Abstract
The chapter explains how government regulation prices Americans out of the most desirable cities, causing some households who prefer city living to choose cheaper suburbs. The chapter goes on to suggest zoning reforms that would reduce urban housing costs.
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Notes
- 1.
See City Data, www.city-data.com. For City Data facts on an individual city, county, zip code or neighborhood, go to the main City Data page and enter the place name or zip code on the website’s individual search engine.
- 2.
See Sean Caperis et. al., Renting in America’s Largest Cities 8, at http://furmancenter.org/files/CapOneNYUFurmanCenter__NationalRentalLandscape_MAY2015.pdf
- 3.
Id. at 37. Similarly, in San Francisco inflation-adjusted rents grew by 8.4 percent, twice the rate at which median renter income increased. Id. at 41.
- 4.
Id. at 37.
- 5.
Id. at 14.
- 6.
See US Department of Housing and Urban Development, Comprehensive Housing Market Analysis: Long Island, New York, at https://www.huduser.gov/publications/pdf/longislandny_comp_12.pdf (“Long Island Housing”).
- 7.
Jennifer Gould Kell, There are no apartments to rent in Manhattan, N.Y. Post, June 10, 2015, 10:38 PM, at http://nypost.com/2015/06/10/its-basically-impossible-to-find-a-rental-in-manhattan/
- 8.
See Streeteasy, Quarterly Market Report, Q3 2015 at 17, http://cdn2.blog-media.zillowstatic.com/streeteasy/2/2015Q3_StreetEasy-Market-Reports_MN-BK-5355fe.pdf (“Streeteasy Market”); Long Island Housing, supra, at 8–12 (average rent is $1375 for one-bedroom in Suffolk County, $1475 in Nassau County). By contrast, the median one-bedroom apartment in Brooklyn rents for $2200. See Streeteasy Market, supra at 17. I note that even Long Island’s rents are nearly twice those of depressed cities such as St. Louis. See Rent Jungle, Average Rent Trends and Market Strength by City, at https://www.rentjungle.com/rentdata/ (average one bedroom apartment in Detroit rents for $758, in St. Louis for $740, in Cleveland for $713).
- 9.
See City Data, supra.
- 10.
It might be argued that my concern over high housing costs is inconsistent with my suggestion above that when transportation costs are included, cities are no more expensive than suburbs. See supra Tables 1.1, 1.2 and accompanying text. But the two ideas can be squared by consideration of the variety of individual preferences. For someone willing to live in the average city neighborhood, a city may be cheaper than its suburbs. But some households may only be willing to live in the “best” (richest, safest, and/or most expensive) city neighborhoods. If these households are priced out of the best city neighborhoods, they will move to suburbia rather than choosing a less expensive urban neighborhood.
- 11.
See Chang Tai-Hsieh and Enrico Moretti, Why Do Cities Matter? Local Growth and Aggregate Growth? 3, 21–22, at http://faculty.chicagobooth.edu/chang-tai.hsieh/research/growth.pdf (noting that wage gaps between expensive cities and rest of the USA imply differences in working productivity, and adding that if housing costs had been lower, more people would have moved to productive cities and driven wages down).
- 12.
In 2014, U.S. GDP was $14.5 trillion. Id. at 25.
- 13.
Id. at 34. Because an expanding region might use more land or use land more productivity, this is probably an understatement. Id. at 25 (estimating 13.5 percent, or $1.95 trillion, increase). Cf. Alex Sarabia, All Growth Is Local: Housing Supply and the Economics of Mobility, at http://chicagopolicyreview.org/2016/02/02/all-growth-is-local-housing-supply-and-the-economics-of-mobility/ (summarizing study in non-technical language).
- 14.
See generally PlanningNYC, The Zoning Resolution, Article II, sec. 23–20 at http://www1.nyc.gov/site/planning/zoning/access-text.page (“NYC Zoning”) (listing regulations for individual districts).
- 15.
See Donald C. Shoup, The High Cost of Free Parking 25. 143–44 (2005) (noting that parking requirements virtually universal, and explaining how they reduce urban density).
- 16.
See Chad Emerson, Making Main Street Legal Again: The Smartcode Solution to Sprawl 71 Mo. L. Rev. 637, 645 n. 36, (2006) (Under conventional American zoning codes, “front setbacks must be either a 25-foot grass yard or a paved parking lot.”) (citation omitted).
- 17.
See william a. fischel, zoning rules: the economics of land use regulation 43–44 (2015) (explaining rezoning process) (“Zoning Rules”).
- 18.
See Stewart E. Sterk, Structural Obstacles to Settlement of Land Use Disputes, 91 B.U.L. Rev. 227, 238 (2011) (“Before a municipal body may effect any kind of zoning change…neighboring landowners must generally receive notice of the proposed change” followed by public hearings.).
- 19.
See William A. Fischel, The Homevoter Hypothesis: How Home Values Influence Local Government Taxation, School Finance, and Land Use Policies 230 (2005) (“Homevoter”).
- 20.
For example, NIMBYs may claim that new development increases traffic, threatens neighborhood character, or affects property values. See Michael Lewyn, Against the Neighborhood Veto, 44 Real Estate L.J. 82, 86–95 (2015) (criticizing these and other justifications for NIMBYism, on the grounds that restrictive zoning merely shifts such externalities to other neighborhoods or are outweighed by social harms caused by a restricted housing supply) (“Veto”).
- 21.
Cf. David Schleicher, City Unplanning, 122 Yale L.J. 1670, 1709–1711 (2013) (city councilors tend to oppose development in their own districts because NIMBYs within district vocally oppose housing, and system of “councilmanic courtesy” encourages rest of council to defer to a councilor’s decisions about zoning in his or her own district).
- 22.
Sheila R. Foster and Brian Glick, Integrative Lawyering: Navigating the Political Economy of Urban Redevelopment, 95 Cal. L. Rev. 1999, 2033 n. 119 (2007) (describing boards, and noting that they may comment on all zoning actions).
- 23.
See John Mangin, The New Exclusionary Zoning, 25 Stan. L. & Pol’y Rev. 91, 100 (2014).
- 24.
See Zoning Rules, supra, at 35–36 (explaining downzoning).
- 25.
See Furman Center for Real Estate and Development Policy, How Have Recent Rezonings Affected the City’s Ability to Grow? 8, at http://furmancenter.org/files/publications/Rezonings_Furman_Center_Policy_Brief_March_2010.pdf (188,000 lots rezoned; 23 percent of these were downzoned). I notice that on balance, the city upzoned slightly more land than it downzoned. However, some of the alleged upzonings added parking requirements that can reduce a site’s potential for new housing just as easily as a direct density restriction. Id. at 15.
- 26.
See Caperis et. al., supra, at 10.
- 27.
See City and County of San Francisco, Planning Department, Permit FAQ & Glossary, at http://www.sf-planning.org/index.aspx?page=2754.
- 28.
See Map of building height ordinances in SF, at http://imgur.com/Tn7CSTX; John Wildermuth and John Cote, S.F. Voters OK Prop. B on waterfront development, San Francisco Chronicle, June 4, 2014, at http://www.sfgate.com/bayarea/article/S-F-voters-OK-Prop-B-on-waterfr ont-development-5526983.php.
- 29.
See Greg Morris, The Homeowner Revolution: Democracy, Land Use and the Los Angeles Slow-Growth Movement, 1965–92, at 3, at http://escholarship.org/uc/item/6k64g20f#page-1.
- 30.
Id.
- 31.
See Caperis et. al., supra, at 10 (Los Angeles median rent is $1182, only slightly below New York City median rent of $1228).
- 32.
See Edward L. Glaeser, Joseph Gyourko, and Raven Saks, Why is Manhattan So Expensive? Regulation and the Rise in Housing Prices 4, http://www.nber.org/papers/w10124.pdf. It could be argued that land costs are an independent factor justifying high housing costs. This argument lacks merit because a landowner can always reduce per-unit housing costs by building more housing units on the same tract of land. Id. at 5 (in the absence of regulation, “builders always can add an extra floor if that would be profitable. Thus, to understand the marginal physical cost of building a new apartment we do not need to consider land purchase or preparation costs, as these are fixed costs which do not influence the marginal cost of building up.”)
- 33.
Id. at 6.
- 34.
Id. at 16.
- 35.
See City Data, supra (comparing purchase prices); See National Association of Home Builders, Housing Opportunity Index, at http://www.nahb.org/en/research/housing-economics/housing-indexes/housing-opportunity-index.aspx (listing housing costs for most metropolitan areas) (“HOI”).
- 36.
See Glaeser et. al., supra, at 23.
- 37.
See Kim-Mai Cutler, How Burrowing Owls Lead to Vomiting Anarchists (Or SF’s Housing Crisis Explained), http://techcrunch.com/2014/04/14/sf-housing/
- 38.
See Glaeser et. al., supra, at 23.
- 39.
Id. at 50; see also, Zoning Rules, supra at 297 (noting nationwide trend of more restrictive zoning in recent decades).
- 40.
Sheila Dewan, In Many Cities, Rent is Rising Out of Reach of Middle Class, New York Times, Apr. 14, 2014, at http://www.nytimes.com/2014/04/15/business/more-renters-find-30-affordability-ratio-unattainable.html. See also Cutler, supra (citing numerous commentators with similar views).
- 41.
In fairness, the activists may have intended the term “affordable housing” to mean “government- or nonprofit-subsidized housing for the poor” (a usage common in urban planning circles) rather than to mean lower rents for all.
- 42.
Dewan, supra (“as long as there are plenty of upper-income renters looking for apartments, there is little incentive to build anything other than expensive units”). A related argument is that places with lots of new construction tend to have higher rents. See Tom Lehman et. al., Why Rents Rise, in John Ingram Gilderbloom, ed., Invisible City: Poverty, Housing and New Urbanism 47, 59, 63 (2008) (regression analysis shows positive correlation between “% rental created 1995–2000” and higher rents, and speculating that this is because of “the pressure to recapture the cost of construction”). But even the authors of the Lehman essay admit that zoning “rules [that] can limit the amount of housing built in a city…are likely to cause rents to increase.” Id. at 50. Moreover, an alternative explanation may exist for correlations between new housing and higher rents: if landowners can get higher rents for property, they might be more eager to invest in rental housing.
- 43.
See Daniel Meyler, Is Growth Share Working for New Jersey? 13 N.Y.U. J. Legis. & Pub. Pol’y 219, 230–31 (2010) (explaining concept). I note that in low-demand, declining areas, filtering may work too well: the market price of housing may be so low that the market rent is lower than the price of maintaining an apartment, causing widespread abandonment of housing by landlords. Cf. David Reiss, Housing Abandonment and New York City’s Response, 22 N.Y.U. Rev. L. & Soc. Change 783, 786–87 (1991) (under certain circumstances, abandonment may be cheaper than renting to low-income tenants). It logically follows that even in the least expensive cities, government subsidies may be necessary to provide housing for the very poorest renters.
- 44.
This information is based on easily replicated searches at Zillow.com. I note that the newest one-bedroom unit I found for rent in Kansas City, built in 2008, also rented for $1200, perhaps because it was in the heart of downtown Kansas City and thus more valuable.
- 45.
See, e.g., Tim Redmond, Editor’s Notes, San Francisco Bay Guardian Online, Feb. 21, 2012, http://www.sfbg.com/2012/02/21/editors-notes (“in a city that has limited space and nearly unlimited demand…There’s no way to build enough new affordable rental housing, or housing that middle-class families can buy, to keep up with the demand.”) A related argument is that housing supply is being soaked up by wealthy foreigners who do not live in the units, but merely use them as places to hoard capital. However, even in high-cost New York City, only 1554 units cost over $5 million and were purchased by absentee owners- a tiny part of the region’s housing supply. See Dana Rubenstein, Could De Blasio do a pied-a-terre tax? at http://www.capitalnewyork.com/article/city-hall/2014/09/8552990/could-de-blasio-do-pied-%C3%A0-terre-tax
- 46.
See National Association of Home Builders, Housing Opportunity Index, at http://www.nahb.org/en/research/housing-economics/housing-indexes/housing-opportunity-index.aspx (fourth quarter 2015 data) (“Complete Listing by Affordability Rank” table). I note that the NAHB categorizes Oakland as a separate metropolitan area; if this was the case, Oakland would be among the five most expensive regions. However, this listing may be inaccurate. See Janssen, supra, at 613 (listing San Francisco and Oakland as part of same region).
- 47.
Id. (population statistics).
- 48.
By “major” I mean metropolitan areas with over 800,000 people. Id. (listing areas).
- 49.
Id. at 605.
- 50.
See 2016 abstract, supra, at Table 703.
- 51.
It could be argued that the absolute level of housing prices is less important than the rate of price growth. Here, the pattern is less clear, because median home prices actually decreased in one high-cost region (Honolulu) between 2000 and 2012, and only increased by 2 percent (from $410,000 to $420,000) in another (San Jose). See National Association of Home Builders, The NAHB/Wells Fargo Housing Opportunity Index: Complete History by Metropolitan Area (1991-Current), Mar. 27, 2013 at http://web.archive.org/web/20130527113827/http://www.nahb.org/reference_list.aspx?sectionID=135. On the other hand, home prices doubled in New York (from $195,000 to $400,000), and increased by over 50 percent in Los Angeles (from $194,000 to $295,000). By contrast, in none of the high-growth markets listed above did prices increase over 25 percent. Id. (Raleigh median price increased from $159,000 to $194,000, Austin median from $150,000 to $184,000, Orlando from $112,000 to $115,000; Las Vegas median decreased, and no data available for McAllen).
- 52.
See Streeteasy Market, supra, at 17 (data for third quarter of 2015).
- 53.
See supra note 8 and accompanying text.
- 54.
See Streeteasy Market, supra, at 9 (Manhattan data), 17 (Brooklyn data).
- 55.
See Marc Stiles, New report finds “alarming deterioration” of Seattle apartment market”, Puget Sound Bus. Journal, Dec. 22, 2015, at http://www.bizjournals.com/seattle/morning_call/2015/12/report-finds-alarming-deterioration-of-seattle.html
- 56.
Id.
- 57.
Cf. Chinatown Staff and Workers Ass’n v. City of New York, 502 N.E. 2d 176 (1986) (plaintiffs argued that introducing new housing in neighborhood would lead to displacement of existing residents).
- 58.
See Scott M. Stringer, The Growing Gap: New York’s Housing Affordability Challenge 16, http://comptroller.nyc.gov/wp-content/uploads/documents/Growing_Gap.pdf (adding that number of households with incomes over $100,000 more than doubled in this area).
- 59.
Id. at 17.
- 60.
See supra note 54 and accompanying text.
- 61.
See Jesse Dukeminier et. al., Property 967 (8th ed. 2014) (zoning came about because common law was unable to control harms caused by industrialization such as “factories belching smoke from soft coal, and foul odors”). Of course, this is not the only argument for zoning; however, it seems to me that because this argument relates directly to health and safety, it is the strongest possible argument for zoning. Other arguments for zoning, as will be shown below, are much weaker and should not outweigh the public interest in housing affordability.
- 62.
I use this ratio because numerous authors refer to it as a normal ratio for American housing costs. See, e.g. Chris Martenson, The Crash Course: The Unsustainable Future of Our Economy, Energy and Environment 80 (2011) (suggesting that mid-2000s housing prices were in unsustainable housing bubble, because a “more normal range for housing would be in the range of roughly three times income, while anything over four really begins to stretch things a bit”); Richard Florida, The Great Reset: How New Ways of Living and Working Drive Post-Crash Prosperity 95 (2006).
- 63.
It may seem unusual for a legislature to create different laws for larger cities; however, such classifications are allowed under at least some state constitutions. See, e.g., Colorado Constitution, Art. XIV, Sec. 6 (creating election rules that distinguish between counties with over 70,000 people and smaller counties); Jose R. Legaspi, Harrisburg School District v. Zogby: The Supreme Court of Pennsylvania Concludes It Cannot Countenance A “Closed Class” Created By The Education Empowerment Act, 14 Widener L.J. 619, 629 (2005) (“laws that classify cities and school districts based on population are permissible” in Pennsylvania).
- 64.
Because cities and suburbs compete with each other, such a rule would probably be more effective in reducing housing costs. On the other hand, increasing suburban housing supply might increase the attractiveness of suburbia. Thus, such a proposal involves a trade-off between limiting sprawl and reducing housing costs: a legislature concerned with the former would be reluctant to attack suburban growth controls, while a legislature concerned with the latter would limit zoning in city and suburb alike.
- 65.
See, e.g., Watson v. Mayflower Property, 223 So. 2d 368, 374 (Fla. 4th DCA 1969), writ discharged, 233 So. 2d 390 (Fla. 1970) (upholding density limits based on concerns about congestion).
- 66.
See Glaeser and Kahn, supra at 44 (suburbanites drive more than city residents).
- 67.
See, e.g., Heffernan v. Missoula City Council, 255 P.2d 80, 88, 360 Mont. 207, 214–15 (2011) (city opposed new development based on concern that additional population density “can have a significant negative impact…on neighborhood character”).
- 68.
See Dukeminier et. al., supra, at 970 (one reason for birth of zoning was homeowners’ desire for “insurance that their major asset would not be devalued”).
- 69.
See Krishna Rao, The Rent is Too Damn High, at http://www.zillow.com/research/rent-affordability-2013q4-6681/
- 70.
Id.
- 71.
See Joint Center for Housing Studies, America’s Rental Housing: Expanding Options for Diverse and Growing Demand 40 (defining term “severely burdened”), 42 (26.4 percent of renters “severely burdened”).
- 72.
Id. at 28.
- 73.
See Coalition for the Homeless, State of the Homeless 2015, at http://www.coalitionforthehomeless.org/state-homeless-2015/
- 74.
See Gale Holland, L.A. Leads Nation in Chronically Homeless Population, at http://www.latimes.com/local/california/la-me-homeless-national-numbers-20151120-story.html
- 75.
See, e.g., Bradley Karkkainen, Zoning: A Reply to the Critics, 10 J. Land Use & Envtl. L. 45, 69 (1994) (purchaser of house intends to purchase not only property but “intangible qualities such as neighborhood ambiance, aesthetics, and the physical environment”).
- 76.
Cf. David Schleicher, The City as a Law and Economic Subject, 2010 U. Ill. L. Rev. 1507, 1508–09 (2010) (describing theory) (“Law and Economic”).
- 77.
Which is not always the case. Zoning decisions are often low visibility: if a small number of people persuade the city to adopt a policy by attending a sparsely attended meeting, this result might not reflect the opinions of the electorate as a whole. Cf. Freedom Baptist Church of Delaware County v. Township of Middletown, 204 F. Supp. 2d 857, 867 (E.D. Pa. 2002) (noting “undeniably low visibility of land regulation decisions”).
- 78.
Or upon the region as a whole. See Law and Economic, supra, at 1512 (suggesting that anti-density regulation imposes economic costs on region as a whole, by reducing “interactions between physically proximate individuals and businesses”).
- 79.
Id. See David N. Schleicher, City Unplanning, 122 Yale L.J. 1670, 1721–23 (2013) (describing idea in more detail) (“Unplanning”).
- 80.
See Roderick M. Hills, Jr. and David N. Schleicher, Balancing The “Zoning Budget”, 62 Case W. Res. L. Rev. 81, 128–29 (2011).
- 81.
Id. at 129.
- 82.
Or community board, in cities where city-appointed boards of neighborhood residents (colloquially known as “community boards”) vote on rezonings. Unplanning, supra, at 1727.
- 83.
Id. at 1727–28.
- 84.
Some currently existing policies are roughly similar to these tax rebates. Some cities allow development if a developer is willing to pay “impact fees” designed to compensate for the harmful externalities caused by development. But impact fees have two weaknesses: first, because the courts require the fees to be related to the need for public services caused by development, developers may sometimes be unable to pay the city enough to get political support for development. Id. at 1729–30. Second, the costs of impact fees are paid by the developer rather than the city, which means that (if the developer passes these costs onto buyers and renters) that such fees may actually increase housing prices. A similar alternative is community benefit agreements (CBAs) between developers and potential opponents of a rezoning; under such agreements, developers provide various benefits in exchange for political support for development. Id. at 1728–30. However, CBA benefits may be costly for developers, who in turn might pass the cost on to renters and buyers.
- 85.
Id. at 1731.
- 86.
See, Zoning Rules supra, at 354–59 (discussing this proposal, as well as other tax-related proposals and encouraging insurance designed to insure homeowners against decreased home prices).
- 87.
See Governing, Homeownership Statistics for Metro Areas, at http://www.governing.com/gov-data/other/homeownership-statistics-data-for-metro-areas.html (listing homeownership rates by region); supra notes 22–26 and accompanying text (describing zoning in these regions’ central cities).
- 88.
See Chapter 3–4.1 supra.
- 89.
See Ross, supra, at 102 (discussing status as motivation for exclusion).
- 90.
Id. at 94 (noting infinite variety of anti-development arguments: “There’s too much parking or too little. If houses are proposed, offices are what the neighborhood needs; if offices, houses would be better. Property values will go down; we will be priced out of our homes.”)
- 91.
Euclid, 262 U.S. at 395.
- 92.
See Zoning Rules, supra, at 93.
- 93.
Penn Central Transp. Co. v. City of New York, 438 U.S. 104, 124 (1978).
- 94.
See, Zoning Rules, supra, at 333–334 (judges deferential to local governments), 345 (explaining difficulty of ascertaining economic losses).
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Lewyn, M. (2017). Sprawl As Where We Grow, Part 2: How Government Prices Americans Out Of Cities. In: Government Intervention and Suburban Sprawl. Palgrave Macmillan, New York. https://doi.org/10.1057/978-1-349-95149-9_3
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