Why Did the “Missing Middle” Miss the Train? An Actors-In-Systems Exploration of Barriers to Intensified Family Housing in Waterloo Region, Canada

Abstract

(1) Background: Missing Middle (MM) housing may be critical to address decreasing housing affordability and to achieve critical density in transit-oriented neighborhoods; however, its production is in decline. We report on a case study of housing development around a new light-rail transit line in the Region of Waterloo, Canada, investigating the puzzle of how a residential building boom coincided with decreasing housing affordability. (2) Methods: Following participatory co-creation and communication of background research characterizing housing demand with stakeholder partners, we created a data narrative arguing that MM housing was desired by residents and profitable for developers and then used it to guide semi-structured interviews with planners and real estate industry stakeholders. Based on these interviews, we developed a qualitative system map and causal loop diagrams that demonstrate interactions between key actors (residents, brokers, planners, developers, and investors) as mediated by boundedly rational real estate demand expectations. (3) Results: Our interviews identify multi-faceted barriers, beyond demand perception, to MM housing development. Systems analysis illustrates how high-density, small-unit high-rise development can become locked in, concurrently locking out MM housing. (4) Conclusions: Our research identifies barriers to MM housing supply by articulating the systemic feedbacks between the planning and land/housing market realms and reveals key leverage points, empowering planners to develop policies that catalyze hoped-for housing market supply responses to increase housing affordability. Based on these findings, we suggest targeted interventions: multi-unit base residential zoning, MM site plan typologies, non-profit and co-op financing, unit-mix requirements, pre-build MM condo purchase by municipalities or non-profits, and MM demonstration projects.

Estimating household demand for transit-oriented development: A two-stage hedonic analysis in Kitchener-Waterloo, Canada

“…For the variables of interest (transit-related variables), we found that properties within the central transit corridor (CTC) were about 1.4% higher in price (based on the median estimate from GWR), suggesting that people were willing to pay more for living in the CTC even when the LRT was under construction. This evidence supports that TOD has been seen as an urban amenity in our case-study region, if not for every household, for many and diverse households (Huang et al, 2021;Parker et al, 2023). The result also confirms our hypothesis that strong preferences for TOD in KW existed in anticipation of LRT.…”

“…They prefer to build denser, more compact projects and see obstacles to realizing affordable family housing, particular with regards to financing projects (Guthrie and Fan, 2016). In KW, evidence from other case-study research indicates a corresponding supply deficit of suitable housing along the corridor for larger households with low-to-moderate incomes (Parker et al, 2023). The authors hypothesize that complex interactions between developer and investor expectations and planning changes have “locked in” small-unit high-rise development and “locked out” provision of “Missing Middle” (MM) housing supply—medium-density housing types that fall between the scales of single-family homes and high-rise apartments, which can provide desirable home options for larger families (Parker et al, 2023).…”

“…In KW, evidence from other case-study research indicates a corresponding supply deficit of suitable housing along the corridor for larger households with low-to-moderate incomes (Parker et al, 2023). The authors hypothesize that complex interactions between developer and investor expectations and planning changes have “locked in” small-unit high-rise development and “locked out” provision of “Missing Middle” (MM) housing supply—medium-density housing types that fall between the scales of single-family homes and high-rise apartments, which can provide desirable home options for larger families (Parker et al, 2023). In short, land-value uplift triggered by current and perceived future approvals of high-density, high-rise developments have created an expectation that high-rise developments will be both allowed and profitable, although these housing products are too small and too expensive for families.…”

“…In short, land-value uplift triggered by current and perceived future approvals of high-density, high-rise developments have created an expectation that high-rise developments will be both allowed and profitable, although these housing products are too small and too expensive for families. Recently, however, increases in construction costs and interest rates have brought high-rise condo construction to a halt (Parker et al, 2022), potentially opening a new window of opportunities for MM housing in core areas.…”

“…However, the challenge is how to translate the government policies into actions of developers. Considering the complex housing market dynamics, Parker et al (2023) suggests targeted interventions to increase the supply of MM housing, including multi-unit base residential zoning, unit-mix requirements, pre-build MM condo purchase by municipalities or non-profits and MM demonstration projects. Those policies might bridge the supply gap in suitable housing for larger families, especially with children.…”