeowners Finance Accessory Dwelling Units in Austin A report on findings from a student-led research project,"  CRP 386: Financing Real Estate Projects: Nonprofit and For Profit, University of Texas.