Why It Matters That Middle Neighborhoods Are Disappearing

Almost half of all Americans living in cities reside in a “middle neighborhood.” Middle neighborhoods avoid the distinctive downsides of communities above and below them.

Unlike hot and trendy enclaves, middle neighborhoods don’t witness soaring prices that force out long-established residents.  And in stark contrast to distressed districts, middle neighborhoods tend to avert issues of abandoned homes and neglected residential and commercial properties.

Socioeconomically and ethnically diverse, middle neighborhoods have tended through time to serve as home bases to working and middle-class families, and represent springboards to upward mobility.

Some of today’s middle neighborhoods remain stable; some face gentrification. Yet many more are at risk of imminent, substantial decline.

In short, like the American middle class, the number of middle neighborhoods around the country appears to be shrinking. That’s a situation that concerns Scott Choppin, founder of the Long Beach, Calif.-based Urban Pacific Group of Companies, whose specialty is the creation of urban-infill housing that workforce families can afford.

At present rate

“California is in the midst of an affordable housing crisis,” Choppin said. “Yet, despite the state’s dire situation, it would take some California jurisdictions more than 1,000 years before they meet their state-mandated housing goals. ”

That estimate, Choppin says, is based on the report “Missing the Mark: Examining the Shortcomings of California’s Housing Goals,” by the non-profit think tanks Next 10 and Beacon Economics. The report probes the Golden State’s 539 jurisdictions and how well they are meeting their current Regional Housing Needs Assessment (RHNA) goals.

Seven years ago, California state law began requiring jurisdictions to file a report every eight years to determine the overall numbers of housing units needed to meet demand. Among the Next 10-Beacon Economics’ report’s findings? Jurisdictions within the state are “chronically behind on permitting new housing units, and 100 of the 539 jurisdictions have not been participating in the reporting process at all.”

 

Workforce outreach

Choppin’s  enterprise, Urban Pacific Group of companies, has begun reaching out to cities across the state that have not yet met their moderate-income RHNA obligations. In some instances, it’s not simply that the municipalities have failed to meet the goals, but that they have neglected to create moderate-income housing of any kind.

Urban Pacific offers a housing model Choppin believes is ideal for these cities. The Urban Town House, or UTH, is a five-bedroom, four-bath rental model designed and built to serve the needs of larger, dual or multi-generational families. Many markets struggle to meet housing demand from multi-generational households, defined as including at least two adult generations, or grandparents and under-25 grandchildren.

UTHs can be built and rented affordably. They are expressly designed to leverage simple construction methods and can be started, completed and rented in 18 to 24 months.

Urban Pacific utilizes private capital to both finance and build the UTH, in markets with an under supply of moderate-income or workforce housing. Use of private capital eliminates the financing constraints often associated with infill, affordable housing. Some projects are Opportunity Zone-qualified investments. They have historically generated 25 percent-plus investor internal rate of return (IRR). Perhaps most crucial, Urban Pacific targets middle neighborhoods for land parcels on which to build UTHs. That’s because middle neighborhoods are where the target demographic – working urban families– already resides.

Middle neighborhoods are, moreover, typically where households earning from 80 to 120 percent of the county or metropolitan median income reside.

 

Classic example

In March, Urban Pacific was awarded a nearly five-acre urban parcel in El Monte, Calif. on which to build UTHs. The resulting urban infill Paseo Santa Fe project will feature 42 workforce UTH units, along with 45 for-sale condominium units and a one-acre public park, plus linkages to a retail center and public transportation station.

“American housing markets need massive amounts of new innovation to catch up to the massive supply-constrained marketplace for rental housing in many urban metros,” Choppin says. “Urban Pacific’s UTH workforce housing model is one offer helping to increase supply to the massive market for working families.

“But more innovation is necessary and needed.”

This post first appeared on Forbes.com. To see the original, click here.