The post Houston as an Affordability Model appeared first on Market Urbanism.
]]>Following the hearing, I received a good question from Congresswoman Sylvia Garcia. She points out that, as in the country as a whole, the share of cost burdened renters has increased in recent years in Houston, in spite of land use liberalization. She asked what local policymakers could do to improve affordability for low-income residents.
When market-oriented housing researchers point to Houston’s relatively light-touch land use regulations as a model for other U.S. localities to learn from, its declining affordability may cause skepticism. Houston, however, has fared better than many other cities in housing affordability for both renters and homebuyers.
While Houston is the only major U.S. city without use zoning, it does have land use regulations that appear in zoning ordinances elsewhere, including minimum lot size, setback, and parking requirements. These rules drive up the minimum cost of building housing in Houston. However, Houston has been a nationwide leader in reforming these exclusionary rules over the past 25 years. Houston policymakers have enacted rule changes to enable small-lot development and, in parts of the city, they have eliminated parking requirements. In part as a result, Houston’s affordability is impressive compared to peer regions.
As the chart below shows, Houston has the lowest share of cost-burdened renter households among comparable Sun Belt markets for households earning 81% to 100% of the area median income. Only San Antonio and Austin have lower rates of rent burden among households earning 51% to 80% of the area median income.
At the least-well-off end of the income spectrum, Houston has the lowest rate of homelessness among major U.S. cities, due in part to its relative abundance of housing and in part to well-administered public and nonprofit services for formerly homeless residents.
The next chart shows that at the other end of the spectrum, homeownership is also more attainable to residents earning the region’s median income compared to the same group of Sun Belt metros shown in the chart above.
While Houston is a model of relative affordability, its housing market cannot serve its least-well-off residents without aid. As I interpret the evidence, the best way to improve housing affordability and housing quality for households that cannot afford adequate market-rate housing is with housing vouchers or other forms of income assistance targeted to the renter households most in need. The Housing Choice Voucher program improves important outcomes for the households that receive them. Compared to eligible households that do not receive vouchers, those that do suffer less food insecurity, less domestic violence, fewer child separations, and much less housing instability.
Dedicating resources toward vouchers allows dollars to go further relative to dollars dedicated toward new, subsidized housing construction because new-construction housing is generally the most expensive type. Relative to new construction that is fully or partially dedicated to residents of a specific income, vouchers open up opportunities for recipients to live in many different types of housing.
Policymakers in cities like Houston could provide a similar, locally-administered aid for extremely-low-income residents who are not receiving federal Housing Choice Vouchers. However, fiscal constraints and tax competition across local and state borders present challenges for providing this type of aid at the subnational level.
Due in part to the fiscal difficulties in providing costly aid at the local level, local policymakers tend to turn instead to policies to mandate income-restricted housing through programs that appear costless. Increasingly, local policymakers are implementing “inclusionary zoning” programs that require housing developers to set aside a portion of new-construction units as income-restricted. I’ve studied inclusionary zoning in the Baltimore-Washington region, which has the country’s longest history with these mandates. I find that in this case, localities that have adopted mandatory inclusionary zoning programs have seen greater increases in their median house prices relative to what they could have expected without these programs.
Inclusionary zoning can provide large benefits for the few residents who win lotteries for the units that they produce. However, inclusionary zoning provides a very small number of units relative to the number of households that qualify for them based on their income. Further, as I find, these programs can actually make housing affordability worse for the households that don’t specifically benefit from them.
The name “inclusionary zoning” implies that these programs are a reversal of the exclusionary zoning rules that exclude people from neighborhoods and localities on the basis of their income. In fact, inclusionary zoning depends on continued exclusionary zoning in order to function. These programs are typically paired with density bonuses that are intended to fully or partially offset the cost of providing income-restricted units. Without exclusionary zoning, these density bonuses would have no value, and inclusionary zoning would be a clear tax on housing construction.
Even in a city at the far end of land use liberalization, like Houston, the housing market may not adequately serve low-income residents. There is a role for policymakers to provide aid to extremely-low-income households. Expanding the Housing Choice Voucher program is one way to make progress toward improved housing affordability that carries fewer risks than programs that require market-rate housing construction to subsidize income-restricted housing.
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]]>The post Welcome Michael Nahas appeared first on Market Urbanism.
]]>Here’s a short interview we did over email.
Emily: How did you become interested in cities?
Michael: A coincidence back in 2018 got me to look into cities. I had read a pop science article about how zoning policy in San Francisco was driving up the price of homes. The article stuck with me, because I’m fascinated by economics and it was so strange. I had always rented and didn’t know how regulated housing was. Then, at a party, I happened to mention this curious article in a conversation. The person I mentioned it to was Josiah Stevenson, an influential member in AURA, Austin’s YIMBY organization. He quickly recruited me into AURA and got me to look at cities.
And once I started looking into cities, I wondered why economists haven’t studied them more! Cities are where they gather. They’re where information and goods are gathered. In cities, the biggest economic decisions get made and the most goods trade hands. Fission reactors work by bringing refined uranium into a tight space, causing an energy-producing chain reaction. Likewise, when you bring people into a tight space (with the right conditions), it causes the bright glow of economic activity. I believe that making that economic glow brighter will improve my life and everyone else’s life too. That’s what made me so interested in cities.
Emily: What cities have you lived in?
Michael: Ordered by the time I’ve spent as an adult: New York, Austin, Charlottesville (Virginia), Minneapolis, London (UK), Berkeley, and Nijmegen (NL). I have a great love for Philadelphia, having grown up an hour away, but I never lived in the city.
Emily: Wow you have a knack for living in places with high-profile land-use debates. If you could spend a year in a city you’d never visited, where would it be?
Michael: Singapore! Roads are the dominant transportation technology and Singapore is the only city in the world that does roads right. It does (proper) congestion pricing. I’d love to see first-hand how that remedy improves the other transportation networks and the city as a whole.
On a more practical note, half the population speaks English and the city is at a shipping crossroads, which means all sorts of interesting people must show up. Its heat and humidity are awful?—a continuous Houston summer?—but we’re only talking a year, right?
Emily: Tell us about your work with AURA.
Michael: I’ve done it all for AURA: leadership, outreach, political organization and think-tanky analysis. The work I’m most proud of is an analysis of land prices. It showed prices doubling from 2014 to 2019 and that small (cheap) lots are in high demand.
Emily: What’s the current state of CodeNEXT?
Michael: That analysis explains why we need to change Austin’s zoning laws. CodeNEXT, for those unfamiliar, was a proposed rewrite of Austin’s zoning laws. It contained a number of reforms, including taller buildings within 3 blocks of major streets. CodeNEXT was defeated in 2018. A new version of the law was passed in 2020, but a lawsuit stopped it from going into effect. The courts said that state law requires 9 out of 11 votes on City Council to change zoning laws. Until we get those 9 votes, we’re stuck.
Emily: What other issues is AURA focusing on?
Michael: Recently, the big issue has been elections: we need those 9 votes on City Council! In 2022, we had a good year: AURA’s preferred candidates won 5 out of 5 races for City Council and our preferred candidate for Mayor lost by just 900 votes.
Until we get our 9th vote in 2024, we are working on a number of important projects. The new Mayor is a fan of expanding Interstate 35, which is not just a “major artery” but Austin’s aorta. AURA abhorred the initial plan and an offshoot group is suing to stop it. The public transit expansion had its budget upset by COVID’s economic waves. AURA will be monitoring the cutbacks. Lastly, the public transit expansion has opened a door for smaller-scale zoning reform. The land around train stations may be rezoned and we expect to get 9 votes for our policies there.
Emily: Finally, give us a little preview of what you plan to write about here at Market Urbanism.
Michael: Readers will see a variety of posts from me. Some brand-new ideas as well as some new-to-the-reader ideas unearthed from economics paper and books. Some colorful data and some new perspectives on old idea. And, maybe, a rant or two.
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]]>The post Protecting Housing Affordability by Protecting the Right to Build Housing appeared first on Market Urbanism.
]]>Legislators in Colorado and Tennessee have introduced bills modeled on Arizona’s Private Property Rights Protection Act, a law that requires municipal governments to compensate landowners when new land use regulations make land less valuable. Both states already have areas with housing affordability problems due in part to land use regulations that are already on the books. Requiring local policymakers to compensate property owners for downzoning going forward won’t do anything to reduce existing barriers to housing construction, but they can at least help prevent the problem from getting worse.
Though the Fifth and Fourteenth Amendments to the Constitution state that Americans must be compensated when private property is taken by the government, the Supreme Court has long held that state and municipal governments generally don’t have to compensate property owners when land use restrictions reduce their property values, even the rules eliminate nearly the entire value of the property in question. In 1926, the Supreme Court ruled in Euclid v. Ambler that local governments’ police powers, delegated to them by their states, give them the authority to restrict real estate development. The 1978 decision Penn Central v. New York further entrenched this authority. The Court found that land use restrictions are not takings requiring compensation for property owners so long as the property maintains any economic value at all. In Smyth v. Falmouth, the Court held that even a building permit denial that reduced a property’s value by 91% didn’t require the locality to compensate the owner.
Law professor Ilya Somin points out that it wasn’t always this way. The District Court that heard Euclid prior to the Supreme Court determined that local governments were required to compensate property owners for regulatory takings just as with eminent domain. Their opinion stated:
The argument supporting this ordinance proceeds, it seems to me, both on a mistaken view of what is property and of what is police power. Property, generally speaking, defendant’s counsel concede, is protected against a taking without compensation, by the guaranties of the Ohio and United States Constitutions. But their view seems to be that so long as the owner remains clothed with the legal title thereto and is not ousted from the physical possession thereof, his property is not taken, no matter to what extent his right to use it is invaded or destroyed or its present or prospective value is depreciated. This is an erroneous view. The right to property, as used in the Constitution, has no such limited meaning. As has often been said is substance by the Supreme Court: ‘There can be no conception of property aside from its control and use, and upon its use depends its value.’
In overruling the District Court, the Supreme Court determined that zoning restrictions including single-family zoning was a valid use of police power. This has allowed local governments to consider the benefits of land use regulations, including rules limiting residential development to exclusively expensive single-family houses on large lots, without factoring in the cost that taking away the right to develop denser housing has for property owners. The wide authority states and localities have to implement land use restrictions without compensating property owners has created the conditions for housing supply constraints and affordability challenges that many parts of the U.S. are dealing with today. In an alternative world where the Court required localities to compensate property owners for the regulatory takings of zoning, local policymakers would have faced different incentives in implementing land use regulation. They would have had to weigh the benefits of restrictions on development against the cost of compensating property owners for taking away development rights, and reducing their property values, with tax dollars. This alternative world has existed in Arizona since voters approved the Private Property Rights Protection Act in 2006. The state law requires governments to compensate property owners for regulatory takings, such as implementing a new restriction on how a parcel of land can be used, and it has prevented several downzonings to date.
Since the Property Ownership Fairness Act passed, policymakers have rejected multiple proposals for downzoning after realizing that taking away property owners’ development rights would require large outlays. When Tucson neighbors called for a ban on housing construction near the University of Arizona that was affordable to students, policymakers determined that downzoning wouldn’t be worth the cost.
Elsewhere in the country, policymakers have repeatedly downzoned neighborhoods just when infill redevelopment becomes financially feasible. The DC Zoning Commission recently downzoned my neighborhood after developers began replacing rowhouses, duplexes, and fourplexes with larger stickplexes. At the same time, they upzoned a nearby commercial corridor, but it’s not yet clear how much new development will be feasible to build there. This follows the pattern of the Bloomberg Administration in New York, which downzoned many neighborhoods that were experiencing gradual infill redevelopment while upzoning smaller commercial corridor areas for higher density. Under a law like Arizona’s, upzoning would remain feasible, but downzoning would require difficult budgetary tradeoffs.
The Supreme Court’s finding that most land use restrictions are not takings has allowed local governments to set vast limits on the right to build housing, contributing to the widespread housing affordability challenges the U.S. faces today. The Private Property Rights Protection Act has proven to be a way to prevent further limits on housing construction by requiring policymakers to consider the costs of land use restrictions in addition to the benefits.
Edit: Thanks to Ilya Somin for two corrections to this post!
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Arlington County policymakers have issued a call for ideas on improving housing availability and affordability. If you’d like to submit your own ideas, you can do so here through the rest of the day. The ideas that I submitted are below.
Arlington County is a national model for transit-oriented development. Permitting dense, multifamily housing to be built on the County’s transit corridors has contributed to making the Washington, DC region more affordable compared to other high-income coastal regions. Nonetheless, housing prices in Arlington are high and rising due to increasing demand for access to the job market, schools, and other benefits that Arlington offers. County policymakers have opportunities to reform land use regulations to permit both dense multifamily housing and missing middle housing to improve access to Arlington’s opportunities.
Zoning for Transit Oriented Development
Ahead of Metro’s arrival in Arlington, county policymakers adopted the well-known “bulls eye approach” to planning, which calls for dense development surrounding the Rosslyn-Ballston corridor Metro stations. This plan calls for dense development to be permitted within one-quarter mile of these stations. Unfortunately, this plan has never been realized in the zoning ordinance. The County maintains single-family or townhouse zoning within one-quarter mile of four stations on this corridor and a relatively low-density multifamily zone within one-quarter mile of the Rosslyn station. The County needs more townhouses and low-rise multifamily housing, but it also needs more high-rise multifamily housing as the bulls eye plan recognized. Given the high and rising land values and house prices along this corridor, it’s past time to realize this decades-old planning objective.
Further, planning for urban villages around Metro stations should be extended to the area around the East Falls Church station area, where residents of multifamily housing have to walk past land zoned exclusively for single-family houses to reach the station. The Federal Highway Administration finds that pedestrians are willing to walk up to one-half mile to transit stops and considerably farther to heavy rail. The bulls eye plan supports permitted density that gradually tapers off farther than one-quarter mile from Metro stations. But, in many cases, the County’s zoning transitions abruptly from dense multifamily zoning to single-family zoning with substantial minimum lot size requirements.
Zoning for mid-rise, multifamily housing outside the densest zone around all the County’s Orange and Blue Line stations would carry out the 1960s vision and improve housing affordability in Arlington. Permitting new multifamily construction in parts of the county where land is particularly valuable, including on land zoned for single-family or commercial development close to Metro stations, is the policy most likely to preserve existing market-rate affordable units in parts of the county where land is currently less expensive.
Zoning for Missing Middle Development
Arlington has room to improve in zoning for large multifamily developments near transit, but this is an area where Arlington county policymakers have been leaders nationwide. In zoning for missing middle housing, however, Arlington County is lagging behind several jurisdictions that have shown the way to zone for missing middle housing that is economically and politically feasible. Here I use missing middle to mean housing with low-rise construction costs but that requires no more than 2,500 square feet of land per unit. Eliminating single-family zoning to permit more, lower-cost housing across Arlington is a key step policymakers could take to promote housing affordability. Several jurisdictions discussed below provide successful models for permitting missing middle housing.
Houston, TX
Houston, famous for its lack of use zoning and policy environment that facilitates new, greenfield development also has a successful model for missing middle housing reform. In 1999 Houston policymakers reduced the minimum lot size for single-family houses from 5,000 square feet down to effectively 1,400 square feet within the city’s I-610 loop. In 2012, they extended this reduced minimum lot size across the entire city. This reduction has resulted in the construction of tens of thousands of townhouses. Prior to the reform, Houston policymakers were granted variances to permit townhouse construction, primarily in low-income parts of the city. But after the reform, as-of-right construction shifted to take place in higher-income parts of the city. Houston’s openness to all types of housing construction has helped it maintain median house prices across the city that are below the national median.
Palisades Park, NJ
Palisades Park in Bergen County, NJ provides another model of facilitating missing middle construction. When Palisades Park policymakers adopted the city’s first zoning ordinance in the 1940s, they implemented two-family zoning rather than single-family zoning with a 5,000 square foot lot size requirement for either one or two units. The borough was developed with primarily single-family houses through the 1960s like its suburban neighbors. However, as land prices have increased, many of these single-family houses have been replaced with duplexes, accommodating nearly a doubling of population through infill construction. Relative to its neighboring jurisdictions, land prices in Palisades Park are higher, reflecting the option landowners have to build two units per lot rather than one.
One lesson that successful models of missing middle construction show is that flexible rules are key to realizing infill construction. Today, the majority of Palisades Park’s housing units are in two-unit structures. But some neighboring jurisdictions that appear to permit two-unit housing have not seen the same results. In some cases, these jurisdictions ban side-by-side duplexes, permitting only up-down two-family construction. This model is less appealing to home buyers and has resulted in much less construction. Other localities permit two-family construction but effectively cut it off with a subjective review process.
Houston’s townhouses and Palisades Park’s duplexes are not inexpensive. They are large, new construction units in desirable locations. However, they are making important contributions to new regional housing supply and contributing to affordability through the filtering process. Arlington policymakers have expressed concern that some of the County’s missing middle construction similar to the Houston and Palisades Park models are not meeting the County’s goals. New, large townhouses and duplexes in Arlington are perhaps not the cost-effective missing middle units policymakers have in mind. But large missing middle units are not the problem; constraints that prevent any type of missing middle or multifamily housing on the majority of residentially-zoned land in the County are. Permitting housing at the density of Houston townhouses or Palisades Park duplexes would permit three to six households to live on lots currently designated for single-family houses, substantially improving access and affordability in the region.
Washington, DC
Attempting to restrict townhouse or duplex development is not the answer, but DC’s RA-2 zoning provides a model that is resulting in a wide variety of types of missing middle units in the Carver-Langston and Kingman Park neighborhoods. The RA-2 zone allows for buildings up to 50-feet tall with no side setbacks and up to a 1.8 floor area ratio. It has resulted in small walk-up apartment buildings with a variety of unit sizes to meet the needs of different types of households, from one– to four-bedroom units.
RA-2 buildings in DC have the affordability characteristics of missing middle housing, in that they have the relatively low construction costs of single-family housing while allowing multiple households to share expensive land. However, new construction and conversions in RA-2 zones add square footage in addition to new units relative to existing rowhouses. Policymakers have sometimes sought a goldilocks missing middle outcome in which new missing middle units are built, providing a lower-cost housing choice relative to single-family housing that doesn’t change a neighborhood’s built form.
Minneapolis, MN
Earlier this year, Minneapolis implemented zoning reforms to permit triplexes on every lot in the city where only single-family houses were permitted previously. This important reform is one step to reverse the effects of exclusionary zoning restrictions that drive up the cost of housing and limit low- and moderate-income households’ choices of where to locate.
However, prior to implementing its famous triplex reform, Minneapolis policymakers passed zoning rules intended to prevent “McMansion” construction. These rules limit structures in the city’s lowest-density residential zoning district to 2,500 square feet and limit their height to 28 feet. Now that three units are permitted rather than one, these anti-McMansion rules are standing in the way of triplexes, according to homebuilders.
This experience demonstrates the importance of flexible rules for allowing housing construction to respond to changing demand. So far, the reform has resulted in a disappointing level of missing middle construction with just three triplexes permitted so far, several months after they have been permitted. Minneapolis’ triplex reform proved to be politically feasible, but it may not be an economically feasible way to actually gain missing middle construction.
The Minneapolis Planning Commission has recommended new built form regulations that would make triplexes more feasible to build, but it would continue to set lower limits on the size permitted for new single-family houses. However, converting large, single-family houses into apartments years after they’ve been built can result in one of the lowest-cost source of apartments. Choking off large, new single-family houses stands in the way of this opportunity. In general, permitting greater flexibility for homeowners to provide a flexible housing supply in response to changing housing market conditions is key to maintaining affordability.
Housing in Arlington and the Environment
Arlington residents and policymakers regularly raise concerns that development of any type could reduce the County’s tree canopy. This is true, but policy decisions should consider the regional and global environmental benefits of permitting construction in Arlington in addition to the local costs. Allowing more people to live closer to the region’s job center and transit offers major environmental benefits. A study of residents of Boulder, CO, found that on average, residents who live in city limits commute 12.8 miles compared to nonresidents who work in Boulder who commute 29 miles, resulting in a substantial difference in greenhouse gas emissions and traffic.
Similarly, allowing more people to live in Arlington presents substantial opportunities to reduce the environmental impact of commuting. And permitting more people to live in attached housing is more energy-efficient to heat and cool relative to detached, single-family housing. To address the concern of tree canopy loss, New York City’s street tree program provides a model. It has resulted in close to 700,000 trees, providing shade, visual amenities, and stormwater management benefits.
Conclusion
Arlington has shown the potential for transit-oriented development to make room for residents in high-opportunity suburban jurisdictions. Yet more work remains to be done to open up the County to more residents at more affordable prices. Increasing flexibility for homebuilders to provide both more apartment buildings near Metro stations and more missing middle housing across the County will allow Arlington to remain a model of a suburb open to new residents of all income levels.
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]]>The post What’s a stickplex? appeared first on Market Urbanism.
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A stickplex is a dense residential structure or group of structures built with inexpensive materials and techniques, most commonly wood. Stickplexes use 2,500 square feet of land per unit or less. Stickplexes have per-square-foot construction costs roughly in line with detached houses due to avoidance of costly features like elevators and more expensive construction methods.
This type of housing includes features of both multifamily housing and single-family housing. They economize on land while avoiding the high construction costs of large multifamily buildings. Relative to high-rise housing, stickplexes can cost one-third less to build on a per-square-foot basis. And because they use a relatively small amount of land per unit, their land costs are lower than the typical detached house’s land costs.
Stickplexes versus missing middle
Daniel Parolek coined the term “missing middle” and emphasizes that missing middle “is compatible in scale with single-family homes.” He advises caution about permitting three-story buildings, while a stickplex can be three stories or taller. A duplex on a 6,000 square foot lot would fit the definition of missing middle. But it would not be a stickplex since it would use more than 3,000 square feet of land per unit.
Missing middle housing has found traction politically. Policymakers who have passed zoning reforms from Oregon to Nebraska to Durham have used the term to describe the type of construction they would like to see. Minneapolis Council Member Lisa Goodman described the city’s reform to permit triplexes in language similar to Parolek’s:
“I like to refer to it as, ‘the box can’t change,” she said. “All that can change is how many families can live within the existing box.”
However, in Minneapolis, questions remain about how feasible triplexes will be to build in permitted building envelopes. Zoning rules, including floor area ratio limits of less than one and height limits of 2.5 stories for the two largest residential zones, may mean that triplexes aren’t as in-demand as they would otherwise be. These rules may be responsible for the low number of triplexes that have been permitted in Minneapolis under the first several months following the reform. In many cases, the single-family houses at their current size can’t comfortably accommodate additional, well laid out units.
Prior to Minneapolis’ triplex reform, its restrictions on the size of single-family houses were intended to prevent single-family houses from being replaced with “McMansions.” Many localities have similar polices intended to prevent change when housing costs rise but denser redevelopment is banned. Should these localities reform single-family zoning, anti-McMansion rules will stand in the way of infill development.
Sometimes missing middle isn’t enough
Part of the appeal of reforms like Minneapolis’ to permit missing middle housing is the promise of neighborhoods accommodating new residents without changing physical structures. But infill construction that adds housing supply at scale often adds square footage in addition to new units. For example, stickplexes are sprouting in my neighborhood in Washington, DC, pictured above and below. They have increased both the number of units per lot and square footage substantially.
There are some counterexamples. Property owners chop up brownstones in pricey neighborhoods, for example, allowing large houses to accommodate more units in an existing envelope over time. But these large, vertically-oriented units are particularly well-suited for this transformation. Additionally, neighborhoods of attached housing or small-lot housing, particularly ones that include lots of subdivided houses, can offer all of the benefits of urban living. This arrangement includes enough population density to facilitate walkable, amenity-rich neighborhoods and viable public transit. Subdividing standard, detached suburban houses on large lots (whether they’re inside or outside central city jurisdictions) into multiple units will not, in many cases, offer these benefits, but will come with the downsides of sharing walls.
To facilitate missing middle housing, Parolek proposes several different, very specific sets of zoning rules. He provides model zoning language to permit duplexes, cottage courts, and multiplexes, to the exclusion of other typologies. He argues that larger multifamily projects should be banned where missing middle is permitted. Otherwise, he says, land would be too expensive for missing middle to be feasible. As Salim Furth shows this restriction points to the limits of missing middle’s affordability advantages.
Parolek emphasizes aesthetics. He disowns many examples of actually-existing infill development because they are either out of context with their neighborhoods or because they don’t meet his standards for walkability. Some of my favorite examples of infill construction–from Los Angeles dingbats to New Jersey duplexes–are out because they include tuck-under parking. I agree that these forms of stickplexes aren’t ideal urbanism. But stickplexes are defined by their feasibility and cost advantages relative to single-family development, rather than by their individual contributions to walkability.
Zoning for stickplexes
Zoning to permit stickplexes is simpler than zoning for missing middle. Stickplexes don’t require zoning designations that encourage a specific housing format. They simply require that a locality zone for so much multifamily that the highest and best use of some land zoned for multifamily is dense, walk-up stick construction. That is, zoning that isn’t binding at every location.
On the other hand, reforming single-family zoning to permit feasible stickplexes often requires reforming more than just repealing single-family zoning. In Houston, where tens of thousands of infill townhouses have been built, the floor area ratio of townhouses is generally well over one. Most single-family zoning districts in the U.S. wouldn’t allow this level of density even if they were to eliminate single-family zoning. Stickplexes thrive with height limits of 40-feet or higher, low or no lot-size requirements, no unit restrictions, and small setback requirements.
Zoning for missing middle housing has political advantages in terms of promising neighbors that any redevelopment will have a specific aesthetic. But zoning for a specific aesthetic may mean that nothing is feasible to build in neighborhoods that need new housing. Zoning for stickplexes ensures that as housing costs rise, homebuilders are able to respond with new housing.
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In 2015, urban studies professor Anne Haila published a book on Singapore’s land ownership and housing system called Urban Land Rent: Singapore as a Property State. The Singapore housing model has recently been getting some attention for its widespread homeownership and affordability relative to high-cost coastal cities in the United States. Both Haila and, recently, writers at Bloomberg and CityLab approach Singapore uncritically. And Singapore’s housing market does offer some key lessons to the United States. But unlike the story Haila and some other U.S. commentators have told, it has its downsides. Singapore’s housing market works much better for households near the middle of its income distribution relative to the highest-cost U.S. regions, but provides severely inadequate housing for its low-income migrant workers.
The Mechanics of Singapore’s Public Housing
In Singapore, 90% of the land is government-owned, and about 80% of citizens and legal residents live in owner-occupied public housing on leased land. Extensive government landholdings and a leasehold system date back to the country’s colonial era. Following Singaporean independence in 1965, the People’s Action Party, which has been in power ever since, has expanded state land holdings. At independence, about 50% of Singapore was government-owned, reaching its current level of holdings in 2002. Government land ownership has been accomplished through eminent domain along with land reclamation, which has increased the size of the island by a quarter.
Government land is auctioned for housing and other types of development primarily as 99-year leases. The Housing and Development Board (HDB), a government agency, builds the majority of new housing, but some higher-end housing is privately developed. The HDB and private developers compete for land at auctions, and both pay market prices for it. Unlike the U.S. public housing system under which units remain government-owned and are leased to low-income tenants, Singapore’s public housing is primarily sold to middle-income buyers. Purchasers then have the right to live in their flat, sell it at a market-rate price, or lease it to a tenant until the building’s 99-year lease expires.
While Haila didn’t find evidence that Singapore policymakers studied Henry George, she and others have pointed out that their system offers some of the benefits of reducing the rents landowners collect. In his classic Progress and Poverty, George argues that land rents cause poverty because landlords’ monopoly over their property permits them to increase rents when productivity rises. He posits that rents to land prevent wages from rising above a near-subsistence level for many workers. In Singapore, where government land ownership largely prevents individuals from capturing rising land rents, policymakers had a contradictory hypothesis–that keeping housing affordable would also have the effect of keeping wages low, with affordable labor making Singapore an attractive investment opportunity for foreign firms.
Does Singapore succeed at housing affordability?
Yes and no. The median flat in Singapore costs $408,000, 4.6 times the median income. This puts it on par with Salt Lake City, a level of affordability that Demographia categorizes as “Seriously Unaffordable,” but more affordable than many coastal cities in the U.S where the ratio stretches as high as 8.5 in San Jose.
Housing finance in Singapore makes housing accessible to many households at even lower prices. HDB, the provider of most of the city-state’s housing, develops housing at a range of price points affordable to households of different income levels, from studios for seniors, to 3-room flats to higher-end “Executive” flats. HDB provides new flats to buyers at subsidized rates, with income caps for various new units.
Singapore mandates contributions to individual savings accounts, requiring workers to contribute 20% of their pay into individual accounts in the Central Provident Fund. Employers are required to contribute an additional 17% of salaries. Individuals may use the funds in their CPF accounts to help fund a downpayment and monthly mortgage payments.
After residents have lived in the subsidized flat that they purchased for at least five years, they have the right to sell the flat at market value. Throughout their lifetime, residents may purchase two subsidized units from HDB that they can resell at market-rate prices, often reflecting substantial appreciation. Thus, as in countries that aren’t so reliant on public housing, Singapore policymakers’ constituents have conflicting interests. Homebuyers want prices to remain lower while owners want to see more appreciation.
Housing Politics in Singapore
Singapore’s city-state government’s approach to redevelopment stands in stark contrast to how localities in much more expensive regions have used zoning to constrain housing supply. The Singapore Land Authority (SLA) handles land use planning and manages state land. Haila writes:
In 2011 SLA unveiled a new vision, Limited Land, Unlimited Space, embodying ‘the notion that the scarcity of land in Singapore should not be a constraint. Rather it is an opportunity for greater innovation and creativity in land use’.
SLA and HDB both work to ensure consistent opportunities for development and redevelopment on the island to prevent housing constraints from resulting in widespread housing unaffordability. Relative to U.S. cities today, the Singapore model is more like what development in fast-growing U.S. cities looked like prior to zoning. Before local zoning ordinances limited development, fast-growing U.S. cities were characterized both by rapid greenfield development and rapid redevelopment of central locations (see Manhattan Move Uptown by Charles Lockwood for the Manhattan pre-zoning development history). Perplexingly, Haila denies that zoning plays a role in high housing costs:
High land prices and zoning authorities are often blamed for unaffordable housing. However, house prices are not high because land is expensive but vice versa: house prices determine land prices as rent theory explains. The reason for insufficient land supply and high house prices is not planning authorities zoning too little residential land, but that the monopoly of land makes land scarce and invites speculation.
Haila is correct that demand for housing is a key determinant of land prices. But zoning is also a key determinant of both land prices and house prices as a result. Haila argues that prior to her, social scientists have failed to study the importance of land development rights. But urban economists and other social scientists have extensively studied the effects of development rights under zoning. At a regional level, extensive evidence indicates that land use regulations reduce housing supply elasticity and lead to high prices when met with high housing demand. Unlike in the U.S., where many localities use zoning as a tool to severely limit construction and inflate house prices, a key success of the Singapore model is permitting a steady stream of new development to maintain access to housing.
In Haila’s telling, it’s land speculation alone that causes high house prices by incentivizing land owners to underuse land in anticipation of future price increases. She blames speculative house-price increases on those who purchase land or homes that they keep vacant. However vacancy rates in high-cost cities including Singapore are in fact generally very low.
Speculation simply means purchasing an asset with the expectation that it will be worth more in the future. Owner-occupants are speculating when they purchase housing in cities with high price-to-rent ratios rather than renting when current prices make renting look like the better deal. Singaporeans certainly purchase HDB flats with asset price increase in mind. As Prime Minister Lee Hsien Loong has said, “The HDB flat is not just a shelter but also a key investment asset…over the long term, the value of HDB flats depends on the strength of the Singapore economy. Provided Singapore continues to do well, our flats will maintain their value, and Singaporeans can enjoy an appreciating asset.”
However policy designed to ensure redevelopment and new housing supply in Singapore has limited the gains to speculation relative to the windfalls that homeowners in the expensive coastal regions of the U.S. have received. Compared to in the U.S., in Singapore, affordability for new buyers plays a more important consideration in housing policy.
Noah Smith argues that Singapore has “done a better job than the U.S. of using housing to build and transfer wealth across generations…. Because the government manages the supply of new homes, it can ensure that young people earn a decent return by the time they retire.” And this is the line that the SLA and HDB have attempted to walk. Haila explains that Singaporean policymakers have target a rate of leases from the country’s land bank to maintain a rate of house price appreciation that offers gains to purchasers of subsidized HDB flats, but to prevent a level of appreciation that would put new purchases out of reach for many citizens.
Who loses in the Singapore system?
The line to walk between promoting affordability and wealth-building is a difficult one. While Singapore’s model serves many households well, by balancing affordability of subsidized HDB flats with steady appreciation, the system doesn’t serve everyone well. Crucially, of Singapore’s 5.6 million population, about one-fifth are not citizens or residents. These foreign workers are generally shut out from the HDB system although Haila points out some exceptions have been made in an effort to attract skilled foreign workers.
More than 300,000 migrant workers without access to HDB flats live in crowded, dirty dormitories with up to 80 people sharing a single toilet. Housing conditions for these low-income workers in Singapore are much worse than for the typical low-income worker in U.S. cities with comparable levels of affordability for median income earners. Singapore is currently experiencing a COVID-19 outbreak of ten of thousands of cases, nearly all of them among foreign workers living in dormitories.
I’ve argued previously that the availability of bare bones, low-cost housing for low-income workers is an essential part of communities that provide economic opportunity for all. But in the Singaporean system, where the SLA determines how many foreign workers may live where, no market process disciplines the provision of housing that balances cost-effectiveness with desirability, in terms of either location or quality. In a system in which land goes to those willing to pay the most for, those willing to live in denser housing can outbid those who want larger, fancier homes. But this is not an option in Singapore, and instead housing policy for foreign workers has largely been shaped by citizens’ and residents’ NIMBYism toward foreign workers.
Singapore’s system is also designed to encourage heterosexual marriage, childbearing, and living with extended family. For those who want to live in alternative arrangements, HDB offers many fewer benefits. While married Singaporeans become eligible to purchase HDB flats at age 21, singles aren’t permitted to purchase until age 35, and gay marriage is not allowed. Notably Singapore’s housing policy has so far not successfully increased fertility; Singapore’s total fertility rate stands at below 1.2, among the lowest in the world.
Concerns about the values of aging flats are also increasing as seniors are relying on their home equity to help fund their retirement, and yet the prices of older flats inevitably fall as the end of their leasehold term approaches. At the end of a 99-year lease, land and its improvements revert to SLA ownership with no compensation for flat owners. In 1995, the Singapore government established a program called the Selective En bloc Redevelopment Scheme (SERS), under which the government takes over selected buildings in mature estates for redevelopment prior to the expiration of their 99-year lease, compensating the residents for their HDB flats and offering them a chance to purchase in the new development that will take its place. But National Development Minister Lawrence Wong has urged HDB flat owners not to count on this option, as SERS has only worked out for four percent of flat owners to date.
What can the U.S. take away from Singapore?
Haila argues that “Singapore has solved the housing problem” but this certainly isn’t true for those shut out from the HDB system. But the system does allow most citizens the opportunity to both enter the housing market at a reasonable price and sell at a reasonable return.
Were the U.S. as a whole, or a U.S. city to attempt to implement the Singapore system, one key challenge would be building as cost efficiently as the HDB does. The HDB builds flats that are about 1000 square feet for about $135,000 according to some estimates. In high-cost U.S. cities, subsidized housing costs multiples of that price to build, in part because Singapore relies on low-wage migrant workers and also in part, as Conor Dougherty explains of California, it is “a well-known absurdity of the affordable-housing system that it frequently costs more to build no-frills non-profit apartments than it did to build high-end for-profit condos. The public sector [has] too much going on, too many political mouths to feed, to make an even semi-serious attempt to address it.”
The largest U.S. public housing system by far, the New York City Housing Authority, doesn’t build new housing, but currently spends more on both operating costs and capital expenses for the housing they manage relative to private landlords with terrible results. While social housing supporters suggest that foreign systems like Singapore’s could simply be copied in the U.S. with similar outcomes, government-provided housing at reasonable costs would require major reforms to U.S. politics and bureaucracy. Unlike in Singapore’s city-state system, levels of government and various agencies would likely be working at cross-purposes. Congress and federal agencies may want to support low-cost housing in desirable locations, but exclusionary localities that would be involved in siting and managing subsidized housing may attempt to thwart success.
However, any U.S. city where politicians have the will could make major reforms based on the SLA’s motto of “limited land, unlimited space.” Singapore has put development and redevelopment of its land to work to maintain the availability and affordability of flats for the people the system is designed to serve.
The description of SERS has been corrected. Thanks to Singapore resident Chris for pointing out an inaccuracy.
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Elizabeth Warren’s housing bill has received a lot of love from those who favor of land use liberalization. Like Cory Booker’s housing bill, the Warren bill would seek to encourage state and local land use reform using federal grants as an incentive. Warren’s bill would significantly increase funding for the Housing Trust Fund and provide a small increase in allocations for public housing maintenance. However, Warren’s bill also includes new subsidies to homeownership and policies that could reduce the production of new renter-occupied housing relative to owner-occupied housing.
There’s a trade off in housing policy between promoting homeownership as a wealth-building tool and promoting affordability that politicians, including Warren, have failed to confront.
Rather than promoting housing affordability by rolling back policies that subsidize homeowners at the expense of renters, Warren’s bill seeks to reduce exclusionary, suburban zoning at the same time it introduces new policies to incentivize homeownership.
First, Warren’s bill would require most foreclosed homes to be sold to new owner-occupants, rather than to landlords who would rent them out. The intention of the bill is to prevent institutional investors from profiting from foreclosures, but this approach has a strong anti-renter bias. When changes in economic conditions, demographics, or preferences lead to an increase in the proportion of Americans who want to rent rather than own, this policy would stand in the way of homes being adapted to meet new needs.
Second, the bill would provide down payment assistance to first-time homebuyers who live in, or were displaced from, historically redlined neighborhoods. All levels of government have played horrific roles in excluding minorities from white neighborhoods and subsidizing wealth-building through home equity for white households alone. The victims of these policies deserve to be compensated for this unfairness. The Justice Department and the Department of Housing and Urban Development have reached a number of settlements with banks that have discriminated against minority borrowers, but the federal government has not offered settlements to the victims of their long history of racist housing policy.
Rather than attempting to increase the number of minority households that can now benefit from unfair government subsidies to homeownership, these subsidies should be repealed entirely, and damages for the victims of housing policy discrimination should not be tied to home buying. The Warren approach offers nothing to households that decide to rent instead of buy.
Lastly, one way that localities could qualify for grants under the Warren bill is by implementing rent stabilization or rent control. These policies benefit the renters who are able to take advantage of them, but they also encourage the conversion of rental housing to owner-occupied housing, and inadvertently reduce the supply of rental units available to lower income households. One study of the effect of rent control on housing in San Francisco found that rent controlled buildings were eight percentage points more likely to be converted from rental buildings to condos relative to similar market-rate rental buildings. Moreover, rent control reduces the pipeline of aging buildings that can profitably be converted to inexpensive rental units. This has historically been the primary source of affordable housing for working Americans.
Rather than creating new policies that support owner-occupied housing, pro-affordability legislation should repeal current subsidies to homeownership. The federal government provides huge subsidies to homeowners through tax policy. Following a substantial reduction to the mortgage interest deduction in the Tax Cuts and Jobs Act, the deduction still costs $37 billion annually. Additionally, investing in an owner-occupied home is privileged relative to other investments because single people can sell their homes with up to $250,000 in untaxed capital gains, or up to $500,000 for married couples. More than 70 percent of mortgages are either issued by the Federal Housing Authority or are insured by a government-sponsored entity, increasing access to mortgage credit relative to what a private market would provide. These privileges encourage people to store their wealth in the homes that they live in, in turn increasing their incentives to protect and inflate their homes’ value, and, perversely, to oppose new development close to where they live.
Economist William Fischel coined the term “homevoters” to refer to homeowners because of their tendency to vote with a single-issue focus for policies that reduce the risk of home prices falling and increase home values in their jurisdiction. Federal incentives that benefit homeowners translate to increased support for land use regulations at the local level that reduce housing supply, prop up home values, and reduce housing affordability for anyone who doesn’t already own.
Additionally, federal policies to support homeownership have an anti-density and anti-urban bias. As economists Ed Glaeser and Jesse Shapiro write, “There are few facts in urban economics as reliable as the fact that people in multi-family units overwhelmingly rent and people in single-family units overwhelmingly own.” As of 2017, only 18 percent of single-family homes are renter-occupied. All multifamily typologies, from duplexes to large multifamily buildings, are majority renter-occupied by wide margins. By focusing on homeownership, Warren diverts market-rate construction from more affordable units to exclusive, detached homes. Warren has made clear she doesn’t want to reduce house price appreciation as a wealth-building tool. Her bill states:
A home is not only a place to live, but also an asset that may appreciate, help fund a new business, finance an education, or cover retirement expenses. A home provides stability and financial predictability, which are important foundations for prosperity and access to opportunity for a family.
However, rising house prices that benefit homeowners come at the expense of renters, who tend to be lower-income and who are more likely to be minorities. A more visionary approach would reconsider the federal government’s role in encouraging policies that intentionally increase the price of homes and consider the negative effects this policy has had on the housing market as a whole.
While the use of federal grants in Warren’s bill may help reduce exclusionary zoning, it’s other provisions would reduce the supply of rental housing. It would expand federal subsidies to homeownership, further entrenching homevoters as a powerful force in favor of exclusionary zoning at the local level. The incentives it creates to increase housing supply are welcome, but overall it would shift federal policy toward homeownership further in the wrong direction.
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]]>To avoid repeating mistakes of the past, policymakers should create rules that neither subsidize AVs nor give them carte blanche over government-owned rights-of-way. Multiple writers have pointed out that city policymakers should actively be designing policy for the driverless future, but few have spelled out concrete plans for successful driverless policy in cities. Here are three policies that urban policymakers should begin experimenting with right away in anticipation of AVs.
Price Roadways
Perhaps the biggest concern AVs present for urbanists is that they may increase demand for sprawl. AVs may drastically reduce highway commute times over a given distance through platooning, and if people find their trips in AVs to be time well-spent, when they can work, relax, or sleep, they may be willing to accept even more time-consuming commutes than they do today. As the burden of commuting decreases, they reason, people will travel farther to work. However, the looming increase in sprawl would be due in large part to subsidized roads, not AVs themselves. If riders would have to fully internalize the cost of using road space, they would think twice before moving to far flung suburbs.
Now is the time for cities and states to implement congestion pricing policies to manage the demand for scarce road space. Congestion pricing programs in Virginia and London provide potential models. And Singapore provides a model of using congestion pricing not just for highways, but arterial roads as well. Broad-based pricing for road space would encourage a ridesharing model rather than individually-owned AVs, allowing riders to spread the cost of road use over multiple passengers.
In downtown areas, the arrival of AVs will mean a from curbside parking to curbside loading zones. And just as underpriced curbside parking contributes to congestion by causing drivers to cruise for parking, passengers getting in and out of cars will cause traffic if curb space is priced too low. City policymakers should begin exploring options for reallocating curbside parking to loading zones and pricing curb space for short stops. Washington, DC has already started a trial program.
Donald Shoup’s principles for managing curb parking apply to pick ups and drop offs as well; policymakers should set prices high enough so that there’s at least one available pick up/drop-off spot on each block at all times. Since taxis, rideshare vehicles, and delivery trucks are currently the primary users of short-term curb services, cities could begin enforcing prices just for these vehicles using a payment mechanism like EZ-Pass.
Adopt Shared Streets
The adoption of driverless technology presents an opportunity to reform policies designed to support car traffic in dense urban areas at the expense of other road users. Stephen Smith pointed out years ago that AVs will struggle to move in areas that are crowded with pedestrians because walkers will lose their fear of being hit if they step out into slow-moving traffic. Without drastic changes to pedestrian traffic rule enforcement, pedestrians may take over the streets in areas where sidewalks are crowded and in places where there’s a steady stream of people crossing streets. And that’s wonderful! It provides an opportunity to return busy city streets to multi-use spaces that are safe for all types of road users.
Absent policy intervention, driverless cars — or just widespread automatic braking — could turn streets with lots of pedestrians and cyclists into de facto woonerfs. A key promise from AV boosters is that time spent in AVs can be time spent working or doing something fun, so there should be less need to speed AVs through urban areas relative to cars today. AVs are not yet at woonerf-level navigation ability — they would probably come to a complete standstill in a crowded woonerf rather than moving at a walking pace. But testing in San Francisco and Tokyo shows that more difficult environments for navigation may not be far behind.
Cities should ramp up experimentation with shared streets and pedestrian-only streets now to begin determining how to adapt their bus systems to having some streets where traffic moves at a walking pace. Solutions could include grade-separated bus lanes within otherwise shared streets, or rerouting buses to major arterials that have lower pedestrian density.
Most potential woonerfs are in large cities or vacation destinations, and they’re disproportionately in Manhattan. New York policymakers in particular should continue their woonerf and car-free pilots and should plan to adapt public transit accordingly. Places that should begin experimenting with woonerfs outside New York include Georgetown and Chinatown in DC, the French Quarter and Marigny in New Orleans, and State Street in Chicago.
The vast majority of American streets do not have crowded sidewalks or even a steady stream of pedestrians. Without drastic changes to land use, they won’t be reasonable candidates for woonerfs. In these places where pedestrians are sparse, today’s traffic laws may continue working fine even with widespread adoption of driverless cars. Without high pedestrian density, AVs will generally be able to proceed when they have the green light.
Eliminate Parking Requirements and Auction Public Parking
Parking is one of the biggest obstacles to walkabiltity in American cities. With AVs, it will be possible to dramatically reduce car storage in urban areas. Rather than parking when not in use, autonomous ridesharing cars can continuously drop off and pick up passengers. Individuals who own AVs can send them home while they’re at work or to a far flung parking lot that doesn’t take up space in an urban core. Simultaneously eliminating the dead space in parking lots and parking garages and adding more urban residents and destinations would dramatically increase walkability.
Parking requirements — ill-advised at any time — are particularly damaging in a time when it’s foreseeable that parking cars in center cities will continue becoming less important. Now is the time for municipalities to eliminate parking requirements and to sell off city-owned parking for potential redevelopment. Requiring new buildings, with lifespans of several decades, to include space for car storage in places where real estate is valuable is mandating an enormous waste of space and resources as demand for parking decreases.
The private sector is already developing podium parking that is designed to be converted to indoor space once their buildings require fewer parking spaces. Developers are aware that their customers in center cities will increasingly use transportation options other than driving their own cars, and they are building space with the hope of being able to take advantage of reduced parking requirements in the future.
Eliminating parking requirements and selling off government-owned parking lots and garages is the simplest change cities can make right now to for adaptation to a world with less parking and much less center city parking. The introduction of AVs will give policymakers another shot to get this right when they’ll face less constituent pressure for convenient parking.
Driverless Politics
There are a few reasons to believe that the switch to driverless will move politics in a pro-urban direction. The legal system will likely take deaths, injuries, and property damage caused by autonomous vehicles much more seriously than it takes those caused by human drivers. Courts have failed consistently to hold drivers responsible for killing other road users through negligence or reckless driving. Because most judges and jurors drive cars, they can easily imagine themselves in the position of having injured or killed a pedestrian or cyclist. As a consequence, drivers rarely face criminal charges or even traffic tickets for their actions, and victims and their families rarely receive the type of compensation they could expect if their injuries came from a negligent corporation.
While autonomous vehicles are forecast to be much safer than human drivers, some rate of collisions will remain inevitable. But judges, juries and policymakers will be unlikely to show software or car companies anything like the leniency they’ve shown human drivers. After an Uber test car in autonomous mode hit a pedestrian in Phoenix, Arizona state policymakers banned the company from further testing. If a human had been at fault, they likely would have faced no consequences.
Similar politics may help deprioritize the speed of AV traffic in densely populated areas. When drivers are no longer behind the wheel, or even in their own car, politicians and citizens will likely be more open to ideas to level the playing field between cars and other forms of transportation. Cliff Winston and Quentin Karpilow point out that during the period of technological upheaval, when many people will be transitioning from paying for their own car to paying for ridesharing, is a politically opportune time to introduce congestion pricing with the least opposition.
Regardless of the AV industry’s progression, there’s little to now downside risk in pricing roads, trying out woonerfs, and eliminating parking requirements. With these policies in place, AVs present an opportunity to move toward urbanist goals and more walkable cities.
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