“Housing production is up, and rents do indeed appear to be falling. But the effects of Minneapolis’ particular means of eliminating single-family-only zoning, and allowing up to triplexes on residential land citywide, have been exceedingly modest.
Newly legal triplexes and duplexes make up a tiny fraction of new homes being built. Other less headline-grabbing reforms appear to be doing the Lord’s work of boosting housing production.”
“Wittenberg credits the city’s elimination of parking minimums—which had typically required one parking spot per housing unit—with facilitating increased construction of smaller apartment buildings.
The city has been chipping away at residential parking minimums since 2009. The Minneapolis 2040 plan eliminated them entirely. (The city has also adopted some rather un-free market parking policies, including parking maximums in some areas and bike parking minimums.)
Data culled by Wittenberg, and shared with Reason, shows that 19 major projects have been approved by Minneapolis’ Planning Commission since parking minimums were eliminated. The median project provided .42 residential parking spaces per unit, with smaller apartment buildings typically including even less parking.
“For site constraint reasons and economic reasons, it would have been hard to park those buildings at one parking space per unit,” he says. “We’re pretty clearly seeing that is making a significant difference.”
In January 2021, Minneapolis also implemented additional parts of the 2040 Minneapolis comprehensive plan that allows for larger, denser apartment buildings in more of the city, particularly along commercial corridors and near public transit stops. That’s also helped facilitate more development, says Wittenberg.
Flisrand, on Twitter, argues that the fight over eliminating single-family-zoning sucked up most of the attention in the Minneapolis 2040 debate, thus paving the way for more impactful policies like parking minimum elimination and commercial corridor upzoning.”
“One also doesn’t want to learn the wrong lesson that eliminating single-family zoning is the only supply increasing reform cities need to adopt.
There’s a certain current of thought on the political left—represented most prominently by Rep. Alexandria Ocasio-Cortez (D–N.Y.)—that supports eliminating single-family zoning in wealthy neighborhoods while also expressing extreme skepticism of denser private, market-rate development elsewhere in the city
But legalizing the latter type of development, at least in Minneapolis’s experience, appears to go a lot farther in actually producing more housing units and holding down rents.
More and more jurisdictions across the country are catching on to the fact that their zoning laws are strangling housing production and driving up housing costs, and moving to make changes.”
“Pittsburgh is expanding on a remarkably straightforward approach to creating new affordable housing: Force private developers to build it.
On Tuesday, the Pittsburgh City Council unanimously passed an ordinance expanding preexisting requirements that developers include below-market-rate units in their projects to more areas of the city. Now, builders of 20 or more units in Pittsburgh’s Polish Hill and Bloomfield neighborhoods must offer at least 10 percent of those new units at affordable rates to lower-income buyers and renters.
These types of “inclusionary zoning” policies are common across New Jersey, California, and the Washington, D.C., metro area. Supporters argue they ensure that existing residents see some benefit from new, luxury developments going up in their neighborhoods.
“There are imminent developments that could reshape our neighborhood, and we want to be able to preserve a balanced approach to development that ensures people of all income levels can find a home,” said John Rhoades of the Polish Hill Community Association to TribLIVE earlier this month.
Critics of inclusionary zoning say that even the best-designed policies have a poor record of creating new housing while raising overall housing costs. The theory is that developers raise rents on market-rate units to cover the lost revenue from the discounted, affordable apartments they’re required to build.
“It effectively becomes taxation on housing,” says Jim Eichenlaub, executive director of the Builders Association of Metropolitan Pittsburgh, to Reason. “You’re taxing those other units to pay for the subsidy.” Eichenlaub adds that if the market couldn’t support those higher rents, then the project probably wouldn’t have been built in the first place.”
“The nation’s affordable housing crisis has gotten some semblance of attention — with journalists writing stories on the rising cost of rent, the scarce supply of new housing, the looming threat of eviction — but one aspect of the crisis has gone consistently overlooked. On top of the severe housing shortage that currently exists, nearly 6 million homes nationwide have moderate to serious home health hazards. They require repairs that, if left ignored, will make them uninhabitable, and eventually they’ll disappear from the market altogether.
The National Low Income Housing Coalition, a research and advocacy group, estimates a shortage of 7 million affordable housing units for low-income renters, but those figures don’t account for all the existing affordable units that stand at risk of demolition.
Issues like lead paint, leaky roofs, and knob-and-tube wiring don’t just leave tenants and homeowners in substandard, unsafe housing. They also leave families — mostly poor families — shut out from energy efficiency programs the federal government already funds to upgrade homes. Due to inflexible program restrictions, homes with outstanding repairs aren’t eligible for existing weatherization subsidies, despite those families arguably needing them the most. Addressing this problem could help solve both the affordable housing and the climate crisis at once.”
“Pruitt-Igoe represented complete racial and economic segregation. The building was dominated by single mother households that symbolized the collateral damage of public assistance. This was described by sociologist Lee Rainwater, in his book Behind Ghetto Walls: Life in a Federally-Subsidized Slum, “Only those Negroes who are desperate for housing are willing to live in Pruitt-Igoe.” When imploded, the buildings weren’t even two decades old.
The problems that toppled Pruitt-Igoe do not go nearly far enough to capture the deeply mistaken assumptions about government housing policy whose bad ideas continue today.
After clearing seedy areas, housing reformers who pushed for Pruitt-Igoe assumed that the neighborhoods they replaced were irredeemably bad and required what Architectural Forum magazine called, in 1957, “slum surgery.” In reality, the DeSoto-Carr neighborhood—like Chicago’s Bronzeville, Detroit’s Black Bottom, and New York’s East Harlem—contained small businesses, community institutions (such as a St. Louis hospital financed by African-American philanthropy) manufacturing, and, most notably, owner-occupied homes. Of the housing units cleared, according to the Census Bureau, 21 percent of the properties had “nonwhite owners.” What’s more, an additional 25 percent of those included rental units. It offered, in other words, a path to wealth accumulation through property ownership—a path wiped out by public housing.
Implicit in that heedless clearance was the idea that the private market inevitably fails to produce housing for those of modest means. In her landmark 1934 book Modern Housing, housing reformer, Catherine Bauer, wrote “The premises underlying the most successful forward-pointing housing developments are not the premises of capitalism [or] inviolate private property.” It was no coincidence that Bauer also included photographs of government-owned apartments in Soviet Moscow.
The design of Pruitt-Igoe’s modernist garden of towers would, instead, reflect the reformer’s hubris that planners, financed by government, could build a better neighborhood.”
“In a truly rare turn of events, California’s successful approach to legalizing more types of housing is serving as inspiration for reforms elsewhere in the country.
Over the past several years, lawmakers in the Golden State have passed a suite of bills that make it much easier for homeowners to build accessory dwelling units (ADUs), sometimes called granny flats or in-law suites, on their property, while also making it harder for local governments to stop such construction.
It’s proven to be one of the few YIMBY (yes, in my backyard)-inspired zoning reforms that has actually led to more housing being built. Now other states and cities with their own affordability crunches are passing or considering their own ADU deregulations.
Last week, New York Gov. Kathy Hochul, a Democrat, released her 200-page State of the State legislative agenda. Among other things, it took a swipe at local rules that prevent homeowners from turning their garage or attic into a new housing unit.
ADUs “can provide an affordable multi-generational housing option that helps families live closer together,” reads the State of the State book. “Current land use restrictions prevent homeowners in some communities from building ADUs.”
The governor’s agenda says she’ll propose legislation that would require localities to allow at least one ADU on owner-occupied residential lots. This legislation, per the agenda, would also prevent localities from adopting rules that legalize ADUs on paper, but prevent their construction in practice.
That reflects a lesson learned from California’s ADU experience, where state laws allowing homeowners to build a backyard apartment have technically been on the books since the 1980s.
For decades, however, cities were able to stop them from being built by imposing infeasible requirements that they come with off-street parking, be a minimum size, or receive special, discretionary permits in order to be built.
It took the passage of several additional bills between 2016 and 2019 limiting what localities could require of ADUs, and then several lawsuits to actually enforce those new rules, to really kick off new ADU construction.
The results have been pretty amazing so far.”
“To be sure, neither California’s nor New York’s high housing costs are going to be completely solved by more granny flats. But these reforms are an important piece of the puzzle.”
“Another housing development in St. Paul, Minnesota, is on hold after losing its financing partner this week.
On Monday, the St. Paul Pioneer Press reported that developer Alatus had a previously-committed equity partner renege on its commitment to invest $23 million in a proposed 304-unit project in the city’s Frogtown neighborhood. Two other investors who had proposed preliminary financing terms for the project—in which half the units would be rented out at below-market rates—have also walked away.
The reason? St. Paul’s newly-passed rent control ordinance, which Alatus’ principals say is making their once-eager investors skittish about doing business in the city.”
“It’s a near-universal consensus—held in common by progressive policy wonks, radical free marketeers, and the three most recent presidential administrations—that America’s highest-cost cities are so unaffordable because government zoning regulations prevent enough new housing from being built.
So why are a growing number of politicians, wonks, and pundits suddenly embracing a policy that’s been long maligned for further reducing the supply of housing?
The argument from rent control proponents boils down to the need to create short-term stability for renters. That will then, hopefully, give cities some breathing room to get to work on fixing their pressing supply issues.”
“That study looked at a 1994 San Francisco ballot initiative that expanded preexisting rent controls to cover four-unit apartment buildings constructed prior to 1980, but which exempts four-unit apartments built after 1980.
That created something of a natural experiment on the effects of rent control.
The Stanford study concluded that tenants living in the older, rent-controlled buildings were 10–20 percent more likely to stay at their same address than people living in newer, unregulated buildings. The study also concluded that the expansion of rent control caused a 15 percent decline in the availability of rental housing among affected units.
In short, there’s a clear tradeoff in rent control policies between creating stability for existing tenants and preserving and expanding rental housing supply for new tenants. The goal of politicians, according to some, should be to strike the right balance between the two.”
“We actually have a good, real example of what this balance striking in the real world looks like: San Francisco.
The rent stabilization ordinance that’s been in place in San Francisco since 1979, and which the Stanford study examined, has all the features Demsas would want in a well-designed rent control policy: post-1979 construction is exempt from price controls, landlords can raise rents by the lesser of 60 percent of yearly inflation or 7 percent, and there’s vacancy decontrol.
Some 40 percent of San Francisco’s housing stock is covered by these rules. Another 9 percent is deed-restricted affordable housing, meaning that rents can’t generally consume more than 30 percent of tenants’ pretax earnings.
That leaves only 16 percent of housing stock in the city where rents follow the ebb and flow of market forces. (That was at least the case prior to January 2020, when California’s statewide rent control law went into effect.)
The result is, again, San Francisco; a synonym for housing dysfunction and unaffordability. That obviously makes it a place that’s antagonistically expensive to newcomers. Copious amounts of rent control also haven’t stopped it from ranking first among American cities in some measurements for gentrification and displacement, either.”
“Rent control is always going to disincentivize housing construction, regardless of how tight or loose the zoning code is. Repealing zoning restrictions will allow for more housing. It will also make the supply-killing effects of rent control all the more apparent and relevant.”
“Rent control also could disincentivize renters—who should be natural proponents of new housing construction—from supporting zoning reforms.
If government price controls are keeping your rent stable, you have much less of an incentive to support new market-rate construction. At best, it would just be doing more of the same. At worst, it would be adding more construction noise, more traffic, and, God forbid, more shadows.
Indeed, rent-controlled tenants have an incentive to oppose any rezoning on the grounds that it might make their own rental unit a candidate for redevelopment. They’re at risk of losing the below-market rents they’re currently being charged.”
“if rent control isn’t the answer to short-term housing affordability issues and displacement, what is? I’d argue it’s zoning reform, and, failing that, federalism.
New housing units, even if they’re really expensive housing units, act almost immediately to lower the costs of rent for everyone. That addresses both affordability and displacement in the short-term thanks to the magic of the “moving chain.”
When a new “luxury” apartment comes online (and basically all new construction is high-cost “luxury” housing), it’s often filled by a high-income person who moves from his previous, older apartment building in the city. His now-vacant home is then snapped up by a middle-income person who leaves behind an even older unit that a third, lower-income person can now move into.
Follow this “moving chain” back far enough, and soon enough you see that each new unit of luxury housing is freeing up lots of housing in the lowest-cost, lowest-income neighborhoods in the city. That presumably puts downward pressure on prices and displacement.”
“An August 2021 paper from Finnish researchers looking at moving chains in Helsinki found that for every 100 new market-rate apartments built in the city center, “29 units get created through vacancy in bottom-quintile income zip codes and 60 units in bottom-half income zip codes” within two years.”
“Research by economist Evan Mast on the effects of luxury apartment construction in 12 American cities has also found that new, pricey units open up more housing options for middle- and lower-income neighborhoods.”
“relying on rent control to keep that renter in the same home comes at the expense of new housing supply, which in turn raises rents for everyone else in the city and prevents others from moving there entirely.”
“all of these policies share a problem if enacted as the exclusive solution to rising rents. As economists often stress, rent control fails to address the core issue of why housing is so expensive to begin with: lack of supply. In particular, states and cities have a bevy of rules and regulations regarding what kind and size of new homes can be built that overwhelmingly make it illegal or unprofitable to build small single-family homes, multi-family homes, and dense neighborhoods.”
“Rent control should be understood as a remedy for displacement, rather than a solution to the spiraling cost of housing. It’s best as a measure that can help keep current tenants from being displaced from their neighborhoods”
“It’s become abundantly clear that even if states do begin to build more homes, it will take years if not decades to rebalance supply and make housing more affordable, and in the meantime millions of families will continue to suffer. Economists are right to be worried about the ways rent control could worsen the housing crisis, but rent control can work.”
“A well-designed rent control policy exists in tandem with eliminating exclusionary zoning laws, reducing the cost of housing construction, and providing universal vouchers to help low-income tenants afford their rent.”
“To encourage people to still build more homes, it is important to exempt future construction from rent control and to allow landlords to increase rents annually by a moderate sum tied to inflation. Policymakers also want to make sure there are incentives to keep existing rental stock well-maintained; one way to do so is by allowing for vacancy decontrol so that when a tenant moves out, a landlord can upgrade the unit and charge a higher rent to the next tenant.”
“When it comes to worries that rent control policies might increase evictions (both formal and informal) as landlords are motivated by profit to convert to condos or force their tenants to vacate so they can renovate, the answer is that, similarly to all types of abuses of power in the market, there needs to be more oversight. A few policies that cities and states should enact are:
Just cause eviction statutes, which would require the landlord to justify kicking a tenant out of the property. The government can define what a reasonable justification is, including but not limited to failure to pay rent, desire to add another tenant to the renter’s lease, violation of lease terms, illegal activity, etc.
Right to counsel to ensure that tenants are not just getting steamrolled in these types of hearings. Numerous studies have pointed to the fact that the vast majority of tenants are going unrepresented by counsel.
A rental registry to keep track of tenants and landlords. One of the biggest factors leading to informal evictions is that the power imbalance between very low-income tenants and landlords leads the former to simply comply when told to leave their home, even if they have the right to stay. By creating a rental registry, landlords will know that their lease terms are being monitored by local officials and that they will be easily caught if they informally or illegally evict tenants in order to get around rent control laws.”
“Skeptics will correctly note that implementing all these ideas would increase the costs of renting out properties, which might push some landlords toward condo conversions or away from developing new units. That’s why it’s important to simultaneously make it cheaper and easier to build and renovate housing. As almost all urban economists have noted, the primary constraint on housing supply in America’s cities and suburbs is the regulatory morass that drives up the cost of developing and producing new homes and makes it nearly impossible for a landlord to extract multiple rents from a single lot by building multi-family housing.”
“In a new working paper from the National Bureau of Economic Research, researchers found rampant racial discrimination in American rental markets — specifically, that property managers are less likely to respond to prospective Black and Hispanic tenants when they inquire about open listings.
Using a software bot, the economists sent inquiries from fake renters to 8,476 property managers in the 50 largest US metropolitan housing markets. The bot assigned names to fictitious renters that would indicate whether the race of the inquirer was white, Black, or Hispanic.
The bot found that names perceived to be white got a response 5.6 percentage points more than Black-sounding names, and 2.8 percentage points more than Hispanic-sounding names.”
“You might be familiar with résumé studies where researchers will send in identical résumés with just one thing changed, such as a 2003 study by economists Marianne Bertrand and Sendhil Mullainathan that showed résumés with names perceived as Black received 50 percent fewer callbacks than those with white-sounding names.”
“In what might seem like a Christmas miracle come early, the San Francisco Board of Supervisors is considering not one, but two, bills that would legalize lower density “missing middle” housing across the city.
Competing proposals introduced by Supervisors Gordon Mar and Rafael Mandelson would both allow the construction of four-unit homes (or fourplexes) on all residentially zoned land citywide. Combined with state-level reforms from earlier this year that make it easier to divide residential plots in half, both bills could theoretically allow up to eight primary residences where only one was permitted before.”
“Unfortunately, the two proposals also include micromanaging regulations that would lead to less missing middle housing being built than a more hands-off free-market approach would produce.
Mar’s bill would permit up to four units of housing on all current Residential House zones, which currently allow between one and three homes. That sounds like a pretty sweeping reform. But there’s a catch.
Mar’s bill would require the new units to be rented out or sold at rates that are affordable to someone making 100 percent of “area median income.” The San Francisco Chronicle, which first reported on the bill, notes that the current area median income in the city is $106,550 for a couple or $133,200 for a family of four.
Affordable monthly rent for a family making that amount of money would shake out to be $2,664, according to a press release from Mar’s office—$2,000 less than pre-pandemic market-rate rents for a typical two-bedroom apartment.”
“Consider what happened in Austin, Texas. In 2019, the city technically abolished single-family-only zoning when it created the Affordability Unlocked program, which allows developers to build larger projects with more units and fewer parking spaces in exchange for making the new homes affordable to lower-income people. Specifically, it allows the construction of up to eight units of housing in single-family-zoned areas. But to build those extra units, a developer would have to make as much as 75 percent of the new units affordable to people earning below area median income, include a certain number of two-bedroom units, and adopt a host of tenant protections.
As a result, few Affordability Unlocked projects have been built in single-family zones. Those that have required substantial subsidies from the city government.”
“Mandelman’s fourplex legalization bill looks like laissez faire in comparison. It allows the construction of fourplexes citywide, without any of the affordability requirements in Mar’s bill.
Nevertheless, it would require newly legal fourplexes to be built at densities no larger than what the city’s current zoning allows for three-unit homes. (Mar’s proposal has the same density restrictions.) According to Hamilton, that means Mandelman’s bill is more suited for permitting triplexes than the fourplexes it technically allows.”
“Over the course of the pandemic, home prices have skyrocketed; the underlying issue is simply that there are not enough homes for the people who need them (in particular in the places where people need to live for their jobs). This supply crisis is forcing a growing number of people to bid on a small number of available homes, thus increasing prices.
But not all “housing investments” are created equal. Generally, there are two ways you can attack an affordability crisis: 1) You work to make the item itself less expensive (supply-side policies), or 2) You give people more money to be able to afford the item (demand-side policies).
Both have their place in policymaking. But if you pursue demand-side policies when you are facing a massive supply shortage, you end up increasing prices, not decreasing them. And the nation is facing an estimated 3.8 million unit shortage.”
“The major constraint on building housing in the places where people are demanding it the most is zoning laws. These laws restrict what kinds of homes can be built and where, and regulate the size of homes to the point that smaller or “starter” homes are becoming incredibly scarce. For instance, a law mandating that lots of land be no less than 4,000 square feet means that starter homes (smaller than 1,400 square feet) are illegal. The history behind these laws is complicated, but essentially they are a way for some homeowners to block change in their communities, and in their original form were a tool of segregationists.
Beyond even small, single-family homes, it is illegal in most of the United States to build duplexes or small apartment buildings that could bring down the cost of housing. The White House has repeatedly acknowledged this problem, but in the Build Back Better bill, Democrats have metaphorically thrown up their hands, abrogating responsibility for the driving force behind skyrocketing home prices.
The best way to have tackled this problem would have been to tie the dollars in the bipartisan infrastructure framework to zoning reform. Iowa law professor Greg Shill suggested tying existing highway dollars to zoning reform, quipping that “there’s no reason Iowans should be subsidizing a highway from Silicon Valley to SF when the Valley makes it illegal to build homes under $1M.”
Essentially, if California wants federal dollars to build highways or transit, it’s going to need to reform policies like parking minimums and minimum lot sizes to get it. Instead, states are being handed money from the federal government to construct transportation networks that exclude large swaths of the American public from using them.
The federal government has held highway funding hostage for other reasons in the past — notably was the 1984 National Minimum Drinking Age Act, which “requires that States prohibit persons under 21 years of age from purchasing or publicly possessing alcoholic beverages as a condition of receiving State highway funds.” President Ronald Reagan also conditioned highway dollars on setting a national minimum speed limit; this was later repealed, which one study shows may have cost over 12,500 lives
If Democrats are serious about attacking housing inflation, they should put real money into incentivizing states to hold localities accountable. States are ultimately in control of local zoning policy “