Markets with home ownership and rental vacancy rates below the national average might want to take a hard look at the benefits of higher density housing.

A growing number of reports are showing that higher density housing can loosen up tight, expensive markets for more buyers, as well as ease the cost of living, help support economic growth and ease traffic -- for starters.

The National Association of Realtors recently named 22 major metro areas as those most in need of affordable multi-housing developments because of rising housing demand and resultant higher costs that are putting the squeeze on low-income households.

"Rents and home prices have appreciated markedly in these markets, and the lack of new affordable housing could sustain or fuel higher rents and home prices and pose a sever cost burden particularly to many low-income households in these metro areas," wrote Sigrid Z. Fennemore a senior commercial market analyst who penned "A Look At America's Affordable Housing Squeeze," for NAR's Real Estate Outloook, April 2002 edition.

On the list with relatively low ownership and rental rates were seven California metro areas, Los Angeles-Long Beach, Orange County, San Bernardino-Riverside, San Diego, San Francisco, San Jose and Ventura; three New York metros, Albany-Schenectady-Troy, Nassau-Suffolk and New York City; two New Jersey metros, Newark and Middlesex-Somerset-Hunterton; two Florida metros, Miami and Ft. Lauderdale; and the metros of Dallas, TX; Denver, CO; Minneapolis-St. Paul, MN-WI; Norfolk-Virginia Beach-Newport News, VA; Providence-Fall River-Pawtucket, RI-MA; Salt Lake City-Ogden, UT; Scranton-Wilkes-Barre-Hazelton, PA; and Tulsa, OK.

The metros' need for multifamily, high-density housing is pretty obvious, but the benefits aren't always so evident.

To begin with, high-density housing is a central component of neo-traditional planning principles, known as "new urbanism" and, more and more often, the new urbanist approach is considered essential to "smart growth".

New urbanism's principles -- mixed land uses, mixed housing types, public space, pedestrian-oriented design and an interconnected street network -- work hand-in-hand to help manage inevitable community growth by limiting strain on the land supply, on the infrastructure, and on community services, while at the same time supporting economic expansion spawned by growth.

High-density housing, especially in-fill housing, holds a special place in the mix because of its inherent benefits to households, to the community and to the area's economy.

Home Value Benefits

Zoning, planning and land use controls that limit the supply of more affordable housing, including high-density housing, tends to increase the cost of other housing in the community, according to the Brookings Institution's recent "The Link Between Growth Management And Housing Affordability: The Academic Evidence".

The study said policies that include requirements for low-density-only, minimum housing sizes, or bans against attached or cluster homes are exclusionary tactics that effectively make housing more expensive by eliminating lower-income families who are more likely to buy cheaper housing.

High-density housing can be more affordable by at least two measures -- design and location.

By design, high-density housing constructed as apartments, town homes or condos typically has a smaller parcel footprint than conventional single-family housing. Units are often constructed up instead of out without extra yard space, but share some common area. Further improving upon high-density housing's economy of scale, construction often places units one above the other, allowing several or more housing units to occupy a single parcel footprint.

Constructing a sufficient number of units on a given parcel provides a builder with a greater return on its investment in sales or rents, which can be passed onto the consumer in the form of cheaper housing.

For closed sales in March 2002, the median price of single-family homes was $535,000 in Santa Clara County, $492,000 in the city of San Jose, CA, the county seat. The condo and town home median was only $340,000 countywide, $319,000 in San Jose -- in both cases nearly $200,000 cheaper -- though still not necessarily "affordable" by many measures.

As for location, high-density housing that replaces blight and other undesirable conditions can work the other way and increase the desirability of a community, and subsequently boost existing home values.

If development is carefully considered and the housing is located along a transit corridor, however, residents are not necessarily financially worse off because higher housing prices easily can be offset by lower transportation costs, according to the Brookings report.

Transportation Cost-Related Benefits

The value of lower transportation costs associated with living in proximity to public transportation is so compelling, Chicago's Center for Neighborhood Technology and other planning agencies convinced Fannie Mae to test what's called "Location Efficient Mortgages (LEMs)" in Chicago, Portland, San Francisco and Seattle.

Much as "Energy Efficient Mortgages (EEMs)" allow a home owner with a more energy efficient home to spend more money on housing instead of energy, LEMs allow home owners to spend a greater percentage of their income on housing when they spend less on transportation -- a distinct possibility when high-density housing is constructed near public transit corridors.

The cost to operate a privately-owned vehicle is a consumer's second greatest expenditure, after housing and before food, according to the U.S. Bureau of Labor Statistics' March Consumer Price Index.

Even without the special mortgage, high-density housing near public transportation can save home owners transportation annual costs equal to several or more monthly mortgage payments.

In 2000, some public-transit heavy San Francisco neighborhood households were spending less than $4,500 a year to operate an automobile. In some San Jose areas with less public transit, the cost is more than $6,750 a year, according to "Driven To Spend" by the Surface Transportation Policy Project, which documents the often-alarming cost of personal transportation.

The value of high-density housing near public-transit not only benefits home buyers and owners, but the area's traffic load as well.

A San Jose-based Silicon Valley Manufacturing Group-contracted study in 1995, "Transit Based Housing Survey," found that light rail station area residents used the light rail and bus combined as their predominate commute mode (three or more days a week) of transportation more than five times as often as residents throughout Santa Clara County.

"Getting To Smart Growth: 100 Policies For Implementation," by the Smart Growth Network says when communities are created that double household density, vehicle travel is reduced by 20 to 30 percent, as people use convenient and cheaper alternatives to the car. More compact neighborhoods also require fewer linear feet of utility lines, including water, sewer, electricity, phone service and cable than dispersed communities. The pay off is a local government that finds it relatively cheaper to provide and maintain services. That could give jurisdictions the extra funds to help subsidize affordable multi-family housing and make it more profitable for the builder.

Economic Spill-Over

When high-density housing generates the need for sufficient upgrades to public transportation systems, the economic benefits can increase an area's employment rolls, household incomes and property taxes as well as property values. A major transit hub upgrade or construction could mean as many as 1,435 new jobs, household incomes increasing by as much as $1,055 a year, a total property value rise of $20 million and property tax take increasing by $10.25 million, in the city with a population of a half million people or more, according to the recent "The Great American Station Foundation Economic Impact of Station Revitalization" by the Great American Station Foundation.

High-density housing can also be the impetus to create sufficient population clustering to attract and sustain retail operations.

A neighborhood shopping center of 30,000 to 100,000 square feet with a supermarket anchor requires a minimum population of 3,000 to 40,000 within a radius of three miles, according to retail development guidelines in the Urban Land Institute's "Shopping Center Development Handbook".

A larger community shopping center of 100,000 to 450,000 square feet with a junior department, variety or discount store as the anchor, requires a population base of 40,000 to 150,000 within a three to six miles-radius.

The evidence is irrefutable.

Developing high-density housing offers a bounty of economic benefits while helping to make a neighborhood more livable, vibrant and attractive to both residents and businesses alike.

High-density housing, like single-family housing, isn't the only choice -- but it is a compelling choice.

Published: May 9, 2002

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A journalist for 35-years, Broderick Perkins parlayed an old-school daily newspaper career into a digital news service offering editorial content and consulting services. Perkins' San Jose, CA-based DeadlineNews Group includes the flagship news site, DeadlineNews.Com, offering real estate, personal finance and consumer journalism, and a backshop, the Deadline Newsroom.