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)

A few months ago, I blogged about the impact of Airbnb on rents for traditional month-to-month or year-to-year tenancies. I suggested that this impact was pretty minimal, reasoning as follows: even in a large city such as Los Angeles, Airbnb units are less than 1 percent of all rental units. So even if every single Airbnb unit would (in the absence of Airbnb) otherwise be part of the traditional rental market, Airbnb is unlikely to increase rents in that market.

The comments (and a recent San Francisco Chronicle story) raised an interesting response to my theory: what matters isn’t the percentage of all rental units, but the percentage of all rental vacancies or all new housing units. In the words of the Chronicle story: “where a typical year sees just 2,000 new units added, a few hundred units off the market makes a significant dent.”

But as I thought about the argument, I was less and less persuaded by it. Here’s why: first, the number of vacancies is limited to new housing units. San Francisco has just over 236,000 rental housing units. The units other than the new units are not owned by their current owners or occupants forever: rather, they shift around from occupied to unoccupied as tenants move, and as owner-occupants become landlords or vice versa. So the number of units vacant at any given point in time is a bit higher than the 2000 figure, and the number of units that become vacant at some point over the next year or two will be higher still.

Second, it seems to me that a few hundred units will have little effect upon overall vacancy rates, which in turn means that they will have little effect upon rents. A recent report by the Furman Center [pdf] (affiliated with New York University) lists rental vacancy rates of eleven cities (p.8). San Francisco has the lowest vacancy rate (2.5 percent) and the highest rent ($1491). Boston, New York and Los Angeles are in a virtual three-way tie for second lowest vacancy rate (between 3.4 and 3.5 percent). These three cities are numbers 3-5 in rents (p. 10). (Washington is no. 5 in vacancies but no. 2 in rents, perhaps because Washington is a more affluent city).* At the other end of the spectrum, the two cheapest cities, Houston and Dallas, were no. 10 and no. 9 in rental vacancies. In sum, there seems to be a pretty strong correlation between vacancy rates and rental rates. Since the law of supply and demand suggests that a small supply normally leads to high prices for any commodity, I suspect that this correlation indicates a causal relationship.

The Chronicle story states that “at least 350 entire properties listed on Airbnb …appear to be full-time vacation rentals, bolstering claims by activists that the services remove scarce housing from the city’s limited inventory.” So what would San Francisco’s vacancy rate be if these 350 Airbnb units were used for traditional year-to-year rentals instead of shorter tenancies? According to the Furman Center report, there are just over 236,000 rental units in San Francisco (p.40) which means that (assuming the 2.5 percent vacancy rate mentioned above) there are about 5900 rental vacancies. According to the Chronicle story, Airbnb takes 350 rental units off the traditional rental market by turning them into short-term tenancies. So if government compelled those owners to turn their units into year-to-year tenancies, there would perhaps be 6250 rental vacancies. So the rental vacancy rate would be…2.64 percent, still significantly lower than those paragons of affordability New York and Los Angeles. So if the effect of the 350 units upon vacancy rates is that small, it seems to me that their effect upon rents will be that small.

One broader point is what the entire discussion shows about the growth of government regulation of housing. Government uses zoning to artificially constrict the supply of housing (or, in politicianspeak, “protect neighborhoods from overdevelopment”). This in turn causes a housing shortage which leads to higher rents. The higher rents in turn lead to additional government regulation, such as rent control, inclusionary zoning, or (in the case of Airbnb) efforts to prevent property owners from shifting property from the traditional rental market from other markets. In sum, government regulation of housing feeds upon itself.

*The median household income for Washington’s renters was just over $46,000, about $5-6,000 higher than the comparable figures for Boston and New York.

(Cross-posted from planetizen.com)

 (Cross-posted from planetizen.com)