Wednesday, December 28, 2005

How zoning drives away jobs

The Reason Foundation has a new commentary article reinforcing our prescient wisdom of no-zoning in Houston. It opens with a discussion of skyrocketing housing costs across the country, then addresses one of the core causes of the supply-demand imbalance:

Across the country, zoning laws consistently prevent new homes from going up in many locations and often unnecessarily block the transformation of neighborhoods that could provide affordable housing. After all, only about 6 percent of the nation is developed. Two-thirds of New Jersey, the nation's most developed state, is open space. We have plenty of land to build homes - if politicians let them be built.

Restrictive zoning hits the housing market it two ways: It increases costs by adding to delays in approvals, and it reduces the number of homes built to satisfy demand. Economists Christopher Mayer and Tsueriel Somerville found that adding just three months of delay to the approval process could reduce new housing construction by 45 percent. But zoning and conventional land-use planning has an even more destructive impact. They prevent communities from changing to naturally meet new needs and community concerns.

...

Today's zoning codes aren't adaptable or flexible. They are intended to be bureaucratic instruments that control the behavior of local residents and businesses. The views of neighbors aren't important, nor are economic benefits or aesthetics. The only thing that matters is the letter of the law and whether the law can be applied universally throughout the community.

...

A critical key to keeping housing affordable will be loosening up the bureaucratic straight jacket of zoning to allow more homes of all types be built that meet demand. Without this flexibility, the ongoing mismatch between supply and demand will keep home prices higher than they need to be and keep the stability of homeownership beyond the grasp of too many Americans.

It has been noted that much of the townhome densification of Houston's core would be banned under most of the nation's zoning codes, making us semi-unique with that development pattern. Many city planning boards and zoning codes also tend to be hostile to high-density apartment and condo complexes, which are relatively common in Houston's open market. These provide affordable options to Houstonians when they burn out on their daily commute and are ready to move into the core closer to work. Most cities' zoning codes resist this densification (and zoning changes are political landmines that are fought fiercely by homeowners), which means demand outruns supply and drives up home prices in the core way beyond the reach of the average citizen. Those frustrated employees, in turn, put pressure on their employers to move out to the cheaper suburbs so they can afford to live near work with a reasonable commute, leading to an inexorable hollowing out of the commercial tax base and economic vitality of the inner city.

Let's pause for a moment and be thankful that Houston wisely avoided this fate.

10 Comments:

At 11:23 PM, December 28, 2005, Anonymous RJ said...

RE: adding just three months of delay to the approval process could reduce new housing construction by 45 percent

Let's get real... we have zoning all around the Houston area, just not in the city itself. Is zoning causing Sugar Land (or any Houston area jurisdiction with zoning) to see a 45% reduction in new housing construction? Definitely not. I would even entertain the discussion that zoning has lead to stronger growth in Sugar Land. And a lack of zoning (or any other sort of land use protection), can kill a neighborhood, and prevent or at least hinder redevelopment.

In the Houston area, we seek to compensate for the lack of zoning in many ways. We deed restrict our property (which can be a heck of a lot more permanent and inflexible than zoning), we purchase homes in master-planned communities where land uses have been thought out (and again more deed restrictions), and we purchase in suburban cities that have zoning (Sugar Land, Missouri City, Friendswood, League City, etc.).

I would argue that the number of people who actually want to buy a home in an unzoned, unplanned, non-deed restricted setting in metro Houston is small (and those who do are usually seeking distant rural settings). Frankly, rare is the person who wants to build their dream home and see a foundry or a used car lot constructed next door. And what happens to those homes within the city of Houston that have no protection from zoning, deed restrictions, master planning, etc.? They lose their value like cars... They eventually downcycle and become first homes for some immigrants, which is a good thing for the buyers, but sucks if you're the seller who has lost your lifetime of equity because what used to be the neighbor's house is now a hubcap shop and the house across the street is now a propane dealership, thanks to this wonderful free-market approach to land use that makes the folks at Reason so misty-eyed. And this doesn't even begin to address the instability created within the neighborhood for existing residents, who watch their values collapse as that first lot on the street flips from residential to industrial or commercial.

On the developer side, you'll hear talk out of both sides of the mouth. Development can be a risky business, especially as you inject more time into the development process, so naturally developers are going to fuss when they encounter regulations that cost them time. But developers also like certainty. Alot. I've heard several say that they are nervous developing in places like Midtown because they could pour their money (or more likely their investors' money) into a first class development, and then some idiot builds a Chevy dealership across the street. That definitely takes the shine off a new high-end luxury redevelopment! And when that uncertainty about adjoining land use doesn't outright kill a project/idea for a developer, it might at least cause a scaling-back in plans resulting in a lesser-quality finished product.

I wouldn't characterize our lack of zoning as "prescient wisdom"... it has its plusses and minuses, but we certainly didn't reach this point through a combination of events and decisions that one would reflect upon as being carefully thought-out and wise.

 
At 2:11 AM, December 29, 2005, Anonymous Anonymous said...

RJ hit the nail on the head. This blog has an implicit contradiction in loving urban sprawl (which is fueled by growing suburbs, which in Houston are all master-planned communities) yet railing against zoning. Ironic that all the growth in Houston is occurring in the most zoned parts of the city-- the master planned communities.

Its almost as if people buying houses enjoy the certainty of knowing that they will be surrounded by other homes, as opposed to a multiplex $1 movie theater.

Imagine that, and its no surprise that master planned communities which are the extreme result of zoning are flourishing in Houston.

 
At 4:25 AM, December 29, 2005, Anonymous RPVW said...

Tory --

You're 100% right, and let's hope that Houston vote in zoning in a fit of self-consciousness from the condescension of outsiders over zoning.

 
At 10:49 AM, December 29, 2005, Anonymous Anonymous said...

Houston's current townhome construction was effectively banned in Houston itself up until less than ten years ago by density restrictions.

 
At 12:26 PM, December 29, 2005, Blogger kjb434 said...

much of the town home construction in the inner loop is in non-deed restricted areas. The only areas see heavy townhome development that is deed restricted is heights proper (Woodland Heights, Norhill Heights, Heights). Shady Acres, Fourth Ward, Third Ward, East of Downtown, Cottage Grove and Rice Military are the hottest areas of densification and have no restrictions.

Much of the development in the Sugarland area is occuring outside of the city near Rosenberg and Richmond. Friendswood is seeing lots of development begin outside it's city limits where it's zoning has no power. Masterplan communities are only zoned per plat. After that it depends on the HOA to handle where changes occur, at that has limited power anyway. The masterplanning only occurs initially and my hold until the deed restrictions run out or no one enforces which happens often.

I love how Houston is much more flexible to the needs of the housing demand instead many other cities. A good example of the city that was being hurt by zoning was New Orleans prior to Katrina being hit. The city was home to primarily either rich or poor people. Not much in between unless they lived in an apartment. The average home buyer bought in the suburban areas where zoning is lacking and prices are cheaper. Just look at the intense development north and northeast of Lake Ponchartrain. Zoning forced these people out.

 
At 12:37 PM, December 29, 2005, Anonymous RJ said...

Friendswood is seeing lots of development begin outside it's city limits where it's zoning has no power

The reason you're seeing development outside of Friendswood is because there are very few large remaining tracts of land within Friendswood to develop (I think the number is two)... and I know that at least one of those is about to be developed. Friendswood is otherwise just about built-out.

Masterplan communities are only zoned per plat. After that it depends on the HOA to handle where changes occur, at that has limited power anyway. The masterplanning only occurs initially and my hold until the deed restrictions run out or no one enforces which happens often.

Right, until the deed restrictions run out... and unless they have a sunset provision, those restrictions run with the land forever until the appropriate super-majority of landowners within the subdivision decide to change them, or until one can effectively prove that they are not enforced. Do you really think that a homeowner in Sienna Plantation 50 years from now is going to be successful in changing his/he deed restrictions to allow their house to be converted into townhomes or a restaurant?

 
At 2:56 PM, December 29, 2005, Blogger Tory Gattis said...

As far as master planned communities: my understanding is that they are a lot better at giving people what they want than your average town city council. More market responsive.

I think it is fair that people buying single-family homes want some protection, which can be handled well by deed restrictions and nuisance ordinances. But there are benefits to the "everything other than single family homes" category: industrial, offices, retail, apts, condos, etc. Those can often be separate zoning categories, creating all sorts of supply-demand mismatch problems and complexity. As an analogy, imagine the chaos if a 4-lane freeway were divided into one lane for cars, one for trucks/SUVs, one for 18-wheelers, and one for other commercial vehicles. Some lanes would be crunched while others were nearly empty at different times of the day. Land use is the same way. Demand for different uses ebbs and flows over time, and we have the flexibility of supply to meet that demand shift, without limiting development to powerful developers who can bribe and cajole zoning boards for variances.

As a "what-if" example, imagine if the city had zoned several decades ago and decided all skyscrapers should be downtown (like Chicago). While we might have a slightly larger downtown, we also might not have all our other large job centers (Uptown, Greenway, TMC, Westchase, Greenspoint, etc.), which might have headed outside the city or to other cities (also like Chicago).

 
At 3:17 PM, December 29, 2005, Blogger Max Concrete said...

I think the real issue here is the impact of zoning when there is a scarcity of available land for new housing construction, and a demand for new housing exists. That is the case inside the loop. Lack of zoning and lack of deed restrictions opens up land to new housing, enabling a substantial supply increase and providing lower prices which empowers redevelopment.

In the suburbs, in contrast, there is generally not a shortage of land. So zoning would not have a big impact in low-density suburban areas. Also, new home buyers are looking to ensure that development around their property will be predictable since there is often a lot of available undeveloped land. Hence the preference for master-planned communities and zoned cities (eg Sugar Land).

 
At 10:33 PM, December 29, 2005, Anonymous RJ said...

RE: As far as master planned communities: my understanding is that they are a lot better at giving people what they want than your average town city council. More market responsive.

In areas with zoning, the developer submits a planned unit development, which has a mix of land uses that the local gov't could tinker with. Actually, the local gov't might be better suited for identifying needs like land for schools and parks and so on.

As an analogy, imagine the chaos if a 4-lane freeway were divided into one lane for cars, one for trucks/SUVs, one for 18-wheelers, and one for other commercial vehicles.

That's a good analogy, and I readily agree that there are plenty of instances where uses identified on the zoning map are out of step with the market or too specific.

kjb434 said After that it depends on the HOA to handle where changes occur, at that has limited power anyway.

If I understand that statement to be that HOAs have limited power, there are plenty of instances where they have way too much power. You may recall that back in 2001, an 80-something year old woman lost her paid-off $150k house in Champions in NW Harris County when the HOA foreclosed over a few hundred dollars in unpaid dues (there was plenty of dispute regarding payment, notification, and the like). Someone then bought her house in auction for $5,000. That's WAY too much power for an HOA. Whether the Champions HOA had an unusual level of powers or not, I don't know...

 
At 10:32 AM, December 30, 2005, Anonymous Anonymous said...

The article isn't really anti-zoning necessarily...when the author says "today's zoning codes aren't adaptable or flexible. They are intended to be bureaucratic instruments that control the behavior of local residents and businesses. The views of neighbors aren't important, nor are economic benefits or aesthetics" that leaves a lot of room for things like form-based zoning or even just zoning that is more flexible than the use-based restrictions that are usually used now.

 

Post a Comment

Links to this post:

Create a Link

<< Home