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Liberalizing Cities From The Ground Up
The adoption of zoning as a means of preventing external costs led to inefficient use of land and caused many individuals to suffer great unfairness.
by Samuel R Staley Before the twentieth century land-use and housing disputes were largely dealt with through courts using the common-law principle of nuisance. In essence if your neighbor put a building, factory, or house on his property in a way that created a measurable and tangible harm, courts could intervene on behalf of a complainant to force compensation or stop the action. This pro-property rights approach maximized liberty and minimized the ability of citizens and elected officials to politicize the development process. This changed with the Progressive movement. Beginning in the late nineteenth century, Progressives argued that government should become more professional. Rather than being limited, government should use its resources to pursue the “public interest,” loosely defined as whatever the general public decided through democratic processes was the proper scope of government. Legislatures and, by extension, city commissions made up of elected citizens would set policy and goals while a cadre of trained professionals would use the techniques of scientific management to implement policies. One of the leading Progressives of the day, Woodrow Wilson, was skeptical of the value of elected bodies such as Congress because they interfered with scientific management of government. While many in the twenty-first century might be tempted to dismiss this public-interest view of government—indeed an entire academic subdiscipline, Public Choice, has emerged to demonstrate the foibles of governments and explore “government failure”—Progressive ideas held a lot of appeal at the turn of the twentieth century. In addition to national concerns over industries such as oil, steel, and railroads, local governments were rife with corruption, waste, and inefficiency. Reforms, such as the city-manager form of government, civil-service exams, and in some cases even municipal ownership of utilities, were thought to provide more transparency and accountability than the patronage-laden times of political bosses. (Today municipal […]
This is the first article of a five-part series on suburbia in the United States. In primary school, one of my friends lived in a duplex. This fact blew my mind. To my inexperienced 7-year-old mind, a duplex barely registered as a house. Her family shared a driveway with their neighbors, and their yard was tiny. It was the first house I’d ever seen that shared a wall with its neighbors. I’d seen apartments of course, but in my mind those were temporary, for people who who were saving up to buy a “real” home. I couldn’t understand that some people might actually prefer to live in something besides a private home, because I’d never come across it before. Median income in American cities tends to rise at about 8 percent per mile as one moves away from the business district. My mental model of the world was pretty typical for an American child brought up in a single-family home. It’s easy to see why—US residential development is dominated by suburbs, and home ownership is touted as the ultimate symbol of prosperity. Other types of dwellings tend to be for young people starting out in life or low income households unable to afford a place of their own. The popular image of the American Dream includes a white picket fence and a car, not an apartment and a subway pass. This is in stark contrast with most other countries. The French word for suburb is banlieue, and it has come to connote poverty and social isolation, because that is where immigrants and the poor tend to live. They’ve been known as “red suburbs” because of their tendency to vote Communist. Meanwhile, the wealthy live in the city center. In South Africa, the inner city is reserved for the privileged white […]
During his last days in office, former Representative Jason Chaffetz must have forgotten he is supposed to be a fiscal conservative. His recent comments that members of Congress need $2,500 stipends to afford housing in DC reflect a complete ignorance of both the reasons for high housing prices and the best ways to lower those prices. Instead of treating the symptoms of skyrocketing housing prices, policymakers should be striking at the root: rent control, height limits, and burdensome zoning restrictions that discourage development. All of this turns on basic economics. Markets drive prices of goods and services down, but only if they are competitive. In many cases, existing interests try to prevent others from entering markets in order to protect their own bottom lines. Zoning regulations are often manipulated by interest groups, who hope to limit the allowed uses of land within a city and prevent future developments. Zoning essentially fixes the amount of available housing by discouraging developers from building more housing, ultimately driving housing prices up. Academic research places much of the blame for high housing costs on zoning––and this isn’t just limited to a single city or state. Edward Glaeser and Raven Saks of Harvard and Joseph Gyourko of the University of Pennsylvania examined Manhattan’s housing market estimate that new construction costs for housing are only about $300 per square foot, but that square foot tends to be rented out for $600, twice the cost at construction. Glaeser, Gyourko, and Saks write, quite intuitively, that “this would seem to offer an irresistible opportunity for developers.” But it’s zoning regulations that prevent developers from coming in to build more homes (which ultimately lowers housing prices), despite market incentives. Even though there is a deafening clamor for more housing, as evidenced by rising prices, building takes so long in […]
Some people accept the idea that restrictive land use policy is just as bad as all the research suggests, but persist in supporting the status quo. They argue that if a community chooses to regulate its built environment, that choice should be respected as having moral weight because it’s the outcome of a democratic process. This argument, though, is as logically confused as it is normatively problematic. And in the following few lines, I intend to demonstrate exactly why. No decision making process is value neutral. Whatever way we choose to go about collective decision making, we will always privilege certain voices over others. Institutions beget outcomes and the internal logic of our institutions will always favor some outcomes (and therefore voices) over others. The same individuals with the same preferences asked to make the same decisions through different procedures will produce wildly different outcomes. Imagine a U.S. Presidential election based on the popular vote or representation in the U.S. Senate proportional to state population and you should begin to see how the public will is as much a product of procedure as it is aggregated individual preference. Taking the Bay Area as a land use specific example, our system heavily favors the voices of incumbent homeowners to the detriment of everyone else. Land use decisions take place at the municipal level which–given the fact that we have 101 different municipalities–is a hyper local affair. When a new development is proposed, it only takes a handful of angry neighbors to impact decision making. Were land use set at a higher level of government, the typical number of people that get angry over an individual project would be far less effective at killing new housing. Fifty angry homeowners might matter to the Palo Alto City Council, but they’d be quite a […]
This post was originally published at mises.org and reposted under a creative commons license. It’s no secret that in coastal cities — plus some interior cities like Denver — rents and home prices are up significantly since 2009. In many areas, prices are above what they were at the peak of the last housing bubble. Year-over-year rent growth hits more than 10 percent in some places, while wages, needless to say, are hardly growing so fast. Lower-income workers and younger workers are the ones hit the hardest. As a result of high housing costs, many so-called millennials are electing to simply live with their parents, and one Los Angeles study concluded that 42 percent of so-called millennials are living with their parents. Numbers were similar among metros in the northeast United States, as well. Why Housing Costs Are So High? It’s impossible to say that any one reason is responsible for most or all of the relentless rising in home prices and rents in many areas. Certainly, a major factor behind growth in home prices is asset price inflation fueled by inflationary monetary policy. As the money supply increases, certain assets will see increased demand among those who benefit from money-supply growth. These inflationary policies reward those who already own assets (i.e., current homeowners) at the expense of first-time homebuyers and renters who are locked out of homeownership by home price inflation. Not surprisingly, we’ve seen the homeownership rate fall to 50-year lows in recent years. But there is also a much more basic reason for rising housing prices: there’s not enough supply where it’s needed most. Much of the time, high housing costs come down to a very simple equation: rising demand coupled with stagnant supply leads to higher prices. In other words, if the population (and household formation) is […]
Caos Planejado, in conjunction with Editora BEI/ArqFuturo, recently published A Guide to Urban Development (Guia de Gestão Urbana) by Anthony Ling. The book offers best practices for urban design and although it was written for a Brazilian audience, many of its recommendations have universal applicability. For the time being, the book is only available in Portuguese, but after giving it a read through, I decided it deserved an english language review all the same. The following are some of the key ideas and recommendations. I hope you enjoy. GGU sets the stage with a broad overview of the challenges facing Brazilian cities. Rapid urbanization has put pressure on housing prices in the highest productivity areas of the fastest growing cities and car centric transportation systems are unable to scale along with the pace of urban growth. After setting the stage, GGU splits into two sections. The first makes recommendations for the regulation of private spaces, the second for the development and administration of public areas. Reforming Regulation Section one will be familiar territory for any regular MU reader. GGU advocates for letting uses intermingle wherever individuals think is best. Criticism of minimum parking requirements gets its own chapter. And there’s a section a piece dedicated to streamlining permitting processes and abolishing height limits. One interesting idea is a proposal to let developers pay municipalities for the right to reduce FAR restrictions. This would allow a wider range of uses to be priced into property values and create the institutional incentives to gradually allow more intensive use of land over time. Meeting People Where They Are Particular to the Brazilian experience is a section dedicated to formalizing informal settlements, or favelas. These communities are found in every major urban center in the country and often face persistent, intergenerational poverty along with […]
Marcos Paulo Schlickmann, a transportation specialist and collaborator at Caos Planejado, our Brazilian partner website, recently interviewed Professor Donald Shoup, who answered questions about private and public parking issues. Private parking Marcos Paulo Schlickmann: What is your opinion on legal parking minimums? Donald Shoup: In The High Cost of Free Parking, which the American Planning Association published in 2005, I argued that minimum parking requirements subsidize cars, increase traffic congestion, pollute the air, encourage sprawl, increase housing costs, degrade urban design, prevent walkability, damage the economy, and penalize poor people. Since then, to my knowledge, no member of the planning profession has argued that parking requirements do not cause these harmful effects. Instead, a flood of recent research has shown they do cause these harmful effects. Parking requirements in zoning ordinances are poisoning our cities with too much parking. Minimum parking requirements are a fertility drug for cars. MPS: What would happen if we were to abandon parking minimums? DS: Reform is difficult because parking requirements don’t exist without a reason. If on-street parking is free, removing off-street parking requirements will overcrowd the on-street parking and everyone will complain. Therefore, to distill 800 pages of The High Cost of Free Parking into three bullet points, I recommend three parking reforms that can improve cities, the economy, and the environment: Remove off-street parking requirements. Developers and businesses can then decide how many parking spaces to provide for their customers. Charge the right prices for on-street parking. The right prices are the lowest prices that will leave one or two open spaces on each block, so there will be no parking shortages. Prices will balance the demand and supply for on-street parking spaces. Spend the parking revenue to improve public services on the metered streets. If everybody sees their meter money at work, the new public services can […]
I just finished reading Richard Florida’s new book, The New Urban Crisis. Florida writes that part of this “crisis” is the exploding cost of housing in some prosperous cities. Does that make him a market urbanist? Yes, and no. On the one hand, Florida criticizes existing zoning laws and the NIMBYs who support them. He suggests that these policies not only raise housing prices, but by doing so harm the economy as a whole. For example, he writes that if “everyone who wanted to work in San Francisco could afford to live there, the city would see a 500 percent increase in jobs… On a national basis, [similar results] would add up to an annual wage increase of $8775 for the average worker, adding 13.5 percent to America’s GNP – a total gain of nearly $2 trillion” (p 27). On the other hand, Florida is not ready to endorse the idea that “we can make our cities more affordable… simply by getting rid of existing land use restrictions” because “the high cost of land in superstar neighborhoods makes it very hard if not impossible, for the private market to create affordable housing in their vicinity. Combine the high costs of land with the high costs of high-rise construction and the result is more high-end luxury housing.” (p. 28). I don’t find his point persuasive, for a variety of reasons. First, as I have written elsewhere, land prices are often quite volatile. Second, the overwhelming majority of any region’s housing is not particularly new; even in high-growth Houston, only 2 percent of housing units were built after 2010. Thus, new market-rate housing is likely to affect rents by affecting the price of older housing, rather than by bringing new cheap units into the market. Florida also writes that “too much density can […]
Inclusionary zoning allows a few people to live in desirable, new construction buildings for much less than market rates. But it also carries with it a slew of perverse consequences. Because it’s a tax on construction, it reduces supply. Inclusionary zoning also leads developers to build higher-end buildings than they would otherwise, further squeezing out lower- and middle-income tenants. While inclusionary zoning makes life easier for a few middle- and high-income residents lucky enough to secure below market-rate units in expensive cities, it also contributes to the regulatory mess that constrains housing supply in general. This in turn drives up the cost of housing. The effects of these supply constraints fall hardest on low-income residents who can least afford artificially high housing costs. By placing further constraints on housing markets, inclusionary zoning makes it so that resources dedicated to providing housing for the truly needy don’t go as far as they could in a less regulated market. Subsidies to middle-income residents come with the unfortunate side effect of making it more difficult for non-profits and government programs to make housing accessible to the truly needy. Recently I presented on a panel at Chapman University on the future of housing in Orange County. Our panel highlighted the tensions between housing programs designed to help low-income and homeless households and those designed to help middle-income households. While my talk focused on regulatory barriers that make housing unaffordable for people across the income spectrum, Maria Cabildo — a former non-profit developer for low-income housing — talked about her experiences building housing for the homeless and very-low-income families. Maria pointed out that market-rate housing is too expensive for minimum wage earners in every single county in the country. In expensive markets, policies designed to subsidize housing for middle-income people drives prices even farther out of reach for low-income […]
