Rules that wreck hous­ing af­ford­abil­ity

Bur­den­some zon­ing reg­u­la­tions raise build­ing costs in the most pro­duc­tive cities

The Washington Times Daily - - OPINION - By Emily Hamil­ton Emily Hamil­ton is a pol­icy re­search man­ager with the Mer­ca­tus Cen­ter at Ge­orge Ma­son Univer­sity and coau­thor of “How Land-Use Reg­u­la­tion Un­der­mines Af­ford­able Hous­ing.”

The White House re­cently re­leased a re­port on hous­ing af­ford­abil­ity, point­ing out that rental rates are ris­ing faster than in­comes in many cities, thanks to a lack of hous­ing sup­ply. Land-use reg­u­la­tions are the do­main of lo­cal gov­ern­ments, but as the Obama ad­min­is­tra­tion ex­plained, zon­ing poli­cies also have na­tional im­por­tance. Wash­ing­to­ni­ans, along with city dwellers across the coun­try, are shoul­der­ing the costs of zon­ing rules in­tended for de­vel­op­ers through higher rents and home prices, even con­tribut­ing to big­ger prob­lems like in­come in­equal­ity and eco­nomic stag­na­tion.

It hasn’t al­ways been this way. The cities of New York, Los An­ge­les and Bos­ton all have one thing in com­mon: They would be il­le­gal to re­build today. Many of their great build­ings are taller, closer to­gether and pro­vide less park­ing than cur­rent laws re­quire. In fact, zon­ing rules that dic­tate what can — and can­not — be built in our cities have grown so re­stric­tive over past decades that any ma­jor project typ­i­cally needs spe­cial ap­proval from city plan­ners.

Nearly half of Amer­i­can renters spend more than 30 per­cent of their in­comes on hous­ing. They make this sac­ri­fice in or­der to live in the cities that of­fer them the best eco­nomic op­por­tu­ni­ties. This is par­tic­u­larly dif­fi­cult for the lower-in­come pop­u­la­tion.

The White House re­port cites Mer­ca­tus Cen­ter re­search by San­ford Ikeda and me on the re­gres­sive ef­fects of land-use reg­u­la­tions, show­ing how zon­ing rules that drive up the cost of hous­ing act as a tax on the low-in­come renters who can least af­ford it. Large lot re­quire­ments, height lim­its and park­ing man­dates also make hous­ing need­lessly ex­pen­sive while of­fer­ing few ben­e­fits.

The White House re­port in­cludes pol­icy rec­om­men­da­tions for mu­nic­i­pal­i­ties, start­ing with the im­por­tance of cre­at­ing a sys­tem of as-of-right de­vel­op­ment. Un­der as-of-right zon­ing rules, a de­vel­oper seek­ing to build some­thing that is in ac­cor­dance with cur­rent zon­ing doesn’t have to go through a dis­cre­tionary re­view process un­der which projects can be ve­toed by plan­ning de­part­ments, city coun­cils or com­mu­nity groups. With­out as-of-right de­vel­op­ment, each new de­vel­op­ment has to go through a lengthy and ex­pen­sive ap­proval process that drives up hous­ing costs.

Wash­ing­ton, D.C., is home to many pro­posed build­ings that take years to re­ceive ap­proval. Since 2000, the Wash­ing­ton Met­ro­pol­i­tan Tran­sit Au­thor­ity has sought to re­de­velop the sprawl­ing sur­face park­ing lot sur­round­ing its Takoma sta­tion. A lo­cal de­vel­oper has sub­mit­ted mul­ti­ple pro­pos­als to build town­houses or apart­ments at the site, but more than a decade later, the Of­fice of Plan­ning has not yet granted zon­ing ap­proval be­cause of neigh­bor­hood op­po­si­tion to ac­com­mo­dat­ing new res­i­dents.

The process that the pro­posed Takoma de­vel­op­ment has gone through is all too com­mon. The costs that de­vel­op­ers in­cur in le­gal fees, de­lay and un­cer­tainty end up be­ing passed on to renters and fu­ture home­buy­ers. San Fran­cisco, for ex­am­ple, has the most con­strained hous­ing mar­ket in the coun­try. Har­vard econ­o­mist Ed­ward Glaeser es­ti­mates that more than 50 per­cent of the city’s hous­ing costs are due to reg­u­la­tory con­straints alone. With less bur­den­some reg­u­la­tions, a $3,000 a month San Fran­cisco apart­ment could be rented for as lit­tle as $1,500.

These rules also ef­fect the econ­omy as a whole. The coun­try’s most pro­duc­tive cities that of­fer the high­est-pay­ing jobs also have some of the high­est hous­ing costs. Res­i­dents of ex­pen­sive cities make bud­getary sac­ri­fices and en­dure long, stress­ful com­mutes in or­der to pur­sue op­por­tu­ni­ties that they hope will im­prove their fam­i­lies’ lives in the long run. But high rents in pros­per­ous cities cause some work­ers to forgo op­por­tu­ni­ties be­cause they sim­ply can’t af­ford to live where the best jobs are. Some Amer­i­cans are stuck in bad jobs or long-term un­em­ploy­ment be­cause they can only af­ford to live in a de­pressed area. Economists Chang-Tai Hsieh and En­rico Moretti es­ti­mate that zon­ing rules in the coun­try’s most pro­duc­tive cities cost Amer­i­cans tril­lions of dol­lars in lost out­put each year.

Pres­i­dent Obama de­serves credit for rec­og­niz­ing a se­ri­ous eco­nomic prob­lem that is es­cap­ing our at­ten­tion. What’s hap­pen­ing in Takoma is hap­pen­ing in every ex­pen­sive city in the coun­try, re­sult­ing in lost op­por­tu­ni­ties for the peo­ple who need them the most. Re­forms to city land-use reg­u­la­tions would not only im­prove the lives of lo­cal renters, but could also im­prove eco­nomic growth for the whole coun­try.

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