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Getting housing wrong (and right): In Buffalo and beyond-Empire State Future-June 7, 2014

Getting housing wrong (and right): In Buffalo and beyond
Empire State Future Staff

Major media extol new housing starts as a sign of a robust economy. But this metric ignores the significant service and infrastructure costs that housing–and surplus housing–exacts on local governments and taxpayers.

In 2003, Cleveland State University planning professor Tom Bier illuminated the extent of residential overdevelopment in America’s regions in a report he wrote for the Brookings Institution Metropolitan Policy Program. Entitled Vacating the City: An Analysis of New Homes vs. Household Growth, the report revealed that many American regions issued building permits and built new housing units at clips far greater than the increase in the number of new households. Of the 75 regions analyzed in the report, our own Greater Buffalo was far and away the gold medalist for residential overdevelopment, having issued over four housing building permits for every single new household formed in the region between 1990 and 2000. Bier concluded in his report that such surplus means increased vacancy and depreciation, especially in regions’ center cities.

Given that residential development is the most expensive form of development to government and taxpayers when measuring the infrastructure and service costs against the tax revenues (and this fact doesn’t even include the costs and losses stemming from the vacancy and depreciation that oversupply creates), judicious planning for residential development is a must. Yet most municipalities have the lion’s share of their land zoned for residential development–an ominous phenomenon. What’s more, counties and regions in New York don’t plan collectively or cooperatively for land use and development; this leads to overdevelopment, as municipalities plan, zone, and build without regard for regional demographic realities.

The Bier report was important in that it blew apart an argument used by home builders in Upstate New York– the argument that even though population is declining or flat in Upstate regions, new housing is needed because demographic shifts (prevalence of divorce, increases in amount and length of solo living, decreased average household size) have resulted in many new households being formed. It is true that in Upstate regions the number of households has been growing substantially over the last couple of decades (despite a dramatic slowing during the recession of 2007-2009), yet Bier’s analysis revealed that these regions were issuing new housing permits and building new housing units far in excess of even new household formation. This pointed squarely to a problem of overbuilding residential, and to the fiscal and physical challenges that accompany such a pattern: the aforementioned vacancy and depreciation, rising infrastructure and school/service costs and therefore rising government tax burdens and taxes, and lost farmland and open space.

Since Bier’s report analyzed trends between 1990 and 2000, Empire State Future was interested in looking at changes in population, household formation, and new housing construction in Upstate New York between the 2000 and 2010 Censuses, to see if our overbuilding of residential units has persisted.

Our research found that four of six major Upstate counties are still building housing units in substantial excess of the number of new households being formed.Our analysis revealed that with two surprising exceptions, major Upstate counties continue to overbuild residential units. We decided on a different methodology from Bier’s report– we looked at the number of housing units actually built, as opposed to the number of residential building permits issued. Although the number of building permits issued is surely a measure of willingness to overdevelop housing, we believe the number of actual units built better show its real extent.

The six counties analyzed were Albany, Broome (Binghamton), Erie (Buffalo), Monroe (Rochester), Onondaga (Syracuse), and Oneida (Utica). The first four showed continued overbuilding of housing, while Onondaga and Oneida surprisingly showed housing unit development trailing the formation of new households.

The following table displays the extent of overbuilding in the first four counties:


Collectively, these four counties added 23,358 households between 2000 and 2010, but added 29,824 new housing units–an excess of 6,466 units. This means a 27.7% excess of new housing units over new households formed. One has to wonder what effect the increased supply of housing has on the value of existing homes. Economics 101 suggests that overbuilding, while good for developers, is bad for existing homeowners…

Bucking the residential overdevelopment trend are Onondaga and Oneida Counties. Both actually saw household formation exceed the number of new housing units developed– a significant deviation from their four sister regions. In Onondaga, 6,533 new households were created between 2000 and 2010, yet only 5,724 new housing units came on line. In Oneida, 2,532 new households were formed while only 1,377 new housing units came on line.

Why these two regions deviated from the other four is not entirely clear, and warrants further investigation. Have Onondaga and Oneida Counties successfully steered many new households into existing housing stock? Vacancy statistics support this claim, as Onondaga and Oneida Counties saw their number of vacant properties drop between 2000 and 2010, while Albany, Broome, Erie, and Monroe all experienced increases in vacancy. Given what we learned from researching our 2012 blog on a wave of immigration to Utica, it stands to reason that immigrants there have been taking residence in formerly vacant properties.

So what are the implications of overdevelopment of residential units in Upstate communities? It bears repeating: since residential development is the most expensive land use to government and taxpayers, the residentially overbuilt communities are likely facing worsening fiscal deficits and growing difficulties providing and maintaining infrastructure and services. In addition, these communities will continue to experience more vacant properties and the associated costs, and lose their open space and farmland, as well as rural character and heritage, as the excessive new housing continues to spill into the countryside.

The solution? Municipalities must scrutinize their plans and zoning to see how they enable overdevelopment of housing. In addition, municipalities must come together to derive regional housing development plans, as our communities and their collective vitality–and viability–depends on finding the right quantity, type, and location of housing. Without such action, we will continue costly housing overdevelopment–and New York taxpayers will foot the burgeoning bill.