The narrow ruling reflects the sound principle that, when dealing with constitutional questions, a court shouldn’t address hypotheticals or other issues not in direct contention among the parties. Nonetheless, the majority felt compelled to state that it would not address “whether a permit condition imposed on a class of properties must be tailored with the same degree of specificity as a permit condition that targets a particular development,” which seems to leave open the possibility that the answer might be “no.” Justice Gorsuch, in his concurrence, was astonished by this statement, wondering how a court which had just endorsed the universal applicability of the takings clause could stumble into another arbitrary distinction with no basis in common sense or constitutional law.

The court’s concern was not a jurisprudential one, but apparently a policy one: in another concurrence, Justices Kavanaugh, Kagan and Jackson note that “[i]mportantly, therefore, today’s decision does not address or prohibit the common government practice of imposing permit conditions, such as impact fees, on new developments . . . .”  The justices’ impression that applying the current Nollan/Dolan formula to impact fees would or even could “prohibit” them is unfounded.  As Emily Hamilton and I wrote in our amicus brief, Florida’s courts have adopted an even stricter test than in Nollan/Dolan, requiring a specific nexus between the government services that impact fees will fund and the needs of new construction, yet impact fees are ubiquitous there. It’s worth underlining: impact fees themselves aren’t the enemy, and Nollan/Dolan doesn’t forbid them.

The absence of mention of the experience of the many state courts which have addressed these same questions going back 30 years is puzzling.  After all, the constitutional question in Sheetz has been pending since at least 1995, when the Supreme Court denied certiorari in Parking Association of Georgia v. City of Atlanta, 264 Ga. 764, 450 S.E.2d 200 (1994), cert. den. 515 U.S. 1116, 115 S.Ct. 2268, 132 L.Ed.2d 273 (1995).  Justice Thomas, dissenting from the denial of certiorari in that case along with Justice O’Connor, noted “confusion in the lower courts” even at that time, just a year after Dolan had been issued.  That the question has been left to fester for so long is unfortunate, particularly where the answer was so straightforward as to command a concise, 9-0 opinion.  Writing at the Inverse Condemnation blog in 2017,  attorney Robert H. Thomas reasonably surmised than certiorari on the same issue had failed that year as well due to uncertain support for a reversal among the justices, but that now seems difficult to reconcile with the unanimous result in Sheetz.

Underlining the court’s lack of familiarity with state experience is the limited list of cases cited to establish a split in authority. Apart from the California case under petition, the majority lists only four cases, from Ohio, Illinois, Alabama and Arizona, omitting many other applicable cases from states including Florida, Nebraska, Oregon, Colorado, Maryland, Arkansas, Minnesota, Kentucky, Tennessee and North Carolina. Even the Parking Association case from 1995 which resulted in a published opinion is nowhere mentioned. The lack of discussion of this context obscures the experience of many of these states with applying the Nollan/Dolan test to permit conditions and makes the decision perhaps appear more consequential and further reaching than it actually is.

Even in those states where Sheetz overrules precedent – California, Arizona, Nebraska, Alabama, Maryland, Georgia, Oregon, Washington and possibly others – the impact of the decision is likely to be modest, at least in the near term. Starting with the California courts, where the housing stakes are highest, lower courts, courts of appeals and state supreme courts will need to revisit prior decisions and determine how to apply Nollan/Dolan to legislative permit conditions. Fortunately, they have a wealth of jurisprudence from other states to consider in their analysis.* If at least one court accepts the majority’s invitation to apply a watered-down version of the test to legislative exactions, yet another split in authority will emerge. 

State courts which do apply the Nollan/Dolan doctrine faithfully will, if Florida is any indication, help unshackle housing production by shifting generalized municipal cost burdens off new construction while still allowing new development to account for any directly related and immediate costs. For California, that result would go a long way to addressing the unjust situation that George Sheetz found himself in years ago, and which adds to the cost and detracts from the production of so much other housing.

*For examples, see Anderson Creek Partners, L.P. v. Cnty. of Harnett, 2022-NCSC-93, 382 N.C. 1, 876 S.E.2d 476, reh’g denied, 878 S.E.2d 145 (N.C. 2022); Home Builders Ass’n of Dayton & the Miami Valley v. Beavercreek, 2000-Ohio-115, 89 Ohio St. 3d 121, 127, 729 N.E.2d 349, 355; Knight v. Metro. Gov’t of Nashville & Davidson Cnty., Tennessee, 67 F.4th 816 (6th Cir. 2023), Kottschade v. City of Rochester, 537 N.W.2d 301, 308 (Minn. Ct. App. 1995); Amoco Oil Co. v. Village of Schaumburg, 277 Ill.App.3d 926, 214 Ill.Dec. 526, 661 N.E.2d 380 (1995), cert. den. 519 U.S. 976, 117 S.Ct. 413, 136 L.Ed.2d 325 (1996); St. Johns Cnty. v. Ne. Fla. Builders Ass’n, Inc., 583 So. 2d 635, 637 (Fla. 1991); William J. (Jack) Jones Ins. Tr. v. City of Fort Smith, Ark., 731 F. Supp. 912, 914 (W.D. Ark. 1990).

The post Ruminating on Sheetz appeared first on Market Urbanism.

Let’s take as a given that sprawl is “bad” urbanism, mediocre at best. Realistically, it’s rarely going to be transit-oriented, highly walkable, or architecturally profound.

So the question is whether outward, greenfield growth is necessary to achieve affordability. And the answer from urban economics is yes. You can’t get far in making a city affordable without letting it grow outward.

Model 1: All hands on deck

Let’s start with a nonspatial model where people demand housing space and it’s provided by both existing and new housing. Existing housing doesn’t easily disappear, so the supply curve is kinked.

A citywide supply curve is the sum of a million little property-level supply curves. We can split it into two groups: infill and greenfield, which we add horizontally.

If demand rises to the new purple line, you can see that the equilibrium point where both infill & greenfield are active is at a lower price & higher quantity than the infill-only line. The only way to get some infill growth to replace some greenfield growth, in this model, is to raise the overall price level. And even then, the replacement is less than 1-for-1.

Of course, this is just a core YIMBY idea reversed! In most U.S. cities, greenfield growth has been allowed and infill growth sharply constrained, so that prices are higher, total growth is lower, and greenfield growth is higher than if infill were also allowed.

At the most basic level, greenfield growth is simply one of the ways to meet demand. With fewer pumps working, you’ll drain less of the flood.

Model 2: Paying for what you demolish

Now let’s look at a spatial model where people will pay more per square foot when they are closer to downtown. (If the jobs are evenly dispersed everywhere, the place with the best job access is…the center. So the math is the same for a job-seeker.)

Of course, builders won’t supply new housing unless the price comes in above their construction cost. In general, more intensive types of building cost more per square foot. And building on large greenfield sites costs less (both via scale efficiencies and ease of access/staging) than small-site, infill growth. Finally, infill growth usually has to replace an existing land use.

Taking a specific transect across the city, let’s suppose that the existing value of parcels* as built is shown by the brown line.

[*existing value here has to be expressed in dollars per hypothetical square foot of the parcel as redeveloped. This is weird, but not hard to calculate in a model.]

To generate growth, the cost of development has to fit between the black willingness-to-pay line and the brown existing-value line. And infill typologies are often more expensive, per square foot, than greenfield ones.

What will infill housing cost? First, it will cost more than housing at the fringe, but that’s OK – the people at the core are benefiting in terms of commute time and job access. Paying more to be close to downtown is like paying more for a bigger house – you can’t complain.

Second, infill housing won’t be able to push the price per square foot of new construction below the cost of construction plus the value of existing development. As infill development runs out of abandoned warehouses and parking lots, that wedge will rise.

A successful YIMBY strategy via infill would run into a shrinking gap between falling prices and a rising existing-value wedge. If it got that far, I’d actually be surprised and impressed – but the point of this second model is that the price floor is higher.

Model 3: The tyranny of circles

What neither of the first two models could really tell us is how much greenfield matters as a quantitative matter. The first model shows how all supply channels are additive, the second shows that infill has a higher price floor. The final boss is the circle.

Back in model 2, it looked like there was about as much room for new development at that sharp dip just to the left of downtown (an old warehouse district, say) as in the greenfield areas at the edges. But cities don’t exist on a line – they usually approximate a circle.

In this map of DC, there’s a circle about 2 miles from the center and another about 20 miles from the center. How much more land does the outer one contain?

You don’t need pi for the answer: the outer circle is 100 times bigger in area. And it’s not even at the fringe in most places.

In most debates about the merits of the infill and greenfield, there’s an implicit “acres to acres” comparison – a parcel here versus a parcel there. But that misses the forest: the power of greenfield development is the incredible amount of land that is available for relatively low-cost conversion.

Counterarguments

Don’t greenfield infrastructure costs make it more expensive? If we didn’t subsidize sprawl, wouldn’t it mostly stop?

There are certainly gains from re-using existing urban infrastructure. But the dominance of horizontal growth across civilizations using a huge range of transportation technologies, taxation schemes, regulatory approaches, and infrastructure norms belies the idea that horizontal growth is mostly a subsidy phenomenon.

Cities also come with significant infrastructure costs that intensify with built and human density. I’m skeptical that a full, accurate accounting of costs can be done at the micro level. And the macro-level indicators, like overall tax rates, certainly don’t suggest large savings from density.

Can’t we build greenfield development that’s fully urban and transit-oriented?

There’s a huge variation in the quality of greenfield growth, and we can all applaud developers who are doing interesting things and building suburbs that have the bones for continued growth. But in American cities, transit is almost utterly useless to people living at the edge. It’s the tyranny of circles again: How many transit lines would need to reach the 20-mile radius perimeter to put everyone within a mile of transit? And how long will those commutes take?

Can we allow housing at the urban fringe but ban new highways?

This is just a recipe for stroads. Places like Northern Virginia that failed to build a network of limited-access highways instead have 6-lane arterials with traffic lights that mean they always run at half capacity. For a major city with serious demand pressure, building new highways or parkways is a good and necessary part of greenfield growth.

This is just part of a bigger principle for greenfield growth: Your suburb is never the last one. Much U.S. sprawl is built badly in the specific way that every town, every subdivision pretends that it will always be the last thing before farms and forests.

Yes In My Greenfield

The YIMBY movement is and should remain focused on re-legalizing infill growth. Strong Towns offers good principles for fiscal responsibility in moderate-demand places. There’s room for another policy movement focused on greenfield growth – getting the financing and governance right, planning for future growth, learning from successes and failures, promoting quality design that’s cheap enough for low-end development, and so on. If and when that movement arises, YIMBYs should greet it as a friend and ally: both are important to a future where housing is affordable.

The post The urban economics of sprawl appeared first on Market Urbanism.

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 least-well-off end of the income spectrum, Houston has the lowest rate of homelessness among major U.S. cities, due in part to its relative abundance of housing and in part to well-administered public and nonprofit services for formerly homeless residents.

The next chart shows that at the other end of the spectrum, homeownership is also more attainable to residents earning the region’s median income compared to the same group of Sun Belt metros shown in the chart above.

While Houston is a model of relative affordability, its housing market cannot serve its least-well-off residents without aid. As I interpret the evidence, the best way to improve housing affordability and housing quality for households that cannot afford adequate market-rate housing is with housing vouchers or other forms of income assistance targeted to the renter households most in need. The Housing Choice Voucher program improves important outcomes for the households that receive them. Compared to eligible households that do not receive vouchers, those that do suffer less food insecurity, less domestic violence, fewer child separations, and much less housing instability.

Dedicating resources toward vouchers allows dollars to go further relative to dollars dedicated toward new, subsidized housing construction because new-construction housing is generally the most expensive type. Relative to new construction that is fully or partially dedicated to residents of a specific income, vouchers open up opportunities for recipients to live in many different types of housing.

Policymakers in cities like Houston could provide a similar, locally-administered aid for extremely-low-income residents who are not receiving federal Housing Choice Vouchers. However, fiscal constraints and tax competition across local and state borders present challenges for providing this type of aid at the subnational level.

Due in part to the fiscal difficulties in providing costly aid at the local level, local policymakers tend to turn instead to policies to mandate income-restricted housing through programs that appear costless. Increasingly, local policymakers are implementing “inclusionary zoning” programs that require housing developers to set aside a portion of new-construction units as income-restricted. I’ve studied inclusionary zoning in the Baltimore-Washington region, which has the country’s longest history with these mandates. I find that in this case, localities that have adopted mandatory inclusionary zoning programs have seen greater increases in their median house prices relative to what they could have expected without these programs.

Inclusionary zoning can provide large benefits for the few residents who win lotteries for the units that they produce. However, inclusionary zoning provides a very small number of units relative to the number of households that qualify for them based on their income. Further, as I find, these programs can actually make housing affordability worse for the households that don’t specifically benefit from them.

The name “inclusionary zoning” implies that these programs are a reversal of the exclusionary zoning rules that exclude people from neighborhoods and localities on the basis of their income. In fact, inclusionary zoning depends on continued exclusionary zoning in order to function. These programs are typically paired with density bonuses that are intended to fully or partially offset the cost of providing income-restricted units. Without exclusionary zoning, these density bonuses would have no value, and inclusionary zoning would be a clear tax on housing construction.

Even in a city at the far end of land use liberalization, like Houston, the housing market may not adequately serve low-income residents. There is a role for policymakers to provide aid to extremely-low-income households. Expanding the Housing Choice Voucher program is one way to make progress toward improved housing affordability that carries fewer risks than programs that require market-rate housing construction to subsidize income-restricted housing.

The post Houston as an Affordability Model appeared first on Market Urbanism.

But what’s important to recall – especially for those of us under, uh, 41 – is that pedestrianized streets aren’t a new concept coming into style, they’re an old one that’s been in a three-decade decline. Samantha Matuke, Stephan Schmidt, and Wenzheng Li tracked the rise and decline of the pedestrian mall up to the onset of the pandemic. Even in the urbanizing 2000s and 2010s, 14 pedestrian malls were “demalled” against 4 streets that were pedestrianized:

In a 1977 handbook promoting pedestrianization, Roberto Brambilla and Gianni Longo admit that some of the earliest “successes” had already failed:

In Pomona, California, the first year [1962] the mall received nationwide press coverage as a successful model of urban revitalization; there was a 40 percent increase in sales. But the mall was slowly abandoned by its patrons, and now, after fifteen years of operation, it is almost totally deserted.

A Handbook for Pedestrian Action, Roberto Brambilla and Gianni Longo, p. 25

One obvious reason for the failure of many other pedestrianized streets is that they were too little, too late. The pedestrian mall was one of several strategies against the overwhelming ebb tide of retail from downtowns in the postwar era. They weren’t seen as alternatives to driving, but destinations for drivers, who could park in the new, convenient downtown lots that replaced dangerous, defunct factories.

A minority of the postwar-era malls survived. The predictors of survival are sort of obvious in hindsight: tourism, sunny weather, and lots of college students, among other things.

Some of the streets which were “malled” and “demalled” have rebounded nicely in the 2000s. The slideshow below shows Sioux Falls’ Phillips Avenue in 1905, 1934, c. 1975, and 2015.

The saddest case might be Baltimore’s Old Town Mall, pedestrianized in 1968. Since it’s still legally closed to cars, it’s not reckoned among Matuke et al’s “failures”. As in many other failures, this commercial strip was already in bad shape in the 1960s. Subsidies and buzz around pedestrianization gave it a short-term fillip, but the downward trend took hold again quickly.

This time is different, maybe

Pedestrian mall advocacy today is somewhat different, although the death of retail everywhere today echoes the 1950s downtowns. Perhaps most obvious is the change in commercial uses: today’s pedestrian malls are anchored by the patios of eateries and drinkeries. Those seem a more natural pairing with outdoor space than shopping. (Even better are playgrounds, which are still absent from most pedestrian malls).

The valence of cars in cities has also flipped from asset to liability. If you’re aiming to reduce car space in cities anyway, busy social strips are obvious places to start.

What does “failure” mean?

A pedestrian mall with low traffic is considered a failure. But we don’t normally hold a road (or sidewalk) to that standard. And if stores or homes sit vacant on a normal street, we rarely blame the infrastructure. If you want, you can see this as a car-centric conspiracy. But I think it’s more reasonable to admit that pedestrian malls are pitched as commercial and social spaces, a potentially delightful blend of public and private space with benefits to all. When that fails, like any commercial concept, it needs to be rolled up.

But – like other commercial failures – this need not be a big deal. Restaurants fail without fail. Social commerce may be more fragile than other forms, because it can go into a downward spiral.

Why not leave a street pedestrianized even if it’s a commercial and social failure? In most cases, there are real costs to the closure, either to traffic circulation or accessibility and deliveries for whatever businesses (or homes) remain. In addition, abandoned pedestrian spaces frequently feel unsafe. Finally, there are cases – like Baltimore’s Old Town Mall – which can remain pedestrian-only even in failure, because there’s nothing better to do with the space.

Failure can be fine

The long, slow, recent death of the postwar pedestrian mall is a solid reason for city bureaucrats and merchants to be skeptical of eager proposals. For every photo of a vibrant throng on a pedestrian street, they can produce one of failed stores or empty pavement.

A notable improvement of the COVID-era street conversions over the 1960s and 70s pedestrian malls is their physical simplicity. Most use simple barriers and moveable street furniture, sometimes paint, to transform what is otherwise the same span of asphalt. This allows regular, small changes. If, like a restaurant, avenue du Mont-Royal fails in five or ten years, it will have been a success – and the barriers can come back down.

The post Pedestrianized streets usually fail – and that’s OK appeared first on Market Urbanism.

The writing in these posts is a bit squirrelly (or is it Straussian?), but as best I can make out, Tyler is deviating from the mainline economic views of externalities and prices by arguing a few points:

1. Urban serendipity and growth are high-value externalities quite distinct from the usual efficiencies of combining large amounts of capital and labor in downtown office towers.
2. Occasional visitors to the city find very high value there (presumably via a long-right-tail distribution)
   • including by creating demand for new goods
3. Congestion pricing will (a) decrease the number of people in the city, (b) particularly high-value visitors.

He also makes some specific critiques of the mechanism design of the proposed NYC congestion charge. It’s worth getting that right, but let’s leave the technicalities aside here.

Tyler’s points – as I’ve summarized (or mangled) them – seem like a mix of reasonable and wrong, although in several cases difficult if not impossible falsify. I’ll tackle these points in a completely irresponsible order.

2. Distinguished visitors

On the second point: Diminishing marginal returns is enough to give Tyler’s argument the benefit of the doubt. The first visit to a symphony or subway likely has a bigger inspirational impact than the seventh or seven-hundredth. And outsiders may bring insights to the city in an Eli-Whitney-and-the-cotton-gin way.

But for consuming new goods? Perhaps visitors’ demand is enough to sustain new imitations of low-end consumer goods (like a McDonalds in Chennai, if there is one). But for narratives of urban creativity, I prefer Malcolm Gladwell’s account of Airwalk shoes or Peter Thiel’s identification of eBay “PowerSellers” as a stepping stone for PayPal. A concentrated, differentiated – weird – population is better grounds for scaling innovation.

Cities are extremely good places to form weird communities. But slow travel within the city hurts it. Just as Alain Bertaud argues for job access, effective social access is limited by the human density and travel speed.

3b. The stay-at-homes

Tyler affiliates “congestion pricing” with the provincial sentiment “residents good, visitors bad.” This isn’t my interpretation, but I’m not a New Yorker.

As for who is likely to be dissuaded from coming to New York at all by an additional $23 driving fee, it is likely to be someone for whom the $23 represents a large percentage increase of the cost of their trip. For a visitor from outside the metro area making a vacation or work visit, the fee is a minor nuisance, perhaps 5% of a two- or three-day trip that includes expensive parking, gas, a hotel, tickets, and meals. By contrast, a Jersey City couple thinking about driving in for an ice cream and a walk in Central Park might see their trip cost double.

1. Mode shift, job shift

In the long run, the person most likely to stop coming to Manhattan entirely is the car commuter who really dislikes or fears transit. In the short run, car commuters and other city regulars – people for whom the cost would add up day after day – would be most likely to stop driving. Many would switch to other modes or work more days from home.

Ultimately, some of those people would decrease their labor supply to the city. Since drivers tend to be the highest-paid workers, there could be an echo of the 1970s trend of moving corporate headquarters to the CEO’s backyard in Westchester County.

Unlike Tyler’s narrative, this is a very boring risk of inefficiencies in capital-and-labor markets. In fact, maybe nudging some of the too-efficient, too-well paid financiers out of the city will lower prices and create more room for urban creativity, just as tariffs and Luddism can boost growth by forcing people to solve problems creatively instead of efficiently.

3a. Fewer cars…fewer people?

I addressed the “particularly” clause of the third bullet. But there’s a more basic question: Will congestion pricing increase or decrease the number of people in a central city? I wasn’t able to find research on this. One plausibly causal study found that an unexpected congestion price increase in Singapore sharply lowered the value of retail real estate, but not office or residential. London statistics show that entries have grown post-congestion price. This isn’t causal, but it does bring home just how small cars can loom in the social life of a major downtown.

Bus traffic is a key variable here: to the extent that congestion prices speed up bus service (including jitneys or informal car-shares), faster traffic could make trips to a center much more viable. My prior is that this effect would predominate in developing world cities (especially those without rail transit) but be weaker in the developed world. Still, London buses counterbalanced most of the private car decline in the first two years of congestion pricing.

Will congestion pricing improve the quality of life for non-car users and induce more demand to be downtown? Air quality will probably improve, but not a huge amount. There’s no difference between sitting at a café while cars pass at 10 mph instead of 5 mph.

The steel-man case for congestion pricing is that the authorities will spend the money as NYC’s have promised, to improve transit, and will be sufficiently defensive of their scheme to follow through. Significant service improvements on transit could lure far more visitors into downtown (since the price of a transit trip in NYC is mostly inconvenience and distaste), generating the kind of eucongestion that Tyler argues is so essential to urban creativity.

The post Will congestion pricing hurt cities? appeared first on Market Urbanism.

The state of Massachusetts lets municipal governments choose how strictly they regulate energy efficiency in buildings. Fifty-two of the state’s municipalities use the base building code, whereas 299, including Boston, have opted into the stricter “stretch” energy code. In addition to these two, the state recently rolled out an even stricter “specialized” stretch code in the interest of getting to net-zero carbon emissions faster. Cities could opt in to the specialized code as of last December; several municipalities have already opted in, and Boston may do so soon. The new code is technically the Municipal Opt-In Specialized Stretch Energy Code, and I considered referring to it hereinafter as MOISSEC, which is cute because it sounds like a wine, but I ended up deciding that the least confusing option is to follow official documents in referring to the new option as the specialized code, and refer to what is existing law in most of the state as the stretch code.

Given that Massachusetts has some of the most expensive housing in the country, it’s reasonable to worry about the impact of any housing regulations on affordability, even when they serve an important objective. Massachusetts had the third highest cost of new housing of all states in 2021, and has unusually low housing supply, even among expensive coastal states. Research from the Boston Foundation details the extent of the problem: Greater Boston has lower vacancy rates than even Los Angeles or New York, homes spend less time on the market in Boston, and Boston is not on track to meet its housing production goals, though construction has increased somewhat in recent years.

A new report released Tuesday by the MIT Center for Real Estate, the Home Builders and Remodelers Association of Massachusetts (HBRAMA), and Wentworth Institute of Technology (WIT) projects the impact of Massachusetts’ new specialized building code on housing costs in the state. Unsurprisingly, it turns out that the new requirements raise costs. But the authors have recommendations for how to make those price increases easier to bear, most notably liberalizing land use.

In the first stage of the analysis, WIT researchers Payam Bakhshi, John Cribbs and Afshin Pourmokhtarian model the added cost of building a home that complies with the specialized code. There are three pathways to compliance, based on a mixture of electrification, the Home Energy Rating System (HERS) standards for energy efficiency, and Passive House efficiency certification. Bakhshi, Cribbs and Pourmokhtarian assess each of the pathways for single-family homes and small multifamily homes, comparing each to a baseline scenario of compliance with HERS 55, which is the median requirement in the current stretch code. Using model designs for a single-family home and a small 2-4 family building, they interview developers and contractors to estimate the cost of the design and equipment choices that would assure compliance, combining hard and soft costs. For a single-family home, construction to the specialized standards costs between $10,000 and $23,500 more than construction to the current stretch standards, depending on which compliance pathway the developer follows; for small multifamily, the specialized standards would add between $34,000 and $105,000 for the whole structure.

To estimate the cost increase facing builders of larger multifamily buildings, the authors build on research done in Boston on buildings built to Passive House standards, one of the standards incorporated into the specialized code; their calculations support Passive House Institute US’s estimate of a 2-4% cost premium for compliance. This is comparable to their projections for single-family homes: given NAHB’s estimated construction cost of $608,827 for a newly built single-family home in Massachusetts in 2022, the figures in this report would amount to between a 1.6% and a 3.8% premium of compliance for single-family homes.

Bakhshi et al., joined by Justin Steil, Zhengzhen Tan, and Siqi Zheng from MIT, then estimate how much of these costs are passed on to families as opposed to eaten by the construction industry. With data on the issue scarce, they use a sensitivity analysis to look at a range of scenarios. As the authors point out, however, it’s fair to predict that the bulk of the additional costs in most towns will fall on the consumer, because both the supply elasticity and the demand elasticity of housing are low in Massachusetts, with its constrained housing supply and concentration of high-paying jobs.

Based on those numbers, the researchers use Census and NAHB data to calculate the number of Massachusetts households who could buy a newly built home under the current stretch code but not one built to the specialized code (or who would be cost-burdened in doing so). Depending on the compliance pathway, they estimate that between 15,000 and 33,000 households fall into this category – between half a percent and one and a half percent of Massachusetts households.

That topline number isn’t as dire as it first seems, since most Massachusetts households are not in the market for a new home, and most who are won’t buy a newly built one.  So it’s an oversimplification to say the state has put housing out of reach for thousands of families in the name of sustainability. The number of households affected also depends on how many cities actually opt in to the specialized code, though the stretch code is also due to be updated for a stricter HERS standard in 2024, meaning some of the cost implications will soon apply to most of the state whether or not their towns have signed up for the specialized code. And if the new regulations chill new construction, it will mean missing buildings from tomorrow’s stock of housing, putting further upward pressure on prices.

Dampening construction will also undercut the potential benefit for the climate: there are no energy efficiency gains from houses that don’t get built. The opportunity cost of foregoing new construction in Massachusetts is particularly high: with Massachusetts having the second-oldest housing stock of any state, new construction built to either the stretch code or the specialized code will be more energy efficient than much of what’s there. And Massachusetts has low per-capita carbon emissions, so if the new rules end up displacing construction to higher-emissions states, they may end up being counterproductive.

Of course, while new housing is more expensive, energy-efficient housing saves the resident money on their utility bill. Unfortunately, the authors find that those savings are a drop in the bucket compared to the cost of installation, at least for those households likely to purchase a newly built home. They project that a household living in a single-family home built since 2010 and compliant with HERS 55 would save $48/month on their utility bill by switching to a home built to the stricter HERS 42 standard, meaning they would recoup the cost of building to the stricter standards in 42 years. (The researchers argue that tenants and homeowners in recently built buildings are a better comparison group than the population as a whole, since people likely to buy a newly built home are wealthier, but given the age of Massachusetts’s housing stock it would be useful to see the possible savings for people currently living in older buildings.)

Utility bills weigh more heavily on lower-income households not just in the way that every expense weighs more heavily on lower-income households, but also because lower-income households are more likely to live in older homes. If raising energy efficiency standards makes newly built homes even more of a luxury than they are, that will widen the gap between rich and poor households’ utility burden. Retrofits of existing buildings are outside the scope of the MIT/WIT/HBRAMA report, but for equity reasons as well as climate ones the state of Massachusetts should be finding ways to electrify and insulate the existing building stock.

The findings in the MIT/WIT/HBRAMA report underscore how little the US housing sector can afford unnecessary regulation. It makes sense for Massachusetts taxpayers to sign up for extra costs in the name of reducing greenhouse gas emissions – indeed, it’s the right thing to do, given rich countries’ outsize contribution to global warming. However, policymakers need to be honest with themselves about tradeoffs, and make the adjustments necessary to hold housing costs (at least) harmless.

Bakhshi et al. provide a series of recommendations for how to do that, starting with the obvious: repeal onerous land use and zoning regulations and streamline byzantine permitting processes for housing. Given that Boston’s zoning is so complex as to call to mind Borges’ Library of Babel – containing not only every zoning regulation in existence but every one that could theoretically exist –  there’s work to be done.

The MIT/WIT/HBRAMA report also shines a light on the difficulty of navigating Massachusetts’s network of incentives for energy-efficient construction. Interviewees were uncertain whether programs like Mass Save will be sustained over time, and smaller developers said accessing single programs sometimes requires multiple applications. This is a problem the state seems to be aware of: the Massachusetts Commission on Clean Heat has proposed coordinating the state’s sustainable buildings incentives in a Building Decarbonization Clearinghouse. The report also recommends new state tax credits for energy saving technology and increased training opportunities for professionals in the field, including within the construction industry as well as in real estate.

While it’s disheartening to think that two goals as important as fighting climate change and improving housing affordability are in tension, this report emphasizes just how much the tension is of the ‘we tried nothing, and we’re all out of ideas’ variety. Massachusetts, like much of the rest of the US, has made a choice about its values over the decades. Its laws and planning processes make clear that it values large-lot single-family homes for the favored few, and parking as a human right, over affordability or sustainability. It’s only in that context that the latter two are in conflict: if the state reconsiders its commitment to mandating a certain built form, its housing stock could be both more affordable and more sustainable.

The post New Report on Massachusetts’s Building Code Confirms: It’s Harder to Build Energy-Efficient Housing When You Don’t Let People Build Anything 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.

Of the legislation that has been enacted to date, California’s accessory dwelling unit laws (beginning with SB 1069 in 2016), according to those interviewed by the Terner Center, have been responsible for the astonishing twenty-fold increase in ADU permits documented from 2016 to 2021.  Legislation enacted in 2021 requiring ministerial approval for duplexes and lot splits (SB 9), estimated by the Center to allow for up to 700,000 new units, has not yet been widely used, partly due to localities’ use of other restrictive zoning regulations such as mandatory setbacks to impede use of the law.  Further strengthening of this law, in the same manner that the ADU law was fortified through 2019 revisions, may be necessary to unlock its full potential for new home construction. 

Other new laws are in the early stages of demonstrating their effectiveness. The imposition of stricter requirements on localities’ Regional Housing Needs Allocation (RHNA) process through legislation enacted in 2017 and 2018 has resulted in dramatic increases in zoning capacity targets for the next eight-year period set by the Housing Element Law (of which the RHNA is a part).  For Southern California and the Bay Area, total housing allocation has increased from 600,000 to 1.7 million. 

Of the housing elements submitted to date by localities, however, 35% have been rejected by the state, and the Center’s interviewees voiced concern that some jurisdictions lack the staff resources to timely comply.  Over the longer term, it is anticipated that these ambitious changes could provide a major impetus for new housing as cities gradually come into compliance and incorporate allocations into their zoning maps.  For the time being, California’s so-called “builder’s remedy,” intended to apply to noncompliant cities, is hobbled by a requirement for 20% deed-restricted units which lessens the consequences for noncompliance.  With the cost of labor and materials already high, any additional cost burdens not accompanied by incentives or subsidies run the risk of undermining financial feasibility.

Among numerous other new laws, the Density Bonus Law (Government Code § 65915) has been modified and expanded 12 times since 2016 and now permits density increases of up to 50 percent for projects that dedicate 15 percent of units to lower-income households (AB 2345) and even larger increases to areas in proximity of transit stops (AB 1763) or which are less car-dependent (AB 2334), among other changes.  

Other legislation has included CEQA exemptions for certain projects, though interviewees noted that simply qualifying for exemptions can still be a costly and time-consuming process.  Reforms to the Housing Accountability Act (HAA), including SB 330, have limited the discretion municipalities have in reviewing development proposals, including capping the number of hearings on a project to five.  The most recent laws include SB 2097, which was passed in 2022 and which prohibits parking minimums within a half mile of certain transit stops, and AB 2011, which bars municipalities from excluding residential uses from retail and office zones.  The latter of these does not go into effect until July 1, 2023.

The Terner Center has also released a searchable database which allows users to sort and explore applicable legislation passed since 2016.

The post Cataloguing California’s Cornucopia of Land Use Legislation appeared first on Market Urbanism.