On Sunday, May 7, the Albuquerque Journal published the below Dinelli Guest Opinion Column on page C3 of its editorial pages. On the same day, the paper published on its front page an in depth article with the bold print banner headlines “WHAT’S BEHIND ABQ’S SKYROCKETING RENTS? Out-of-state investment could be a boon to city’s apartment scene, but tenants face rent hikes and other issues”.
HEADLINE: “Keller’s shanty town of casitas, duplexes, encampments”
PUBLISHED: SUNDAY, MAY 7TH, 2023 AT 10:00AM
UPDATED: SUNDAY, MAY 7TH, 2023 AT 10:15AM
A shanty town is loosely defined as an area of improvised buildings known as shanties or shacks of poor construction that lack adequate infrastructure including proper sanitation, safe water supply, electricity and street drainage and parking. Mayor Tim Keller wants enactment by the City Council of two major amendments to the zoning laws that will transform the city into a shanty town. The amendments will allow the construction of 750 square-foot “casitas” and “duplex” additions in the backyards of all 120,000 residential lots that have existing homes. The City Council has voted to allow 18 city-sanctioned Safe Outdoor Space tent encampments for the homeless to help with the “shanty town ambiance.”
The casita and duplex amendments are part of Keller’s Housing Forward ABQ Plan. It is a “multifaceted initiative” where Keller has set the goal of adding 5,000 new housing units across the city by 2025 above and beyond what private industry normally creates each year. Keller has proclaimed the city is in a major “housing crisis” and the city immediately needs 13,000 to 28,000 more housing units.
The zoning code amendments would make both casitas and duplex additions “permissive uses” and not “conditional uses” as they are now and have always been historically. A “conditional use” requires an application process with the city Planning Department, notice to surrounding property owners and affected neighborhood associations and provides for appeal rights. A “permissive use” would give the Planning Department exclusive authority to issue permits for construction without notices and hearings and with no appeal process. Objecting property owners and neighborhood associations to the permissive casita and duplex uses would be relegated to filing lawsuits to enforce covenants and restrictions.
Reclassification zoning of all single-family lots to allow residential duplex development and casita development will encourage large private investors and real estate developers, including out-of-state corporate entities, to buy up distressed properties to lease and convert whole blocks into rental duplexes with substandard rental casitas. This will dramatically degrade the character of neighborhoods and the city as a whole.
To put the argument in perspective, an individual investor will be able to purchase single-family homes to rent, add a 750-square-foot two-family home addition and build a separate 750-square-foot free-standing casita. The result is a one-home rental being converted into three separate rental units. Such development will increase an area’s property values and property taxes. It will also decrease the availability of affordable homes and raise rental prices even higher. It will increase gentrification in the more historical areas of the city as generational residents will be squeezed out by the developers and increases in property taxes.
The housing shortage is related to economics, the development community’s inability to keep up with supply and demand and the public’s inability to purchase housing and qualify for long-term housing mortgage loans. There is also a shortage of rental properties resulting in dramatic increases in rents.
Keller is using the short-term housing “crunch” to declare a “housing crisis” to shove his Housing Forward ABQ Plan down the throats of city residents and property owners. Keller is advocating transformative zoning changes to increase density by severely relaxing zoning restrictions to favor investors and the developers that will destroy entire neighborhoods.
ALBUQUERQUE JOURNAL COLUMN
On May 7, the Albuquerque Journal published on its front page an in depth article written by Journal staff reporter Alaina Mencinger spread out over 3 pages with the bold print banner headlines “WHAT’S BEHIND ABQ’S SKYROCKETING RENTS? Out-of-state investment could be a boon to city’s apartment scene, but tenants face rent hikes and other issues”. Major highlights of the Albuquerque Journal article that are worth noting are as follows:
“More outside investors are buying multifamily properties around the metro area — which could be a boon for Albuquerque’s aging housing stock, with many investors promising renovations and updates post-purchase. But tenants from several buildings around the city have reached out to the Journal over the past months, detailing rent hikes, problems with maintenance and unexpected lease non-renewals after ownership changed hands.
Maria Griego, director of economic equity at the New Mexico Center on Law and Poverty, said the center frequently receives calls from tenants after their building are bought.
“I’d say it’s one of our more common calls that we get,” Griego said. “More and more, we’re hearing from folks who are surprised to know that their lease is not going to be renewed, or that it will be renewed, but, they have to pay a huge increase in rent.”
So what’s causing the changes in the Albuquerque rental scene? And what’s the impact on the city’s thousands of renters?
The vast majority — about 88% — of the 8,000-odd multifamily rental properties in Albuquerque are locally owned, mom-and-pop operations, said New Mexico Apartment Advisors CEO Todd Clarke.
But a growing number of real estate investors are entering the market.
According to data from Clarke, there are currently 1,999 investors looking in the Albuquerque multifamily market — a number that has increased sixfold since before the pandemic.
There are a number of factors that have made Albuquerque appealing to outside investors, Clarke said. Pre-pandemic, he saw many investors come from markets that had rent control, unlike New Mexico, and were attracted by the low square-footage cost.
Clarke said Albuquerque’s economic growth over the past few years has been boosted by the FAANG effect — the relocation of major tech companies including Facebook, Amazon, Apple, Netflix and Google to an area. And investors started to take more notice, Clarke said.
“I feel like if not for the global pandemic, and kind of crazy national and global politics, that the headline news every day would have been this phenomenal economic success that Albuquerque is having,” Clarke said. “Investors like to go to markets where you see some strong job growth, because it speaks well about your future prospects for the community.”
Outside investment could increase and update Albuquerque’s housing stock. There are several thousand new units either under construction or newly opened, Clarke said. But before those units came on the market, the average age of an apartment in Albuquerque was 58 years — significantly older than housing in similar markets.
Cynthia Meister, vice president of Albuquerque’s branch of real estate company Northmarq said when she first moved to Albuquerque, she found the condition of the housing stock “embarrassing” — and said investors also noticed how out-of-date many properties were.
“There were some developers that came in and they bought up some of these properties that were just dilapidated, and they put in outside lighting … they put in new cabinets, etc,” Meister said. “And yes, there is going to be a rent increase. Absolutely, there is going to be a rent increase.”
Meister noted that tenants don’t necessarily want to move out of their current apartments into renovated units — and thus either pay higher rents for unrenovated or have to move entirely at the end of a lease.
Clarke said many Albuquerque residents have put up with “substandard housing,” in exchange for lower rents. Over the past decades, Clarke said, rents have remained somewhat stagnant — until now, as the city reckons with a rental shortage of about 13,000 units. In Northmarq’s Q4 2022 report, data indicated that low vacancy and high rents had prompted more housing development, but Meister noted that enduring supply chain issues could push back opening dates.
A pressure cooker of high demand and the cost of renovating outdated buildings has led to the citywide rent spikes, giving a “heart attack” to residents as prices increase all at once, Clarke said. And, mortgages are now harder to afford, he continued, so there are fewer housing options available, putting additional pressure on the rental market.”
The link to read the full May 7 Albuquerque Journal article with accompanying graphs is here:
CASITAS AND DUPLEX ADDITIONS WILL BE COSTLY
Home Builder Digest is a national online magazine dedicated to the residential housing industry. According to Homebuilders Digest, the United States market rate to build is at $207 per square foot. Home builders serving the Albuquerque area estimate the cost to build in Albuquerque between $175 to $275 per square foot.
The Homebuilder’s Digest has also addressed the hard costs of construction and affordable housing in the city as follows:
Hard costs cover everything from materials to the actual home construction. In Albuquerque, a value-based custom home would start around $175 per square foot. This is a home that would have builder-grade finishes, such as ceramic tile, laminate flooring, basic cabinets, level one granite or quartz, aluminum or builder-grade vinyl windows, value series appliances, and basic plumbing and electrical fixtures.
A mid-range home would start at around $225 per square foot. Mid-range finishes would include porcelain tile, engineered wood, mid-level cabinets with soft close, level two or three granite or quartz, and a moderate budget for plumbing and electrical fixtures. It would also have premium vinyl or fiberglass windows and higher-end appliances.
A high-end custom home would start at around $275 per square foot. This home would have all high-end custom finishes, fiberglass or wood windows, and professional appliances.
A home with energy efficiency features would range between $200 to $400 per square foot depending on selections for mechanical systems, windows, plumbing and lighting fixtures, cabinets, appliances, flooring, and more.
“Many in the city believe Albuquerque should develop a more comprehensive housing strategy that will include provisions for homeless programs, transitional living programs, low-income rental, market-rate rental, and homeownership programs. Zoning policies enabling greater density, such as allowing for more accessory dwelling units (ADUs) on properties and encouraging high-rise condominiums can also help. Even new developments at higher price points can make a difference, as a family moving into a condominium can put their single-family house on the market and create an opening for a step-up buyer, and then consequently a first-time homebuyer. …
Home builders serving the Albuquerque area estimate the cost to build residents in Albuquerque is between $175 to $275 per square foot. It’s a cost that equally applies to casitas and duplex development. To build and construct a 750 foot casita or duplex at the $175 foot construction cost would be $131,425 (750 sq ft X 175 = $131,421) and to build both $262,848. To build and construct a 750 foot casita or duplex at the $275 foot construction cost would be $206,250 (750 sq ft X $275 = $206,250) and to build both $412,500. These are just actual construction costs. The addition of plumbing, sewer, electrical and gas hook ups and permits will likely add and additional $30,000 to $50,000 to the final construction costs bring the actual total cost to $180,000 for a single unit or to perhaps $256,000 for both a casita and a duplex.
COMMENTARY AND ANALYSIS
The Dinelli Journal guest opinion column and the Albuquerque Journal front page column complement each other. Both identify that what is occurring in Albuquerque is major outside investors are coming to the city and buying up residential properties.
The casita and duplex amendments to the city zoning code are part of Keller’s Housing Forward ABQ Plan. At all 5 public meetings held in March and April, and the two City Council Land Use Planning and Zoning committee meetings on the zoning changes, the Keller Administration repeatedly said that casita and duplex development are needed to increase density, create affordable housing and to get away from “urban sprawl”. They repeatedly made the misleading representation that many within the community want additional housing for extended families making reference to “mother-in-law quarters”. Calling casitas “mother-in-law quarters” is nothing more than a ploy by the Keller Administration to make the proposal palatable to the general public.
Not once has the Keller Administration ever discussed the actual cost of construction of 750 square foot casitas and duplex remodeling nor who will be able to afford such remodeling and construction. They simply presume property owners will be able to afford to do it themselves which is not at all likely given the high cost of construction and materials. The truth is very few people have the financial ability to invest another $130,000 to $250,000 in homes they already own. The casitas and duplexes will be used predominantly by developers and investors as rental units, either for housing or business use.
The blunt truth is that outside investors are the only ones that will likely be able to afford and undertake increasing the city’s density with casitas and duplex development.