The Cameron, a new apartment building in downtown Silver Spring. Photo from Behringer Harvard Residential, LLC.
All other things being equal, old buildings are usually more affordable than new buildings. Without the latest amenities, old buildings have to charge less in order to attract tenants. A healthy supply of old buildings is therefore crucial to long term neighborhood affordability.
Local governments are to be commended for adopting inclusionary regulations that require new projects to contain a certain percentage of affordable housing units, but this process has never been able to provide enough affordable housing supply to meet the demand. The only way to stabilize affordable residential rents in the long term is to increase the supply of old buildings.
Luckily, creating more old buildings is easy. We just have to build a lot of new ones and then let them age. Our problem in the short term is that not enough new buildings were built in walkable areas in recent decades, resulting in a dearth of old buildings today.
A friend’s recent housing search offers an interesting example of the phenomenon.
Up until a few months ago my friend lived in a brand new, and quite expensive, building in White Flint. When they announced a rent increase, she decided to look elsewhere. I suggested downtown Silver Spring, thinking that the increased supply of housing units there in recent years would result in lower rents. After doing some research, my friend determined that rents in Silver Spring were comparable to what she was seeing in White Flint.
New buildings, it turns out, are expensive even if there are lots of them. Of course, Silver Spring’s desirability in general has also greatly increased recent years, which is why there are so many new buildings there in the first place.
There are more people who are interested in paying to live in Silver Spring than there were a decade ago. While there are now more residential units than before, there is simply far more demand than the new buildings can accommodate to keep rents stable.
Just up the Red Line in Wheaton the situation is a little different. Wheaton is still a few years away from revitalization on the scale of Silver Spring. It is a much less desirable location. Therefore, one would suppose that rents there would be less expensive.
Because Wheaton is a less desirable location, it has fewer new buildings than Silver Spring. But it does have a few. If one compares the rents for a new building in Wheaton to those of a similar new building in Silver Spring, the listed rents are comparably expensive.
Despite the location differences, they are both new buildings. And new buildings have high rents.
Older buildings compete with newer buildings by offering lower rents.
In the specific case of downtown Silver Spring, the older buildings can charge almost as much as the new buildings because the area is so desirable that there is a supply shortage. If there were enough supply to meet the demand, the older buildings would be the first to become more affordable.
Buildings in the same location compete with each other for tenants. New buildings offer amenities, and old buildings offer affordability. Previously new buildings eventually become comparatively old, and therefore eventually have to compete more strongly on price.
The key lesson is that we must produce enough new urban buildings today to meet tomorrow’s affordable housing needs. Our current affordability problems are due in no small part to a failure in the late 20th Century to produce enough urban buildings that we would today consider “old”. We must not repeat that mistake.