How to make rentals more attractive as the American dream evolves, adapts

Years ago at the University of Maryland, I taught "Economic Determinants in Architecture," an elective course introducing architecture students to the real world of capitalism and showing how that world influences design and development. Students learned that market and financial conditions, along with governmental fiscal and monetary policies, can profoundly influence what gets designed and built.

These lessons will be refreshed as government-backed mortgage funding provided by Fannie Mae, Freddie Mac and the Federal Housing Administration diminishes. The effects of more stringent underwriting standards - higher down payment requirements and lower loan ceilings -and tighter credit will ripple through the real estate industry, dampening home buying and construction. At the same time, demand for rental housing will increase, which means architects, including my former students, will have more multi-family projects to design.

Tougher mortgage financing standards are likely to slow creation of exurban, single-family subdivisions, which means less sprawl. While this is bad news for many homebuilders, it may be good news for smart-growth-minded jurisdictions. In areas well served by transportation infrastructure, counties and municipalities are crafting new master plans calling for development or redevelopment at higher densities with mixed-use buildings and lots of apartments. Examples in this region include Tysons Corner in Fairfax County; Potomac Yards in Alexandria; National Harbor in Prince George's County; the White Flint area in Montgomery County, and downtown Columbia, Md.

Rising market demand for rental housing is already a fact, the result of economic recession, rising unemployment, flat or falling home prices and more-conservative loan practices. For a growing portion of the American population, the probable reality is that conventional home ownership will be economically unfeasible and, with gradual or no appreciation in home value, relatively unprofitable. Increasing numbers of American households will rent.

But will this be detrimental to American society and culture, perhaps signaling the end of the American dream of home ownership?

Tomorrow's reality will not be a nightmare. Rather it will be the manifestation of a common-sense, rational concept disregarded during the housing bubble years: Homes should be bought and owned only by people who can sustainably afford to pay the full gamut of home ownership expenses, including mortgage principal and interest, taxes, insurance, utilities, maintenance and repairs. For others, renting will be the economically prudent and necessary choice. Yet it can be a desirable choice.

Rental desirability will depend on several factors:

l Favorable location and multi-modal transportation options within a community, including convenient access to good jobs, good schools, ample shopping, restaurants, recreation, entertainment and cultural facilities.

l Adequate housing unit size and layout. Rental dwellings must be conceived as "homes," with more apartments designed to accommodate families with children.

l Higher levels of aesthetic and construction quality. Apartment buildings and individual apartments must be commodiously planned with well-designed kitchens and baths, soundproofed walls and floors, ample daylighting, reliable elevators, well-appointed public spaces and attractive landscaping.

l Convenient, shared amenities such as parking, outdoor terraces and gardens, playgrounds, swimming pools and spas, meeting and exercise rooms.

l Affordable rents. Desirability will always depend on rental rates being a reasonable percentage of total household income.

Although somewhat affected by tighter credit, rental housing will be less constrained by changing mortgage finance practices because most projects are funded privately without government support. Unfortunately low-income tenants will continue to struggle, since their rents are made affordable through government subsidies. Regardless of what Fannie, Freddie or FHA do, public-sector budget cutting is likely to reduce housing subsidies and cause considerable pain for low-income families.

Destined to be more urbanized, America will increasingly resemble European metropolises, where renting a home is more commonplace and bears no social or economic stigma. For some of America's next generation of citizens, the American dream of home ownership, and more specifically of owning a single-family detached home in a suburban subdivision, will be less compelling and harder to achieve. This is why rental housing must become a desirable choice and not merely an acceptable necessity.

Roger K. Lewis is a practicing architect and a professor emeritus of architecture at the University of Maryland.

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D.C. newcomers searching for their dream home might get a few wake-up calls

Anyone who has searched for a home in the District, for convenient parking - or even for a bar stool during happy hour - may have sensed what census statistics confirm: There are a lot of newcomers around town. And these newcomers - and their housing wish lists - are helping reshape the city's neighborhoods and housing stock.

From July 2008 to July 2009, a net of 6,550 people migrated to D.C., according to a Census Bureau analysis of Internal Revenue Service data. Last year, the District's population surged past 600,000 for the first time in two decades. Developers are taking notice.

"When newcomers . . . come to Washington for employment, they generally rent first," said Ann Scully, executive vice president of Mayhood, which has been developing condominiums in the District for almost 30 years. "They pick a neighborhood and they rent in that neighborhood. If they end up liking it they might look for something to buy in that area after a year or two," added Scully, who has been with Mayhood since 1984 and is involved with the Workforce Housing Committee of the Urban Land Institute, a nonprofit group that advocates for increased development for moderate-income households.

In addition to favoring rentals, experts say, newcomers generally gravitate toward neighborhoods they recognize.

"Typically newcomers are looking for areas that are nationally identifiable. So we get a lot of people asking about Georgetown, Dupont Circle and downtown," said Ken Johnson, who founded DCRealEstate.com, a marketing, sales and leasing company. "For someone who is coming from outside the area for a job, they're usually not looking to pioneer. They want something they see as safe and that's in the center of things," added Johnson, who also edits the DCMud real estate blog.

Affordability shock

But newcomers soon find that prices in those neighborhoods are among the highest in the city, so many have to broaden their search.

Alefiyah Mesiwala, 30, a preventive-medicine resident at Johns Hopkins who is doing a rotation in Washington, and her husband, Aadil Ginwala, 32, a business consultant, said that after renting in Baltimore for the past few years they were ready to settle down and buy in D.C.

"Our requirements were that it would be Metro-accessible, that it would be physically convenient, that if we needed to rent the building out at some point it would be really easy, and we would be in a fun part of town," Ginwala said.

They considered Dupont Circle, Chinatown, Penn Quarter, Adams Morgan and U Street but soon discovered that their options, given what they could afford, were limited.

"Our initial goal was condos, but they were so expensive and the fees were so high," Mesiwala said. "You might be paying $2,000 or $3,000 for a mortgage and on top of that anywhere from $400 to $1,000 in maintenance."

In the end, they found an attractive two-bedroom rowhouse between U Street and Dupont Circle that had been lingering on the market. They recalled that the garden was unkempt and mold had grown on the deck.

"Really all it needed was a good power washing," said Ginwala, who suggested that the building's modest neglect helped the couple afford their neighborhood of choice.

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