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Category Zoning

Irrelevant real estate trends

Earlier this week Wendell Cox wrote a piece at New Geography arguing that projections for increasing demand for multifamily housing relative to single family homes are incorrect. He was criticizing a study by Arthur Nelson that predicts increased demand for multifamily housing relative to single-family housing in California between 2010 and 2035. So far, Cox points out that this hypothesis is not being fulfilled; between 2000 and 2008 slightly over half of newly occupied housing units were single-family homes on conventional lots (larger than 1/8 acre), not indicative of a shift in preferences toward multifamily housing. Cox emphasizes that his data is based on revealed preferences rather than forecasts or surveys which may indicate a false preference for denser housing. However, he does not acknowledge that these preferences he cites are not revealed in a free market. The mortgage interest tax deduction biases home buyers toward larger homes, the complex entitlement process for dense infill development restricts supply of denser housing, and the the zoning and parking requirements that regulate development all shape revealed consumer decisions. Both Cox and Nelson seem to base their views of consumer preferences heavily on introspection, assuming that over time more Americans will come to share their preference for suburban or urban living respectively. And they both take the same approach of looking at the real estate trends aggregated across the entire state. This is an interesting question for academics, but not a particularly relevant area for real estate markets. Real estate is local, and state trends are not likely to apply to many cities and neighborhoods. The average home sold in California went for $309,000 at $195 per square foot last month. However this statistic is meaningless for West Hollywood residents where the  average sale price was $378 per square foot. It’s equally meaningless […]

The Renewed Debate on Inclusionary Zoning

Stephen Smith and I co-wrote this post. In case you haven’t been following Stephen elsewhere, he’s also been writing at The Atlantic Cities and Bloomberg View.   This year, some of the first apartments and condos subject to inclusionary zoning laws in DC are hitting the market, stoking debate over development laws that the city adopted in 2007. The inclusionary zoning requirement is currently stalling the city’s West End Library renovation with Ralph Nader leading efforts to include an affordable housing aspect with the library project. Inclusionary zoning advocates often base their support on the desirability of mixed-income neighborhoods, while challengers argue that inclusionary zoning is an inefficient way to deliver housing with unintended consequences. Heather Schwartz, who studies education and housing policies at the RAND Institute, says that one important feature of this policy tool is that it gives low-income families access to high-income neighborhoods while at the same time limiting the number of low-income residents in a neighborhood. She said, “Since IZ is a place-based strategy that tends to only apply to high-cost housing markets, it can offer access to lower-poverty places than housing vouchers and other forms of subsidized housing have historically done.” David Alpert, editor-in-chief of Greater Greater Washington, a local urban planning blog, offers another argument in favor of inclusionary zoning, “a policy that builds support for both greater density and affordable housing,” he said in an email. “Much of the opposition to greater density involves a feeling that it is just a ‘giveaway’ to developers who make the profit and impose some collateral burden on a neighborhood, but many people are more supportive of the density if it serves an affordable housing goal.” While inclusionary zoning proponents may see its ability to introduce just a few low-income residents to a higher income neighborhood as an […]

Selling the Rights to Greater Density

At Next American City, Mark Bergen has an interesting long-form piece on municipal infrastructure financing. He argues that the property owners who benefit from public policies, such as infrastructure investment, should be required to fund these policies. He suggests infrastructure improvements should be paid for with Tax Increment Finance or value capture (PDF). I don’t necessarily agree with his infrastructure funding prescriptions, and may take these up in a future post. What I found even more interesting, though, is his suggestion that developers should pay for zoning changes. The basis for this proposal comes from the Georgist land tax. Because in urban settings, land’s value largely comes from the amenities surrounding it, landowners do not have the exclusive rights to this value, according to Henry George. The suggestion that developers should pay for the rights to build on the land they own is based, Mark explains, on a policy from São Paulo, called Certificates of Additional Construction Potential (CEPAC). These bonds, representing rights to build, are transferable and are publicly traded. He quotes Gregory K. Ingram of Lincoln Institute of Land Policy: “They’re essentially selling zoning changes,” explained Ingram. Crucially, the building fees have not eaten away at developers’ profits. By some accounts, the rates of return for real estate in the districts increase. […] The notes, sold by municipalities, are one of the world’s most innovative public financing techniques. Across many sections of São Paulo, if a developer hopes to build or do nearly anything with her property — adjust its uses, expand outward or upward — she must first buy a CEPAC. On a fairness level, selling zoning changes seems wrong to me. Current zoning policies are an arbitrary starting point, so it doesn’t make sense that developers should have to pay for permission to change a policy that […]

Tokyo’s surprising lack of density

Wendell Cox has received his fair share of criticism from this blog, but his post last week about Tokyo’s surprising lack of density is very interesting. Sure, Tokyo’s suburbs are dense enough to be connected by job centers by rail, but the core is almost completely low- and lower-mid-rise, and thus not very dense: Tokyo does not have intensely dense central areas. The ku area [historic core] has a density of 37,300 per square mile (14,400 per square kilometer). This is well below the densities of Manhattan (69,000 & 27,000) and the ville de Paris (51,000 & 21,000). Only one of the ku (Toshima) exceeds the density of Paris. And then the suburbs themselves aren’t as compact as they could be: Further, according to the Japan House and Land Survey of 2008, Tokyo has a large stock of detached houses, by definition lower density. Nearly 45 percent of the Tokyo region’s housing is detached. One-third of the dwellings within 30 kilometers (18 miles) of the core are detached. This figure rises to more than 60 percent outside 30 kilometers from the core and 85 percent between 60 and 70 kilometers (37-43 kilometers) from the core (Figure 2). Some might see this as a validation of New Urbanism (which is sort of a bastardization of Old Urbanism), whose response to tall building enthusiasts like myself, Ed Glaeser, and Alon Levy is that “dense doesn’t have to mean tall.” And it’s true – Tokyo manages a relatively high density with very few tall buildings. But there are costs that Tokyo bears for its lack of height and downtown density. First and foremost are the high housing prices. Imagine New York City if Midtown and the Upper East and West Sides were still tenement neighborhoods, and everyone living and working above the sixth floor […]

Rent control by any other name

Earlier this week, David Alpert wrote a piece at Greater Greater Washington on the benefits of inclusionary zoning and why economists should support it. I would counter that IZ as designed in DC is not an efficient program for providing affordable housing, and to the extent that it does provide significant numbers of price-controlled housing units, it will necessarily have many of the negative attributes of rent control. IZ works by requiring developers to provide below-market cost units in addition to market rate housing, and providing them with “density bonuses” in exchange. The problem with this is that building more units in itself makes housing more affordable. Obviously I understand the many political obstacles to allowing more residential development, but I don’t think that introducing units that are permanently price-controlled is the appropriate price to pay for this political concession. As Walter Block writes at the Library of Economics and Liberty: Economists are virtually unanimous in concluding that rent controls are destructive. In a 1990 poll of 464 economists published in the May 1992 issue of the American Economic Review, 93 percent of U.S. respondents agreed, either completely or with provisos, that “a ceiling on rents reduces the quantity and quality of housing available.” Similarly, another study reported that more than 95 percent of the Canadian economists polled agreed with the statement. The agreement cuts across the usual political spectrum, ranging all the way from Nobel Prize winners Milton Friedman and Friedrich Hayek on the “right” to their fellow Nobel laureate Gunnar Mydral, an important architect of the Swedish Labor Party’s welfare state, on the “left.” Myrdal stated, “Rent control has in certain Western countries constituted, maybe, the worst example of poor planning by governments lacking courage and vision.” Consumers and producers in the IZ market will face the same […]

Look beyond Fourth Avenue in Brooklyn for solutions to a lack of retail

Robbie Whelan’s got a column in today’s Wall Street Journal on Brooklyn’s Fourth Avenue, which is something I’ve been thinking a lot about since I moved to Brooklyn earlier this year. If you don’t recall, last year the City Council passed a zoning amendment to require new residential developments on the transit-rich, pedestrian-unfriendly avenue in South Brooklyn to include a certain amount of ground-level retail, to appease the ghost of Jane Jacobs and to stop burning the souls of all who walk the avenue. Robbie’s column is outwardly critical of the city (he blames “bad decisions by Amanda Burden’s City Planning Department”), but on another level, he’s just cheering on what DCP already did (“the city finally got wise and passed another zoning change last year”). But walking down Fourth Avenue, and seeing all the vacant retail storefronts in apartment buildings sprinkled around the neighborhood from the last development cycle, it seems obvious that the real problem is a lack of demand, which Robbie derides as “the profit-above-all-else motive of some developers” (“some”…ha!). Namely: the neighborhoods around Fourth Avenue are too auto-bound and not dense enough to support the retail and pedestrian traffic that would make Fourth Avenue a vibrant place. (The lots bordering Fourth Avenue may one day grow dense enough to support retail without the help of their side streets. But for now, only mid-rise development is allowed, so I don’t see Fourth Avenue being self-sustaining any time soon.) Perhaps the biggest problem is the industrial zoning around the Gowanus Canal and Bay, a few avenues over from Fourth Avenue. Capital has replaced labor in U.S. non-service-sector jobs over the last century, and the only business that can take advantage of the zoning around Third Avenue are auto-oriented (manufacturers these days ship their goods by highways, not canals!). […]

Randal O’Toole: “If you didn’t have those suburban restrictions, you wouldn’t have that pressure for density in DC”

Earlier today I posted the video of the Cato discussion on housing with Randal O’Toole, Ryan Avent, Adam Gordon, and Matt Yglesias, but I wanted to transcribe one segment towards the end. (Like I said, it’s hard to skip to the end of the streaming video because you can’t scroll beyond what’s already been downloaded.). For the last question, someone from the audience says he’s a fan of Randal’s who lives in DC, and asks Randal, and the rest of the panelists, what they about the recent calls to lift the city’s height limit in response to development pressures. Randal responds first: Well this is where I think the policy questions [and the difference between Randal and the other panelists] come in on density. I think we ‘ve got Maryland, which has all these restrictions on supposedly protecting agricultural land, we have Loudoun County and other counties in Virginia that have zoned most of their land for 20-acre large lot sizes, those have restricted the ability of people to live in single-family, to build new single-family homes in the Washington, DC, metropolitan area. And so it’s created a pressure for more density in Washington, DC, but if you didn’t have those suburban restrictions, you wouldn’t have that pressure for density in Washington, DC. So I’d say, let’s get rid of the suburban restrictions, and then see if there really is a demand for high-density high-rise in Washington. If there really was a demand, there’s a lot of three-story buildings that could be redeveloped to be six and seven stories if you wanted to. Matt: “You’re not allowed to!” Ryan: “You should try to do that – if you can make it happen, then that would be a great profit opportunity.” Randal: “Well, I’ve seen streets of row houses here [in DC] […]

Market Urbanism vs. Market Suburbanism smackdown at Cato: “The Death and Life of Affordable Housing”

The debate you’ve been waiting for! Randal O’Toole, Matt Yglesias, Ryan Avent, and Adam Gordon participated yesterday in a discussion at the Cato Institute moderated by Diana Lind from Next American City/Forefront. (How had this never happened before??) Randal O’Toole did not disappoint, arriving in top form in his shoestring necktie and armed with a surprisingly interesting Powerpoint, but I think New Jersey-based attorney Adam Gordon stole the show with his discussion of inclusionary zoning and the Mt. Laurel doctrine (probably because he was on the only one on stage who hasn’t already spewed hundreds of thousands of words on the subject). You can download the 90-minute discussion as an MP3 from Cato (much easier to scroll through), or watch the video streaming:

An Early Defense of Zoning

At Discovering Urbanism, Daniel Nairn offers an interesting summary of Edward Murray Bassett’s 1922 defense of zoning (available as a free e-book). Bassett faced opponents who were against a new type of land use regulation, many arguing that zoning was unconstitutional. In retrospect, some of his arguments defending zoning are comical. He asserts that zoning would never go so far as to direct aesthetics because the courts would protect us from the overreach. It would be interesting to hear what he’d have to say about a planning commission meeting today. Nairn’s entire analysis is interesting, but I was particularly intrigued by Bassett’s assertion that zoning fosters cooperation. As Nairn summarizes: Cooperation yields overall larger return on investment for all property owners. This was Bassett’s primary concern, one that he underscored with a number of prisoners’ dilemma scenarios. For example, “In some of the larger cities a landowner in the business district is almost compelled to put up a skyscraper because if he put up a low building, his next neighbor would put up a higher one that would take advantage of his light and air.” He asserted that skyscrapers were probably not a sound investment in their own right, but they were built anyway in a virtual arms race for public goods of light, air, privacy, and scenery. Zoning was the truce that made everyone better off. I’m not sure that I follow Bassett’s logic here. If light and air are only available on floors that are higher than the floors of the neighboring buildings, then only the top few floors of any building would typically have this asset. It’s almost as if he’s talking about a race to the highest roof deck here. Aside from the problems with how he makes this argument, it is worth a look to determine […]

Brookings Study Ties Exclusionary Zoning to Gaps in School Performance

Last week the Brookings Institute released a study by Jonathan Rothwell on the relationship between exclusionary zoning and school performance. He points out that this is the first study linking zoning to educational outcomes. The findings demonstrate that cities with stronger exclusionary zoning policies have larger differences in test scores across schools. This finding makes sense, as exclusionary zoning policies segregate households by income, and household income is strongly correlated with children’s educational outcomes. This research is important because school district quality is a key factor in families’ decisions of where to live. I think that school quality is likely an important factor behind many NIMBY efforts too, as parents in a neighborhood may be afraid that lower-income residents moving into the school boundary will bring down the quality of education. Whether or not this is a valid concern on NIMBYs’ part, perception is all that matters. Rothwell’s dependent variable is called the school-test score gap, or the difference between a school’s test results and the state’s test results. So his results don’t tell us whether reducing exclusionary zoning will improve individuals’ outcomes or merely bring schools’ averages more in line. Of course what we would like to see is improved absolute educational outcomes, particularly for those students with the poorest performace. Theory does suggest some reasons that more equal schools could improve absolute student results, one being that more experienced teachers typically do not work in a city’s worst-performing schools. Another is that students may do better when they are surrounded by higher-achieving classmates. Through those channel and perhaps others, reducing disparities across schools could improve low-income students’ results. In developing the case for why it’s important for children of all income levels to attend schools with higher median test scores, Rothwell cites studies that demonstrate that “the quality of […]

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