Upzoning will ease housing affordability problems

http://cityobservatory.org/will-upzoning-ease_affordability/

by jseliger • 7 years ago

43 52 7 years ago

hash8724• 7 years ago

Not a NIMBY. But. What these type of pieces never discuss is how much they think rents will be brought down by upzoning.

Manhattan/the Bay Area/LA/DC would need staggering rental decreases to reach anyone's definition of 'affordable', much less the government's definition of a middle class family. Like, 33-50%+. I struggle to find examples of this happening in market economies outside of a major natural disaster.

If the US was an authoritarian dictatorship and we bulldozed every single family home in the Bay Area, and replaced them with 100 story apartment buildings as far as the eye can see, of course rents would dramatically decrease. Seeing as that's not an option- the discussion is how much could rents be brought down by upzoning in a market economy where only so many homes are sold every year, developers can only build so much per year, development is very economic cycle and interest rate driven, etc. Like, upzoning only works once the existing single family home owner sells, and then a developer purchases. Did you know the average turnover in many neighborhoods is 1-2% annually? Thousands of units are not exactly going to flood the market overnight.

I'm for upzoning generally, but people assign it magical properties that don't exist IRL. The whole NIMBY/YIMBY/build more discussion is kinda reaching unrealistic fever pitches among the right crowd of people who, like, follow Noah Smith on Twitter or whatever

rory0962• 7 years ago

What these type of pieces never discuss is how much they think rents will be brought down by upzoning.

Sure they do. In an unconstrained market, prices will decline to the marginal cost of building one more unit. See Glaeser & Gyourko (2002): https://www.nber.org/papers/w8835.pdf

riku_iki• 7 years ago

in market economies developer will come to homeowner and propose to buy house for 50% more than market price, owner will sell, buy house in another place and have half million $ on bank account.

hinkley• 7 years ago

In my old neighborhood, someone was going around buying pairs of pillbox houses and putting condos up in their place. I'm fairly certain that developers aren't waiting for houses to go up for sale to approach people. I know a guy who got cold called about his rental property because some big developer was trying to build... something... and needed about 5 lots to do it. They bumped the offer about 10% every time they called and eventually he was the last holdout so they called him a 3rd time.

xvedejas2• 7 years ago

It's not really all-or-nothing though; even relieving rent a little bit in these places would represent relief for a large number of people. And upzoning has other benefits. People who own small SFHs and have family struggling to make rent will be able to add ADUs to help house that family. And fundamentally, upzoning is reducing restrictions on peoples' private property which to me seem needless. It sounds hyperbolic or cliche, but why not do it in the name of Freedom?

clairity2• 7 years ago

"What these type of pieces never discuss is how much they think rents will be brought down by upzoning."

[slighted edited for clarity]

according to some quick and dirty searching, we build about 140,000 units per year in california and need another 110,000 to house the net increase in population. that means we need 250K units per year total. it now costs about $400K to build a unit of housing. so that means we need $100B of new housing per year in cali. incidentally, the gdp is about $3T and the annual state budget is about $200B.

at that rate of building (250K units/year), you'd expect housing prices to stabilize. if you want prices to go down, you'd have to build more than that (hard to incentivize unless costs are brought down or subsidies are brought up).

according to the census, even in metropolitan statistical areas, new residential construction is mostly (90+%) detached single family residences (SFRs). so if we upzone all SFRs (R-1 in LA) to two-family residences (R-2 in LA) and encouraged the building of 2-family structures, we'd expect housing prices to stabilize, at least in metro areas, where housing is at crisis levels.

i think this was the reasoning behind california cities (like pasadena) experimenting with allowing in-law/accessory units (based on the quick calcs above). i would actually go even further and upzone to R-3 (as proposed by scott weiner in SB50 [0]), which would then allow fourplexes on what would only have a single home. fourplexes are nice because the massing (from the street) is about the same as a single family home, but it potentially quadruples density. then you'd actually see decreases in housing costs.

i'd also encourage owner-occupied fourplexes to create more coherent neighborhoods, rather than corporate-controlled rentals that extract and deplete wealth from a neighborhood.

[0] https://www.latimes.com/politics/la-pol-ca-single-family-zon...

hash8724• 7 years ago

new residential construction is mostly (90+%) detached single family residences

But how much brand new residential construction on vacant plots of land is going on in the most expensive cities? The slightly unrealistic YIMBY movement makes it sound like there's many plots of vacant land just waiting to be developed. But..... there's not. Upzoning mostly means buying existing SFRs and doing teardowns, not just building brand new on these imaginary vacant plots of land in San Fran or Manhattan. This is limited by number of SFR sellers, etc.

paulddraper• 7 years ago

What these type of pieces never discuss is how much they think rents will be brought down by upzoning.

That's not the way to measure success. The way to measure success is the number of new people living in the desirable area.

It's not "Rent is now $200 cheaper"; it's "3,000 people can now afford to live here that couldn't before (because, FYI, the rent is $X cheaper)".

BurningFrog• 7 years ago

Or, more likely, "3,000 fewer people were forced to move out".

ummonk• 7 years ago

NYC is already relatively affordable compared to the Bay Area despite its massive population, thanks to aggressive upzoming. Sure, Manhattan is expensive but it manages to absorb a ton of people and makes the surrounding areas far more affordable. Contrast with the Bay Area, where anything within reasonable commute time of SF or Silicon Valley is still very expensive.

zjaffee5• 7 years ago

Upzoning would not make a place like manhattan more affordable, there have been studies (https://www.federalreserve.gov/econres/feds/files/2018035pap...) that evaluate what up to a 20% increase in housing supply would bring to any one given area and they never say it would fall by anything more than 2% (and that would be if the supply was introduced all at once in todays current environment).

What is shown by this is that, when you build more housing in desirable areas, people will always move in to fill it. The value of which being that more people can now experience such desirable areas. In fact, the price decreases aren't coming from the actual housing supply increase directly, but that prices fall when there is a bigger competitive pool of those seeking housing and those supplying it even with 1:1 increases on both sides.

So what's the solution?

The truth is there isn't one, in our current political environment we will neither see a command economy that seriously solves housing issues (or even something like what singapore does). We won't see national multifamily by right zoning/building codes that enable economies of scale for high density construction. We won't see every suburb in America allow density increases to the level that automotive travel becomes a serious hassle. Additionally, we won't see major financing efforts come about for new housing production at the scale of a trillion dollars a year (which is the level of investment needed from a debt financing perspective).

Within the broader market, the cost of financing and construction are just too high right now for housing prices to fall on the production side of the equation. It is not possible to build 1000 sqft apartments in existing dense parts of the US that cost $100k on the production side (what it would cost to build a similar sized average single family home) in any of these major cities, and that's before land acquisition costs.

The truth is, that the most viable way for creating affordable housing in this country right now would be to build an entirely new city made up of moderately sized row homes that would have the ability to sprawl as such for 60 miles in any direction from its center.

granshaw• 7 years ago

Sounds like a great environment to invest in Real estate!

hash8724• 7 years ago

Was with you until that last sentence. The most viable way to create affordable housing is to admit that a very small number of Tier 1 US cities are effectively full- and encourage smart young people to move to Denver and Charlotte and Miami and Raleigh and Indianapolis and Phoenix and Burlington and Madison and.....

But yeah, everything else you said is spot on. I previously worked in commercial real estate, and I find the Matt Yglesias-types' understanding of how property development works to be bordering on magical. I mean, again, I fundamentally agree with the YIMBY movement, and that many zoning laws are glorified rent seeking. But the affordability issue is fast leaving rational discussion and entering belief system territory. Manhattan & the Bay Area & LA are expensive because the demand to live there is 10,000x or 20,000x what it is to live in, say, Milwaukee. This is the root of the problem- you cannot possibly build enough to sate demand in a non-command economy

rory0962• 7 years ago

evaluate what up to a 20% increase in housing supply would bring to any one given area and they never say it would fall by anything more than 2%

Hold on. That study is about an increase in the housing stock of a single neighborhood in a city, only for the top decile of expensive neighborhoods, and the resulting effect on rents within that same neighborhood. Its counterfactual is somehow taking the entire private expenditure used to build that housing and putting into public works projects in the bottom 9 deciles of neighborhoods in order to attract demand there instead.

eli_gottlieb• 7 years ago

I tend to think of it in much more brutalist terms: what's the desirable or appropriate ratio of population to housing units for housing to be affordable for everyone? If the ratio in one area is too high, upzone. If it's too low and that's somehow causing problems as well, downzone.

throwing838383• 7 years ago

Think of it like Climate Change. Sure, we can't fix the entire environment by planting a few trees, but every little bit helps.

we owe it to future generations to try our best and get as much housing supply as we possibly can. The whole problem isn't going away in 1 year, it took 4+ decades to create this problem and it will take multiple decades to fix it completely too.

Look at Houston. It's the 4th largest city in the US and growing much more quickly than any other city in CA. Their housing prices are 100$/sq ft!! How did they accomplish that? No zoning laws. Developers built as much housing as people needed and everyone prospers: it's win/win, more jobs, more housing, more prosperity. There's no reason this can't be done in an area with "nice weather"

dillonmckay• 7 years ago

That is how people wind up in this situation...

https://apps.texastribune.org/harvey-reservoirs/

Building homes in reservoirs.

secabeen• 7 years ago

Houston is really sprawling, and can expand in all directions. If the LA area didn't have an adjacent ocean, and mountains, it would be easier. Instead, if we do expand out past the mountains, then everyone has to funnel through the passes.

zkms• 7 years ago

I struggle to find examples of this happening in market economies outside of a major natural disaster.

i would suggest looking outside the US. The zoning/land-use regime where single-family zoning dominates is not universal -- see http://devonzuegel.com/post/north-american-vs-japanese-zonin.... In fact, Japan kind of is a shining example of upzoning bringing down (and keeping down) rents to levels unthinkable in US cities.

jdavis7032• 7 years ago

If the US was an authoritarian dictatorship and we bulldozed every single family home in the Bay Area

No where in the Bay Area "is built out" so there's no need to bulldoze single family homes. There's lot of parking lots, abandoned or under-utilized malls (e.g. Valco) and land zoned for other uses like office or manufacturing that can be used for new construction.

I'm pretty sure building more alone won't solve the affordability problem, but it will stop prices from rising. As it stands as a software engineer I can't afford rent in the average San Francisco apartment (I live in Oakland, so I'm OK for now).

But that's why many housing advocates support the three Ps: Production, Protection and Preservation. These three ideas combine to build more homes, protect exist tenants from abuses and to preserve existing affordable housing stock such as SROs.

Zoning is not a magic pill for ending the crisis, but we can't even begin to do things like build government subsidized housing when communities spend 20 years battling one apartment building to house 28 families [0].

0: https://twitter.com/LibbySchaaf/status/1128517407486517248?r...

AbrahamParangi• 7 years ago

The arguments against increasing the supply of housing remind me of the arguments that losing weight isn't just a matter of calories in and calories out. I mean- yes these are complex systems we're talking about, yes there are lots of effects and if you paint with a broad brush you're going to make mistakes sometimes.

But at the end of the day there are simple dynamics you can't get away from.

maneesh• 7 years ago

Do you think induced demand might be a problem? It's been shown that by increasing the size of highways, for example, you increase traffic:

https://www.wired.com/2014/06/wuwt-traffic-induced-demand/

karanbhangui• 7 years ago

There are arguments that induced demand is a myth: https://www.cato.org/blog/debunking-induced-demand-myth

xvedejas2• 7 years ago

I think induced demand is real, but it's a second-order effect. So while building one unit might attract an additional 0.1 people to an area (for example), it's not going to attract more people than it houses. So building more housing is still the right thing to do to lower prices. Even if you don't get perfect efficiency of 1 person's housing needs met per 1 unit built, meeting the needs of 0.9 people is still pretty good.

nordsieck• 7 years ago

Do you think induced demand might be a problem? It's been shown that by increasing the size of highways, for example, you increase traffic

The thing with induced demand is, everyone admits that it's possible to out build induced demand - it's just impractical to do so, so it rarely happens. The housing equivalent of induced demand (people who live in suburbs moving to the city) is a very real phenomenon, but it's inherently self-regulating. If people avoid living in the city because of cost, they'll stop moving in when the price stops coming down.

Luckily for housing, while the main reason we don't have infinite transportation infrastructure is cost, the main reason we don't have infinite housing is regulation which is inexpensive (in theory) to remove.

forrestthewoods• 7 years ago

Induced demand means that wider roads don’t reduce latency (traffic). But it does increase throughout (cars per hour).

More housing may not result in an equivalent drop in price. But it will increase the number of people with access to economic opportunity.

Suffice to say I’m in favor of increasing throughout. For both transportation and housing.

coding123• 7 years ago

nah, it's actually the number of whole foods, targets and pf changs that induces demand in an area.

stale2002• 7 years ago

"induced demand" basically means that you make a place so awesome to live, that even more people want to move there!

Like yeah, maybe. But if a place is so awesome, then shouldn't we try to let more people live there? Shouldn't we trying to continue to do things that make this city awesome?

jdavis7032• 7 years ago

Induced demand in itself is not a bad thing. The reason why induced highway demand is almost always bad is because expanding highways rarely results in faster trips after a few years. But a public transit expansion on the other hand can move many, many more people for decades before the induced demand causes the transit system to choke up.

Likewise for housing, induced demand isn't that bad. Most people will only ever have one house. In the case of a highway expansion, people can easily take multiple auto trips that they'd otherwise avoid given congestion. Unless the price of housing craters, I doubt most people will start consuming multiple homes.

wahern• 7 years ago

Induced demand is generally found in situations where you're giving something away below cost or especially for free. Highways are the classic example of induced demand precisely because they're free to use.

Induced demand in the context of market-rate housing is highly speculative and if it exists at all likely to be very limited. It's sort of non-sensical, like saying that demand for the original iPhone (or any new product) is "induced demand", either because it was new or because people wanted to be like other people. That's not the kind of phenomenon the concept of induced demand is trying to describe.

oftenwrong• 7 years ago

Latent demand gated by price + decreased price = induced demand

It applies to everything, from housing to hamburgers.

I have a hamburger restaurant where I sell hamburgers for $5. Some people buy hamburgers, and some people will not buy hamburgers. Some of the people who will not buy hamburgers would buy a hamburger if the price was lower. If I drop the price, I will induce demand.

zjaffee5• 7 years ago

It's because there is a conflict of desires that exist within cities. People want cities with thriving economies, jobs with rising wages, world class amenities and institutions.

However, they also want the amenities that are only available in mid sized cities. The ability to have a single family home a 20 minute drive from downtown with a yard with available parking, undeveloped nature and farm land that isn't over an hour away, parks that aren't always packed, and many other things that are incredibly hard to add back into the city once it starts to be developed in any serious way.

The YIMBY solution is to let the market decide, which will always demand increased transformation of cities with good economies, when we'd build a better world for everyone should we put in more effort to transform smaller cities into the places with jobs, good wages, with high quality institutions and amenities. Tons of tech workers move to the west coast not because they've always wanted to, but because they know that they're restricting their career opportunities should they not move.

maxsilver3• 7 years ago

There's no argument against increasing supply. There's an argument against increasing expensive supply.

It's like saying, "I'm going to lose weight, by eating only pizza 24/7". Sure, you technically could do it from a calories in/calories out perspective, but it's going to do a hell of a lot of damage to your body along the way.

It might be less damaging to your body to lose weight by eating healthy first (building affordable housing, building public housing). But the urbanists are generally against this, they want to only eat pizza (only build high-end / 'market rate') while pretending that counts as an effective weight loss program, because "weight lost is exclusively just calories in vs calories out" -- "housing is exclusively just supply vs demand".

---

Does their approach work? Technically, if you build a metric-insane amount of high end housing, you eventually slightly decrease a tiny percent off the yearly rental growth at the highest-end of the market (Seattle is the textbook example of this).

Is this a healthy approach for the city at large? I'd argue no -- it does massive damage to the poor/middle-class, and to the climate in general, all of which is all completely ignored while Urbanists focus exclusively on bringing luxury housing down tiny percentages for a tiny few people who qualify for them.

anonuser1234562• 7 years ago

Why not just help the poor / middle class migrate to lower cost of living areas? By definition, poor / low income people have low productivity and will never be able to compete in a city.

lanius• 7 years ago

What are the arguments against calories in/calories out? Do critics believe that they will not lose weight on a caloric deficit?

CodeWriter232• 7 years ago

Post title is materially different than article headline.

mjevans• 7 years ago

The transposition of two words (the first two) seems to make the headline less clickbaity, more clear, and accurately reflect the general opinion in the article. I feel it's a good and fitting title.

CodeWriter232• 7 years ago

The article does not arrive at that conclusion at all. It actually tears down the Upzoning idea and further states nobody is making the Upzoning argument anyway. Aside from the title of this post.

Justsignedup• 7 years ago

So what you're saying is a published paper failed peer reviews yet is heavily cited.

Welcome to modern science reporting and interest groups. :(

Tiktaalik• 7 years ago

The important question is who the new housing is for.

Building new housing for locals is good, but in some cities what is occurring is new housing is being explicitly marketed to foreign investors seeking yield. This doesn't benefit locals and doesn't ease affordability problems.

Upzoning will ease housing affordability problems

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