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How teardowns hurt housing affordability, and how to fix it

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Vancouver researchers estimate a quarter of the city’s homes could be torn down by 2030

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In high-priced urban neighborhoods of single-family homes, the teardown has become an evolutionary stage, the process by which middle-class becomes McMansion (or McModern).

When the land beneath a decades-old dwelling built for working-class residents becomes more valuable than the house, and zoning hasn’t been changed to allow for multifamily construction, homes get bought, bulldozed, and then rebuilt as bigger, boxier, and less budget-friendly options.

“When a big chunk of a neighborhood is zoned for single-family homes, a teardown offers a terrible trade-off,” says Dan Bertolet, senior researcher at the Seattle-based Sightline Institute. “You’re swapping a less expensive home for a more expensive one, and not gaining any inventory. It’s a developer seeking to maximize the land.”

In many quickly appreciating areas that were recently affordable—Venice in Los Angeles, Logan Square in Chicago, or Queen Anne in Seattle, or many parts of San Francisco and he Bay Area—the teardown may seem like a inevitability, a natural part of the residential property lifecycle that ruins neighborhood character via the pursuit of maximum value.

According to a pair of academics in Vancouver, there actually is a formula at work.

Enter the teardown index. Joseph Dahmen, a professor of architecture at the University of British Columbia, and mathematician Jens von Bergmann of MountainMath Software, developed a tool using assessment records and municipal data to calculate the likelihood a home in Vancouver would be demolished and replaced. The tool looks at the ratio of land to home value—dubbed relative building value, or RBV—and determined that 60 to 70 percent is healthy for a new home, but when the RBV drops below 10 percent, the chances for a teardown increase dramatically.

Due to skyrocketing home prices, half of all single-family homes in Vancouver currently have an RBV of below 7.5 per percent, and research showed that roughly a quarter of all single-family homes sales were tied to teardowns. Absent any zoning changes or dramatic shifts in the Vancouver housing market, the tool predicts that roughly 25 percent of the detached homes in the city will be torn down by 2030.

To Dahmen, these findings suggest the city needs to have a serious conversation about zoning and density.

“Do we want very limited numbers of units for a certain number of rich people?” he says. “With another million expected to move to Vancouver in the next 20 years, what do we do? This is an example of why zoning needs to catch up with radical changes. Vancouver needs to understand what the city is, not what it was.”

A single-family home in Vancouver.
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Letting go of the sacrosanct single-family home

Dahmen says the duo created the tool after observing the teardown phenomenon repeatedly, and becoming curious if they could go beyond anecdotes and get hard numbers.

“You can’t walk past a block in the city without seeing how common this is,” he says. “I wanted to see what was going on, and what the future would look like under today’s policies.”

The same phenomenon occurs regularly in U.S. cities, although some are trying to introduce reform. According to Bertolet, Seattle, which has its fair share of teardowns, has looked at tweaking some zoning policies to upzone certain single-family neighborhoods. Studies have also shown that allowing for more accessory-dwelling units in backyards adds to inventory and property value, taking some of the pressure off teardowns.

“In a city like Seattle, crushed by a housing shortage, it’s a great idea to replace old homes with new buildings and less units with more,” says Bertolet.

The teardown index only covers a specific type of zoning in Vancouver, known as RS zoning, or One-Family Districts. Roughly 68,000 homes in the downtown Vancouver fall under this category, and 40 percent of the historic stock of these homes has been torn down since 1985. Dahmen he says the lessons can be applied more generally to how Vancouver thinks about land value, density, housing costs, and the shape of the city.

Different zoning that would allow for multifamily units would tip the teardown index, since the potential profit of building multiple units on a lot would raise its value relative to an existing single-family home. And it would also increase density.

“To create the kind of multi-unit, low-rise housing that you see in Berlin, Paris, or Montreal would require letting go of the kind of single-family home that’s sacrosanct in North America,” Dahmen says.

The environmental impact of rebuilding repeatedly

Another reason Dahmen and von Bergmann looked at teardowns was to examine the environmental repercussions of these residential replacements. With constantly rising land values, even today’s new homes will be tomorrow’s teardowns without significant changes to how the city thinks about zoning and density.

The carbon emission implications of teardowns is significant, and taking the renovation instead of removal route can have significantly better results. Eventually, he wants to factor in more environmental data and begin to examine other cities.

If single-family homes were replaced by more efficient, more dense multi-unit developments, the shift could contribute to the effort of Vancouver, and cities like it, to create more sustainable, affordable, and available housing stock. he says. “We can’t rely on a backwards-looking zoning policy that will only allow you to build another single-family home on that same spot.”