There has been some controversy about the federal government’s new “Affirmatively Furthering Fair Housing” (AFFH) rule. Supporters hope, and opponents fear, that the rule will integrate lily-white suburbs and eliminate exclusionary zoning. However, there is reason to believe that the rule’s impacts will be fairly minor.

The Department of Housing and Urban Development (HUD) which enacted the rule, did so in order to implement sec. 808(d) of the Fair Housing Act, which requires federal agencies “to administer their programs…relating to housing and urban development…in a manner affirmatively to further” the policies of the Act—in other words, to affirmatively further fair housing.

In the past, HUD has sought to implement this statute by requiring grant recipients (such as local governments and public housing agencies) to draft an analysis of impediments (AI) to fair housing. An AI typically described impediments to racial integration, such as exclusionary zoning and racial disparities in mortgage lending. HUD decided that the AIs were not tremendously successful, because they did not contain enough data and were not adequately linked to other planning documents. (80 Fed. Reg. 42348).

The new rule requires grantees to create a new document called the “Assessment of Fair Housing” (AFH) every five years. The AFH will address a community’s barriers to integrated housing, such as “integration and segregation; racially or ethnically concentrated areas of poverty; disparities in access to opportunity, and disproportionate housing needs based on race, color [and other factors]” (80 Fed. Reg. 42355). The AFH will summarize any current litigation, analyze relevant data, and identify major factors limiting housing opportunity. The grant recipient must also set goals for overcoming the effects of these factors.To receive funding from HUD, a grantee must certify that it will affirmatively further fair housing, which means that it must promise to take meaningful actions to further these goals.  (80 Fed. Reg. 42316).  In other words, the grant recipient has to create paperwork stating: “This is why our city/county/area is more segregated than we would like, and this is what we would like to do about it.”

According to HUD, the new rule will impose increased costs of data collection and paperwork upon municipalities, because municipalities must solicit more community participation than under the prior rule. HUD also suggests that the municipalities that have already been taking their AI obligations seriously “may experience a net decrease in administrative burden as a result of the revised process” (80 Fed. Reg. 42349).

The rule does not require any specific policies; instead, it just requires municipalities to describe the status quo, promise to adopt some sort of policy related to fair housing, and to justify those policies to HUD. Thus, it seems to me unlikely (though not impossible) that HUD will actually force significant changes in municipal policy.

In theory, HUD could keep saying no to a municipal AFH until the city or county adopts far-reaching policy changes, or could deny funding on the ground that the city has violated the promises in its AFH. But I doubt that this will occur, for two reasons. First, if HUD has not been using the AI process to remake cities and suburbs, I question whether it will have the willpower to use its new and improved procedural tools much more aggressively. Second, if HUD went to the edges of its authority, it would be risking fights in the courts and fights with Congress.

(Cross-posted from planetizen.com)

A recent article by Joel Kotkin tries to stir up a stew of resentment about alleged “attacks on suburbia”.  Kotkin’s article is in black; my comments to the article are in gray.

COUNTERING PROGRESSIVES’ ASSAULT ON SUBURBIA

BY JOEL KOTKIN – July 10, 2015

NOT REALLY FALSE, BUT (1) THE ARTICLE KOTKIN LINKS TO (BY WENDELL COX) DEFINES “INNER CORES” REALLY REALLY NARROWLY (BASICALLY, AS JUST DOWNTOWN), AND (2) COX HIMSELF WRITES, IN THAT VERY SAME ARTICLE, ” THE CENTRAL CORES OF THE NATION’S LARGEST CITIES ARE DOING BETTER THAN AT ANY TIME IN RECENT HISTORY. “

(Cross-posted from mlewyn.wordpress.com)

In an excellent blog post, Reuben Duarte explained that many big-city zoning disputes involve a conflict of visions: a “preservation camp” favors preserving neighborhood character at all costs, while an “affordability camp” favors construction of new housing in order to make the city more affordable.

Duarte write that the preservation camp’s interests “hover around preventing evictions of tenants in long-held residences, but also includes the topics of traffic (“this neighborhood can’t support more development, because, traffic!”), parking (replace “traffic” with “parking”), and neighborhood character (“building is too tall or too dense!” “Views!”).”

It seems to me that to the extent government uses preservation as a reason to exclude new housing, arguments based on “neighborhood character” fail on their own terms: either because limiting housing supply itself changes neighborhood character, or because it forces less exclusionary places to change their character.

Zoning restrictions designed to limit traffic create the second problem. For example, suppose a city freezes a neighborhood’s housing supply in order to limit traffic and parking. Other things being equal, fewer households mean fewer cars. So at first glance, this policy has no losers. But if a city or region is adding households, those new households have to go somewhere. And if they don’t go to your neighborhood, they go to another neighborhood, adding cars (and thus traffic/parking problems) to that neighborhood.

To make matters worse, if the frozen neighborhood is more pedestrian-friendly than the “housing-receiving” neighborhood, freezing housing increases traffic everywhere. For example, suppose that the housing moratorium occurs in Pedtown, a neighborhood where 40 percent of households have no car, and 60 percent get to work without driving. The average household excluded by the moratorium moves to Sprawlville, a suburb where only 5 percent of the households have no car, and only 10 percent of them get to work without driving. Obviously, the new Sprawlville households are much more likely to drive cars throughout the region to work, thus increasing regional traffic and parking problems.

But zoning restrictions may also change the character of the neighborhood allegedly benefitting from them. Suppose a city freezes a neighborhood’s housing supply in order to prevent gentrification and the resulting increase in rents. As long as demand is stagnant (for example, in a declining neighborhood) this policy has no real effect: no one will want to build new housing anyhow. But when demand is growing (either because of rising city population or rising city incomes) rents are likely, all else being equal*, to rise in the absence of new construction. If rising rents lead to more evictions, freezing supply is actually likely to lead to more evictions, not fewer evictions. (Of course, I am assuming that the new construction actually increases the neighborhood housing supply, which is not always the case. A new building that merely replaces an old building is obviously more problematic.)**

And if rents rise, that in turn defeats attempts to preserve the intangible “character” of the neighborhood. Even if a neighborhood’s housing stock is frozen in amber, its character will be very different if it becomes more expensive. At a minimum, the inhabitants will be richer. And in turn, this reality will affect the age, race, and even religion of the neighborhood’s inhabitants, to the extent that some races, ages, and religions have more money than others. If the neighborhood has commercial blocks, the shops may look very different if the neighborhood gets wealthier. For example, a street catering to wealthy 50 year olds will have somewhat different shops than one catering to not-so-wealthy 25 year olds.

Moreover, if housing restrictions in one neighborhood cause new housing to be built elsewhere in a region, the “receiving” neighborhood’s character changes. Going back to Pedtown and Sprawlville: if Sprawlville was a rural, sparsely populated suburb in 2000, and zoning restrictions in Pedtown cause dozens of new subdivisions to be built in Sprawlville, obviously Sprawlville will feel very different in 2015. Thus, the restrictions in Pedtown are a classic example of a “beggar thy neighbor” policy—that is, a policy that shifts social harm from one neighborhood to another, rather than actually reducing the harm.

In sum, government sometimes restricts housing to preserve neighborhood character—but if those restrictions keep out new people and raise rents, that neighborhood’s character will still change (albeit in different ways), and shifting populations will change the character of other neighborhoods.

*One huge caveat: this is not the case where supply creates its own demand: that is, where the new housing is so desirable that it not only commands higher rents than the existing housing supply, but also makes the neighborhood as a whole more popular, thus attracting new people even into the existing units. Certainly, a few neighborhoods have become much more desirable in recent decades (for example, New York’s Williamsburg and Greenpoint)—so it could be argued that new housing in Williamsburg and Greenpoint is undesirable because it creates such demand. But this would only be the case if the new housing actually caused the increased demand rather than being a result of the increased demand. Moreover, housing restrictions based on this argument still create the “beggar thy neighbor” problem: if new housing is shifted to another neighborhood or suburb, how do we know that the new housing won’t make that neighborhood more desirable?

**In addition, government can try to avoid this problem by limiting evictions in other ways—but this seems to me to be a separate issue.

(Cross-posted from planetizen.com)

Is zoning racist? After a committee designed to study Seattle’s zoning codes suggested some significant reforms to the city’s code, Mayor Ed Murray said: “In Seattle, we’re also dealing with a pretty horrific history of zoning based on race, and there’s residue of that still in place.” Even if this remark is factually true, it doesn’t mean that today’s zoning is racist: low-density zoning exists in black neighborhoods as well as white ones, and opposition to changing such zoning crosses color lines.

But it seems to me that even though zoning is not consistently or intentionally racist, zoning is similar to racist housing discrimination (or “RHD” for short) in a few ways. Both involve a politically influential dominant class (in one case, whites generally; in the other case, homeowners of all colors) who have the votes to impose their will on the political process. In both situations, the dominators use their political power to exclude someone else from its neighborhood; racists usually seek to exclude blacks, while pro-zoning homeowners usually seek to exclude new residents regardless of color (to the extent that zoning is designed to exclude housing smaller or more compact than the status quo, such as smaller houses or multifamily dwellings).*

Both RHD and low-density zoning do, on balance, exclude blacks more than whites—though of course RHD does so much more consistently. One purpose of zoning is to raise housing prices (or, as courts and homeowners euphemistically say, “values”). And higher housing prices mean higher rents, which means that everyone has to pay more for less. If you don’t have any money, you are obviously going to suffer more from that policy than someone who has plenty of money, since the difference between having a small apartment and sleeping on the street is a bit more significant than the difference between having a 8000-square-foot mansion and a 12,000-square-foot mansion. And since blacks tend to have less money than whites, on balance blacks are going to suffer a little more than whites from these policies, just as they are going to suffer more from any tax imposed without ability to pay (for example, an increase in bus fares).**

RHD and low-density zoning are motivated by the same concern: fear of change in neighborhood character. Homeowners believe that new housing will change neighborhood character—and even if such housing does not have any tangible negative impact, this of course is the case. A neighborhood with ten houses per acre obviously looks and feels different than a neighborhood with one house per acre.

I suspect that racists similarly believe that an influx of blacks into their neighborhood will lead to crime, poor schools, and of course lower property prices—but even if they didn’t believe this, racists might believe that a neighborhood where they have to look at black faces on a regular basis has a different character from one where they don’t. Certainly, other forms of illegal discrimination affect neighborhood character: for example, a neighborhood full of Orthodox Jews has a very different character than an equally affluent neighborhood that does not, in that stores will be closed on the Jewish Sabbath and restaurants will comply with traditional Jewish dietary laws.

More importantly, both RHD and low-density zoning are rational for an individual neighborhood but perhaps irrational for a city, region or nation as a whole. A racist in the pre-Fair Housing era no doubt wanted to live in an all-white neighborhood, and even non-racist homeowners might have rationally favored RHD because they did not want to take a chance that integration would lead to unwelcome change. But the widespread adoption of fair housing legislation suggests that many whites did not welcome the nationwide results of rigid segregation.

Low-density zoning is more clearly rational for an individual neighborhood. After all, what homeowner would not like his home to be worth a little more, and what homeowner really wants his neighborhood to change (even in intangible ways)? But if no one liberalizes their zoning enough to accommodate new residents, rents explode, and a city’s prospective residents are either priced out of the city or forced to live on the streets.

So what? Why should we care about these similarities? It seems to me that if RHD and zoning have similar results, maybe they should be attacked with similar remedies. RHD was not eliminated by allowing neighborhoods to discriminate a tiny bit less than they had discriminated in the past or by requiring only a few neighborhoods to cease discrimination. Instead, Congress and state legislatures responded with a meat ax: the Fair Housing Act generally prohibits housing discrimination, and has only a few narrow exemptions. Maybe state legislatures in high-cost states should use a similar meat ax in addressing zoning.

*As opposed to commercial and industrial enterprises, or houses larger than the neighborhood norm.

**On the other hand, to the extent that higher home prices increase property tax revenue, and property tax revenue means better government services, poorer people (and thus blacks) may get a countervailing benefit from better government services—if the extra revenue goes to services that disproportionately benefit the poor (a very big IF).

(Cross-posted from planetizen.com)

This argument seems to be to be based on two assumptions that are at best unprovable:

1.  Washington is just attractive enough to attract foreign demand if height limits are lifted. Since I don’t know of any evidence of a surge in foreign investment in the Washington suburbs (which lack height limits) this seems hard to believe.

It could be argued that the blocks near Congress or the White House are so prestigious that they have an attraction that the District of Columbia’s more urban suburbs lack. Even if this was true, it seems to me that (a) this is not true of most of the District, and (b) if it was true, the District’s townhouses and existing stock of mid-rise buildings would be just as attractive to the rich foreigners as high-rises.

2.   Rich foreigners will only invest in urban high-rise condos (as opposed to other types of buildings). This argument could be true in theory, but I don’t see any evidence that this is the case. In fact, at least some low-rise areas are attractive to foreign buyers; for example, 41 percent of trulia.com searches in Los Angeles’s suburban Bel Air district come from foreigners, as opposed to 13 percent of searches in Los Angeles generally. Thus, it seems to me that if a well-off area lacks foreign demand absent high-rises, high-rises will not create such demand.

(Cross-posted from cnu.org)

I just received a email newsletter raising the decades-old argument that public transit gets too much federal support because transit gets 20 percent of federal funding for surface transportation, but its share of trips and transportation mileage is far lower.

One obvious retort to this argument is environmental: highway spending, by encouraging automobile travel to car-dependent places, increases vehicle miles traveled (VMT), thus increasing pollution—not just greenhouse gas pollution, but also more heavily regulated types of pollution such as carbon monoxide and particulate matter. To the extent that highway spending increases such social harms, one dollar of spending may be one dollar too much, let alone the tens of billions of dollars currently devoted to roads.

In addition, highway spending can create other negative side effects: for example, where jobs track new highways but public transit does not, a “spatial mismatch” exists between the pre-highway population and jobs; population was located in more urban areas, but the highway has shifted jobs into outer suburbs and exurbs. To the extent people react to this spatial mismatch by buying cars and driving more, they have suffered additional costs caused by government action. To the extent people too poor to buy cars cannot reach work, they have suffered an even more severe cost: the loss of job opportunities.

Furthermore, the “20 percent” argument overlooks both the impact of past spending and the existence of current non-transportation policies that effectively subsidize highways and sprawl.

In the first half of the 20th century, government at all levels spent liberally on highway, but streetcars (the leading mode of public transit in most of the United States) were a private industry, which meant that government’s job was to tax and regulate it. So in many places, roads got not only the money devoted to roads, but also the implicit subsidy that government created by taxing and regulating the competition. And over the course of the 20th century, transit received far less than 20 percent of government transportation spending.

What about the past 50 years? Even if one pretends that history began with the urban transit legislation of the 1960s, government effectively subsidizes highways and sprawl in at least two major respects: zoning and education.

As a rule, zoning effectively makes sprawl easy and infill development difficult. If a developer builds a subdivision in the middle of nowhere, it will usually be able to get government permission because there will be no neighbors around to object, and municipal legislators will thus decide that the project is noncontroversial.

By contrast, if someone wants to densify an existing neighborhood, there will be plenty of neighbors around to object. As a result, community opposition will often lead cities to reject new development, since neighbors of a project vote and the project’s potential residents and customers do not. Even where infill development is allowed, cities limit density through minimum lot size, parking and setback requirements, all of which limit the number of residences, shops or offices that can be built per acre of land.

Because transit systems tend to be centered on downtown, limitations on infill development force new housing into areas that are automobile-dependent. Thus, zoning laws encourage driving and discourage transit use, thereby increasing VMT and increasing gas tax revenue. Thus, the costs of zoning are an (admittedly nonquantifiable) subway for highways.

The public education system also indirectly subsidizes highways. American school attendance laws require children to attend public schools in the municipality of their residence. Municipalities which are near downtown (and thus likely to have the best transit service) tend to be demographically diverse. Because the public education system tends to have difficulty educating children from disadvantaged backgrounds, such jurisdictions tend to have less prestigious public schools than car-oriented suburbs. Thus, American parents are more likely to favor car-oriented places than would be the case in a nation without government-run schools (or one where school attendance zones were drawn differently), which in turn means more driving and more gas tax revenue. This subsidy too is difficult to quantify, because not all government spending on education is on prestigious suburban schools.

In sum, government favors driving in a wide variety of ways beyond current spending on highways. As a result, the real amount of social spending and regulation favoring driving is far beyond the billions of dollars currently spent on highways, which in turn may mean that the real “spending gap” between highways and transit may exceed the 4-1 ratio between highway and transit spending.

In the recent case of Loughead v. Buckhead Investment Partners, a group of Houston, Texas, homeowners filed a common-law nuisance action to prevent a developer from building an apartment building in their neighborhood; the plaintiffs asserted (among other claims) that the apartments caused increased traffic—a claim that would be true of any new housing. Under the law of nuisance, a landowner may recover damages whenever another person uses their land in a manner that causes substantial, unreasonable harm to other landowners. A jury awarded the plaintiffs damages in December 2013, and the verdict will be appealed.

The landowners sued for nuisance because Houston has no zoning code and the city could therefore not legally exclude the apartments—but at common law, something permitted by zoning can still be an actionable nuisance. So if the Loughead action is upheld on appeal, landowners all over the country may become more willing to file nuisance actions to keep out multifamily housing (or for that matter, any other allegedly undesirable land use).

It seems to me that states should prohibit nuisance claims against new multifamily housing (either through state legislation or through judicial decisionmaking), for three reasons.

First, the public policy in favor of affordable rental housing dictates against such actions. Throughout the United States, there is a rental housing shortage. Between 2000 and 2013, median household income has increased by 25.4 percent, while rent has increased by 52.8 percent. The explosion in rental costs has not been limited to gentrifying, traditionally high-cost cities such as San Francisco and New York. For example, in Hattiesburg, Mississippi, rents increased from 20 percent of household income in 1979 to 35.2 percent in 2013. The explosion in rents is in large part the result of increased demand for rental property; tighter credit standards and stagnant wages have kept would-be homeowners from buying houses and forced them to rent instead. The supply of multifamily housing has increased, but not fast enough to keep up with increased demand: the national rental vacancy rate (8.3 percent) is at its lowest point since 2000.

If (as in the Loughead action) homeowners are allowed to use nuisance law to keep multifamily housing out of their neighborhoods, the shortage of rental housing is likely to get worse, causing rents to continue rising. If would-be landlords can only build in places far from single-family homes, the possible supply of land available for multifamily housing will decrease, and the number of new units will decrease.

Second, the public interest in promoting infill should bar such nuisance suits. Because most land is zoned for single-family housing, most of urban America is near a single-family neighborhood. In Houston, for example, single-family housing takes up 67 percent of all land and 95 percent of land used for housing. Even in relatively dense Boston, single-family housing takes up 56 percent of all land and 88 percent of land used for housing. So if apartments near single-family homes were a nuisance, almost every new apartment building in the United States would be a nuisance. If apartments could be built at all, they could only be built in “greenfield” locations—that is, in exurban places far from existing development. But the public interest favors building multifamily housing in existing urban neighborhoods and inner suburbs, especially if those neighborhoods are near downtown and/or densely developed. Existing neighborhoods near downtown tend to be less dependent on automobiles than greenfields, for two reasons. First, transit networks have historically been centered near downtown business districts so neighborhoods near downtowns tend to have the most convenient transit service and the highest transit ridership. Second, compact neighborhoods tend to have higher transit ridership than thinly populated places; if only a few houses can be built on a block near public transit, only a few houses can access such transit. Neighborhoods near downtown tend to be more compact, and thus can support more transit service. It follows that if new housing is built in unpopulated greenfields, the residents of this new housing will be more likely to drive and less likely to use other modes of transportation, thus increasing citywide congestion and pollution. And since renters tend to be poorer than owners, they are less likely to be able to afford the added costs that come from living in automobile-dependent neighborhoods.

Third, in cities with zoning, the public interest in orderly planning should support strict limits on nuisance actions designed to stop new development. (Obviously, this argument does not apply to Houston, which lacks zoning.) One purpose of zoning is to allow cities to create an orderly plan of development for the entire city, as opposed to just one land owner or group of landowners. But if anyone who dislikes an apartment building (or any other controversial land use) can file for nuisance, the location of land uses can be determined by a small number of landowner plaintiffs and by juries, neither of whom are as likely to be as familiar with citywide interests as a city council or zoning board.

Admittedly, land use in cities with zoning is already heavily influenced by “Not In My Back Yard” (NIMBY) activists. So why is nuisance NIMBYism worse than zoning NIMBYism? Zoning decisions are usually made by elected officials, who are unlikely to limit development unless some critical mass of NIMBYs want to stop it. By contrast, just one landowner can file a nuisance action, even if the landowner’s own neighborhood does not oppose the new development. So if nuisance actions are used to create yet another form of “NIMBY veto,” citywide interests become even less important in the land use process.

The Loughead plaintiffs argue that their suit is necessary to prevent their neighborhood from being deluged with traffic. I don’t find this argument persuasive even in Houston, because if new residents and their cars are kept out of one neighborhood, they will merely create traffic somewhere else, and will probably wind up driving their cars through the plaintiffs’ neighborhood. But even if this argument is sensible in Houston, it does not justify nuisance actions in cities with zoning. In those places, arguments about traffic, noise, etc., should be made before city councils and zoning boards, who can balance neighborhood concerns against broader citywide interests.

The public benefits of Airbnb (a website allowing people to rent out rooms in their houses and apartments) seem fairly obvious to me. Visitors and new movers can pay less for their lodging by renting a room in someone’s apartment than by renting a hotel room, thus enabling longer trips, thus enabling city economies to benefit from more tourism. So it might appear that Airbnb might make housing more affordable, at least for visitors and movers.

But the hotel lobby and a variety of other opponents have sought to shut down Airbnb, especially in high-cost cities like New York and San Francisco where it competes most effectively with hotels.

For example, Sen. Dianne Feinstein (whose is in the hotel business)* has written an op-ed arguing that Airbnb allows landlords to “vacate their units and rent them out to hotel users, further increasing the cost of living.”

In other words, Airnbnb opponents see lodging as a zero-sum game: what benefits visitors must harm existing renters. By this logic, govenrment should just outlaw hotels, since every hotel unit is a potential apartment.

More seriously, the zero-sum argument assumes that every room rented to a visitor would otherwise be rented to a roommate. But the two “products” are not reasonably interchangeable; roommates involve advantages (such as familiarity and a regular rent check every month) and disadvantages (such as a 365-day relationship) that differ from those of Airbnb “temporary roommates.”**

Moreover, the supply of Airbnb rooms is actually pretty limited; for example, I just searched for Airbnb rooms in San Francisco renting for under $100 (and thus cheaper than most private hotels) and found a grand total of 486 rooms (not counting entire apartments, which compete more with ordinary landlords than with hotels). When I searched for rooms cheaper than the cheapest hotel on hotels.com, I found only 74 rentals- hardly enough to affect housing prices.  In less expensive cities, Airbnb is even less popular and thus even less likely to affect housing supply; for example, in Houston, I found only 139 rentals for less than $100.

Feinstein argues that renters should at least be kept out of single-family neighborhoods, because temporary renters would create “a blanket commercialization of our neighborhoods. ” This argument makes no sense to me; renting a room in a house for a night is no more “commercial” than renting the whole house for a year.  In both situations, someone is paying for lodging.

*In the interests of full disclosure, I note that I am an occasional Airbnb customer and thus have a small financial interest in this issue myself).

**I realize that this argument is slightly less absurd when the Airbnb host is renting out an entire house or apartment, since this “product” is more similar to a traditional tenancy.