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Cities Struggle to Add Upscale Housing While Maintaining Diversity

Cities from Seattle to Chicago to Washington and New York are struggling to crack the ultimate urban code: How to squeeze in ever more well-off people without driving out the less affluent?

As urban populations near a new apex, city planners are raising the ire of many locals with proposals to allow developers to pack more housing into existing neighborhoods, a process called upzoning, if they pay up to protect or add options for lower-income residents.

The push to add density without sacrificing diversity comes as an influx of professionals are driving up prices and rents in many cities, a force expected to intensify in coming years. The issue has become more severe as large numbers of millennials, pushing off marriage and children, eschew suburban living for amenity-rich urban areas.

The problem has been particularly acute in Seattle, which is gearing up to absorb at least 6,000 new residents a year for the next 20 years. The average rent for a one-bedroom apartment has shot up 29% in the last five years, according to the city.

In response, Mayor Ed Murray in late 2014 created a committee made up of for-profit developers, affordable-housing advocates and neighborhood activists. The group proposed a “grand bargain” that would allow developers to build more densely in exchange for affordable housing.

The mayor initially supported a plan to open the nearly two-thirds of the city’s neighborhoods zoned exclusively for single-family homes, many of which are outside the city center, to accommodate a wider range of housing options, like flats, duplexes and triplexes.

But stiff opposition from residents forced the mayor to focus on upzoning proposals in the city center. New commercial developments and multifamily residential projects can exceed current zoning restrictions on how big and tall they can be if developers set aside a portion for affordable housing or pay the city to build affordable units off site.

Seattle’s City Council has approved commercial upzoning and is expected to vote on a framework for similar moves in residential areas later this summer.

Mitchell Brown, a 23-year-old private equity analyst in Seattle, joined the mayor’s committee to advocate for student housing needs while he was at the University of Washington. He shared a house zoned for eight people with 11 roommates while he was a student. He said he got lucky when he found a place to live after school, describing competitive open houses where 50 people show up with briefcases and resumes hoping to win over landlords. He spends 35% of his salary on rent and said that is “about as good as it gets.”

A study by New York University’s Furman Center of the 11 largest metropolitan areas in the country found the renter population grew 6% faster than the rental supply between 2006 and 2014. At the same time, in most cities, rents were rising faster than incomes, leaving many urbanites struggling. Low-income renters could afford less than 10% of recently available units, the study found.

But finding the right mix of growth and affordability has presented challenges, with debates around upzoning turning intensely political and pitting developers, neighborhood activists and affordable-housing advocates against one another.

“Whatever you do with rezoning you are invariably stepping on somebody’s foot, or blocking their light or taking their air,” said Benjamin Dulchin, executive director of the Association of Neighborhood Housing and Development, an affordable-housing advocacy organization in New York City.

Cities are finding it isn’t enough to relax density restrictions without a simultaneous commitment to build or maintain affordable housing.

Facing its own crush, New York passed a provision in March allowing upzoning in some areas in exchange for affordable-housing commitments. The vote followed more than two years of debate over what constitutes affordability—in a city where the mayor, Bill DeBlasio, had made income equality a key issue for the administration, which was met with criticism.

“A lot of the struggle in New York City was, ‘affordable for whom?’” Mr. Dulchin said. “Is it technically affordable or is this affordable for me?”

After fierce debate, New York settled on making a portion of housing affordable for residents making as little as 40% of the area median income. That translates into $31,000 a year for a family of three. Other cities, like Seattle, have settled at 60%.

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