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Category Zoning

San Francisco Turned Sisyphus: Why the City Can’t Fix the Housing Crisis On its Own

Housing prices in San Francisco are obscene. And, in large part, that’s because the city hasn’t permitted enough new construction. But that’s not the entire story. For as hard as San Francisco has resisted development, the Peninsula cities have resisted it even more. And in so doing they’ve pushed the responsibility of development onto their Northern neighbor. If San Francisco’s housing crisis is to be resolved, the Peninsula cities will have to quite literally grow up. Bad Neighbors San Francisco is synonymous with tech, but there’s plenty going on just down the road. Menlo Park has Facebook. Mountain View has both Google and Linkedin. These two cities alone are home to over 1,300 other tech companies and the story’s much the same elsewhere on the Peninsula. But where firms have sprung up and jobs have become abundant, housing has remained in short supply. Tech companies bus an estimated 7,500 workers from San Francisco apartments to Peninsula offices every day. They don’t do this for fun. There’s simply not enough housing near major employers. And what is available is often unaffordable, even for tech workers. But if housing prices are as bad or worse on the peninsula, one might ask why we only hear the word “crisis” in San Francisco. The reason is simple. What makes for crisis in San Francisco is nothing but windfall to the South. According to the U.S. Census, San Francisco’s homeownership rate is 36.6%. Mountain View’s is 41.8%, San Mateo’s is 53.6%, Palo Alto’s is 55.4%, Menlo Park’s is 56.2%, and Cupertino’s is 63.7%. Homeowners in these cities aren’t faced with skyrocketing rent. And thanks to Prop 13, they also pay almost nothing in property tax–no matter how much their homes appreciate in value. They not only face no downside from the anti-development status quo, they […]

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

Over at Greater Greater Washington, Ms. Cheryl Cort attempts to temper expectations of what she calls the “libertarian view (a more right-leaning view in our region)” on affordable housing.  It is certainly reassuring to see the cosmopolitan left and the pro-market right begin to warm to the benefits of liberalization of land-use.  Land-use is one area the “right,” in it’s fear of change, has failed to embrace a widespread pro-market stance.  Meanwhile, many urban-dwellers who consider themselves on the “left” unknowingly display an anti-outsider mentality typically attributed to the right’s stance on immigration.  Unfortunately, in failing to grasp the enormity of the bipartisan-caused distortion of the housing market, Ms. Cort resigns to advocate solutions that fail to deliver widespread housing affordability. Yes, adding more housing must absolutely be a part of the strategy to make housing more affordable. And zoning changes to allow people to build taller and more usable space near transit, rent out carriage houses, and avoid expensive and often-unnecessary parking are all steps in the right direction. But some proponents go on to say relaxing zoning will solve the problem all on its own. It won’t. Well, if “relaxing” zoning is the solution at hand, she may be right – relaxing will only help a tad…  While keenly aware of the high prices many are willing to pay, Cort does not seem to grasp the incredible degree to which development is inhibited by zoning.  “Relaxing” won’t do the trick in a city where prices are high enough to justify skyscrapers with four to ten times the density currently allowed.  When considering a supply cap that only allows a fraction of what the market demands, one can not reasonably conclude “Unlimited FAR” (building density) would merely result in a bit more development here and there. A radically liberalized land-use regime would […]

Only 2 Ways to Fight Gentrification (you’re not going to like one of them)

gentrification

Gentrification is the result of powerful economic forces. Those who misunderstand the nature of the economic forces at play, risk misdirecting those forces.  Misdirection can exasperate city-wide displacement.  Before discussing solutions to fighting gentrification, it is important to accept that gentrification is one symptom of a larger problem. Anti-capitalists often portray gentrification as class war.  Often, they paint the archetypal greedy developer as the culprit.  As asserted in jacobin magazine: Gentrification has always been a top-down affair, not a spontaneous hipster influx, orchestrated by the real estate developers and investors who pull the strings of city policy, with individual home-buyers deployed in mopping up operations. Is Gentrification a Class War?   In a way, yes.  But the typical class analysis mistakes the symptom for the cause.  The finger gets pointed at the wrong rich people.  There is no grand conspiracy concocted by real estate developers, though it’s not surprising it seems that way. Real estate developers would be happy to build in already expensive neighborhoods. Here, demand is stable and predictable.  They don’t for a simple reason: they are not allowed to. Take Chicago’s Lincoln Park for example.  Daniel Hertz points out that the number of housing units in Lincoln Park actually decreased 4.1% since 2000.   The neighborhood hasn’t allowed a single unit of affordable housing to be developed in 35 years. The affluent residents of Lincoln Park like their neighborhood the way it is, and have the political clout to keep it that way. Given that development projects are blocked in upper class neighborhoods, developers seek out alternatives. Here’s where “pulling the strings” is a viable strategy for developers. Politicians are far more willing to upzone working class neighborhoods. These communities are far less influential and have far fewer resources with which to fight back. Rich, entitled, white areas get down-zoned. Less-affluent, disempowered, minority […]

How to Fix San Francisco’s Housing Market

Want to live in San Francisco? No problem, that’ll be $3,000 (a month)–but only if you act fast. In the last two years, the the cost of housing in San Francisco has increased 47% and shows no signs of stopping. Longtime residents find themselves priced out of town, the most vulnerable of whom end up as far away as Stockton. Some blame techie transplants. After all, every new arrival drives up the rent that much more. And many tech workers command wages that are well above the non-tech average. But labelling the problem a zero sum class struggle is both inaccurate and unproductive. The real problem is an emasculated housing market unable to absorb the new arrivals without shedding older residents. The only solution is to take supply off its leash and finally let it chase after demand. Strangling Supply From 2010 to 2013, San Francisco’s population increased by 32,000 residents. For the same period of time, the city’s housing stock increased by roughly 4,500 units. Why isn’t growth in housing keeping pace with growth in population? It’s not allowed to. San Francisco uses what’s known as discretionary permitting. Even if a project meets all the relevant land use regulations, the Permitting Department can mandate modifications “in the public interest”.  There’s also a six month review process during which neighbors can contest the permit based on an entitlement or environmental concern. Neighbors can also file a CEQA lawsuit in state court or even put a project on the ballot for an up or down vote. This process is heavily weighted against new construction. It limits how quickly the housing stock can grow. And as a result, when demand skyrockets so do prices. To remedy this, San Francisco should move from discretionary to as-of-right permitting. In an as-of-right system, it’s much […]

On the Mixing of Incompatible Uses and Incumbency

I noticed an interestingly ironic thing today. The usual argument for the necessity of use-based zoning is that it protects homeowners in residential area from uses that would potentially create negative externalities – ie: smelting factory, garbage dump, or Sriracha factory. Urban Economics teaches us that such an event happening is highly unlikely in today’s marketplace. (nevermind the fact that nuisance laws should resolve these disputes) The business owner who is looking for a site for a stinky business would be foolish to look in a residential area where land costs are significantly higher. However, as Aaron Renn pointed out in the comments of my last post on Planned Manufacturing Districts, the inverse of this is happening in many cities as residential uses begin to outbid other uses in industrial areas: I think part of the rationale in this is that once you allow residential into a manufacturing zone, the new residents will start issuing loud complaints about the byproducts of manufacturing: noise, smells, etc. I know owners of businesses in Chicago who have experienced just that. They’ve been there for decades but now are getting complaints from people who live in residential buildings that didn’t even exist when the manufacturer located there. This puts those businesses under a lot of pressure to leave as officials will almost always side with residents who vote rather than businesses who don’t get to. It’s clear this is a more relevant defense of use-based zoning than the one we usually hear. Of course, I’d argue that segregating uses through zoning isn’t a just way to resolve these disputes, and my last post discusses some of the detrimental consequences for cities. It seems ironic, because it inverts the usual argument in-favor of zoning.  Residents are choosing to move near established industrial firms, and PMDs are a tool […]

Planned Manufacturing Districts: Planning the Life Out of Districts

They are called different things in different cities, but they are similar in form and intent among the cities where they are found.  For simplicity’s sake, a Planned Manufacturing District (PMD), as they are called in Chicago, is an area of land, defined by zoning, that prohibits residential development and other specific uses with the intent of fostering manufacturing and blue-collar employment. Proponent of PMDs purport to be champions of the middle-class or blue-collar workers, but fail to consider the unintended consequences of prohibiting alternative uses on that land.  At best, PMDs have little effect on changing land-use patterns where industrial is already the highest-and-best-use.  At worst, they have the long-run potential to distort the land use market, drive up the costs of housing, and prevent vibrant neighborhoods from emerging. A Race to The Bottom Before getting into it further, it is important to examine the economic decisions industrial firms make in comparison to other uses.  Earlier in the industrial revolution, industry was heavily reliant on access to resources.  Manufacturing and related firms were very sensitive to location.  The firms desired locations with easy access to ports, waterways, and later railways to transport raw materials coming in, and products going out. However, the advent of the Interstate Highway System and ubiquitously socialized transportation network have made logistical costs negligible compared to other costs.  Where firms once competed for locations with access to logistical hubs and outbid other uses for land near waterways in cities, they now seek locations with the cheapest land where they can have a large, single-floor facility under one roof.  This means sizable subsidies must be combined with the artificially cheap land to attract and retain industrial employers on constrained urban sites. Additionally, today’s economy has become much more talent-based rather than resource based, and patterns have shifted accordingly.  In contrast to industrial, residential and office uses are […]

How Land Prices Obviate the Need for Euclidean Zoning

https://www.youtube.com/watch?v=n-zESacteu4 Yesterday, Reason TV released a video comparing Houston with more heavily regulated East Coast cities, explaining that Houston’s relatively lax land use regulations contribute to its housing costs that are much lower than in other large cities. While the video paints an exaggerated picture of Houston as a free market paradise in spite of its codified sprawl, Todd Krainin makes some great points about Houston’s land use tolerance. For example, the city’s tin houses that save on construction and energy costs would be illegal in many cities that have tighter restrictions on building codes. In the video, the former mayor of Victoria, TX makes the great point that in spite of the absence of Euclidean Zoning in some Texas cities, residents don’t need to worry about heavy industry cropping up in their neighborhoods. “Economics dictates that you’re not going to put a rendering plant next to a residential subdivision,” he says. He’s referring to rent gradients that lead to land near amenities being priced at higher rates than land farther from amenities. Owners of low-value land uses don’t choose to pay high prices to be near these amenities. While there are occasionally legitimate nuisance cases in which housing and industrial uses impose externalities on each other because of their proximity, in a free market these cases would be very rare because it doesn’t make sense for industrial uses to take place on the land that people are willing to pay premium prices to live on. While city planners make the case for Euclidean zoning by saying that they are protecting residents from living near industry, zoning often results in the exact opposite outcome. Valuable property in cities including New York and San Francisco that is zoned industrial gets surrounded by residential neighborhoods over time as the city grows. Planners’ inability to keep codes up to date […]

How Affordable Housing Policies Backfire

Affordable housing policies have a long history of hurting the very people they are said to help. Past decades’ practices of building Corbusian public housing that concentrates low-income people in environments that support crime or pursuing “slum clearance” to eliminate housing deemed to be substandard have largely been abandoned by housing affordability advocates for the obvious harm that they cause stated beneficiaries. While rent control remains an important feature of the housing market in New York and San Francisco, even Bill de Blasio’s deputy mayor acknowledges the negative consequences of strong rent control policies. In the U.S. and abroad, politicians and pundits are beginning to vocalize the fact that maintaining and improving housing affordability requires housing supply to increase in response to demand increases. While support for older housing affordability policies has dissipated, the same isn’t true of inclusionary zoning.  From New York to California, housing affordability advocates tout IZ as a cornerstone of successful housing policy. IZ has emerged as the affordable housing policy of choice because it has the benefit of supporting socioeconomic diversity, and its costs are opaque and dispersed over many people. However, IZ has several key downsides including these hidden costs and a failure to meaningfully address housing affordability for a significant number of people. Shaila Dewan of the New York Times captures the strangeness of IZ’s popularity: New York needs more than 300,000 units by 2030. By contrast, inclusionary zoning, a celebrated policy solution that requires developers to set aside units for working and low-income families, has created a measly 2,800 affordable apartments in New York since 2005. Montgomery County, a Maryland suburb of DC,  has perhaps the most well-established IZ policy in the country. After 30 years, the program has produced about 13,000 units. Montgomery County is home to over one million people, 20 percent of whom have a household income of less than $43,000 annually. While this is an extraordinarily high income distribution relative to the rest of the country, this makes the […]

Culs de sac for safety?

At Cato At Liberty, Randall O’Toole provides a list of recommendations for reversing Rust Belt urban decline in response to a study on the topic from the Lincoln Land Institute. He focuses on policies to improve public service provision and deregulation, but he also makes a surprising recommendation that declining cities should “reduce crime by doing things like changing the gridded city streets that planners love into cul de sacs so that criminals have fewer escape routes.” This recommendation is surprising because it would require significant tax payer resources, a critique O’Toole holds against those from the Lincoln Land Institute. Short of building large barricades, it’s inconceivable how a city with an existing grid of streets would even go about turning its grid into culs de sac without extensive use of eminent domain and other disruptive policies. O’Toole is correct that the grid owes its origins to authoritarian regimes and that today it’s embraced by city planners in the Smart Growth and New Urbanist schools. But while culs de sac may have originally appeared in organically developed networks of streets, today’s culs de sac promoted by traffic engineers are hardly a free market outcome. As Daniel Nairn has written, the public maintenance of what are essentially shared driveways “smacks of socialism in its most extreme form.” Some studies have found that culs de sac experience less crime relative to nearby through streets, perhaps in part because they draw less traffic. However, it’s far from clear that a pattern of suburban streets makes a city safer than it would be would be with greater street connectivity. Some studies find that street connectivity correlates with greater social capital. O’Toole’s promotion of social engineering through culs de sac to create a localized drop in crime at the expense of a city’s residents’ social capital is […]

Ranking State Land Use Regulations

Yesterday, the Mercatus Center released the third edition of Freedom in the 50 States by Will Ruger and Jason Sorens. The authors break down state freedom among regulatory, fiscal, and personal categories. At the study’s website, readers can re-rank the states based on the aspects of freedom that they think are most important, including some variables related to land use and housing. The available variables include local rent control, regulatory takings restrictions, the Wharton Residential Land Use Regulatory Index, and an eminent domain index. Using only these “Property Rights Protection” variables, Kansas ranks as the freest state, followed by Louisiana, Indiana, Missouri, and South Dakota. Texas, sometimes cited as the state without zoning, comes in at 18th. The least free state is New Jersey, with Maryland at 49th, followed by California, New York, and Hawaii. This result — states with some of the most expensive cities being the most regulated — is unsurprising. In the places with the freest land use regulations, where a developer would be able to build walkable, mixed-use neighborhoods without going through a burdensome entitlement process, there isn’t demand for dense development. This may be one reason why the Piscataquis Village project, an effort to build a traditional city, is happening in a sparsely populated Maine county because new development of this sort is simply not permitted near any population centers. As Stephen recently pointed out, public opinion in New York tends to see city policies as wildly pro-development: In spite of the popular impression of New York as a builder-friendly city that’s constantly exceeding the bounds of rational development, the city’s growth over the past half-century has been anemic, and has not kept pace with the natural growth in population. This ranking of New York near the bottom of the index demonstrates what urban economists already know — new development […]

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