Urban[ism] Legend: The Free Market Can’t Provide Affordable Housing

Over at Greater Greater Washington, Ms. Cheryl Cort attempts to temper expectations of what she calls the “libertarian view (a more right-leaning view in our region)” on affordable housing.  It is certainly reassuring to see the cosmopolitan left and the pro-market right begin to warm to the benefits of liberalization of land-use.  Land-use is one area the “right,” in it’s fear of change, has failed to embrace a widespread pro-market stance.  Meanwhile, many urban-dwellers who consider themselves on the “left” unknowingly display an anti-outsider mentality typically attributed to the right’s stance on immigration.  Unfortunately, in failing to grasp the enormity of the bipartisan-caused distortion of the housing market, Ms. Cort resigns to advocate solutions that fail to deliver widespread housing affordability.

Yes, adding more housing must absolutely be a part of the strategy to make housing more affordable. And zoning changes to allow people to build taller and more usable space near transit, rent out carriage houses, and avoid expensive and often-unnecessary parking are all steps in the right direction. But some proponents go on to say relaxing zoning will solve the problem all on its own. It won’t.

Well, if “relaxing” zoning is the solution at hand, she may be right – relaxing will only help a tad…  While keenly aware of the high prices many are willing to pay, Cort does not seem to grasp the incredible degree to which development is inhibited by zoning.  “Relaxing” won’t do the trick in a city where prices are high enough to justify skyscrapers with four to ten times the density currently allowed.  When considering a supply cap that only allows a fraction of what the market demands, one can not reasonably conclude “Unlimited FAR” (building density) would merely result in a bit more development here and there. A radically liberalized land-use regime would deliver numbers of units several times what is permitted under current regulation.

Ms. Cort correctly concludes that because of today’s construction costs, new construction would not provide housing at prices affordable to low income people.  This will certainly be the case in the most expensive areas where developers would be allowed to meet market demands by building 60 story skyscrapers.  Advocates of land-use liberalization who understand the costs of construction would not claim that dense new construction will house the poor.  But if enough supply is allowed to come to market today, today’s new construction will become tomorrow’s affordable housing.  And this brings us to the more meaningful discussion: filtering.  Here’s where Ms. Cort’s analysis completely falls apart.

It is true that increasing supply eases upward pressure on all prices. But the reservoir of naturally cheaper, older buildings runs out after a while.

Tragically, Ms. Cort is using the current radically supply-constrained paradigm to analyze a free-market counter-factual.  If development at levels several times the current rate were allowed over the past few cycles, the reservoir of cheaper, older buildings would have remained plentiful and affordable.  If the market were allowed to meet demand for high-end units in the form of dense new construction, there would be little or no market pressure for unsubsidized market-rate units to be converted into luxury units.  The 1400 Block of W Street NW example she gives would almost certainly still be affordable.

On a larger scale, the increased supply of housing in the area helps absorb demand for more housing, but it’s not enough to stem the demand for such a sought-after location. Between 2005 and 2011, the rental housing market’s growth added more than 12,500 units. But at the same time, $800/month apartments fell by half, while $1000/month rentals nearly doubled. Strong market demand will shrink the availability of low-priced units. That’s what has happened over the last decade as DC transformed from a declining city into a rapidly growing one.

But, 12,500 units is the amount of supply added under the current over-regulated regime.  This amount of development is minuscule in a large city. (see diagram below)  What if DC allowed as much supply growth as Austin or Miami?  The 12,500 figure would triple.  Further, since Austin and Miami are far from free-market, the development rate in a truly free-market DC would certainly exceed a tripling.  If you consider the amount of supply that would have been added over the last several decades in an unlimited FAR DC, Ms. Cort’s position starts to sound quaint.  Conservatively assuming 50-100,000 units of rental housing would have been developed over the last few decades of DC’s growth, rents certainly would not have doubled.  I’ll go out on a limb and estimate that average rent growth would be close to inflation.

Chart by the Citizens Budget Commission (via NYYIMBY)

Chart by the Citizens Budget Commission (via NYYIMBY)

Ms. Cort wants housing to be less than 30% of gross income for nearly all residents.  Will the market provide new housing affordable to minimum wage earners at the most expensive intersection in Georgetown?  Probably not, and I hope she isn’t setting the bar that high.  While nobody is wise enough to know whether a free-market in land use would accomplish this, a free-market DC could be affordable to 50-100,000 more people than the zoned-to-death DC of today.  Will stock of units deemed affordable to low wage earners be of the quality, location, and size acceptable to Cort?  The necessity for further intervention is a subjective preference.

While acknowledging the validity of liberalization in her critique of supply-and-demand denialism, Cort’s conclusion fails to look at supply and demand wholistically:

Supply matters, but it’s not the whole story

Wrong. Supply really must be part of the whole story.  A city is only affordable to the number of residents it houses affordably.  Failure to recognize this only shifts the burden from one demographic to another. (and it won’t be the rich who pays the price)  If a zoning-plagued city fails to provide 1,000 units demanded, 1,000 people can no longer afford to live there.  Even if that city chose to subsidize housing for 2,000 people at 50-80% of AMI, that doesn’t change the fact that 1,000 people who wanted to live in that city must leave.  Any viable solution (free-market or otherwise) must involve increasing supply significantly, either through creating supply directly or subsidizing demand through vouchers, which induces new development.  But, this simply can’t happen if overall supply is capped through zoning.

Laneway housing in Vancouver and beyond

Vancouver holds a special place in most urbanists’ heart – a sort of supercharged version of Portland, with its stunning skyline and bold embrace of density and transit. In addition to the glassy forest of skyscrapers, it also passed a law enabling laneway housing under former mayor Sam Sullivan’s EcoDensity initiative. Sullivan was pretty controversial, but he never even came up for a second vote after Peter Ladner launched a party coup and then went on to lose the election anyway. As a result, it doesn’t look like the laneway housing rules have been revised, which is a shame, since as Vancouver architect Graham Barron (who has an excellent blog on development in Vancouver) writes, there are some problems:

The objective of the infill design guideline is to encourage the retention of existing buildings, but the guideline’s own side yard setback makes this nearly impossible. In practice, this means that the vast majority of developers of these lots demolish the existing building and construct a new duplex. (Many of these new duplexes look like character buildings, but in fact are built slab-on-grade, i.e. without basements, and without attics, much like the cheap Vancouver Specials that preceded them). This is the first irony.

The second irony is that many of the two-family zones in the City are meant to be heritage-friendly zones, which promote the preservation of character and heritage houses. Since it is largely impossible to build infill, and very costly to renovate or expand an older building, most developers will demolish the existing house, and then design the new duplex in a faux heritage style in order to get a density bonus that allows for greater floorspace. Result: character is being replaced with faux character.

The final irony is that these new duplexes are then required to have a two-car garage on the lane, a parking requirement that is meant to reduce crowding on the street. (Never mind that many duplex owners park on the street anyway, and use their garage for storage.) This required garage ends up being about the same size as the infill laneway house that the design guidelines originally prevented.

Even though Vancouver is, I believe, the only city in North America to allow any sort of laneway infill, I think it’s a very promising form. The District of Columbia, in particular could, desperately use it – strong demand has hit up against the limit of the Height Act downtown, and now that downtown is nearly built up to the absolute limit that Congress will allow, the gentrification line has hit the streetcar suburbs filled with rowhomes. Here people commonly see two options: don’t allow any more development, or allow the prewar rowhomes to be knocked down and replaced with mid- or high-rises.

But there is another option: Allow development in the alleyways! DC has tons of alleys, and in my neighborhood, Trinidad, some of the alleys are so wide that they show up as unmarked streets on Google Maps. In any other city they would had crammed at least one more row of houses. Most alleys are of course not that large, but any alley that currently has a garage could manage a small two-story house in its place. In Georgetown one alley was blessed by the intervention of Eastbanc, a developer with enough clout to have their way with the city planners, and is now one of the nicest places in Georgetown, but I don’t think any developer has managed to successfully persuade local community groups and city planners to allow that sort of redevelopment anywhere else.

If Washington and other cities across the US do some day deign to loosen their grip on development and allow laneway housing, they would do well to learn lessons from Vancouver – be flexible about where you allow the buildings, and for god’s sake, don’t mandate parking!

(By the way, here’s another good blog about development in Vancouver, this one by developer Michael Geller.)

Links: “At least they’re being honest” edition

1. NY Governor Cuomo promises the “most aggressive” strengthening of the state’s (read: NYC’s) rent laws.

2. Bronx <3 parking: “This community wants a moratorium on any more building until we get a parking lot.” “We don’t want any bigger buildings and we want parking space for everyone.”

3. Do people realize that “I don’t mind modernist architecture” and “All new buildings must have decorative cornices and intricate brickwork” are fundamentally incompatible statements?

4. Witold Rybczynski on density. Nothing you haven’t already heard a million times before, but, Witold Rybczynski!

5. DC’s zoning code finally allows building owners to enclose the once-encouraged outdoor arcades.

The little-known history of “light and air”

“Light and air” is a very common excuse that people give for why we must have basic zoning laws, and while nowadays a lot of people mean it simply in an aesthetic sense – another way of saying “I like to be able to look out a window and not see another skyscraper 50 feet away” (though for some reason when said interaction happens on the second or third floor, it’s okay?) – the origins of it are very interesting, and I believe crucial to understanding today’s urban plans. Of course, the ideas that turn-of-the-century planners had about disease and density turned out to be totally incorrect – privacy and being able to look out a window is nice, but the lack thereof is not a great health risk. As Robert Fogelson writes on pages 125-26 of Downtown

Skyscrapers were also a serious menace to public health, advocates of height limits charged. As early as the mid 1880s, they said that tall office buildings were turning the streets below into dark, damp, and gloomy canyons. During the winter they blocked the sun, leaving the cold streets even colder. During the summer, wrote American Architect and Building News, they acted as “storehouses of heat,” driving up the temperature after sunset, making the once cool and refreshing nights unbearable. The skyscrapers also shrouded the nearby buildings in darkness, forcing the office workers to rely on artificial light – which, it was believed, put a strain on the eyes. Worst of all, the skyscrapers deprived both the streets below and the adjacent buildings of fresh air and sunlight. To Americans who still held that disease was a product of the “miasma,” the noxious vapors that permeated the cities, the lack of fresh air was bad enough. To Americans who believed in the new germ theory of disease, the lack of sunlight was even worse. For it was sunlight, described by doctors as “the best disinfectant,” “the best bacteriacide,” and “our greatest sterilizer,” that killed the microbes that caused disease. Sunlight and wind were as vital to public health as pure water, argued a representative of the Chicago Medical Society in 1891; without them “life would be almost impossible in crowded communities.”

From a sanitary viewpoint, skyscrapers were “an outrage,” declared George B. Post, a prominent New York architect. By creating the conditions “in which bacteria and microbes flourish best,” skyscrapers turned the streets into what a Chicago doctor called “the breeding ground for germs.” “To shut off the sunbeams from the earth,” a Chicago businessman added, “Is to encourage the bacteria, to breed fevers, to sap vitality, to make men and women pale cellar plants.” A few skyscrapers here and there would not pose much of a problem, critics conceded. But “if the down-town area were covered with twenty-story buildings,” the Chicago doctor claimed,” There would hardly be enough sunlight and air to support life.” There would be a sharp rise in the incidence of bronchitis, pneumonia, and consumption (or tuberculosis), the so-called white plague. The business district would become as unhealthy as the tenement districts, a grim prospect indeed. Writing at the turn of the century, another opponent of the skyscraper pointed out that some New Yorkers were planning to build a hospital for consumptives at the same time that others were planning to build a thirty-story skyscraper. This made no sense, he declared. “We build hospitals for the poor consumptive, and then we turn around and erect skyscraping structures where consumption may breed.” “We shall not lack for patients,” he said.

This isn’t just a quirky factoid – it’s an integral part of the modern antipathy towards density, as much as the consequences of the intellectually bankrupt racial eugenics of the era still reverberate today. Now, of course today’s planners don’t oppose forests of skyscrapers because they believe in the miasma theory of disease, but it is striking that the profession still accepts its turn-of-the-century health-based reforms as dogma. Nowadays we have a slightly different justifications for why the laws were a good idea, but the planning outcomes remain stubbornly similar. Then again, given that planners have never really faced up to their pre-war history (the rot only started after the war, they always say), I guess this shouldn’t come as a surprise.


1. NYT A-1 headline! Number of new single-family homes sold in February was at its lowest point since data was first collected in 1963, but multi-unit sales are up.

2. Lydia DePillis with an example of some abhorrent NIMBYism from DC.

3. Anti-laneway housing propaganda from Vancouver. It looks like some are bucking the requirement that you have one parking spot per lot and are “putting in large windows and heated flooring in the garage of their laneway homes.”

4. A Toronto developer on “podiumism,” or skyscraper form that zoning rules force architects to build. New York City’s first zoning code in 1916 had setbacks that had a similar effect, though it formed more of a ziggurat – a much bulkier shape than is allowed today.

5. The Overhead Wire and The Transport Politic criticize new surburban-oriented low-ridership American commuter rail lines.

How important really are skyscrapers?

Mary Newsom, in a review of Ed Glaeser’s new book, makes some arguments about skyscrapers that I’ve never heard before:

In his eyes, skyscrapers are the height of green living. But as architect Michael Mehaffy and others have pointed out, tall buildings can be less energy-efficient than shorter ones. In cities lacking the intense development pressure of a New York or Hong Kong – i.e., most other U.S. cities – one skyscraper can suck up a disproportionate chunk of the existing market, leading to the odd sight of tall towers surrounded by surface parking lots – not your greenest landscape.

Is Houston the skyscrapers' fault?

Regarding the energy efficiency of skyscrapers, she doesn’t link to any one claim in particular so I’m not sure what exactly Michael Mehaffy’s argument is, but I suspect that it doesn’t account for transportation energy use. Tall buildings (4+ stories), when built in large numbers, transfer a lot of energy spent on transit from horizontal modes (cars, rail, your feet, buses) to the one relatively energy efficient vertical mode: the elevator.

As for skyscrapers surrounded by a sea of parking, when does this actually happen? I can think of two instances: public housing projects, and places with high minimum parking requirements. Neither of these are really the fault of skyscrapers.

Mary also makes some similar, more reasonable, arguments against Glaeser’s skyscraper obsession – as one blogger who I can’t remember or find right now pointed out a while ago [edit: It was Charlie at Old Urbanist], skyscrapers make up a pretty small portion of NYC’s total number of units. But then again, skyscrapers are also the most regulated-against form, so I’m not sure how much we can learn from revealed preferences.

I don’t have any one fact in particular to back this up, but I suspect that the demand for living in high-rises (say, 10+ stories) is actually a lot higher than a lot of urbanists suspect. New Urbanists idolize the three- and four-story towns of yore (James Kunstler famously announced the death of skyscrapers after 9/11), but I see skyscrapers sprouting essentially wherever they’re allowed.

When Mary says that most US cities other than New York couldn’t support them, she’s only right in as far as you consider Woodland Mills a city. There are many other large and mid-sized cities, though, that I think could definitely support a few dozen more skyscrapers. In the Northeast alone, the feeding frenzy in Northern Virginia demonstrates that the Washington region would obviously sprout tons of towers if they were allowed. But even outside of the red hot DC market, I think it’s safe to say that there’s demand for quite a few more high-rises in many neighborhoods in Philadelphia, Boston, North Jersey, Queens, and Brooklyn. Hell, I’m sure even some places that are very car-oriented nowadays but have good transit access – mainly wealthy suburbs like the Main Line outside of Philadelphia and Long Island and Westchester in the New York metro area – would see a few towers go up if they let them.

I have a feeling that a lot of urbanists downplay skyscrapers in order to appear politically palatable to places that are hesitant even about mid-rise New Urbanist-style development, but sometimes I think they get a little carried away. This sort of anti-skyscraper sentiment, when taken to the extreme as it is in DC, can have very real consequences. It may have forced the city to be a bit more proactive in other deregulatory moves, like parking minimums (as I understand it, DC’s plan will be the most radical off-street parking deregulation in the country). But unless the Height Act is repealed and a significant amount of skyscrapers are allowed, I worry that the city’s dizzyingly high rents will never fall.

Is O’Toole right that California is too dense to matter?

Remember my response yesterday to Randal O’Toole’s Cato article on parking, when I said that I could easily write a three-part series? Not a joke! (Though I might spare you and leave the trilogy unfinished. Maybe.)

Today, I’d like to take on O’Toole’s comments on California, which he argues is too dense and hostile to automobiles to say anything about the real America:

While New York City is very dense, its suburbs are not, so it is not the densest, or even the second or third densest, urban area in America. Instead, that title goes to Los Angeles, followed by San Francisco-Oakland and San Jose—the locations of most of Dr. Shoup’s other examples. Thanks to urban-growth boundaries that are now mandatory for California cities, whatever happens there is hardly representative of much of the rest of America.

He also said something similar in a comment he left on a Market Urbanism post last August about an empirical paper that found that a large portion of the parking in Los Angeles County (population: 10 million) was built because of minimum parking regulations:

I’ve said it before, but Los Angeles is hardly typical of the rest of the U.S. It is the densest urban area in the country (and not just the city is dense). Beyond that, my more important point is that developers build parking lots everywhere, not just where there are parking minimums.

Average density: a misleading measure of walkability

Average density: a misleading measure of walkability

My problem here is that O’Toole is using the literal definition of “density” – that is, average density. But this is just a shorthand for what really matters when you decide whether you need a car or not (and developers decide how much parking they need to build to maximize profits): walkability and access to mass transit. We often use “density” as shorthand for auto-orientedness, but it only really serves as a good metric over very small spaces. When you start looking at metro areas, though, its utility declines.

Paul Mees and Jarrett Walker have written about this to death, and it can get a little tricky to think about, but I think the best way to grasp it is with an example. Say you have two metro areas with the same population and same area, but with one where everyone’s concentrated in one city with only few people scattered around the suburbs, and another where everyone’s the same distance from each other. They’ll both have the same average density (population divided by area), but clearly one will be walkable and one will not be. Obviously this is a stylized example, but similar dynamics inevitably play out in the real world. California’s suburbs may be dense, but they’re still built in a very suburban style and are thus largely unwalkable. Much of this effect is achieved through separation of uses and the road network: Even if you live at Manhattan densities, you’re going to need 100% parking if the road network is all cul-de-sacs and limited-access highways with low connectivity and mixed uses are not allowed.

All of this is to say, Los Angeles’ high average density seems like a flimsy reason to disregard one of the few (two, by my count – the other looks at Queens) empirical studies on the effects of parking minimums. And while it’s true that California has urban growth boundaries that make it relatively unusual among American cities, it’s also true that the same anti-growth environmental forces also put in place some pretty anti-growth policies in the already built-up areas, so it’s not at all clear that the net effect is to make the place less car-oriented. I’ve never spent any appreciable time in the state, so maybe I’ve just been deceived by Hollywood and everyone I know and everything I’ve ever read, but I’d bet that it is indeed at least of average auto-orientedness for American metropolitan areas. If density in Los Angeles County is hobbled by parking minimums, then I see no reason to think that the same wouldn’t apply for similar parking minimums in metro areas throughout the rest of America.

Has Wendell Cox ever heard of India’s license raj?

Wendell Cox, in his ongoing crusade to prove that everyone hates cities, writes about the suburbanization of Mumbai at New Geography. After reviewing all the statistics, he concludes:

Mumbai: Penultimate Density, Yet Representative: The core urban area (area of continuous urban development) of Mumbai represents approximately 80 percent of the larger metropolitan area population. Mumbai is the third most dense major urban area in the world at nearly 65,000 residents per square mile (25,000 per square kilometer), trailing Dhaka (Bangladesh) and Hong Kong. Yet even at this near penultimate density, Mumbai exhibits the general trends of dispersion and declining density that are occurring in urban areas around the world, from the most affluent to the least. In the two Mumbai city districts, as in other megacities, housing has become so expensive that population growth is being severely limited. Overall, the Mumbai larger metropolitan area may also be experiencing slower growth as smaller metropolitan areas outperform larger ones, a trend identified in a recent report by the McKinsey Global Institute. Finally, the over-crowded, slum conditions that prevail for more than one-half of the city’s residents could be instrumental in driving growth to more the distant suburbs of Thane and Raigarh.

He never comes out and says it explicitly, but the implication is clear: Market forces are driving people out of Mumbai.

But with all this talk about overcrowded slums and high housing prices, Wendell Cox is missing the elephant in the room: land use regulation. Given rent control laws that would make Sheldon Silver blush and a fixed floor-area ratio of 1.33 for even the dense historical island core, how the hell does Wendell Cox expect Mumbai’s core to grow? India’s stifling regulations are legendary, but Cox seems to be floating on a cloud of car exhaust fumes, blissfully unaware of any facts that might get in the way of his people-love-suburbs narrative.