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The Tyranny of Zoning: Exhibit A

The Washington Post reports that the redevelopment of the Giant grocery store at Wisconsin Ave and Idaho Ave will finally be getting underway. Through the sick humors of the real estate gods, I live pretty close the this grocery store and can attest that it is an eyesore in bad need of a renovation: It is one of the most belabored Washington development projects in recent memory, but on April 12 the Giant grocery store at 3336 Wisconsin Ave. NW will finally close, making way for construction of a $125 million housing-and-retail project that will feature a much bigger new store. Giant began discussing plans to replace the out-of-date, 18,500-square-foot Giant almost a decade ago, but questions about what the company ought to build in its place grew to monstrous proportions in the Cleveland Park neighborhood. Eventually, the debate reached the point that some neighbors on opposing sides of the issue ceased speaking to one another. Last week I attended one of the Urban Land Institute’s Real Estate 101 courses about this project and learned about this project from the land use attorney’s perspective.  Phil Feola with Goulston & Storrs shared the story of the entitlement process for this project, going back to the first ANC meeting in 2005. Part of the property that Giant wanted to develop as retail is zoned residential, so rather than attempting to amend the code, they sought approval of a Planned Unit Development. Typically a PUD is easier to achieve than blanket upzoning for a parcel because with a PUD both city planning and the project’s neighbors know what they will be getting with the redevelopment. The neighbors initially requested 32 changes to the PUD, and after making some adjustments, Giant’s proposal received near-unanimous support from both the Zoning Commission and the National Capital Development Commission.   […]

Book Review: The Rent Is Too Damn High

Matt Yglesias’ new Kindle single, The Rent Is Too Damn High, is a quick and engaging read on the reasons that much of the conventional wisdom about housing markets is wrong. While Yglesias has many progressive views, with regard to land use he takes a classical liberal stance. He explains that the “rent is too damn high” because land use regulations restrict housing supply, keeping prices above the free market equilibrium. My favorite part of the book was Yglesias’ discussion of unbundling the supply and demand for land from the supply and demand for buildings. He provides a very clear explanation of the differences between the two, explaining that rising land values benefit land owners, but rising housing prices serve only to decrease everyone’s real income. Under a system where land use is regulated to constrain the supply of buildings, landowners earn long term rents (higher than they would otherwise earn) that cannot be eroded by other landowners building more densely. In the chapter “The Virtues of Density,” Yglesias offers a powerful counter-argument to “market suburbanists” who argue that land use deregulation amounts to forcing density on people: People worry that a denser neighborhood will have more traffic and more noise. Generally speaking, they’re correct. But all this means is that allowing higher density will be a self-limiting process. Balancing the different costs and benefits involved in denser building is, after all, precisely the sort of thing that relatively free markets are good at. Different people have different preferences about noise, commuting mode, lawn size, amenities, and employment possibililties. . . . To say that some of America’s neighborhoods — especially in coastal cities with strong economic opportunities and limited space — should be denser is not an argument for infinite density. Nor is it an argument for central planning […]

Maryland realtors fight to protect their subsidy

This post originally appeared at Neighborhood Effects, a Mercatus Center blog where we write about the economics of state and local policy. We’ve already explored Governor O’Malley’s proposal for the Maryland budget here and here, but recently, a perhaps unintended consequence of the budget came to light. By limiting the deduction that residents earning over $100,000 can make on their state income taxes, the proposed budget would limit the size of the mortgage interest tax deduction for many taxpayers. I stand by my earlier argument that reducing deductions for only one group of people is not a step in the direction of fairness, but a reduction in the mortgage interest tax deduction may be a positive side effect of an otherwise bad policy. From a limited-government perspective, the obvious downside of a reduction in the mortgage-interest tax deduction is that this represents a revenue-positive change in Maryland’s tax code in a state that already has one of the highest tax burdens in the country. Overall though, I think reducing this tax expenditure is a positive change because the policy has many negative consequences. While the causes of the financial crisis were many, by subsidizing investment in homes, the mortgage interest tax deduction played some part in the overvaluation of housing stock. Aside from the poor incentives that this tax expenditure creates in financial markets, it amounts to favoritism of suburbs over cities. In Triumph of the City, Ed Glaeser argues that the deduction leads many people to abandon renting in a city center for homeownership in the suburbs. However the Federal Reserve Bank of Boston provides evidence that the policy is more likely to lead people to buy larger homes than they otherwise would rather than trading renting for buying a home. Richard K. Green and Andrew Reschovsky write: If one set out to design a policy to encourage homeownership, […]

A hole in the literature?

In the comments of a previous post, readers discussed the incentives facing different types of landowners whose properties are facing potential upzoning, demonstrating just how complicated the relationship between land use regulations and property values is. As I see it, theory tells us that upzoning will increase the value of much of the land that will be redeveloped by opening up options for the developer to put the land to a higher valued use. However, land that is not economically viable for redevelopment and perhaps some land near this margin would fall in value due to the increased supply permitted. The example from the earlier post was a proposal for upzoning in Hollywood. I would think that plenty of properties there would be ripe for redevelopment, as single family zoning is constricting supply to well below the market clearing level. If this is true, many homeowners would stand to receive a windfall with upzoning. I’m not very familiar with Los Angeles, but I’d think it likely that owners on the periphery of the area to be upzoned could potentially lose money, as the supply of housing would increase in the most desirable parts of Hollywood, devaluing homes in the less desirable areas. In the comments, awp provided clear analysis of what’s going on in this situation: The excess “rent” comes from having a part of a limited SUPPLY. Any one individual would be able to increase their portion of the “rent” by being the only one allowed to increase their supply, while lowering the total “rent” through the increase in SUPPLY.  If the zoning is removed there will be no remaining excess “rent”.  It would take some serious analysis that I have never seen to figure who would benefit the by moving from a zoning regime to a free market regime. […]

Transportation and Infrastructure Blues Links

1. For anyone who doesn’t follow Stephen on Twitter at @MarketUrbanism, he’s now a real estate reporter at International Business Times. Here he covers criticism of the National Association of Realtors’ forecast that housing prices have bottomed out. 2. In the debate over whether or not to ban food on the Subway, a rider whom the New York Times interviews brings up the key issue of enforceability. The state senate proposed the ban to mitigate the system’s rat problem. While the state could certainly change the rules about eating on the Subway, the informal law wouldn’t be so easy to change. Metro has always (?) been food-free, and the ridership culture generally supports this, but New Yorkers who are in the habit of eating on their commute are unlikely to stop due to a small probability of a fine. 3. At the risk of turning Market Urbanism into an EconTalk fan blog, Russ Roberts has another great urbanism-related podcast with David Owens, author of The Conundrum. The book is about the unintended consequences of environmental activism. While the podcast (and I believe the book) deals primarily with climate change and cities’ relatively low per-capita carbon usage, the problem of unintended consequences is abundant throughout urban planning. As much as they’d like to, planners can’t change human behavior in a vacuum. 4. Yes! Melbourne Planning Minister Matthew Guy proposes not some wimpy upzoning, but abolishing height limits in the city’s CBD. The plan has a long road to implementation, but it’s a first step in allowing developers to meet the growing city’s demand for space. The opposition predictably cites the fallacy that density makes traffic worse. 5. Penelope Trunk ponders the fundamental differences between city people and non-city people and concludes that city dwellers are relatively unhappy because they are “maximizers.” I’m not totally sold […]

DC Office of Planning releases an underwhelming study of proposed new streetcar network

Last week the DC Department of Transportation DC Office of Planning released a Streetcar Land Use Study describing the impacts that the proposed DC streetcar network will have for the city. Greater Greater Washington accepts the study as proof that the streetcar will be great for DC. The report is full of the feel-good economics that really bothers me about Smart Growth in general, and I think that this sort of treatment of the trade offs of public policy hurts the urban agenda in the long run. The study finds that the streetcar will pay for itself by raising the property tax base. From a Smart Growth perspective, though, this is a problem because it will make housing less affordable. The study suggests that inclusionary zoning will provide the necessary affordable housing after the streetcar raises property values. Current zoning laws require new multifamily buildings with 10 or more units to comply with inclusionary zoning requirements for low-income housing. As Stephen has pointed out before, inclusionary zoning is just a more complicated policy that ultimately has many of the same unintended consequences as rent control or subsidized housing. Subsidizing the cost of housing for a select group necessarily makes it more expensive for those of all income levels who are not lucky enough to secure this subsidy. Forcing developers to provide this subsidy does not change its economic impact on those who are left paying market rate. DDOT  The Office of Planning predicts that by far the greatest gains in real estate value will accrue to property owners within one quarter of a mile of the stops along K Street (see graph on page 24 of the study). It’s important to note that the vast majority of these gains will be realized in higher per-square-foot prices rather than new square footage since […]

Street art: violation of property rights or positive emergent order?

Among Egypt’s pro-democracy protesters, graffiti has played an important role in the communication, providing a platform for free speech under military rule. The Associated Press reports: Graffiti has turned into perhaps the most fertile artistic expression of Egypt’s uprising, shifting rapidly to keep up with events. Faces of protesters killed or arrested in crackdowns are common subjects — and as soon as a new one falls, his face is ubiquitous nearly the next day. The face of Khaled Said, a young man whose beating death at the hands of police officers in 2010 helped fuel the anti-Mubarak uprising, even appeared briefly on the walls of the Interior Ministry, the daunting security headquarters that few would dare even approach in the past. Other pieces mock members of the Supreme Council of the Armed Forces, the council of generals that is now in power, or figures from Mubarak’s regime. While this artistic movement in the Arab Spring puts the importance of freedom of expression in sharp relief, we of course more typically see graffiti and street art in freer societies where the act is often seen not as political uprising but as mindless vandalism. As a big believer in the power of property rights, I feel like I should be against street art as clear violations of building owners’ rights. However, it’s hard to argue that illegal street art doesn’t add something valuable to cities both visually and culturally, in times of peace as well as times of civil uprising. It would be nice to suggest that a signalling mechanism could show artists on which buildings their work is permissible, but, not knowing much about the culture of street art or graffiti, I imagine that decriminalizing this art form would destroy it. What do you all think of unsanctioned street art? Does it make […]

“Really Narrow Streets” project in the planning stages in Maine

In Maine, a group of residents are hoping to start a new community based on the principles of urban design advocated by Nathan Lewis at New World Economics and J.H. Crawford at Carfree.com. The group, led by Tracy Gayton, is hoping to attract enough individual investors to buy 125 acres of land which will be home to Piscataquis Village, a community of narrow streets. They’re using a Kickstarter-like investment model, in which individuals pledge to buy land contingent upon the group reaching the critical mass needed to get the project underway. The development would use covenants to limit building to require attached buildings, arcade sidewalks, and a building height limited to four stories based on the Really Narrow Streets model of dense low- to mid-rise buildings. On a previous post, some commenters came out strongly against covenants as a means for determining land use restrictions. What do you all think of them here? To me, this case illustrates the effectiveness that covenants have for shaping land use over an area broader than individual lots without the coercion of zoning. Tracy has created a presentation on the preliminary objectives for Piscataquis Village. He writes: We envision a settlement evolving organically and growing incrementally. Those people or groups of people that wish to pursue their own, various versions of the Good Life within the bounds of the Village are welcome. This project reminds me a bit of seasteading, the libertarian vision of a bottom-up society living on a water vessel to escape government coercion and violence. While I believe that most of the initial Piscataquis Village investors are from Maine and wish to continue living there, the projects’ rural location draws attention to the impossibility of a similar village emerging in the open space of, say, Howard County or Loudoun County because the […]

“Upzoning means up yours!” Links

1. The title quote comes from this gem of an LA Weekly article about proposed changes to Hollywood’s zoning code which would allow for taller buildings and denser development. According to the Weekly, “For decades, zoning that governs height and size has preserved thousands of affordable, low-slung, older apartments, bungalows and commercial buildings in Hollywood.” The words “preserve” and “affordable” rarely belong in the same sentence. 2. Once again in New York upzoning is linked with affordable housing. Expanding student housing at NYU also depends on the university providing land and potentially a building for a public school. 3. In San Francisco, an activist is working with developers to achieve upzoning approval for waterfront property. Despite the positive upzoning, on the surface this deal wreaks of crony capitalism. But the real kicker comes from the proposed funding: First up, the plan to build a high-rise residential tower near the waterfront at 8 Washington St. with funding from the state teachers’ retirement fund. The plan is being backed by Pak’s business allies, developer Simon Snellgrove and lobbyist Marcia Smolens. The project spokesman is P.J. Johnston, former spokesman for Brown. Approval of the deal could yield millions of dollars in affordable-housing money to help fund one of Pak’s pet projects, a $32 million apartment complex being built on Stockton Street by the nonprofit Chinatown Community Development Center. In my job I do a lot of work with pension reform, and this project would be an egregious abuse of CalSTRS, one of the most underfunded public pension plans in the country. Public pension funds should be managed to minimize risks for retirees, employees, and taxpayers, not to provide kickbacks to business interests. 4. Last note on special interests in upzoning: At least some property owners must hope to sell in the future rather than hold on to their […]

Market Urbanism Flickr Group

Small streets are all over urban planning blogs right now. Nathan Lewis at New World Economics is leading the way with beautiful images of really narrow streets along with Charlie Gardner at Old Urbanist, Small Streets, and Cap’n Transit. They have all compiled photographs of pedestrian-centric streets from all over the world with very inspiring results. Some of my favorite posts on small streets are here, here, here, and here. I’ve started a Flickr group with the hopes of providing another way for urbanists to share their own images of beautiful (or not beautiful) streets and talk about city design. I’ve started it off with some of my own photos with a couple of disclaimers. I know nothing about photography except that I’m not good at it, and I’ve never been to many of the cities known for really narrow streets. I hope to add some photos of nice small streets right here in the Mid-Atlantic sometime soon. I’m sure you all have many better pictures of really narrow streets and pedestrian environments, and I hope you’ll share some. I would suggest flagging your photos as Creative Commons which means that any bloggers would be free to use them with attribution, but if you’d prefer not to allow others to use them, feel free to add them to the group as copyright protected. To add photos to the group, you just have to create a Flickr account, upload photos, and then add away. You can also comment on any of the photos I’ve added or on the group’s discussion board.

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