To put it another way, to compare Chicago and New York you should look at comparable neighborhoods rather than regionwide averages.

For example, one reasonable comparison might be between Chicago’s reasonably desirable inner suburbs and New York’s. I picked four suburbs that I have visited and that are reasonably close to city boundaries: Great Neck and Cedarhurst on the New York Side, Skokie and Evanston on the Chicago side. According to Trulia.com, the cheapest two bedroom condo* (other than one that clearly needs major renovations) in Evanston sells for $115,000 and the cheapest in Skokie for $165,000. By contrast, Great Neck condos start at around $350,000, and Cedarhurst prices are similar.

Similarly, elite intown areas are cheaper in Chicago. I looked at Chicago’s Lakeview, where I spent part of my honeymoon five years ago; two-bedroom units there start at $235,000. By contrast, in Manhattan’s Upper West Side such units start at $730,000 (not counting units that require extensive renovation or are income-restricted).

To sum up: regional averages do seem to reflect the reality of housing costs, at least in these two cities.

*I picked two bedroom condos for the somewhat arbitrary reason that I currently live in a two-bedroom apartment.

*

The post Apples to apples housing cost comparisons appeared first on Market Urbanism.

A concerted research effort has brought minimum lot sizes into focus as a key element in city zoning reform. Boise is looking at significant reforms. Auburn, Maine, and Helena, Montana, did away with minimums in some zones. And even state legislatures are putting a toe in the water: Bills enabling smaller lots have been introduced [in 2023] in Arizona, Massachusetts, Montana, New York, Texas, Vermont, and Washington. The bipartisan appeal of minimum lot size reform is reflected in Washington HB 1245, a lot-split bill carried by Rep. Andy Barkis (R-Chehalis). It passed the Democratic-dominated House of Representatives by a vote of 94-2 and has moved on to the Senate.

City officials and legislators are, reasonably, going to have questions about the likely effects of minimum lot size reductions. Fortunately, one major American city has offered a laboratory for the political, economic, and planning questions that have to be answered to unlock the promise of minimum lot size reforms.

Problem, we have a Houston

Houston’s reduced minimum lot sizes from 5,000 to 1,400 square feet in 1998 (for the city’s central area) and 2013 (for outer areas). This reform is one of the most notable of our times – and thus has been studied in depth.

To bring all the existing scholarship into one place, I’ve compiled this annotated bibliography covering the academic papers and some less-formal but informative articles that have studied Houston’s lot size reform. Please inform me of anything I’m missing – I’ll add it.

Political economy of Houston’s reform

M. Nolan Gray & Adam Millsap (2020). Subdividing the Unzoned City: An Analysis of the Causes and Effects of Houston’s 1998 Subdivision Reform. Journal of Planning Education and Reform.

Jake Wegmann (2020). Bayou City Townhouse Boom: Does Houston Have Something to Teach Us About Pro-Climate Urban Transformation? Platform,
The University of Texas at Austin School of Architecture.

NuNu Chang (2018). Planning the Houston Way, Part II: Special Minimum Lot Size. Rice Design Alliance.

Jake Wegmann, Aabiya Noman Baqai, and Josh Conrad (2023). Here Come the Tall Skinny Houses: Assessing Single-Family to Townhouse Redevelopment in Houston, 2007–2020. Cityscape.

Big ideas

• HOA deed restrictions & opt-out options enabled the broad reform of Houston’s lot-size mandates.
• The reform slowed gentrification in low-income neighborhoods, concentrating rather in middle-income neighborhoods.
• Builders took advantage of reform to build “Houston townhouses”, which are not attached to neighboring houses and are usually 3 stories tall with a “tuck-under” garage.
• Normal fee simple ownership is a key to townhouse success. Nobody wanted condo-ownership townhouses.
• Wegmann and co-authors argue from tax data that relatively few Houston townhouses replaced single-family homes. But Dobbels and Takavalov (below) claim that 59% of townhouses are on old single family lots. This contradiction remains to be resolved.

Discussion

• Shane Phillips, Mike Manville, and M. Nolan Gray on the UCLA Housing Voice Podcast.
• Max Masuda-Farkas in The Regulatory Review.
• M. Nolan Gray and Jessica McBirney at the Mercatus Center.
• Salim Furth at Market Urbanism.

History and geography of Houston townhomes

Stephen Fox (2000). The Houston Townhouse. Cite: The Architecture and Design Magazine of Houston.

John Park, Luis Guajardo, Kyle Shelton, Steve Sherman, and William Fulton (2021). Re-Taking Stock: Understanding How Trends in the Housing Stock and Gentrification are connected in Houston and Harris County. Kinder Institute for Urban Research, Rice University.

Big ideas

• The unique “detached townhouse” is a new concept, probably owing to the 1999 regulatory reform.
  • As of 2000, Fox makes no mention of detached townhomes.
  • In 2005, Houston had about 12,000 detached townhomes and 31,000 attached townhomes.
  • From 2005 to 2018, Houston added 34,000 detached townhomes against 5,000 attached townhomes.
• Detached townhomes are common in inner neighborhoods undergoing redevelopment; greenfield development is almost entirely traditional single family and large-scale multifamily.
• Construction and demolition are more frequent in affluent and already-gentrified core neighborhoods than gentrifying ones, as shown in Figure 4.

Discussion

• Jake Wegmann at Urban Edge (Kinder Institute)
• Luis Guajardo at Urban Edge (Kinder Institute)

Who benefits from small lots?

Mike Mei (2022). House Size and Household Size: The Distributional Effects of the Minimum Lot Size Regulation. Working paper.

Gregory Dobbels and Suren Tavakalov (2023). Not in My Back Yard: The Local Political Economy of Residential Land-Use Regulations. Working paper.

Big ideas

• From Mei:
  • Small lots result in smaller houses. The average new house size in Houston declined by 10 to 15 percent when small lots were legalized.
  • A simplified model shows that smaller, lower-income families and those who have not yet bought a house are big winners. Most existing homeowners took small losses (See Figure 15).
  • The lot size reform was equivalent to a one-time gift of $18,000 to every Houston household living in a single-family home (the model doesn’t incorporate apartment dwellers). That adds up to about $8 billion.

• From Dobbels & Tavakalov:
  • If the authors’ “revealed preference” approach is correct, most incumbent homeowners dislike added density on their block. They estimate that the subdivision of 2 old houses into 4 townhouses creates a $6,900 amenity cost for each other house on a block.
  • But incumbents value the profitable sale opportunity even more. The typical homeowner comes out about $2,300 ahead.
  • 16% of eligible blocks took the “special minimum lot size” opt-out and kept the old 5,000 square foot minimum. The opt outs were more likely affluent and white.

Discussion

• Salim Furth at Market Urbanism

Yard space isn’t highly valued

Salim Furth (2021). Foundations and Microfoundations: Building Houses on Regulated Land. Mercatus Center Working Paper.

M. Nolan Gray and Salim Furth (2019). Do Minimum-Lot-Size Regulations Limit Housing Supply in Texas? Mercatus Center Research Paper.

Big ideas

• Houston area homebuyers are happy to pay more for bigger houses – but they don’t place much value on larger yards.
• In suburbs of Dallas and Austin with large minimum lot sizes, most house lots are built very close to the minimum lot size (or below it via various exceptions). See Figure 4.
  • But in Pearland, with many small lots available in nearby Houston, suburbanites are happy to buy larger-than-mandated lots.

Discussion

• Nolan Gray at Strong Towns.
• Nolan Gray and Salim Furth in the Austin American-Statesman.

Did Lot Size Reform Change Property Values?

Joseph Shortell (2022). The Effect of a Minimum Lot Size Reduction on Residential Property Values: The Case of Houston. Universitat de Barcelona master’s thesis.

Emily Hamilton (2024) addresses the same question by comparing land price growth in areas where minimum lot sizes were lowered in 2013 to areas where it had been lowered in 1999.

Big ideas

• In theory, lowering lot size mandates ought to raise the price of land while lowering the price of existing structures.
• Comparing Houston lots (which benefited from reform) to those outside the city, Shortell finds that the price of land definitely rose and the price of existing structures may have fallen (but the evidence is less clear).
• With an all-city sample, however, Hamilton finds that minimum lot size reform had either no effect or a negative effect on assessed land values.

Discussion

Nobody has critiqued or dissected Shortell (2022) yet. It is an excellent master’s thesis, but readers should bear in mind that it is student work and has not undergone peer review. Given the disagreement between these two papers – which both rely on assessment data – more research may be needed.

• Florian Martin in Houston Business Journal covers the unaffordability of larger lots.

How does small lot development handle stormwater?

Samuel Brody, Russell Blessing, Antonia Sebastian & Philip Bedient (2012). Examining the impact of land use/land cover characteristics on flood losses. Journal of Environmental Planning and Management.

Big ideas

• The authors examined the Clear Creek watershed, in Houston’s southeastern suburbs. It’s not directly a study of Houston small-lot development, though.
• They found a mixed relationship between impervious cover and flood losses. An area surrounded by “medium” coverage development (50 to 79 percent covered) fared best, even better than one surrounded by “developed open space” (0 to 20 percent).
  • The authors guess this is because denser development is usually accompanied by better infrastructure.
  • The worst-performing category was “low” coverage (20 to 49 percent).

Discussion

• Houston planners have noted that impact fees from small-lot infill development have helped fund stormwater improvements and sidewalks. Houston incentivizes shared courtyards in part because they handle stormwater better. Further research is needed on the fiscal consequences of small lot reform.
• Phil Magness offers a quick history of Houston flooding.
• Nolan Gray notes the irrelevance of zoning to flood damage.

The post Resources for Reformers: Houston’s minimum lot sizes appeared first on Market Urbanism.

But is supply really increasing that rapidly? Federal statistics on housing construction are at a Census housing data webpage. I looked at the “New Housing Units Completed” table and found that about 216,000 housing units in structures with over five units were completed in the first half of 2023.

On the positive side, this is definitely an improvement over the 2010s, when the economy was still recovering from the 2008 recession. For example, in the first half of 2019, just over 169,000 such units were built, and 2018 was pretty similar.

But is construction still up to Reagan-era levels? Not really. In the first half of 1986, almost 258,000 relevant units were completed. And in the first half of 1973, just over 378,000(!) such units were built.

And these levels of construction were in a less populous country. Today the U.S. population is about 335 million, up from about 240 million in 1986 and 212 million in 1973. So if construction had kept up with population, our new unit count would be about 1/3 higher than in 1986, and almost 60 percent higher than in 1973. Instead, construction went down.

To put the facts another way: our half-year multifamily construction rate is about 644 per one million Americans for 2023, down from 1075 per million in 1986 and 1783 per million in 1973. That’s not my idea of a “50-year high.”

The post Is there really a building boom? Not as much as you might think appeared first on Market Urbanism.

After examining some poll data, I discovered that the answer depends on how the question is asked. A 2023 Yougov poll asked respondents to choose between two alternative views: “People should be free to buy land and develop real estate where they please” and “The government should limit where people are allowed to build things.” 64 percent of Republicans favored the free-market option, as opposed to only 47 percent of Democrats.

Similarly, a 2023 California poll asked Californians whether state government should “ease current land use and environmental restrictions to increase the supply of housing.” 64 percent of Republicans favored less regulation, as opposed to only 48 percent of Democrats. Similarly, 62 percent of conservatives and only 49 percent of liberals favored less regulation. Thus, it seems that where development issues are framed as a choice between government regulation and freedom, Democrats are more pro-regulation and Republicans more pro-freedom.

Where questions about regulation exclude the magic word “government”, partisan differences become a bit narrower. A July 2022 Yougov poll asked about removing “Regulations and codes that prevent developers from constructing more housing”. Republicans favored the free-market answer by a 43-40% margin, while Democrats disagreed by a 45-38% margin.

Polls that don’t directly reference regulation sometimes show that Democrats are more pro-housing. For example, a June 2022 Yougov poll asked respondents whether more apartments should be built: 83 percent of Democrats said yes, as opposed to 68 percent of Republicans. When asked whether more apartments should be built in respondents’ “local area”, the Democratic percentage dropped to 74 percent, and the Republican percentage to 50 percent.

When a poll asks generally about “density” and “development” rather than about apartments or homes or government regulation, poll support collapses among both Democrats and Republicans. The July 2022 Yougov poll asked about “Changing zoning practices to allow for more high-density development”. Only 39 percent of Democrats favored this idea, and an even smaller percentage of Republicans (24 percent) agreed.

A more idiosyncratic question, from Echelon Insights,

In sum, public opinion on new housing depends on how the issue is framed. Polls that emphasize freedom, government regulation, and environmental concerns tend to show that Republicans favor less regulation. On the other hand, polls that emphasize conflicts over density and development tend to show that Democrats are more pro-housing.

*Because it could be interpreted to mean that building more housing included “reducing… affordable housing close to public transit” OR to mean that “building more housing in high demand areas” included building “affordable housing close to public transit.”

The post Are Republicans or Democrats more pro-housing? Yes. appeared first on Market Urbanism.

But unlike in Montana and Washington, Rhode Island’s were largely procedural, aiming to lubricate the the gears of its existing institutions rather than directly preempting local regulations. House Speaker Joseph Shekarchi (D-Warwick), who championed the reforms, clearly drew on his professional expertise as a zoning attorney to identify areas for procedural streamlining.

Specific and objective

Six bills transmitted to the governor cover the general rules affecting most Rhode Island zoning procedures:

• S 1032 makes it easier to acquire discretionary development permission. 
  • Municipalities cannot enforce regulations that make it near-impossible to build on legacy lots that do not meet current regulatory standards.
  • Municipalities can more quickly issue variances and modifications. (Rhode Island draws a unique distinction between minor and substantial variances, labeling the former “modifications” and subjecting them to a simpler process. A substantial variance must go before a board for approval; a modification can be approved administratively unless a neighbor objects.
  • Municipalities must issue “specific and objective” criteria for “special use permits”, otherwise those use are automatically allowed as of right.

That phrase – specific and objective – shows up again and again in Speaker Shekarchi’s bills.

• S 1033 requires that zoning be updated to match a municipality’s own Comprehensive Plan within 18 months of a new plan’s adoption. It also requires an annually updated “strategic plan” for each municipality, although the content and legal force of the strategic plans are unclear to me.
• S 1034 broadly revises and clarifies several categories of development approval. It formalizes that site plan review must have “specific and objective” guidelines. It also allows slightly larger housing developments (nine lots or units, rather than five) to take advantage of the simpler “minor land development” category.
• S 1038 updates notice requirements, mentioning websites and allowing notice via first-class mail rather than registered or certified mail. Another bill S 1039, has not advanced, but would make a more interesting change: expanding rezoning notice requirements from property owners within 200′ to property owners and tenants within 1000′. I’d like to see a city try this experimentally – but the cost of noticing so many more people is a good reason not to mandate it.
• S 1050 and S 1053 replace a State Housing Appeals Board and with a land use docket within the superior court.

Double or nothing

Two bills dealt specifically with density bonuses for mixed-income housing. Mandatory inclusionary zoning has rapidly gained popularity in Rhode Island: a 2006 state report identified just two mandatory IZ programs. A 2021 study identified 10. A 2022 report identified 16.

• S 1051 regulates local “inclusionary zoning” (IZ) programs. Local IZ programs will have to require 25 percent of all units to be affordable and will also have to offer a density bonus of two additional market-rate units for each deed-restricted unit.
• S 1037 creates a statewide density bonus of 5 to 12 units per acre for developments containing 25% to 100% deed-restricted low- and moderate-income housing and streamlines the approval process, including eliminating a clause requiring them to cause “no significant negative environmental impacts.” It preempts limits on family-sized units or excessive parking requirements in such developments. Notably, this applies to single-family as well as multifamily development and has provisions for areas unserved by public sewer. It could thus become a powerful tool for creating much denser single-family subdivisions affordable at moderate incomes.

I reviewed the 16 IZ ordinances, plus a draft ordinance under consideration in Middletown. None of them complied with either provision of S 1051. The majority require 20 percent of new units to be affordable. Few provide a density bonus big enough that the number of market rate units matches the base zoning density, let alone exceeding it as S 1051 requires. Presumably, these noncompliant ordinances must now be amended to comply with the new law.

An outstanding question is whether the state density bonus in S 1037 applies in addition to a local IZ density bonus created by S 1051.

Salmagundi

Finally, three other bills cover a variety of specific topics:

• S 311 prohibits rental application fees.
• S 1035 allows the adaptive reuse of commercial buildings for residential and mixed uses by right. This bill has gained ample attention, but may deserve even more: it legalizes multifamily housing in every Rhode Island city and town without absurdly large per-unit lot sizes, in most cases for the first time.
• S 1052 creates a pilot program fund for transit oriented development. In order to apply, municipalities must rezone to allow at least a moderate density level near transit stops.
• EDIT: Removed S 1061, which isn’t part of the Speaker’s package and hasn’t been sent to the governor.

A bridge too far

One notable part of Speaker Shekarchi’s package did not pass: legalizing ADUs (S 1006, S 1036, and H 6082). In a lot of states, beginning with California, ADU legislation has been the easy first step in statewide housing legislation. Rhode Island’s bills were not especially ambitious, legalizing only ADUs within the footprint of an existing structure (except on large lots). This bridge too far shows that Rhode Island’s Democrats were not especially bold – and it also shows how process legislation can pass even in an environment where legislators are unwilling to preempt.

In most other states that pass pro-housing reform, bipartisanship is a central part of the political strategy. But Rhode Island’s Republican minority, occupying just 13 percent of legislative seats, was essentially irrelevant.

The post Rhode Island’s housing process package appeared first on Market Urbanism.

Why is this relevant to urbanism or markets? Because one common argument against new condos (at least in NYC) is that they will be bought by foreign investors instead of by local residents. In turn, this argument rests on the assumption that new housing is so expensive that the local rich can’t afford it.

But someone who earns $15 million per year can afford almost all new condos, even in Manhattan. When I bought a condo in Atlanta many years ago, the sticker price was about 2.6 times my salary. Even if you assume no one will pay more than that, this means that a $15 million household can pay for a $39 million condo.

Almost every new condo in Manhattan costs less than $39 million. My latest zillow.com search reveals that 541 units in condos and co-ops were built in 2020 or later. Only seven of those units cost over $39 million. In fact, only 34 cost over $15 million, and the majority (376 of the 541) cost under $5 million- certainly far more than I could ever afford, but affordable even for an attorney earning $1 or 2 million per year.

The post Why lawyer salaries matter appeared first on Market Urbanism.

Indeed, many people do seem to believe that apartments and houses are somehow incompatible. But I saw an interesting counterexample recently.

A couple of weeks ago, I attended the CNU (Congress for the New Urbanism) conference in Charlotte, North Carolina. CNU usually sponsors neighborhood tours, and I toured Myers Park, one of the city’s richest neighborhoods. Myers Park was built in the 1910s; most blocks are dominated by large single-family houses with an enormous tree canopy. Although Myers Park is only a couple of miles from downtown Charlotte, it certainly looks suburban, if by “suburban” you mean low-density and dominated by houses. (According to city-data.com, the neighborhood density is just below 4000 people per square mile, less than that of affluent Long Island suburbs like Great Neck and Cedarhurst).

And yet on one of the neighborhood’s major streets (Queens Road) apartments and houses seemed to alternate. This does not seem to have reduced home values; the average value of detached homes there is over $1 million, about four times the statewide average.

Moreover, Myers Park apartments are not the sort of “missing middle” housing that is virtually indistinguishable from a house. I saw a five-story building in Myers Park: not a skyscraper but definitely not something that looks like its neighbors. Not far away is a four-story building that looks like it has a few dozen units.

In other words, apartments and houses can coexist, even in places that are very suburban in many ways.

*As many readers of this blog probably know, NIMBY is an acronym for “Not In My Back Yard.”

The post On coexistence appeared first on Market Urbanism.

The most important conclusion (to me) of the study is that it reinforces the commonsense view that lower housing supply leads to higher costs. In particular, the study concludes: “Reforms tightening regulations are associated with increased rents, potentially worsening conditions for low- and moderate-income renters.” (page 4, emphasis mine).

What about upzonings (reforms that allowed more construction)? The study concludes that they “lead to a 0.8 percent increase in housing supply, on average.” (p. 28). How small is 0.8 percent? In fast-growing Harris County, Texas (Houston and its inner ring suburbs), 17 percent of the county’s 1.885 million units have been built since 2010, or about 1.7 percent per year. So 0.8 percent increase would be only five or six months’ worth of new housing in Houston- not a huge amount. Given the miniscule amount of reform the lack of impact on housing prices should hardly be surprising.

In other words, if zoning allows six months’ worth of new housing (compared to the pre-reform status quo), things stop getting worse but don’t really get better. If zoning allows less housing, things get worse.

The post Another of these studies that don’t mean what some people thinks it means appeared first on Market Urbanism.