Where Do Upzonings Happen?

(Not by the beach or other desirable amenities / publicdomainpictures.net)

I think the most useful way to think about NIMBYism is as a neighborhood-centered phenomenon. When people shop for homes, they shop for specific, physical features of a dwelling, of course, but mainly they shop for neighborhoods. The quality of neighborhood amenities — interpreted broadly to include things like school quality and access to the CBD — varies wildly from neighborhood to neighborhood, and thus does the amount people are willing to pay for those amenities.

What NIMBYs are really after is limiting access to neighborhood amenities, mostly by limiting the quantity of housing. Neighborhoods (at least the ones empowered politically) do their best to hold housing below the market-clearing quantity. This ensures that the value of neighborhood amenities is capitalized into home prices. Without quantity controls, the “nicest” neighborhoods would be the densest. Instead, thanks to zoning, they’re simply the most expensive. There’s a steep premium for buying into the neighborhood club.

Here’s evidence in favor of the “club” theory from L.A. planner C.J. Gabbe. (H/t Urbanize.LA.) Gabbe asks the question, “Where do upzonings and downzonings happen?” To answer it, he looked at how the zoning of each of L.A.’s 780,000 parcels changed between 2002 and 2014, and tallied whether a lot was “upzoned” or “downzoned”, as measured by the change in allowed residential density.

The first striking result was how few of the parcels were either upzoned or downzoned: an average of just 225 acres were upzoned and 216 acres downzoned annually between 2002 and 2014. That is, less than two-tenths of one percent of L.A.’s land area was upzoned or downzoned each year. Given the surge in demand for housing in L.A., especially over the last 6 years or so, that’s remarkably little.

But the other thing Gabbe documents is that resistance to zoning really does seem to depend on the quality of neighborhood amenities.

It is not known why some Los Angeles parcels were upzoned and not others. The City should be increasing housing densities near public transit and in other neighborhood where growth enables the City’s goals, including helping to mitigate climate change.

But it is clear that upzoning in Los Angeles follows the path of least political resistance and most development opportunity. Upzoning was most likely on well-located parcels near freeways, and on parcels previously zoned for low-intensity uses like manufacturing and parking. For every mile farther from a freeway ramp, the odds of a parcel being upzoned were nearly halved. The odds of upzoning were 85% higher for a parcel where housing wasn’t allowed in 2002 (e.g., parcels zoned for manufacturing, parking etc.)

Meanwhile, upzoning was least likely in neighborhoods with average or higher shares of homeowners coupled with desirable amenities such as proximity to the beach and high-performing schools. A parcel in a neighborhood with a high homeownership rate was about 96% less likely to be upzoned than a parcel in a neighborhood with a low homeownership rate. (High homeownership neighborhoods were defined as the City’s top quartile in terms of ownership and low ownership neighborhoods were those in the bottom quartile.) For every mile farther from the beach, the odds of a parcel being upzoned increased by 56%. Lastly, every 100 point increase in a parcel’s local elementary school Academic Performance Index score decreased the odds of being upzoned by 15%.

If the housing markets were at all efficient, a nice neighborhood would be upzoned as demand rises for its specific set of amenities. Nice neighborhoods should be growing denser than less-nice neighborhoods. In reality, the opposite is true. A desirable amenity such as good beach access or a good neighborhood school just makes neighborhood owners more determined to fight off any sort of increase in the quantity of housing. Clubs must be exclusive to be expensive.