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Houston as an Affordability Model

In December, I was asked to testify at a House Subcommittee on Housing and Insurance hearing on government barriers to housing construction and affordability. I provided examples of reforms to land regulations that have facilitated increased housing supply, particularly relatively low-cost types of housing, including multifamily, small-lot single-family, and accessory dwelling units. Following the hearing, I received a good question from Congresswoman Sylvia Garcia. She points out that, as in the country as a whole, the share of cost burdened renters has increased in recent years in Houston, in spite of land use liberalization. She asked what local policymakers could do to improve affordability for low-income residents. When market-oriented housing researchers point to Houston’s relatively light-touch land use regulations as a model for other U.S. localities to learn from, its declining affordability may cause skepticism. Houston, however, has fared better than many other cities in housing affordability for both renters and homebuyers. While Houston is the only major U.S. city without use zoning, it does have land use regulations that appear in zoning ordinances elsewhere, including minimum lot size, setback, and parking requirements. These rules drive up the minimum cost of building housing in Houston. However, Houston has been a nationwide leader in reforming these exclusionary rules over the past 25 years. Houston policymakers have enacted rule changes to enable small-lot development and, in parts of the city, they have eliminated parking requirements. In part as a result, Houston’s affordability is impressive compared to peer regions. As the chart below shows, Houston has the lowest share of cost-burdened renter households among comparable Sun Belt markets for households earning 81% to 100% of the area median income. Only San Antonio and Austin have lower rates of rent burden among households earning 51% to 80% of the area median income. At the […]

Resources for Reformers: Houston’s minimum lot sizes

Updated 1/11/24 to add 3 new papers, Wegmann, Baqai, and Conrad (2023), Dobbels & Tavakalov (2023), and Hamilton (2024). The original post was published 3/14/23. 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. For a summary treatment, see Emily Hamilton’s 2023 case study. 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 […]

Hopefully, AI will create a perpetual housing crisis

I don’t know how successful artificial intelligence will be. But let’s agree, for the moment, to consider a reasonably optimistic case where AI delivers significant productivity gains across a broad range of tasks – but not in a way that radically alters our Newtonian constraints. What would happen to housing economics and, consequently, housing politics? TL;DR Construction won’t be much affected by AI. Consumers will be richer and spend a bigger share of their incomes on housing. The stakes around housing policy will only grow. Inscriptibility Karl Marx divided the economic world into capital and labor. More recent economists have frequently (and self-regardingly) divided labor into low-skill and high-skill. In an AI world, we need to start talking about inscriptible and uninscriptible labor. I’m using a circular definition on purpose – AI will replace inscriptible labor because inscriptible labor is the type that AI is good at replacing – because I have only a fuzzy idea what AI will be good at. (A diversion) (Why inscriptible rather than legible, in a James C. Scott sense? I thank Bard for the suggestion. Think about visual art – AI is probably no better than humans at guessing what nuances a human artist intended, but it can produce human-quality visual art rich with nuance. Since AI’s value is partly predicated on repetition speed, it will thrive in arenas where failures are costless. Thus, AI may be formulating 99% of new drugs in a few years even if nobody trusts it to perform a simple surgery. That’s an inscriptibility difference, not a legibility difference. The most inscriptible human tasks are presumably those that simpler software replaced long ago, usually called “routine.” The big surprise of 2023 AI was the advances that software made with tasks we have considered creative. The “routine” concept was valuable […]

The weird D.C. housing grift that’s sending a former FBI agent to jail

WASHINGTON – David Paitsel, 42, a former FBI agent, and Brian Bailey, 53, a D.C. real estate developer were sentenced today on bribery and conspiracy charges for their role in schemes involving confidential information held by the D.C. Department of Housing and Community Development United States Attorney’s office There are plenty of housing laws you can break. But these grifters were busted only for bribing a city official for information. Otherwise, they used the housing law – the most innocent-sounding of all housing laws – correctly. Washington DC has a strong Tenant Opportunity to Purchase Act (TOPA). When a landlord sells, tenants have the right to match any offer, conceivably buying their own building. That never happens. But TOPA also allows tenants to sell their rights to literally anyone else. The law treats the new owner of the TOPA rights with the same exaggerated deference as a tenant. The TOPA grift goes like this: A TOPA shark, like Paitsel and Bailey, approaches tenants whose building is on the market. The “approach”, as I’ve witnessed it, can be a hand-scrawled note placed in the tenants doors or mailboxes. The tenants rarely know the mechanics of buying a house, let alone utilizing an obscure city-specific TOPA scheme that would have to involve collective action among many tenants. So the sharks offer the tenants a few hundred dollars for their rights. If the offer is accepted, the shark informs the landlord. Now suppose a prospective buyer comes along and offers $1,200,000 for a D.C. sixplex. The landlord must inform the shark, who now has the right to match any bona fide offer on the property. But the shark has no interest in buying – he just demands ten or twenty thousand dollars to surrender the rights. If the landlord resists extortion, the shark […]

Unexpected correlation in Census housing data

Since 1973, the US Census Bureau has administered the American Housing Survey (AHS) in odd-numbered years. Surveyors ask questions about the quality and value of respondents’ housing, and have a battery of questions for the subset of respondents who moved recently, asking about their search process. The AHS regularly adds new questions and rephrases old ones from year to year.  In 2021, they rolled out a group of three new questions. One asks recent movers whether they spent more or less than a month searching for their new home. This is the AHS’s first-ever variable dealing with search time. The other two, which are similar to questions asked in previous years, ask about search scope: whether respondents looked for housing in neighborhoods besides the one they ended up moving to, and whether they looked at other housing units in the same neighborhood they moved to. In analyzing these new questions within the largest 15 metro areas in the US, I found a curious and hard-to-explain relationship. Search time – the binary variable of taking more or less than a month to look for a home – seems to be predicted by the population of a metropolitan area (with r=0.57 and p > |t| = 0.026), whereas search scope in the sense of looking at multiple neighborhoods or multiple units within a neighborhood seems to be predicted by the cost of housing as gathered from 2021 Zillow data (for looking at multiple neighborhoods, r=0.65 and p > |t| = 0.009; for looking at multiple units, r=0.68 and p > |t| = 0.007).  The inverse set of relationships are much weaker. Price and likelihood of taking over a month to search are positively correlated, but the relationship is not statistically significant; the same is true of the relationship between metro population and […]

An Autopsy of Hsieh & Moretti (2019)?

Update 11/20: Chang-Tai Hsieh counters that Greaney’s critique ignores general equilibrium effects which make labor scale invariant. That doesn’t address the alleged coding errors. We’ll see – and perhaps I wrote an autopsy too early. Thanks to Bryan Caplan for getting Hsieh’s response out to the world. Popular urban econ should be shaken with the revelation that its most famous academic paper had two coding errors, a serious theoretical flaw, and a hypothesized mechanism that – when executed correctly – did not work at all. Chang-Tai Hsieh and Enrico Moretti’s paper Housing Constraints and Spatial Misallocation noted that “high productivity cities like New York and the San Francisco Bay Area have adopted stringent restrictions to new housing supply, effectively limiting the number of workers who have access to such high productivity” – and used a simple model to estimate how much US growth could have been unlocked by decreasing those restrictions. Brian Greaney, an assistant professor at the University of Washington, released notes on his replication of The paper gained widespread notice as a 2015 NBER working paper and was published in 2019 in American Economic Journal: Macroeconomics. The paper already has an impressive 813 scholarly citations. But the paper has problems – fatal problems – and is embarrassingly sloppy. The embarrassment extends beyond the authors to the many referees and editors who missed surface, implementation, architectural, and foundational problems over a four-year period of peer review and discussion. Surface Greaney is not the first to find a mistake in Hsieh & Moretti. Bryan Caplan caught a major inconsistency in 2021, one that readers (myself included) and referees should have caught earlier. The authors reported huge annual effects adding up to a merely-large effects over 45 years. He noted a few other arithmetical mistakes and generously concluded, “authors and referees […]

Court: Arlington “Missing Middle” Lawsuit May Proceed to Trial

By Andrew Crouch and Charles Gardner In March 2023, Arlington County, Virginia passed an amendment to its zoning ordinance which legalized so-called “missing middle” housing typologies in several residential districts, including many which had been zoned for single-family homes. Ten local homeowners filed suit in Arlington County Circuit Court in April 2023, alleging among other things that the proper procedure for amending the ordinance was not followed and the zoning change should be invalidated. The County Board and Planning Commission, the defendants in the lawsuit, fired back, alleging a fatal lack of standing and claims that, if they were true, could not and should not be resolved by the circuit court. During proceedings held on October 19, 2023, Judge David Schell delivered a win to the plaintiffs, ruling that they have demonstrated standing by virtue of being within the rezoned area and that the case against Arlington County’s missing middle zoning ordinance amendment therefore may proceed to trial. Initial trial proceedings are scheduled for November 16, 2023. Judge Schell also ruled in favor of the defendants on a separate issue, holding that one of the plaintiffs’ seven claims, alleging a violation of the Virginia Freedom of Information Act (VFOIA), should be dismissed. With respect to standing, Judge Schell ruled that the claims made by the homeowners, if true and presented in the most favorable light, were justiciable and ripe for relief, and that the homeowners had standing to challenge a general zoning ordinance. The latter holding may set precedent, as the cases presented to the court by the parties did not address the issue of standing in the context of an ordinance-level, district-wide zoning change. In their 162-page complaint, plaintiffs claim entitlement to sue on the basis that the ordinance “will result in a higher tax assessment,” although this appears […]

Tyler Cowen: “Is Tokyo really a YIMBY success story?”

Tyler is stirring the pot over at Marginal Revolution, asking whether Tokyo’s low rents are a YIMBY success or just a productivity failure: low productivity and low immigration keep demand down. He calls the latter “NIMBYism”. That framing doesn’t hold up very well, but we can discard it and think about the substance of the question. If we were totally ignorant of policy, what would we expect? Alonso-Muth-Mills models say prices should be higher in larger cities, and Tokyo is the largest city in the world. Most people think that price/income is the right way to compare home prices across countries, although price/construction cost might be better if we could accurately measure the latter. Let’s at least clarify the factual issues. Are Tokyo wages low? Japan wages are quite low by developed-world standards. Tokyo is perhaps 22% above the national average, about half of the New York/USA markup. The Alonso-Muth-Mills model says the largest city should be so because its wages are highest. Obviously, that assumes free movement of people. It’s not a mystery why Karachi is larger than Austin. But then why is Tyler criticizing Japan for low immigration? Clearly Japanese people should emigrate, like wage peer Spaniards and Poles. Is Tokyo cheap? Only relatively. I asked ChatGPT for a comparative list, but it wouldn’t even try. The best comparison I could find was in Demographia’s affordability yearbooks. They last included Japan in 2018 because of data reliability issues, so ymmv. But a Japanese PDFsays that Metropolitan Tokyo’s price-income ratio was 7.16 in 2016; in Tokyo Prefecture (the core) it was 9. Who knows how the definitions differ? All sources agree that Japanese home prices have risen less than most of the world in the pandemic era, so current data would favor Tokyo more. Tyler’s claim that Japan’s “brand […]

New Report: Georgia Not Quite an Unregulated Paradise

In a recent report from the Georgia Public Policy Foundation, Chris Denson and J. Thomas Perdue compile the strictest minimum lot size regulations and minimum home size regulations from a range of cities and counties in Georgia. 31 of Georgia’s 159 counties mandate minimum lot sizes (in unincorporated land, on some districts) larger than 1 acre, with minimums as high as 5 acres in two southwestern Georgia counties. Charting local zoning in America is no small task, and Denson and Perdue give a valuable snapshot of one of its facets in a big and growing state. Georgia is not known for onerous regulation of homebuilding – when I volunteered with Abundant Housing LA, a fellow volunteer who’d moved from Georgia would shame liberal NIMBYs by saying how much easier it was to get apartments permitted in her conservative home state – but like much of the US, Georgia’s home construction has failed to meet the growing demand. Denson and Perdue spotlight one specific regulatory tool more typical of Georgia than elsewhere: minimum home size regulations (as distinct from minimum lot size regulations, which are ubiquitous nationwide). Denson and Perdue show that Georgia counties and county seats often require minimum home sizes far in excess of American Society of Planning Officials benchmarks, and point out this drives up housing costs significantly. Below is a map (made in ArcGIS by my colleague Micah Perry) of Denson and Perdue’s data on county government minimum home sizes, showing the highest minimum in any zone on unincorporated land for counties for which data was available: The clear lesson from Georgia’s surprisingly strict regulations is that policymakers in growing Sun Belt cities and states shouldn’t delude themselves: the crises afflicting coastal “superstar” cities are coming for them too if they don’t liberalize land use laws. Austin […]

traffic and development

One common NIMBY argument is that new development is bad because it brings traffic. As I have pointed out elsewhere, this is silly because it is a “beggar thy neighbor” argument: the traffic doesn’t go away if you block the development, it just goes somewhere else. But my argument assumed that new development would in fact bring traffic wherever it occurred. A new study by three North Carolina State University scholars suggests otherwise. The study concludes that “rural locations are more likely to experience an increase in traffic due to increased development as compared to urban land uses.” (p. 19). This is because “locations that did not experience a significant traffic increase… had a higher traffic volume before development”. (p. 20). This might be because those areas were “already highly saturated, which served as a major disincentive for the migration of traffic” (id.) So in other words, if I am understanding this paper correctly, an already-congested area will not get much more congested with new development, because people react to congestion by going elsewhere or using slightly different routes. By contrast, when a basically uncongested area gets new development, the new development does not create enough traffic to scare off drivers.

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