zoning – Market Urbanism http://marketurbanism.com Liberalizing cities | From the bottom up Thu, 31 May 2018 20:23:23 +0000 en-US hourly 1 https://wordpress.org/?v=4.9.6 https://i2.wp.com/marketurbanism.com/wp-content/uploads/2017/05/cropped-Market-Urbanism-icon.png?fit=32%2C32 zoning – Market Urbanism http://marketurbanism.com 32 32 3505127 The Case for Subsidizing Deed Restrictions http://marketurbanism.com/2018/05/09/case-subsidizing-deed-restrictions/ Wed, 09 May 2018 17:46:19 +0000 http://marketurbanism.com/?p=10021 In most of my discussions of Houston here on the blog, I have always been quick to hedge that the city still subsidizes a system of quasi-private deed restrictions that control land use and that this is a bad thing. After reading Bernard Siegan’s sleeper market urbanist classic, “Land Use Without Zoning,” I am less […]

The post The Case for Subsidizing Deed Restrictions appeared first on Market Urbanism.

]]>
Houston skyline

In most of my discussions of Houston here on the blog, I have always been quick to hedge that the city still subsidizes a system of quasi-private deed restrictions that control land use and that this is a bad thing. After reading Bernard Siegan’s sleeper market urbanist classic, “Land Use Without Zoning,” I am less sure of this position. Toward this end, I’d like to argue a somewhat contrarian case: subsidizing private deed restrictions, as is the case in Houston, is a good idea insomuch as it defrays resident demand for more restrictive citywide land-use controls.

For those of you who haven’t read my last four or five wonky blog posts on land-use regulations in Houston (what else could you possibly be doing?), here is a quick refresher. Houston doesn’t have conventional Euclidean zoning. Residents voted it down three times. However, Houston does have standard subdivision and setback controls, which serve to reduce densities. The city also enforces high minimum parking requirements outside of downtown.

On top of these standard land-use regulations, the city heavily relies on private deed restrictions. Also known as restrictive covenants, these are essentially legal agreements among neighbors about how they can and cannot use their property, often set up by a developer and signed onto as a condition for buying a home in a particular neighborhood. In most cities, deed restrictions cover superfluous lifestyle preferences not already covered by zoning, including lawn maintenance and permitted architectural styles. In Houston, however, these perform most of the functions normally covered by zoning, regulating issues such as permissible land uses, minimum lot sizes, and densities.

Houston’s deed restrictions are also different in that they are heavily subsidized by the city. In most cities, deed restrictions are overseen and enforced by parties to a deed, typically organized as a homeowners association (HOA) to which members are required to pay dues. When a resident in a subdivision breaks the rules of the deed, the HOA takes them to court on their own dime. In Houston, however, the municipal government covers the cost of enforcement, much like with zoning. Neighbors complain, the city reviews the complaint, sends the offending party a letter, and eventually takes her to court if her noncompliance continues.

This has at least three effects: First, this encourages the creation of overly detailed and broad deed restrictions, which might otherwise be a hassle to oversee and enforce if all the costs were falling on residents. Second, this leads to consistent enforcement of all rule violations, even in minor cases where residents might otherwise agree to let harmless violations that aren’t worth enforcing slide. Third, following on this second effect, this preserves the legal force of deed restrictions far beyond what might otherwise occur. If so many violations go unenforced, eventually courts stop enforcing certain rules or enforcing the rules in certain parts of the subdivision. This gradual withering away of deed restrictions is still somewhat common in Houston, indicating that many violations aren’t even worth the phone call to the city to complain, but it is less common under a system of municipal enforcement.

Houston further subsidizes deed restrictions in at least two other ways: First, the city will not issue permits for developments and improvements that run afoul of any deed restrictions. Second, Texas state law allows deed restrictions in unzoned cities (e.g. Houston) to be created, extended, or renewed with a simple majority of residents in a subdivision and they can be modified with the support of three quarters of residents. In every other state, unanimity among the affected parties is required to create, renew, or modify a deed restriction, as with most other contracts. Similar to enforcement, this acts as a kind of subsidy, making it much easier for subdivision majorities to adopt and maintain deed restrictions, meaning that Houston probably has far more active deed restrictions than one might find under regular conditions.

All of this might sound bad to you, and with good reason. Why should majorities be able to strip minorities of their property rights?  Doesn’t this lead to an arbitrary patchwork of regulations, undermining comprehensive planning? Why should the city pick up the tab to enforce the preferences of middle- and upper-class homeowners?

Indeed, these are all issues under a system of subsidized deed restrictions. Yet each of these issues are far more challenging under conventional land-use regulations. Under deed restrictions, residents only have the power to downzone their immediate subdivision. Outsiders have no say in the matter, but at the same time, many residential areas, and virtually all commercial and industrial areas, are almost completely unaffected. This is in contrast to conventional land-use regulation, where active minority interest groups (i.e. homeowners) can and do capture the process and dictate the property rights of entire cities.[1] Under conventional land-use regulations, these groups nearly always decide the zoning of their local neighborhood, which can often be in conflict with regional housing or mobility planning. Again, the city then picks up the tab and enforces these preferences citywide using public resources. At most, Houston’s private deed restrictions only affect 25 percent of the city.

Yet my argument isn’t simply that deed restrictions are less bad than conventional land-use regulation. You can find that argument here. Rather, my point is that subsidized deed restrictions perform a useful political function: they give those residents with the strongest preferences for restrictions the restrictions they crave, thereby obviating the need to agitate for restrictive land-use regulations. The “homevoters” who drive land-use and zoning policy are essentially allowed to opt out of the laissez faire status quo, with some support from the city. This allows Houston to avoid having to adopt citywide conventional land-use regulations for things like land use and densities, as has happened in every other major city.

There is substantial evidence for this from Houston’s history. Consider the failed 1939 zoning push. According to Siegan, the most enthusiastic support for zoning came from Montrose, whose covenants had expired in 1936, leaving the neighborhood open to then-unwanted commercial and multifamily development. At the time, there was no city enforcement of covenants and renewal or extension often required unanimous support. This is an important point to state plainly: When their deed restrictions expired, residents started agitating for citywide zoning.

This exact same plot unfolded surrounding the failed 1948 and 1962 zoning referenda. In 1955, the deed restriction for River Oaks—an affluent white neighborhood—were set to expire after their original 30 years run (they began in 1926), after which renewal would be required every 10 years. It won’t surprise you to learn that the city’s elites, who disproportionately lived in River Oaks, became enthusiastic supporters of zoning in Houston around this time. In both referenda, River Oaks was the source of zoning support. In fact, in 1962, it was one of only two neighborhoods that voted for zoning. Again, when their deed restrictions were threatened, homeowners started agitating for zoning.

 

Units Built per Half Decade in Houston: Spikes in 1946 to 1950, 1976 to 1980, and after 1996

Data from the Harris County Appraisal District

There is some evidence that the same phenomenon occurred with the 1993 referendum. As you can see in Chart 1, there was a massive residential subdivision building boom in the mid- to late-1970s. Assuming for our purposes that a standard share of these developments were subject to deed restrictions, and that these deed restrictions had a standard initial run of 30 years, these deed restrictions were poised to start expiring between 2005 and 2010.[2] If we take all this together, we would expect a zoning referendum somewhere between 1995 and 2000, with deed expirations on the horizon. Lo and behold, one arrived two years early in 1993. The narrative again comes into focus: when deed restrictions are at risk, homeowners start agitating for zoning.[3]

The natural takeaway is that if you want to avoid restrictive land-use regulations, the city should actively support deed restrictions. That is to say, you must provide an effective and inexpensive way for those with the strongest preferences for strict regulations to “opt out” of the lightly regulated status quo. When you do that, you take away their incentive to lobby for conventional land-use regulations.

Houston history indicates that I am not the first person to figure this out. A mere three years after the failed 1962 zoning referendum, the Texas state legislature changed the law to allow Houston to enforce private deed restrictions and lowered the barriers to creating, renewing, and modifying them, which we discussed above. That is to say, they created an “opt out” option. After four decades of constant agitation for zoning beginning in the 1920s, there wouldn’t be a major push after 1962 for three decades. Within a decade of the 1993 referendum, the city of Houston again scaled up the enforcement of private deed restrictions in 2003, broadening enforcement to include things like design and maintenance rules.

This general policy of allowing NIMBY residents to “opt out” of liberalization isn’t just limited to preserving the non-zoning status quo. It also makes easing up on existing restrictions easier. In 1998, Houston policymakers substantially lowered minimum lot sizes from 5,000 to 1,400 square feet within the I-610 loop.[4] This constituted the most dramatic liberalization of subdivision rules in any U.S. city to date.

How was this possible? Because everyone who might have preferred a larger minimum lot size either was either already shielded from the change by deed restrictions or could easily “opt out” of the new rules. At the same time that Houston lowered minimum lot sizes, they created a process whereby a majority of local residents could petition to set higher minimum lot size rules based on the prevailing lot dimensions within their local block or neighborhood. Residents with a strong preference for large minimum lot sizes had no reason to go out and raise hell about the city as a whole, as their community was protected in proportion to the preferences of local residents.

As with deed restrictions, these local minimum lot sizes are still even less restrictive than conventional land-use regulations. Not only do they only affect a limited area and require a majority vote; they also automatically expire after 40 years. Predictably, when the city expanded these newer, more liberal subdivision rules to the city as a whole in 2013 (i.e. beyond the I-610 loop), they also lowered the threshold for adopting higher local minimum lot sizes.

Is a system of subsidized private deed restrictions and “opt out” provisions the ideal policy arrangement? No. Like zoning, they can create a messy patchwork of rules and regulations for which, as far as I’m aware, there is still no public database. But we aren’t operating in the realm of ideal policy. We are operating subject to very real political constraints, namely a vocal and powerful special interest group (i.e. homeowners) that desires strict land-use regulations around their home.

This is the genius of Houston’s unique system: Let those with strong preferences for tight restrictions have them and the city as a whole can go on operating under a largely liberal land-use regime. There is a valuable lesson here for other cities: when attempting to liberalize land-use regulations, consider strengthening the private (subdivision deed restrictions) and public (stricter local rules subject to local consensus) mechanisms whereby the most powerful opponents of liberalization can simply opt out. Houston figured this out in 1965 and again deployed this strategy to great effect in the 1998 subdivision regulation overhaul. In relationships as in city planning, sometimes you have to give a little to get a little.

 

For future content and discussion, follow me on Twitter at @mnolangray.

 

[1] Refer to Bill Fischel’s “The Homevoter Hypothesis” (2001) and associated papers, which convincingly argue that middle- and upper-class homeowners play an outsized role in determining zoning and land-use policy, particularly in smaller municipalities.

[2] These are standard assumptions about length based on Houston history. Note that this expiration length maps onto the length of a standard mortgage. As you might have guessed, FHA and private sector underwriters were major boosters of deed restrictions, as a way to secure property values in the face of non-zoning.

[3] If my theory is valid, expect a fourth zoning referendum somewhere between 2020 and 2026, 20 years after the 2000 to 2006 building boom.

[4] The causes and effects of this liberalization are the topic of a forthcoming paper. Stay tuned!

The post The Case for Subsidizing Deed Restrictions appeared first on Market Urbanism.

]]>
10021
Are Houston’s Deed Restrictions “Basically Zoning”? http://marketurbanism.com/2018/04/11/houstons-deed-restrictions-basically-zoning/ Wed, 11 Apr 2018 14:00:39 +0000 http://marketurbanism.com/?p=9791 Houston doesn’t have zoning. As I have written about previously here on the blog, this doesn’t mean nearly as much as you would think. Sure, Houston’s municipal government doesn’t segregate uses or expressly regulate densities. But as my Market Urbanism colleague Michael Lewyn has documented, city officials do regulate lot sizes, setbacks, and parking requirements. […]

The post Are Houston’s Deed Restrictions “Basically Zoning”? appeared first on Market Urbanism.

]]>
Houston Neighborhood

Houston doesn’t have zoning. As I have written about previously here on the blog, this doesn’t mean nearly as much as you would think. Sure, Houston’s municipal government doesn’t segregate uses or expressly regulate densities. But as my Market Urbanism colleague Michael Lewyn has documented, city officials do regulate lot sizes, setbacks, and parking requirements. They also enforce private deed restrictions, which blanket many of the city’s residential neighborhoods.

A deed restriction is a legal agreement among neighbors about how they can and cannot use their property. In most cities, deed restrictions are purely private and often fairly marginal, adding rules on top of zoning that property owners must follow. But in Houston, deed restrictions do most of the heavy lifting typically covered by zoning, including delineating permissible uses and design standards. Whenever I point out that Houston has relatively light land-use regulations (and is enjoying the benefits), folks often respond that the city’s deed restrictions are basically zoning. This couldn’t be further from the truth.

Before I turn to the essential differences, it’s worth first observing how Houston’s deed restrictions are like any other city’s zoning. First, like zoning, Houston’s deed restrictions are almost universally designed to prop up the values of single-family houses. Despite the weak evidence for a use segregation-property values connection, this justification for zoning goes back to the program’s roots in the 1920s. Many of Houston’s nicest residential neighborhoods, like River Oaks and Tanglewood, follow this line of thinking, enforcing tight deed restrictions on residents that come out looking a lot like zoned neighborhoods in nearby municipalities like Bellaire and Jersey Village.

Second, both zoning and Houston’s deed restrictions are enforced by government officials at taxpayer expense. In most other cities, deed restrictions are overseen and enforced by a private group like a homeowners association, funding enforcement through required HOA fees. But in the aftermath of the failed 1962 referendum to adopt zoning, the Texas state legislature gave Houston the right to publicly enforce deed restrictions. This means that Houston taxpayers pick up the tab to enforce private rules regarding everything from land use to lot sizes. In 2003, these rules were expanded to allow the city to enforce restrictions related to minor issues like landscaping and architecture. In practice, this looks a lot like zoning.

Beyond these superficial similarities, deed restrictions are different from zoning in at least three crucial ways. First, deed restrictions don’t apply to the whole city. Writing in 1972, in his fantastic survey of Houston’s land-use regulations, Bernard Siegan estimates that no more than 25 percent of the city is covered by deed restrictions. Teddy Kapur, writing 30 years later, suggests a similar percentage. We have no real way of checking these estimates, since deed restrictions aren’t compiled in any kind of publicly available GIS format, but this generally comports with other estimates floating around. This is compared to zoning, which regulates 100 percent of urban land, regardless of the needs or preferences of local land users.

Where deed restrictions exist at all, they almost exclusively apply to single-family residential neighborhoods. Industrial areas and townhouses are only occasionally subject to deed restrictions, and commercial corridors and multifamily neighborhoods are almost never subject to them. Vacant land and agricultural land is also almost never subject to deed restrictions, meaning that unlike in zoned cities, this land is free to develop into the use and form most in demand at that particular time and place. In most zoned cities, acres of vacant land sit under-utilized because it’s zoned for uneconomical uses. This difference is important, since it means that policymakers don’t have to make (almost certainly wrong) guesses about the optimal use and density for all lots across all of time. All of this taken together means that nearly of three quarters of the Houston urban landscape isn’t subject to anything remotely resembling zoning and is free to change and adapt over time.

Second, deed restrictions are designed and initially implemented by people with the information and incentives to get the regulations right. Land-use regulation is, at its heart, a knowledge problem: how do we regulate, to what extent, and where? Unlike the zoning commissions or planners typically tasked with drafting zoning ordinances, the residential developers who normally develop deed restrictions have a clear, immediate signal about the desirability of their deed restrictions and a strong incentive to get them right through rising and falling property values.[1] Developers crafting deed restrictions under competitive conditions will regulate up to the point of maximizing property values and no more. To quote Siegan:

The landowner who engages, in effect, in exclusionary land use practices by restricting ‘excessive’ amounts of land risks suffering the economic sanctions of the private market, a hazard never confronted by local legislators. (79)

That is to say, implement too little private regulation, and your houses sell for less since prospective homebuyers aren’t confident that they will enjoy the amenities (e.g. purely residential community character) that they prefer. Implement too much private regulation, on the other hand, and your houses sell for less since prospective homebuyers will be forced to overproduce certain public goods (e.g. landscaping, design standards), or won’t be able to use their property as they might like (e.g. as home-based businesses). Thus, the market disciplines deed restrictions in a way that zoning is almost never disciplined, since shopping among neighborhoods is much easier than shopping among entire municipalities.

These market pressures lead to at least two interesting outcomes that distinguish deed restrictions from zoning: First, certain exclusionary regulations that are the norm in zoned cities—e.g. one acre minimum lot sizes—are relatively unheard of in Houston, since they would make it next to impossible for residential developers to outbid other land users. Second, even among single-family residential neighborhoods, the form and strictness of deed restrictions may vary by income and other factors, reflecting the obvious fact that different groups of people may have different preferences regarding how strictly—and in what way—their neighborhood should be regulated. This leads to an incredible amount of diversity among Houston’s deed restricted neighborhoods, a far cry from the standard “R-1” zoning district.

Third and finally, deed restrictions can and do adapt to changing market conditions over time. Your typical zoning ordinance is well over 40 years old. True, zoning can change through mechanisms like rezonings or variances, but these are ad hoc and frequently arbitrary, and rarely change the regulation for an entire area of town—let alone single-family residential neighborhoods. Full zoning rewrites are cumbersome and contentious. They are infrequent, and even when they occur, policymakers are loathe fundamentally change any particular neighborhood’s rules for fear of agitating vocal proponents of the status quo, irrationally afraid that any official zoning change would destroy the value of their homes. A planning professor of mine once joked, “Two things will survive the apocalypse: cockroaches and single-family zoning.”

Compare that to Houston’s deed restrictions, which nearly always incorporate expiration dates, after which the restrictions must be approved by a majority of residents every 10 or so years depending on the deed’s terms. At these intervals, residents can and occasionally do let the restrictions expire, allowing single-family neighborhoods to incorporate townhomes, apartments, and small businesses. As Kapur notes, however, residents often use these intervals as an opportunity to reconfigure the deed to reflect changing market conditions. Particularly in older neighborhoods within the 610 loop, where the original terms of the deed restrictions are often long-expired, residents are made to regularly come together to debate and discuss how they think their community should be regulated as part of the re-approval process, meeting as equals with relatively little top-down control of process.[2] This leads to the de facto upzoning of high-demand Houston single-family residential neighborhoods with surprisingly frequency, an unthinkable outcome in most zoned cities.

Outside of these regular official intervals, deed restrictions also regularly unofficially wither away, either as infractions build up unaddressed or residents forget to re-approve the deeds. This withering away of yesteryear’s regulations can and often does happen in Houston, allowing formerly single-family residential neighborhoods to gradually transform into mixed-use urban neighborhoods. Again, this is almost unimaginable in any zoned city, where regulations older than you or I are still on the books and fully enforced, regardless of how much the neighborhood in question has changed.

Make no mistake: public enforcement acts as an artificial subsidy for deed restrictions in Houston, almost certainly producing deeds that are more extensive and longer lasting than they might otherwise be under market conditions. Yet even allowing for this minor asterisk, it’s clear that Houston’s system of quasi-private land regulation is very different—and in certain key respects much better—than zoning.

Siegan concludes his discussion of this topic by perceptively noting that zoning implicitly tries to answer two very difficult questions:

  1. What is the extent of protection to which property owners are entitled?
  2. What powers should existing residents have to exclude other people and things from the municipality?[3]

Zoning addresses these questions using an opaque political process in which certain privileged special interests—namely homeowners—may impose their particular preferences across all time. Houston’s deed restrictions, on the other hand, are constantly rediscovering the answers to these questions. It all comes back to consumer preferences: if consumers desire things like large lots and ample off-street parking and are willing to pay more for the extra land, developers will respond by bidding up the land and implementing tight deed restrictions. If they either don’t want these restrictions, or aren’t willing to pay more for them, developers might still build the houses but with deed restrictions that allow for smaller lots, higher lot coverage, or certain complimentary commercial uses.

In this way, the process of identifying the optimal mix of land-use regulation is a dynamic discovery process, subject to ongoing changes in local conditions. As the costs of zoning stasis in cities like San Francisco become clearer, the value of understanding Houston’s uniquely dynamic system of deed restrictions only rises.

For future content and discussion, follow me on Twitter at @mnolangray.

[1] This should not be misinterpreted as an anti-planning (or anti-planner) screed. As I have written here on the blog, planners are very good at many things and deserve more respect in these spheres. That said, nobody—however smart and well-meaning—has the necessary knowledge to plan things like future land uses and densities for an entire city.

[2] This puts much of what we might otherwise call the “deliberative” or “participatory” planning in other cities to shame.

[3] These questions are posed on page 84. For Siegan’s full discussion of this issue, I strongly urge you to read Chapter 3 of “Land Use Without Zoning.”

The post Are Houston’s Deed Restrictions “Basically Zoning”? appeared first on Market Urbanism.

]]>
9791
Density Is How the Working Poor Outbid the Rich for Urban Land http://marketurbanism.com/2018/02/05/density-working-poor-outbid-rich-urban-land/ Mon, 05 Feb 2018 15:00:38 +0000 http://marketurbanism.com/?p=9582 The great failing of modern land-use regulation is the failure to allow densities to naturally change over time. Let me explain. Imagine you are trying to sell a property you own in a desirable inner suburban neighborhood in your town. The lot is 4,000 square feet and hosts an old 4,000 square-foot home. There is […]

The post Density Is How the Working Poor Outbid the Rich for Urban Land appeared first on Market Urbanism.

]]>
multifamily housing

The great failing of modern land-use regulation is the failure to allow densities to naturally change over time. Let me explain.

Imagine you are trying to sell a property you own in a desirable inner suburban neighborhood in your town. The lot is 4,000 square feet and hosts an old 4,000 square-foot home. There is incredible demand for housing in this area; perhaps the schools are good, or the amenities are nice, or the neighborhood sits adjacent to a major jobs center, meaning that residents can walk to work. I’ll leave the reasons to you. Who do you sell it to?

You have at least two options: First, you could sell it to a wealthy individual, who would use the entire property as his home. He is willing to pay the market rate for single-family homes like this, which in this case is $300,000. Under current financing, he would likely have a monthly mortgage payment in the ballpark of $1,300. Second, you could sell it to a developer who intends to subdivide the house into four 1,000 square foot one-bedroom apartments, renting each of them at a market rate of $500 to service workers who commute to downtown. After factoring in expenses, her annual net operating income would be around $20,160. Assuming a multifamily cap rate of 6.0.%, this means that she could pay up to $336,000 for your property.

Based on this analysis, who do you sell it to? The answer is obvious: you will sell it to the multifamily developer who will subdivide and rent out the house, not necessarily because you’re a bleeding heart urbanist, but in order to maximize your earnings. As rents in the area rise, the pressure to sell to a buyer who would densify the property will only grow. The prospective mansion buyer simply cannot compete with the service workers under these very typical market conditions. How cool is that?

This may sound like an oversimplification. As with all economic examples, it is. But at the end of the day, these very simple market dynamics play an essential role in guiding the spatial patterns of our cities. When demand for housing grows in urban neighborhoods, low-density uses will convert into higher density uses. This might often start smallhomeowners converting underutilized floorspace in attics and basements into additional housing units to earn incomeand under high demand circumstances might escalatetearing down single-family homes and constructing apartment buildings.

When my great grandmother, a grocery store clerk and single mother, migrated to Louisville from a small town in Kentucky in the 1940s, they shared a subdivided mansion in Old Louisville with multiple other working-class families. The opposite also happens occasionally: when demand for housing falls, high density uses may be converted into low-density uses, or demolished altogether. When Louisville’s population collapsed in the 1970s and 80s, the glorified tenement my grandmother grew up in was converted back into a mansion owing to lack of demand.

Thus, density is the key to ensuring that the incredible opportunity that cities offer is available to everyone. It’s the only sustainable way that the working poor can outbid the rich for urban land, and it’s naturally facilitated by markets under normal conditions. Density is what makes a room in an old mansion affordable to a grocery store clerk struggling to provide for her children. Density is what enables the apartment developer discussed above to outbid the prospective mansion developer for land, because in a sense what she is actually doing is pulling the resources of those working poor families.

Density controls, whether the result of zoning, land-use regulations, or subdivision regulations, break this system, effectively prohibiting the working poor from outbidding the rich for urban land. These policies come in a variety of forms: minimum lot sizes, single-family zoning, parking requirements, minimum unit sizes, etc. But they all require some minimum level of housing consumption—purportedly for the residents own good, in many cases—which means that residents who cannot afford to consume this minimum threshold of urban land cannot consume housing in this neighborhood at all.

Let’s return to our above example. If your property was zoned for single-family housing, the developer who intended to subdivide wouldn’t even bother to bid and the structure would remain a single-family home, despite high market demand. The four prospective tenants would have to look elsewhere, bidding up other scarce units and suffering longer than desirable commutes.

Or imagine if the city allowed subdivisions, but restricted apartments to 1,500 square feet. In this case, the developer could only divide the house into two units. Rents normally rise with floorspace and additional bedrooms, but they rarely double in price. If the developer could only earn $800 per unit on the market, she could only justify spending $268,000 on the project, meaning she would be outbid by the prospective mansion buyer. If she could squeeze out $900 per unit, she would barely outbid the prospective mansion buyer, letting in only two tenants, and only those who could afford a 45% increase in rents. The two other tenants would be forced out of the community. Other mandatory minimum standards like parking requirements and lot sizes work the same way, prohibiting density and pricing potential residents out of the community. Needless to say, this process falls hardest on the working poor.

Banning density, whatever the pretense, whatever the means, effectively means banishing the working poor from cities. As the urban planner Alain Bertaud has put it, the market is not an end or a construct, it is a mechanism. It is an emergent system for distributing scarce resources. Sometimes it fails and state actors or civil society must intervene. Sometimes it produces undesirable outcomes that warrant rectification. But if we don’t understand it and work to build policy around it, the results will be ugly. From the mounting affordability crisis to the income and racial segregation of our cities, the failure of shifting responsibility for the distribution of densities from markets to planning boards has been a self-evident failure.

For future content and discussion, follow me on Twitter at @mnolangray.

The post Density Is How the Working Poor Outbid the Rich for Urban Land appeared first on Market Urbanism.

]]>
9582
Is Zoning Popular? Reevaluating the Evidence http://marketurbanism.com/2018/01/25/zoning-popular-evidence-weak/ http://marketurbanism.com/2018/01/25/zoning-popular-evidence-weak/#comments Thu, 25 Jan 2018 17:09:02 +0000 http://marketurbanism.com/?p=9555 In my regular discussions of U.S. zoning, I often hear a defense that goes something like this: “You may have concerns about zoning, but it sure is popular with the American people. After all, every state has approved of zoning and virtually every city in the country has implemented zoning.” One of two implications might be […]

The post Is Zoning Popular? Reevaluating the Evidence appeared first on Market Urbanism.

]]>
New Brunswick, NJ Zoning Map

In my regular discussions of U.S. zoning, I often hear a defense that goes something like this: “You may have concerns about zoning, but it sure is popular with the American people. After all, every state has approved of zoning and virtually every city in the country has implemented zoning.”

One of two implications might be drawn from this defense of Euclidean zoning: First, perhaps conventional zoning critics are missing some redeeming benefit that obviates its many costs. Second, like it or not, we live in a democratic country and zoning as it exists today is evidently the will of the people and thus deserves your respect. The first possible interpretation is vague and unsatisfying. The second possible interpretation, however, is what I take to really be at the heart of this defense. After all, Americans love to make “love it or leave it” arguments when they’re in the temporary majority on a policy.

But is Euclidean zoning actually popular? The evidence for any kind of mass support for zoning in the early days is surprisingly weak. Despite the revolutionary impact that zoning would have on how cities operate, many cities quietly adopted zoning through administrative means. Occasionally city councils would design and adopt zoning regimes on their own, but often they would simply authorize the local executive to establish and staff a zoning commission.

Houston was among the only major U.S. city to put zoning to a public vote—a surefire way to gauge popularity, if it were there—and it was rejected in all five referendums. In the most recent referendum in 1995, low-income and minority residents voted overwhelmingly against zoning. Houston  lacks zoning to this day. Meanwhile, the major proponents of early zoning programs in cities like New York and Chicago were business groups and elite philanthropists. Where votes were held, as in cities like St. Louis, support for zoning was often openly predicated on the idea that zoning would implement and preserve racial segregation. Needless to say, the poor, immigrants, and African Americans were often prevented from voicing their opposition to zoning and other racial segregation programs at the ballot box.

Yet the puzzle remains: if zoning was never popular, why did nearly every state and adopt it? Here it might help to clear up the actual origins of US zoning policy. Contrary to the popular view of zoning as a ground-up phenomenon, zoning was in fact developed, promoted, and heavily incentivized by the federal government.

Zoning as it exists today was developed by the federal Department of Commerce under future president Herbert Hoover. In 1924 and 1928, the department published the Standard Zoning Enabling Act and Standard City Planning Enabling Act, respectively, and distributed copies of each to every state legislature in the country. These acts aimed to accomplish three goals: First, to popularize the policies among legislators and provide a clear federal seal of approval. Second, to provide a model for zoning enabling legislation—legislation whereby the state allows municipalities to undertake certain police powers—and make it easy for state legislatures to quickly pass it. Finally, to secure court approval of zoning. At the time, the constitutionality of zoning was very much in doubt. Many zoning advocates both feared that poorly drafted zoning would prompt the courts to declare the policy unconstitutional nationwide and hoped that the widespread adoption of zoning would leave the courts hesitant to overturn it. Their strategy clearly worked: before 1920, just over a third of states had adopted any kind of zoning enabling legislation. By 1930, nearly three quarters of states had adopted the legislation. In 1926, a divided Supreme Court ruled in favor of zoning.

Over the next 90 years, the federal government would continue to promote and in many cases require zoning, particularly during the New Deal. In 1936, the USDA published rural zoning enabling legislation, designed to push zoning into small towns and rural hamlets. Whether or not towns and cities needed or even wanted zoning, waves of grants and technical experts were forthcoming to nudge municipalities to draft zoning ordinances.

Often, these zoning ordinances were shoddily crafted by non-locals to help municipalities meet federal mandates. After all, as the federal government played a larger role in financing state and local infrastructure projects, zoning came to be expected. Likewise, as the government entered into housing finance in 1934, low-density, racially segregated residential zoning became a necessary prerequisite to secure funding for residential projects or mortgages. Today, the expectation that towns and cities have zoning continues to show up in applications for everything from infrastructure funding to emergency relief. Under such a regime, regardless of popular support, it would be downright weird if most towns and cities didn’t adopt zoning.

None of this is to say that there were never popular constituencies for zoning. A handful of states and cities had clearly adopted zoning by their own volition, as unsavory though their motives often were. But even if we were agree that the popularity of zoning in any way excuses the program—an argument which I am highly skeptical of, see postscript—the purported popularity of early zoning remains far from settled.  

On the one hand, we have strikingly little evidence from democratic public referenda for the popularity of US zoning. On the other hand, we have a century of the federal government drafting, promoting, incentivizing and mandating zoning. Where mass movements in favor of zoning are missing, we find only xenophobic business groups and progressive technocrats in favor. All of this casts serious doubt over the idea that zoning is in the result of popular movements or enjoys mass support today. Meanwhile, Eucludean zoning’s incredible costs become clearer every day.


Postscript: Let’s take the defense that Euclidean zoning is popular on its own terms, contrary to the historical evidence. It’s not obvious that popularity qualifies as an overriding merit in all or even most cases. Sure, we live in a republic, where policy is meant to operate with the consent of the public. But we also live in a liberal republic, where all citizens enjoy certain basic rights regardless of the whims of majorities. Until quite recently, nearly every city in the country enforced some form of school segregation. When unelected judges, after much hemming and hawing, finally cracked down on school segregation—against the wishes of majorities—they did the right thing. A policy that violates basic rights, or arbitrarily expropriates property, or abuses vulnerable populations isn’t made right for being popular in this country. Even if zoning were popular, its tendency to do all of these things should make us deeply skeptical of the policy.

The post Is Zoning Popular? Reevaluating the Evidence appeared first on Market Urbanism.

]]>
http://marketurbanism.com/2018/01/25/zoning-popular-evidence-weak/feed/ 1 9555
Mini review: Suburb, by Royce Hanson http://marketurbanism.com/2018/01/17/mini-review-suburb-royce-hanson/ Wed, 17 Jan 2018 15:40:50 +0000 http://marketurbanism.com/?p=9543 Suburb: Planning Politics and the Public Interest is a scholarly book about planning politics in Montgomery County, a (mostly) affluent suburb of Washington, D.C.  The book contains chapters on redevelopment of inner ring, transit-friendly areas such as Friendship Heights and Silver Spring, but also discusses outer suburbs and the county’s agricultural areas. From my perspective, […]

The post Mini review: Suburb, by Royce Hanson appeared first on Market Urbanism.

]]>

Suburb: Planning Politics and the Public Interest is a scholarly book about planning politics in Montgomery County, a (mostly) affluent suburb of Washington, D.C.  The book contains chapters on redevelopment of inner ring, transit-friendly areas such as Friendship Heights and Silver Spring, but also discusses outer suburbs and the county’s agricultural areas.

From my perspective, the most interesting section of the book was the chapter on Friendship Heights and Bethesda, two inner-ring areas near subway stops.  When landowners proposed to redevelop these areas, the planning staff actually downzoned them (p. 56)- and NIMBYs fought the planning board, arguing that even more downzoning was necessary to prevent unwelcome development.

These downzoning decisions were based on the staff’s “transportation capacity analysis”- the idea that an area’s roads can only support X feet of additional development.  For example, Hanson writes that Friendship Heights “could support only 1.6 million square feet of additional development.” (p. 62).   Similarly, he writes that Bethesda’s “roads and transit could handle only 12 million square feet of new development at an acceptable level of service.” (p. 75)

Thus, planning staff artificially limited development based on “level of service “(LOS) .  “Level of service” is a concept used to grade automobile traffic; where traffic is free-flowing the LOS is A.  But the idea that development is inappropriate in low-LOS places seems a bit inconsistent with my experience. Bethesda and Friendship Heights zip codes have about 5000-10,000 people per square mile; many places with far more density seem to function adequately.   For example, Kew Gardens Hills in central Queens has 27,000 people per square mile, relies on bus service, and yet seems to be a moderately popular area.

Moreover, the use of LOS to cap density has a variety of other negative effects.  First, places with free-flowing traffic tend to be dangerous for pedestrians; for example, if an arterial is at LOS A, cars travel over 35 mph and thus create a high risk of injury or death to walkers.  Second, when people and jobs are excluded from transit-friendly places such as Bethesda, they do not disappear.  Instead, they migrate elsewhere- often to more car-dependent places, increasing regional auto traffic.  Third, policies that limit housing anywhere reduce the regional supply of housing, thus affecting regionwide housing costs.

At any rate, this book’s value for market urbanists is to show what planners really do.  Sprawl supporters often paint zoning as a reflection of the market, and planners as pro-density ideologues.  But in fact, planners often seek to split the difference between developers who seek to create housing and jobs, and nearby homeowners who want less of both.

 

The post Mini review: Suburb, by Royce Hanson appeared first on Market Urbanism.

]]>
9543
Zoning Laws, the Housing Market and the Ripple Effect http://marketurbanism.com/2017/12/28/zoning-laws-housing-market-ripple-effect/ http://marketurbanism.com/2017/12/28/zoning-laws-housing-market-ripple-effect/#comments Thu, 28 Dec 2017 13:23:18 +0000 http://marketurbanism.com/?p=9332 The adoption of zoning as a means of preventing external costs led to inefficient use of land and caused many individuals to suffer great unfairness.

The post Zoning Laws, the Housing Market and the Ripple Effect appeared first on Market Urbanism.

]]>
ripple effect housing

 Henry Hazlitt has called economics a science of recognizing secondary consequences. What he and others who have taken the time to study the working of free markets have perceived is that there is a natural orderliness in uncoerced dealings between men which tends to maximize the well-being of each individual and put resources to their best use. But to accomplish this, a market must be free, which means that each participant must be allowed to decide for himself how he will use his assets, whether personal skills, money, or physical property. Whenever government compels a person to use his property in a way other than he would freely have chosen, this natural orderliness is upset.

The effect of any such tampering with a market may be likened to throwing a stone into a calm pool. Waves of disturbance will ripple outward. Unfortunately, government will now look upon these ripples as new problems calling for its false remedies, and throw more stones in an attempt to neutralize the unwanted and unforeseen consequences of its earlier stone-throwing. I call this the ripple effect; it is nothing other than a failure to foresee secondary consequences.

This article is about one form of governmental interference with free markets which nicely illustrates the ripple effect. It is about zoning ordinances, particularly those which regulate the type of housing a person may build on his property. Such ordinances demonstrably have worsened the housing situation in this country, have been a vehicle for much manipulation, unfairness and favoritism, and, of course, have spawned new coercive remedies designed to set aright the problems zoning has caused. What government cannot see is that these “remedies” will even further impair the functioning of the housing market.

A Primer on Zoning

A zoning ordinance is a decree by government that land in its jurisdiction may be used only in accordance with its regulations. These regulations are contained in a zoning map, which designates the permissible uses for property in each zone. For example, a subdivision might be zoned to permit only single-family dwellings on lots of one acre or more.

The original rationale behind zoning was that it was necessary to prevent nuisances. City governments thought it desirable that industry and retail trade be segregated lest their attendant smoke, noise, and traffic impose costs on residential areas. The paradigm case zoning was aimed at would be the construction of a steel mill on a quiet, shady street. Zoning based upon this argument was upheld by the Supreme Court even though its adoption might cause an enormous loss to the owner of affected property. 1

Zoning, however, was not limited to the segregation of industrial from residential areas. It was also used to demarcate the boundaries for single-and multi-family housing. When challenged in court, cities argued that allowing apartment buildings to be constructed next to single-family houses would shut off air and light to the latter, increase noise and traffic, and deprive children of places to play. Lurking behind these doubtful arguments (which the Supreme Court also accepted as justifying zoning of this nature) was the objective of protecting the property values of homeowners against the decline which would follow if their area became less exclusive. It will be observed that this concern has nothing to do with true nuisances such as pollution and noise, but rather is an attempt to use the coercive power of government to protect against those losses which free markets must necessarily sometimes inflict.

The Law of Nuisance

The common law had long recognized actions for nuisance when zoning first became popular. This action was based upon the idea, inseparable from the argument for freedom, that one does not have a right to make use of his property in such a way as to injure or render less fit for use the property of another. If one did so, he might be compelled by a court to pay for the extent of his damage, and the destructive use might also be enjoined.

Now, it cannot be said that nuisance suits ever became a perfect solution to the problem of externalities (the imposition of costs by one landowner upon his neighbors). Legal actions have high transaction costs, and success is never a sure thing. And if the losses were spread over a large number of people—e.g., smoke damage from a steel mill—almost certainly no one of them would feel sufficiently aggrieved to undertake the expense of a lawsuit (at least prior to the advent of the class action). These factors served to deter many from asserting their legal rights.

All this may be admitted without indicting nuisance law for any inherent flaw. Courts and legislatures could have devised new procedures fairer to plaintiffs and new remedies for accommodating competing interests had they seen the necessity to do so. Nuisance law, however, has suffered from extreme neglect during the nation’s half-century infatuation with zoning. Even so, there have been noteworthy nuisance cases in the last few years, indicating that zoning is not the only answer to the externalities problem.2

Zoning vs. Nuisance Law

It is important to compare the way in which zoning and nuisance law operate. Nuisance law is based on the market idea that one should pay for the costs that he causes to be incurred, and works punitively—at least until people come to know what uses will probably cause them to have to pay penalties. At that point, uses for which the expected costs are too high will be deterred. Thus, nuisance law should—or could—lead to the same sort of economic calculation which underlies any business decision. An entrepreneur would decide against building a steel mill in a residential area for the same reason he would decide against building one where it was difficult to get raw materials—the costs Would be too high. On the other hand, a contemplated use of land, a grocery store, for instance, might impose small costs on the neighboring owners, but still be a worthwhile project because of large expected returns. It is this sort of rational economic calculation which optimizes the use of resources. Zoning, however, does not allow individual decisions as to the costs and benefits of the uses of land. While zoning may prevent some nuisances3, it lacks the ability to discriminate between nuisances which are worth their cost and those which are not, and prohibits some land uses which would not be nuisances at all. This is so because zoning is not predicated upon a calculation of costs and benefits, but only upon a planning “expert’s” notion of how cities ought to be patterned. With zoning, we pay a high cost in efficiency to prevent an unknown but probably small number of nuisances. The planners cannot know how much land will be demanded for each possible use at the time they draw up the zoning map; too much may be allocated to light industry, or too little to multifamily dwellings. As a result, we have waste and inefficiency.4

“Exclusionary” Zoning

Now we meet the villain of the piece. After the courts gave the green light to zoning, people quickly realized what a powerful tool they had been given. All manner of restrictions might be put on the use of land which would guarantee that “undesirable types” would have to live somewhere else. Municipalities frequently enacted ordinances requiring a minimum lot size of an acre or more; often there was no provision for apartment houses and mobile homes, while in some cases they were even affirmatively excluded. Various rationales were advanced to justify these interferences with freedom, but none more than tenuously linked to any proper governmental function of protecting health or safety, or preventing nuisances. At the bottom was always the desire to exclude people of lesser income from the community.

It was in the mid-sixties that the people who are usually so fond of government planning and who enthusiastically support zoning as long as it is “only” commercial interests which are affected, realized that they had created a monster. The shoe was on the other foot now—one of their favored groups, the poor, was being victimized by zoning. The result was a large number of courtroom battles over the legality of what was called “exclusionary” zoning. (All zoning is exclusionary, but never mind.)

The Legal Outcome

In several cases, courts struck down large minimum lot size ordinances. Those who believe in freedom can applaud such decisions; if a group desires to insulate itself from the rest of society, it may do so by purchasing enough land to achieve that objective, but it is wrong to do so through the use of the coercive power of government. Unfortunately, not all courts and legislative bodies were content with a mere restoration of freedom. Instead, they sought to rectify the problems created by zoning by imposing even more zoning.

The leading case, Southern Burlington County NAACP v. Township of Mt. Laurel, comes to us from the Supreme Court of New Jersey.5 In ringing language, the court invalidated the town’s highly restrictive zoning scheme, and then intoned that every developing community has an obligation:

Affirmatively to plan and provide, by its land use regulations, the reasonable opportunity for an appropriate variety and choice of housing, including, of course, low and moderate cost housing, to meet the needs, desires and resources of all categories of people who may desire to live within its boundaries.

The animating force behind the court’s ruling was not a belief in liberty, but rather a simple-minded mathematical notion that each municipality should contain its “fair share” of low- and middle-income residents.

This idea that people should be distributed throughout society in accordance with precise ratios shows forth even more disturbingly in the so-called “inclusionary” zoning ordinance. The concept, which has found some support in academic journals6, is to require a developer to include a specific percentage of units for low-income families if he is to be allowed to construct any multifamily project. Such an ordinance was enacted in Fairfax County, Virginia, but was held unconstitutional by the Supreme Court of Virginia.’

Making the Problem Worse

Both the Mt. Laurel “fair share” requirement and the “inclusionary” ordinance recognize that zoning has been used to limit the number of places where poor people might live, and seek to remedy the shortage of housing which has resulted. But at best they will be ineffective, and will probably succeed in making the problem worse.

New housing is seldom constructed expressly for the poor. (One exception, of course, is the federal government, but its efforts, such as the famed Pruitt-Igoe project, have been smashing failures.) Rather, the poor benefit from the filtering down of older housing left empty as wealthier individuals move into new or better homes. Careful empirical studies have demonstrated that this intuitively appealing proposition is true.8 Therefore, to the extent that “inclusionary” ordinances or judicially mandated “fair share” plans operate to decrease the total amount of housing which is constructed, they will work against the poor by diminishing the filtering down of older housing.

There are a number of reasons to believe that these legal mandates will, in fact, lead to less housing construction. Consider first the likely eventuality that, under a “fair share” requirement, an incorrect amount of land would be zoned for low-cost housing—i.e., more or less than would be so used in an unhampered market. This must be considered likely because a developing community cannot know what sort of commerce will choose to locate in it, and hence the characteristics of the workforce which may desire to live there will also be unknown. Merely because there is a heavy-industry zone, for instance, there will be no reason to assume that some specific percentage of poor people will be employed. The skill and income level of the workforce will vary greatly depending on whether labor or capital intensive industries move in. Thus, the planner’s guess will probably be wrong when he zones for housing. If too much land is allocated for one type of housing, too little must be for other types. Some land will be inefficiently used, total construction will be less than we would have had in the absence of zoning, and fewer old homes will become available to the poor.

Discouraging Developers

Secondly, we must consider the attitudes of the would-be developers ordered by an “inclusionary” ordinance to use a part of their property for the construction of low-cost housing. They may be reluctant to undertake the project thus presented for any of several reasons. With the mandatory low-income units, the overall rate of return may not be sufficient to induce the builder to devote his resources to this development as opposed to one where he finds no government interference. Or, the developer may have doubts about the marketability of the non-low-income units if compelled to put them in close proximity to those built for the poor. A related concern might be the possibility of high maintenance costs for the low-income units. Reflection upon the way property frequently is treated in the inner city might well dissuade one from building with the poor in mind as tenants. Yet another obstacle might be the architectural difficulties of integrating the smaller low-income units in the same structure with larger apartments designed for the affluent.

Thirdly, many of the reasons which might make the developer hesitant would also be on the minds of prospective lenders. Even if the former were willing, the latter might not be. The result: housing construction foregone.

Two more arguments tell against these schemes to provide better housing for the poor. So far we have left out the intended beneficiaries of this new housing, the poor themselves. Are many of them likely to be interested? Professor Banfield has pointed out that the inner-city dweller is accustomed to the nature of life there, and probably would feel bored and uncomfortable if transported out to suburbia.9 The spaciousness and solitude would be entirely alien, and the preferred entertainments and companionship would be far removed. In short, there is reason to doubt that there would be enough takers for this housing to fill the government’s quotas, leading to further waste.

Lastly, it must be emphasized that low-income housing is quite infeasible without government subsidies. The Mt. Laurel court expressly noted this. Do we really want the availability of housing for the poor to depend upon the caprices of federal and state budgeting? The government is anything but a trustworthy provider. A change in administration or voter sentiment could halt building in progress and prevent new construction from being undertaken, again to the detriment of the poor. Uncertainty is one of the prices one pays for government dependence.

No doubt there are more arguments, and perhaps more persuasive ones which could be advanced against these plans. All I have attempted to accomplish in this brief space is to show that the government did not, and indeed cannot, take into consideration all of the reactions one might expect to its tampering with the housing market. Not enough housing for the poor? Why then just zone for more, or compel people to build more, says the government. This simple minded solution pays no heed to secondary consequences, and forgets that people have minds and wills of their own. That is why it will fail.

Conclusion

The adoption of zoning as a means of preventing external costs was ill-considered in the first instance. It led to inefficient use of land and at the same time caused many individuals to suffer great unfairness. Once this authoritarian power to restrict the uses to which a property owner could devote his land was acknowledged as legitimate, it followed inexorably that it would be misused to protect well-placed interests and exclude poor people from developing communities. In attempting to solve this government-created problem in the housing market, courts and legislatures have resorted to more of the statist medicine of coercion. “Inclusionary” zoning and “fair share” plans will not make more housing available to the poor, and will probably have the opposite effect. Then, we may confidently predict, government will react with yet more counterproductive laws and directives.

The radical solution to the chaos zoning has brought to land markets is to eliminate it. To be sure, people then will erect some buildings and do other things with their property that others will not like. If those uses actually interfere with the enjoyment of property by others, those people affected should be encouraged to sue in nuisance to obtain compensation for the damage done. If the offending use does not amount to a true nuisance—an apartment with poor people as tenants, or a building painted an ugly color—that is something people who live in a free society will just have to tolerate as one of the annoyances of life. The alternative to a regime of freedom in land use is zoning with its ever-present potential for waste and inefficiency, inequity and manipulation. Let us choose freedom.

‘ Village of Euclid v. Ambler Realty, 272 U.S. 365 (1926). The value of Ambler Realty’s holding fell by $300,000 when its tract was put in a residential zone.

²See, e.g., Boomer v. Atlantic Cement Co., 287 N.Y.S.2d 112. The court there refused to enjoin the operations of a cement plant, but awarded the plaintiffs the amount by which their property had been permanently damaged (based on market value) plus an amount equal to the ongoing monthly costs the plant imposed on them.

³It is not clear that cities would look much different in the absence of zoning. Professor Siegan points out in his book Land Use Without Zoning that Houston has no zoning, yet the market has neatly segregated industrial and residential districts simply on the basis of the differing characteristics which attract each type of development.

“Zoning decisions, it must be said, are not unalterable. Zoning maps may be changed or variances granted. But it is never certain that zoning mistakes will be corrected through these mechanisms. Whether a zoning change is made or blocked usually does not depend upon abstract considerations of eff¹ciency, but rather on the ability of interested parties to pressure the decision makers. Moreover, these escape hatches from zoning have frequently been used by unscrupulous persons to gain windfalls. See Ellickson, “Alternatives to Zoning”, 40 U. of Chicago Law Rev. 681, 701-05.

5336 A.2? 713. 6See Kleven, “Inclusionary Ordinances—Policy and Legal Issues in Requiring Developers to Build Low Cost Housing”, 21 UCLA Law Rev. 1432.

‘Board of Supervisors v. DeGroff Enterprises, 198 S.E. 2″ 600.

8See Lansing, Clifton and Morgan, New Homes and Poor People: A Study of Claims of Moves, Survey Research Center, Institute of Social Research, Univ of Michigan (1969). 9See The Unheavenly City, especially chapter 2.

George C. Leef


George C. Leef

George Leef is the former book review editor of The Freeman. He is director of research at the John W. Pope Center for Higher Education Policy, and is a graduate of the Duke University School of Law, Durham, North Carolina.

This article was originally published on FEE.org. Read the original article.

Facebook Page

Get regular updates and related posts via facebook

Facebook Group

Join over 3,000 others in an active discussion of topics related to Market Urbanism

@marketurbanism

Join over 20,000 followers in an ongoing conversation about urbanism and liberalization

The post Zoning Laws, the Housing Market and the Ripple Effect appeared first on Market Urbanism.

]]>
http://marketurbanism.com/2017/12/28/zoning-laws-housing-market-ripple-effect/feed/ 1 9332
The Progressive Roots of Zoning http://marketurbanism.com/2017/11/24/the-progressive-roots-of-zoning/ Fri, 24 Nov 2017 14:15:08 +0000 http://marketurbanism.com/?p=8941 by Samuel R Staley Before the twentieth century land-use and housing disputes were largely dealt with through courts using the common-law principle of nuisance. In essence if your neighbor put a building, factory, or house on his property in a way that created a measurable and tangible harm, courts could intervene on behalf of a […]

The post The Progressive Roots of Zoning appeared first on Market Urbanism.

]]>

Edward Bassett, writer of NYC’s 1916 zoning code

by Samuel R Staley

Before the twentieth century land-use and housing disputes were largely dealt with through courts using the common-law principle of nuisance. In essence if your neighbor put a building, factory, or house on his property in a way that created a measurable and tangible harm, courts could intervene on behalf of a complainant to force compensation or stop the action. This pro-property rights approach maximized liberty and minimized the ability of citizens and elected officials to politicize the development process.

This changed with the Progressive movement. Beginning in the late nineteenth century, Progressives argued that government should become more professional. Rather than being limited, government should use its resources to pursue the “public interest,” loosely defined as whatever the general public decided through democratic processes was the proper scope of government. Legislatures and, by extension, city commissions made up of elected citizens would set policy and goals while a cadre of trained professionals would use the techniques of scientific management to implement policies. One of the leading Progressives of the day, Woodrow Wilson, was skeptical of the value of elected bodies such as Congress because they interfered with scientific management of government.

While many in the twenty-first century might be tempted to dismiss this public-interest view of government—indeed an entire academic subdiscipline, Public Choice, has emerged to demonstrate the foibles of governments and explore “government failure”—Progressive ideas held a lot of appeal at the turn of the twentieth century. In addition to national concerns over industries such as oil, steel, and railroads, local governments were rife with corruption, waste, and inefficiency. Reforms, such as the city-manager form of government, civil-service exams, and in some cases even municipal ownership of utilities, were thought to provide more transparency and accountability than the patronage-laden times of political bosses. (Today municipal ownership is associated with higher costs, less transparency, and little accountability.)

The Progressive movement, however, had another, darker side that would end up being much more important to understanding the widespread acceptance and persistence of government land-use regulation: social control. Jonah Goldberg notes in his contemporary political history, Liberal Fascism, that the Progressive movement was also a social movement. The emergence of Prohibition and immigration restrictions at the same time (during the presidencies of Theodore Roosevelt, William Howard Taft, and Wilson) was not a coincidence. Not only could government professionalize public service, Progressives believed it also should mold the community along “progressive” social norms and goals (collectively decided).

This political climate provided the context for zoning and helps explain the rapid increase of zoning and urban planning more generally throughout the United States. Conventional planning history tends to minimize the political reasons why zoning was broadly accepted, seeing urban planning instead as an application of a more scientific and rational approach to land development. Rather than letting private markets decide what housing should be built, at what heights, at what densities, and where, the “community” would decide through a combination of democratic choice (elected officials developing and approving a zoning plan and code) with professional planning and code enforcement. Ideally the zoning code would be tied to a central comprehensive plan, which would establish the “vision” for the community. Zoning would be used to implement the plan.

Importantly, zoning was a Progressive alternative to the more traditional (and conventional) nuisance-based approach. The first zoning code, for example, attempted to address spillover impacts of property development—externalities—by segregating land uses. The proverbial slaughterhouse in the residential district wasn’t a myth; these juxtapositions of “noxious” uses were common in low-wealth, low-mobility societies and communities. As incomes increased, wealthier households tended to move to neighborhoods that were healthier and safer; incomes afforded greater mobility—first with horses and buggies, then horse-drawn and electric trollies, and ultimately with the automobile. Those left behind were forced to use the courts—which required money, time, and expertise—to marshal arguments and win cases. Zoning was an alternative that promised lower costs and consistency with social goals established at the municipal level through scientific land management.

But the acceptance of zoning wasn’t all about scientific management and the implementation of the public interest. Zoning, in effect, collectivized property rights. The zone established in the code determined what kinds of homes could be built, their size, sometimes even their outward appearance, and the density of neighborhoods. Similarly, zones determined where businesses could locate. Proposals to develop property for uses not designated by the zoning code required an amendment to the zoning map or plan. The amendment process was intended to be cumbersome and laborious because the presumption was always in favor of the publicly approved plan and against spontaneous modifications based on individual initiative.

Overestimating the detail of a zoning code is difficult. Even cities of 10,000 or fewer can have dozens of zones, often a half-dozen or more devoted just to housing types. Separate zones may exist for neighborhood business, commercial office space, neighborhood retail, or regional shopping malls. While some cities and towns have adopted a “pyramid approach,” where the base of acceptable uses is broadened as land is “upzoned” (with commercial and industrial development representing “higher” zones to reflect higher densities), many have adopted “exclusive use” zones that specify in detail what uses are permitted. If your proposed use (say, a home-based doctor’s office or tax preparation service) is not listed as a permissible use, it’s illegal.

One of the consequences of adopting a zoning code is the implicit politicization of all land use by making it a community decision. The decision to “grandfather” a use (such as your home) is a political decision, not one based on private property rights. In fact there is no enforceable individual property or civil right to land use under zoning; courts have routinely upheld the legal right of cities to rezone properties regardless of the wishes of individual property owners. Citizens can object as a matter of due process but cannot challenge the substance of the regulation itself, which is presumed to serve the general welfare of the community. Zoning establishes a legal entitlement granted by government to use property in designated ways.

Thus two forces led to the rapid adoption of zoning throughout the United States in the twentieth century: concerns about the nuisance effect of incompatible land uses and the political desire to control property development. Research by political scientist David Clingermayer, published in the academic journal Public Choice in 1993, found evidence that both the market-failure and political-interest justifications were important to understanding the spread of zoning. The conventional history focuses on nuisances and the “failure” of common law. Edward Bassett, an attorney and reformer in New York City, advocated the nation’s first citywide zoning ordinance when the iconic Equitable Building was erected in Manhattan. The building was tall enough to block sunlight into neighboring buildings and properties, prompting calls to restrict the size and height of buildings. A zoning ordinance would do the trick, Bassett said, taking inspiration from European style “districting.”

The second force, however, may have been equally important, according to Clingermayer. Externalities may have prompted some actions, but the economic interests of the politically powerful were also at play. The skyscrapers popping up along Manhattan’s toney Fifth Avenue troubled upscale clothiers, who were not excited about their wealthy clients mixing it up with the immigrant sweatshop workers toiling away in the high-rises. So Fifth Avenue property owners used the political device of zoning to prevent encroachment by uses they thought were “undesirable” or could lower their property values.

The same scene played out later near industrial Cleveland, Ohio. The suburban village of Euclid was concerned that industrial development radiating outward from Cleveland would encroach on the primarily residential character of its community. So it enacted a zoning ordinance to prevent industrial development. In a landmark 1926 decision by the U.S. Supreme Court, Village of Euclid v. Ambler Realty Corp., the zoning ordinance was upheld as a proper exercise of the police powers of local government to protect the general health and welfare of the community. Ironically, in the wake of the zoning ordinance, Ambler Realty’s property lay vacant until World War II, when an aircraft factory was built by General Motors to support the war effort.

Even before the Supreme Court blessed zoning, the federal government was busy encouraging it as part of a general effort to professionalize development control. Bassett helped the U.S. Department of Commerce (under Herbert Hoover) draft a model zoning ordinance called the Standard State Zoning Enabling Act, which provided a blueprint for cities across the nation. Clingermayer notes that 55,000 copies of the report were printed and distributed during the 1920s. By 1930 800 cities, towns, and villages—covering three-fifths of the nation’s urban population—were governed by a zoning ordinance of some kind.

Regardless of the initial intent, however, the effect of zoning was to fully politicize land-use decisions, as economist William Fischel puts it in the classic, Economics of Zoning and Land Use. This was not surprising: Since zoning hinges on the control over land uses rather than free use of property, the complexity of the zoning maps and the development-approval process has increased exponentially.

Euclid’s first zoning ordinance had six districts based on classes of uses. By 2011 the village had become a city of nearly 50,000 residents with 12 zoning districts, including six residential, three commercial, two industrial, and a campus-institutional district. The initial modest control of land use quickly proved ineffective because democracies are not particularly good at predicting the future. As land uses became more complex and the impacts themselves became more diffuse and hard to categorize, zoning became more layered and sophisticated, with cities and planners attempting to anticipate and accommodate more uses. Euclid’s zoning is relatively modest by national and midwestern standards. San Antonio’s zoning districts have grown from 22 in 1938 to 30 in 1958 to 53 in 2009. New York City has adopted hundreds of zoning districts, including ten residential, eight commercial (plus overlays), three manufacturing, dozens of special districts such as street-specific designations for mixed land uses, and environmental districts such as scenic view districts.

For many cities, zoning has become a never-ending cycle of adding complexity to already complex planning procedures as existing zones fail to accommodate innovations in land use and economic development.

Is there an alternative?

While most American cities, towns, and villages have adopted some form of zoning and comprehensive planning, several counties and municipalities have resisted the Progressive call to centrally plan their cities. Chief among these is Houston, Texas, a city of 2.1 million people in the nation’s sixth-largest metropolitan area of six million. Zoning has gone to popular referendum three times (1948, 1962, and 1993) and failed. Most recently a pro-planning city councilman lost his bid to become mayor, in part because of citizen skepticism of zoning.

Despite the lack of zoning, Houston is hardly a land-development free for all. Development is regulated through three different processes. The city regulates development through an approval process that focuses mainly on the impact of land development on public services. New developments, for example, must conform to performance criteria for public services such as sewer and road capacity. The second regulatory mechanism is private restrictions on land use adopted through legally enforceable land covenants, or voluntary restrictions on future land uses by current property owners. Covenants can (and often do) exclude specific uses, such as commercial enterprises or businesses. Yet a surprising number of parcels are “unrestricted,” particularly in the older neighborhoods and sections of the city, effectively allowing informal market forces, the third mechanism, to regulate the timing, intensity, and place of development.

By avoiding zoning, Houston is able to dramatically speed up the approval process while ensuring the land market responds effectively to economic trends. Under conventional zoning securing a rezoning for a major project can take years. In Houston substantial developments such as multifamily housing can be approved through the performance-approval system and be fully constructed within a year.

All three mechanisms have effectively combined to encourage and manage the growth of one of the nation’s most dynamic cities. Houston, for example, builds housing at higher densities and closer to the traditional urban core than competing cities such as Dallas and Phoenix. Its market-oriented approach to land use has also allowed it to adapt, building multiple employment centers to accommodate new economic challenges and opportunities. While Houston was not immune to the housing market collapse, its housing market has tended to be more resilient and adaptable to changing circumstances.

In sum, many citizens of contemporary U.S. cities take the Progressive foundations of zoning and land-use planning for granted. Yet these Progressive principles on which modern-day zoning rests, and its broad cultural acceptance at the grassroots level, have helped undermine alternative ways of regulating development more consistent with individual liberty and markets. Many of those seeking to roll back federal government encroachment should also be casting a skeptical eye into their own political backyards.


Samuel R. Staley

This article was originally published on FEE.org. Read the original article.

The post The Progressive Roots of Zoning appeared first on Market Urbanism.

]]>
8941
Subsidizing Suburbia: A forgotten history of how the government created suburbia http://marketurbanism.com/2017/09/05/subsidizing-suburbia-a-forgotten-history-of-how-the-government-created-suburbia/ http://marketurbanism.com/2017/09/05/subsidizing-suburbia-a-forgotten-history-of-how-the-government-created-suburbia/#comments Tue, 05 Sep 2017 12:14:44 +0000 http://marketurbanism.com/?p=8763 This is the first article of a five-part series on suburbia in the United States. In primary school, one of my friends lived in a duplex. This fact blew my mind. To my inexperienced 7-year-old mind, a duplex barely registered as a house. Her family shared a driveway with their neighbors, and their yard was […]

The post Subsidizing Suburbia: A forgotten history of how the government created suburbia appeared first on Market Urbanism.

]]>
This is the first article of a five-part series on suburbia in the United States.
In primary school, one of my friends lived in a duplex. This fact blew my mind. To my inexperienced 7-year-old mind, a duplex barely registered as a house. Her family shared a driveway with their neighbors, and their yard was tiny. It was the first house I’d ever seen that shared a wall with its neighbors. I’d seen apartments of course, but in my mind those were temporary, for people who who were saving up to buy a “real” home. I couldn’t understand that some people might actually prefer to live in something besides a private home, because I’d never come across it before.

A duplex is a house divided into two units, with a separate entrance for each. Mind-boggling! My 7-year-old mind could barely comprehend what it was seeing.

Median income in American cities tends to rise at about 8 percent per mile as one moves away from the business district.

My mental model of the world was pretty typical for an American child brought up in a single-family home. It’s easy to see why—US residential development is dominated by suburbs, and home ownership is touted as the ultimate symbol of prosperity. Other types of dwellings tend to be for young people starting out in life or low income households unable to afford a place of their own. The popular image of the American Dream includes a white picket fence and a car, not an apartment and a subway pass.

This is in stark contrast with most other countries. The French word for suburb is banlieue, and it has come to connote poverty and social isolation, because that is where immigrants and the poor tend to live. They’ve been known as “red suburbs” because of their tendency to vote Communist. Meanwhile, the wealthy live in the city center. In South Africa, the inner city is reserved for the privileged white class, while black citizens have a hour-long journey to work.* Kenneth Jackson wrote of Amsterdam that “affluence characterizes the old center … but the working class has increasingly been forced outward to the suburbs”. He continues:

“In Brazil the exclusion of slum dwellers from the urban cores is so deeply rooted in the culture that the Portuguese word to describe them is marginais, and the word used to describe their arrival is invasaõ.”

Homeownership rates are lower in most of the world too, even for developed countries of comparable prosperity. Two-thirds of American families own a home. Meanwhile, the rate in Sweden, a wealthy nation, is just one third, and that rate has remained stable in the period of unprecedented prosperity the country has seen since 1945. The US rate is also double that of Germany, Switzerland, France, Great Britain, and Norway.

In Brazil, the poverty exists at the outskirts, where flush toilets, sewers, fire and police protection, and running water are virtually unknown.

As a kid, I assumed that Americans’ tendency to live in suburbs was the result of individual choices. I thought people simply preferred suburban living, and that was why it was predominant. As I got older, I figured it was the result of a frontier mindset, lots of available land relative to Europe, and our economic strength in the postwar period.

There is truth to these explanations—some do truly love that lifestyle, and America’s wealth did enable it to develop in ways that other societies could not. Geography, timing, and prosperity all played a role in the rise of suburbia, but we have forgotten an even more important factor that shaped patterns of American development since the Great Depression.

What we don’t see is that decades of explicit public policy powered the expansion of suburbia. Our communities would look very different today had it not done so. While every level of government favored sprawl in many different ways, four policies had an outsized effect:

  • housing finance,
  • special tax treatment,
  • subsidization of an car-oriented lifestyle, and
  • zoning laws

Today, we take these policies for granted as a normal part of American life. Even fiscal conservatives don’t think twice about paying for roads, and few people can name the original mandate of the Federal Housing Administration. Questioning the mortgage interest deduction is political suicide, and we take for granted the right for homeowners to regulate the land use of their neighbors. Car ownership is a rite of passage for teenagers, and a lawn and a picket fence have become synonymous with the American Dream.

But none of these conclusions were inevitable. Government intervention influenced our expectations about home ownership, tax treatment, car infrastructure, and even what our neighborhoods should look like. In the course of the next few posts, we’ll dive into each of these four topics to understand how American communities came to be what they are today.

  1. Financing Suburbia: How government mortgage policy determined where you live
  2. Exempting Suburbia: How suburban sprawl gets special treatment in our tax code
  3. Paving Suburbia: How federal projects reshaped your community around the automobile (coming soon!)
  4. Zoning Suburbia: How single-use zoning is responsible for your 45-minute commute (coming soon!)

This article was originally published on Medium.

* We also see this pattern in some places in the US. City centers are gentrifying in places like San Francisco, DC, and New York City, pushing lower-income groups outside of the urban core.

The post Subsidizing Suburbia: A forgotten history of how the government created suburbia appeared first on Market Urbanism.

]]>
http://marketurbanism.com/2017/09/05/subsidizing-suburbia-a-forgotten-history-of-how-the-government-created-suburbia/feed/ 15 8763