Open and Viable Neighborhoods

Download Indicators08_housing.pdf

A COMMUNITY OF OPEN AND VIABLE NEIGHBORHOODS 

 

To be sustainable, development must meet the needs and demands of the present generation without compromising the ability of future generations to meet their needs and demands. This requires a balance among economic growth, environmental quality and social cohesion.

 

From this perspective, a sustainable approach to providing shelter for the region’s citizens is indicated by a balanced housing market that provides a sufficient range, diversity, and affordability of housing. Second, the built environment should create a ‘sense of place’ or a positive feeling for people and a local distinctiveness. Third, a sustainable built environment is one that efficiently uses resources and provides places for people to live in an environmentally friendly way.

 

This is summarized in our aspirational goal to be a community of open and viable neighborhoods.

During this time, the housing market was generally strong. However, we now know that the end of 2006 marked the beginning of a nationwide “housing crisis”. Many of the indicators of strength in the housing market most likely worsened in 2007.

Further, serious concerns are raised regarding the balance of this economic growth with environmental quality and social cohesion. The viability of our neighborhoods is challenged by affordability concerns and continuing indications of urban sprawl. As will be seen in this chapter, the journey towards a community of open and viable neighborhoods remains a long one.

HOUSING AND ECONOMIC GROWTH

According to the US Census Bureau, Northwest Indiana contained just over 320,000 units of rental and single-family housing in 2006. 65% of these units are in Lake County. 20% and 15% of the region’s housing units are located in Porter County and La Porte County respectively.

Residential housing is a key driver of economic growth as evidenced by the fact that construction and real estate jobs accounted for 7.8% of the areas employment in 2006¹. Also, nearly 1 in 5 of the region’s workers traveled to another state for employment.  The wages of these 59,868 employees is important part of our region’s economy. Lake County, in particular, is often described as a “bedroom community” of Chicago as nearly 1 in 4 workers who live in the county commute outside of the state for jobs – most to Illinois.

 

Another indicator of the relative strength of the broader decline in the housing market as new housing starts dropped off significantly in 2006.

The final indicator of the strength of the housing market is the median value of owner-occupied homes. Of course, home values are influenced by many elements besides the physical structure of the house. Good schools, quality public services, and community amenities such as parks tend to increase home values while higher property taxes and crime rates tend to decrease home values. In 2006, the median home value for each of the three counties in the region exceeded the state average. Lake and La Porte counties had strong one year gains in home value while Porter County decreased by $1,000.

 In addition to the county level data, the US Census Bureau’s American Community Survey provides data for the two largest cities in the region. The median home value for Hammond in 2006 was $96,700 – up from $90,900 in 2005. This 6.4% growth is greater than the state average growth rate (5.5%) in the same time period. The median home value in Gary also experienced significant growth (9.7%) raising the median value of an owner-occupied home to $69,100 in 2006. However, the average value of a home in Gary is approximately half the value of the average home in Porter (46.5%) and La Porte Counties (56.6%). This indicates great disparity in property tax base across the region as well as household wealth.

HOUSING AND HOUSEHOLD WEALTH

For many households, the home represents the single biggest financial investment. Hence, the rate of homeownership is an indicator of the quality of life in a community. The percent of households who owned their own homes in 2006 was higher than the US average for each of the three counties. Porter County had the largest percentage of home-ownership (77.1%) while Lake County was the lowest (71.1%).

Of course, most homeowners do not own their homes outright but rather hold mortgage debt. A negative indicator of strength in the local economy is the number of households who default on this mortgage debt as measured by the foreclosure rate. According to the Mortgage Bankers Association²,   Indiana’s foreclosure rate was the second highest rate in the country from 20022006.

More locally, in 2005, the Center for Urban Policy and the Environment at IUPUI³ reported that several census tracts in our community had higher than average foreclosure rates (pink and red areas in the map below). In the first quarter of 2008, foreclosure rates were up 176 percent in Lake County, 195 percent in Porter County compared to 2007 according to RealtyTrac.

Although housing values in Northwest Indiana are still affordable relative to national standards, many households have difficulty paying for housing. Housing affordability is typically evaluated by assessing the share of household income spent on housing costs, with 30 percent of household income being a common affordability threshold. 

    In 2006, the three county region was home to 209,004 households. Of these, 27 out of every 100 households (56,682) exceeded the sustainable level of outlay for housing expense. Breaking this down further, 31 out of every 100 households who owned their homes spent more than 30% of their income on a housing payment. 17 out every 100 renter households exceeded this affordability threshold. Further, the percentage of households who are cost-burdened is trending upwards.

Another place-based component of affordability is the cost of transportation. A common rule is that housing plus transportation cost should not exceed 45%. By this measure, much of the regions households are costly places to live as shown in blue on the chart below produced by The Center for Neighborhood Technology⁴ using a formula developed by the Brookings Institution.  

HOUSING AND ENVIRONMENTAL QUALITY

Environmental quality is the third component of sustainability. In order to be in balance with the environment, housing development should consume minimal resources, utilize environmentally friendly materials, and be located close to the workplace. This balance can be measured by the vacancy rate, the location of new housing starts, and the age of the housing stock.

If one considers that each house represents a consumption of land, building materials, and infrastructure, than an unoccupied house represents wasted resources. Further, a high vacancy rate can be an indicator of sprawl or the tendency to build low density, functionally segregated, disparate and overscale developments dependent on the automobile⁵. In 2006, more than 1 in 10 NWI housing units were vacant which is lower than the state average but still a cause for concern regarding the sustainability of our housing development.

Drilling down to the two largest cities in northwest Indiana – Hammond and Gary – provides a measure of the abandonment of the urban core of our region. In 2005, the vacancy rate for Hammond was 15.4% and it dropped to 10.0% in 2006. The vacancy rate in Gary was 17.5% in 2005 and jumped to 25.4% in 2006. This means that approximately 1 in 4 units of housing in Gary are vacant.

Another indication of the level of sprawl in NWI is the geographical distribution of new housing starts. Reviewing the building permit data by place indicates that much of new housing development is occurring outside of the incorporated areas of each county and in the southern part of Lake County. This is another indication of an unsustainable consumption of natural resources particularly loss of open space.

The median age of the housing stock can serve as a rough indicator of environmental quality. Older homes are less energy-efficient on average than newer homes. Additionally, older housing stock is more likely to contain lead-based paint which has been linked with learning disabilities in children. As a point of reference, the federal government banned lead-based paint in 1978. 

In the year 2006, the median year housing units were constructed in Lake County (1963) and La Porte County (1965) was older than the state and US averages while Porter County’s units (1975) were younger than both averages. The housing stock in Gary and Hammond was significantly older than these county averages at 1957 and 1948 respectively.

   

    Older housing stock provides benefits to the community as well. According to a study of historic preservation districts in Indiana⁶, historic districts promote homeownership and stability in a neighborhood. Property values are generally positively affected in neighborhoods designated and regulated by historic preservation commissions. All of these aspects strengthen physical, economic and social fabric of neighborhoods and cities. As of this writing, only Valparaiso, Whiting, Hammond, Lowell, Gary and Crown Point have passed protective legislation for historic properties.

SOCIAL COHESION AND HOUSING

In order to be a community of open and viable neighborhoods, all citizens must have equal access to jobs, better schools, and other services. A sufficient supply of affordable housing should be distributed across the region. Affordable housing should be included as a key component of any urban revitalization strategies so that low-income residents are not displaced. Finally, open and viable neighborhoods must be characterized by a significant presence of mixed-income housing that provides a pathway to build diverse, inclusive communities.

Progress towards these goals is indicated by the number and distribution of rental units. Unfortunately, the percentage of new housing starts that are multi-family units (rentals) has been steadily declining in NWI since 2001.

Furthermore, an uneven distribution of affordable housing within the region is indicated by the rental housing tax credits awards in the last six years– most of which are in the urban north cities.

The final indicator of our progress towards building open and viable neighborhoods is the number of homeless in the region. Unfortunately, comprehensive information on homelessness is not available because only 40% of shelters report statistics to the centralized database, HUD’s Homeless Information System (HMIS).  In addition to limiting our understanding of extent of homelessness in the region, the low participation rate affects the amount of federal funding the region receives to serve the homeless.  A list of those providers not yet reporting to HMIS is available here.

REGIONAL PROGRESS SINCE 2004

The pattern that emerges from this data is sprawling development and urban disinvestment have resulted in large disparities in the housing choices and opportunities. This theme is consistent with the 2004 QLC Indicators report. It seems that we have not made significant strides in the sustainability of our housing development in the intervening four years.

The last report called for a wider distribution of affordable housing with a goal that all new developments would include 10% affordable housing by 2010. In this section we review the action steps recommended and provide an update on possible enhancements to expedite our progress towards a community of open and viable neighborhoods.

Comprehensive Regional Land Use Planning: In the 2004 QLC Indicators report, we called for sustainable growth to be managed in a top-down fashion through the development of a comprehensive regional land use plan. The reality is that our metropolitan planning organization (NIRPC) does not yet have statutory authority to draft a comprehensive land use plan.

In the absence of this authority, voluntary or bottom up efforts to implement “smart growth” principles that have been successful in other areas with a multi-county, multi-city coverage such as the San Francisco Bay Area are being considered. Smart growth principles⁷ such as the following are beginning to be incorporated into local land use plans:

1) Design of “better new communities” with mixed uses, well connected street patterns,
pedestrian scale and an orientation towards public transit.

2) Revitalized downtowns and mature suburbs through infill development, redevelopment and revitalization measures, brownfield reclamation, restoration of urban creeks, historical preservation and reuse of existing structures, improved public schools and crime reduction.

3) The creation of affordable housing through partnerships with developers, financial institutions, nonprofits, etc.

 

4) The management of growth and protection of open space.

 

         5) The consideration of transport alternatives. 

NIRPC is already taking an active role in encouraging smart growth planning by offering training and other assistance to local planners. These efforts should be encouraged and strengthened especially in the absence of comprehensive regional land use planning authority.

Inclusionary Zoning: A second approach discussed in the 2004 report was the practice of inclusionary zoning which is a regulatory mechanism whereby a percentage of housing units in new residential developments are made available to low- or moderate-income families in exchange for benefits such as zoning variances, development rights, and other permits. To our knowledge, no inclusionary zoning practices have been codified in the intervening four years in NWI.

Given the difficultly of enacting local inclusionary zoning laws across the county, some states have taken the initiative to develop “fair share” housing programs that promote more equitable distribution of affordable units throughout the regions. These states include California, Oregon, New Jersey, Massachusetts, and Rhode Island⁸.

All of these action steps require the region to coalesce around a common understanding that when everyone in a metropolitan region participates and prospers from economic activity, regions become stronger. Our lack of progress in the area of sustainable residential development suggests we have yet to embrace this construct.

Endnotes

1 Indiana Department of Workforce Development. Note: Construction sector includes residential as well as commercial and industrial construction.

2 Mortgage Brokers Association, as reported by John Tatom in “Why is the foreclosure rate so high in Indiana?”, Networks Financial Institute at Indiana State University, http://mpra.ub.uni-muenchen.de/4674, posted November, 2007.

3 Center for Urban Policy and the Environment, IUPUI

4 Retrieved from the Center for Neighborhood Technology, http://htaindex.cnt.org/map_tool on May 10, 2008.

5 D. Hayden, Building Suburbia: Green Fields and Urban Growth, 1820-2000. New York: Pantheon Books.

6 Historic Landmarks Foundation of Indiana, Preservation and Property Values in Indiana, 1997.

7 James Wesley Scott, “Smart Growth as Urban Reform: A Pragmatic ‘Recoding’ of the New Regionalism”, Urban Affairs (44:15, 2007).

8 PolicyLink, “Promoting Regional Equity: A Framing Paper”, November 2002.