Rethinking Zoning to Increase Affordable Housing | Hacker News Reader

Rethinking Zoning to Increase Affordable Housing

nahro.org

41 pointsmadihaa72 comments

While zoning restrictions can limit housing supply, the dramatic house price increases observed globally are better explained by monetary policy, particularly historically low interest rates. This is evidenced by simultaneous price increases across jurisdictions with vastly different zoning laws. When interest rates fell to historic lows, monthly mortgage payments became more affordable, leading to increased buying power and competition across all markets - even those with flexible zoning. The rapid price changes following interest rate shifts, compared to the gradual effect of zoning policies, demonstrates that monetary policy is the dominant factor in recent price trends.

> evidenced by simultaneous price increases across jurisdictions with vastly different zoning laws

“Only in particular areas, especially New York City and California, do housing prices diverge substantially from the costs of new construction. The bulk of the evidence examined indicates that zoning and other land use controls are responsible for prices in high cost areas of the country” [1].

Inflation has raised construction costs; climate change the cost of homeownership. Beyond that, it’s almost all zoning.

> rapid price changes following interest rate shifts

Prices didn’t fall when the Fed spiked rates. The monetary-first hypothesis for housing requires epicycles to gain explanatory power over zoning.

Our housing crisis is a political choice.

[1] https://realestate.wharton.upenn.edu/working-papers/the-impa...

Prices didn’t fall as much as a simple model would predict, but sales volume fell a lot. IMO, that was driven by sellers withdrawing from the market, because they weren’t willing (or perhaps able) to sell for what buyers were able to qualify for mortgages to pay.

https://tradingeconomics.com/united-states/existing-home-sal...

There is also a zoning and policy effect, of course, but it’s a mistake to think that mortgage rates do not inversely influence transaction prices.

> Prices didn’t fall as much as a simple model would predict, but sales volume fell a lot

Sure. Anyone running a pricing model and not considering refinancing costs for marginal sellers—and financing costs for marginal buyers—isn’t describing reality. (Refinancing dynamics are heavily studied.)

> also a zoning and policy effect, of course, but it’s a mistake to think that mortgage rates do not inversely influence transaction prices

Nobody said they don’t. Just that the effect isn’t meaningful compared to zoning. The monetary hypothesis seems predicated on the effects of rates on home prices being symmetric, i.e. if low rates caused prices to go up, by enabling buyers to borrow more quickly than builders could borrow and build, high rates should do the inverse. But symmetry isn’t required in economics, e.g. wage stickiness.

There are a bunch of reasons why monetary policy didn’t flow through to pricing. We can debate that fruitfully. What shouldn’t be debated is that it hasn’t. Raising rates won’t fix this problem because it hasn’t. Fixing zoning will. (Do we even have an example from abroad of a housing crisis being fixed with monetary policy? Versus directly manipulating supply and/or demand?)

Construction cost may be a poisoned data source, does it take into account real estate purchasing costs? Or do individuals only build when they can afford a home at a price point greater than the 75th percentile home price in metros?

> This is evidenced by simultaneous price increases across jurisdictions with vastly different zoning laws.

The rate is not the same.

If house prices are nominally higher, but I can get money more cheaply, that doesn't seem like it would have much effect on the price I pay in terms of hours worked.

Without the zoning restrictions monetary policy would have a negligible effect. In the 80s interest rates were 15%+ but there was far less restrictive zoning and housing was incredibly cheap. Unrestricted was the default and zoning was loosely defined where it existed at all. The permitting and inspection process was minimal or even non-existent. The 90s were the decade of extreme NIMBYISM, zoning everywhere and arduous inspection processes.

> In the 80s ... Unrestricted was the default and zoning was loosely defined where it existed at all.

Umm, pardon? Zoning was well-defined by the 1980s. A lot of post-war development was deliberately zoned single-family detached housing, for example.

The suburban and exurban sprawl in the 80s was driven by developers chasing unrestricted zoning. Sure zoning was defined in metro areas but there was a ton of cheap housing available and a major development boom in the areas that allowed it.

Now even very rural and remote places will in many cases have restrictive zoning and arduous permitting processes.

If you look at other countries you see that unsustainable housing price increases are happening everywhere. So yeah your local assholes at the permit and planning department are probably a symptom of the deeper finance driven problem.

We got rid of capital controls and stopped putting limits on what fiat money loans could be used for and a global housing shortage is the result. 50 years ago you couldn't directly borrow from the fed to invest London commercial real estate. More like you could borrow money from a local bank to build an apartment complex in the same city the bank was located in. And if you wanted to build an apartment complex in a different state you'd need to use a different bank.

Visiting a friend in nashville and just learned of a weird loophole called a horizontal property regime. She technically only owns the land under her home but the backyard and driveway is shared with her neighbor under a “HOA” with 50% ownership exactly and zero fees.

https://www.steinberglawfirm.com/blog/what-is-a-horizontal-p...

Apparently they are all over town since the 2010s instead of waiting to split a large lot into two.

The biggest problem is the gigantic list of rules government has created called "Code" that means you can only build homes in one, very expensive, way. This is the result of giving too much power to government bureaucrats and letting them build up thousands of pages of red tape.

Each individual "code" is valid and has a sensible reason for being, but the entire combination means the cost grows. Compare the modern house to one found in the 1930's!

> has a sensible reason for being

Maybe, but sometimes it is just that they "had" a reason which is no longer relevant.

Other times, the reason is protecting high paying union jobs. (e.g. requirements for copper plumbing and electrical conduit)

In some cases like here in Canada, many fire codes were written in the 30s and haven’t been significantly refactored since. For example, Canadian code says you need two stairwells for buildings with two or more floors. That substantially increases costs, reduces floor space, and encodes particular building design requirements. Think of how many building designs this inherently excludes (ie. single staircase brownstones.) Then realize that in 2024, we have sufficient technology where a second staircase perhaps isn’t the best first choice.

Code and zoning is ripe for a rewrite. It would maybe the most significant change to affordability in our lifetimes.

I saw a video about this comparing Seattle’s more modern code to Vancouver’s. I think it was this one https://www.youtube.com/watch?v=iRdwXQb7CfM&t=27s

Seattle still doesn’t have enough housing, but the relaxed stairwell requirement helps.

Regulations are written in blood! (by people with lead poisoning who used cocaine for medicine)

In the US, people have been complaining about this for 100 years. I haven't found any successes yet. I suspect it's because it's a demand problem, not a supply one. Make high-demand areas less attractive and low-demand areas more attractive.

> Make high-demand areas less attractive and low-demand areas more attractive

Figure out how to sell Atherton on affordable housing and the Bronx on gentrification and you’ll have a solution.

Places where many people already live will always be the most attractive. You are not going to solve this by trying to even out population density. Trying to manipulate demand with anything is almost always a losing approach.

You don't have to overcomplicate things. Supply less than demand > price goes up. Increase supply > price goes down. The data shows the same pattern over and over again[1]. See Japan as an international example or Minneapolis[2] and Austin[3] as US examples.

[1] https://deny.substack.com/p/tracking-the-anglo-worlds-housin...

[2] https://www.ft.com/content/86836af4-6b52-49e8-a8f0-8aec6181d...

[3] https://archive.ph/X3zAx

> Trying to manipulate demand with anything is almost always a losing approach.

There goes the entire marketing industry. And taxes on cigarettes.

"almost always". Yes, advertising being the main exception. Kind of hard to change demand for homes.

"trying to manipulate demand with anything is almost always a losing approach"

> The exception being the demand manipulating industry that is used every day by every product being sold to consumers

What would a Venn diagram of these two categories look like.

Those are the three examples everyone uses, but I thought those were pretty weak so I didn't include them. In fact, I was curious enough that I looked up comparable homes to mine in both Austin and Minneapolis, and the house prices were practically the same.

So, 100 years, and three weak successes (if you can call them that) - doesn't sound like a winning strategy.

A demand view gives other routes to explore, at least.

Zoning is a scapegoat that allows us to avoid thinking critically about the "fuzzier" complexities behind housing prices. Of course it may be a primary driver of rising prices in some areas, but I think it's simple-minded to assume (and misleading to claim) that zoning is the cause of high prices in general.

> it's simple-minded to assume (and misleading to claim) that zoning is the cause of high prices in general

Why? Almost all the evidence points to this. And it makes intuitive sense. Take builder financing costs and add 2 years of reviews (super optimistic!) and you’ve added tens if not hundreds of thousands of dollars to the cost per unit.

> it may be a primary driver of rising prices in some areas

Value or population weight your data. Nobody is complaining about a housing shortage in rural New Mexico.

the data shows over and over again that the issue is lack of supply. Zoning is the main roadblock to changing that. I don't know why you would assume people are not thinking critically about this.

... strictly speaking it's not about the actual zones or whatnot.

for example standard reference/model/template plans should not require long permitting over and over and over and over again.

(and, yes, of course this is a fundamental problem of the extremely fucked up overly-procedural lawsuit-prone US regulatory regime, zoning, NEPA, etc. see also vetocracy, tragedy of the anticommons.)

Not having enough housing where people want to live is the cause of high prices in general. Zoning and other overly burdensome land use regulations are the cause of that. It really is that simple. Let people build more housing and prices will decrease.

I'm not going to say zoning isn't a problem, but the article admits "Minneapolis, for instance, experienced limited development after eliminating single-family zoning."

I think the problem is less about zoning and due more to the number of people around who can build houses. Everyone went off to college to be a white collar worker and there just isn't a lot of plumbers and electricians per capita anymore. And that's not easy to fix. You can't even import these sort of people because of licensing, bonding, insurance, etc regulations that exist on these blue collar workers now. It's an uphill battle trying to change any of those regulations too, because insurance companies will fight you.

> And that's not easy to fix.

no, but the simplest fix is to increase the wages of those trades - which is currently what is happening, and also why the expense of building is growing. Unfortunately, this fix takes a long time to take effect (approx. a generation).

A friend of mine wanted to be an electrician, but once he realized he'd be working minimum wage in an apprenticeship for four years, he went back to school for a white collar job instead.

That's the real bottleneck.

So instead of doing minimum wage during training, he opted to go into negative wage (debt), and the potential outcome is not higher with a collage degree.

I think it’s worse than a single generation because you need wages to be competitive for long enough that people are encouraging their children to try it. A good decade won’t do that, and especially not without improvements in our healthcare and retirement systems since physical trades are harder and the richer boomers are pushing to deal with the savings gap by raising the retirement age for everyone younger than them rather than restoring taxes to actuarily-necessary levels. Being a plumber at 60 isn’t for everyone.

You can make it easier to supply housing, but you also need demand. I don’t expect there is terribly high demand for housing in Minneapolis. Especially compared to the cities with the highest rates of housing shortages.

>I don’t expect there is terribly high demand for housing in Minneapolis.

Why not? Why wouldn't people want to live a city with such beautiful weather year-round??? /s

You might be surprised. The population of Minneapolis grew 12.4% in the 2010s. That's higher than NYC has grown in any decade since the 30s and higher than Houston, Dallas, and Phoenix. It's no Austin or Orlando, but…

Though, in fairness, that's after a lot of decades of little to no growth. The population of the city of Minneapolis is still less than it was in the 50s. (Though the metro area has grown steadily.)

A lot of construction workers left the industry during the 2008 crash, and the way talent grows (via apprenticeships) we were bound to have a shortage during the current boom. If we could even out the boom bust nature of the industry, maybe we could lead to more stable availability of trades talent.

Yes! And poor people are kept out of the market (aka not in my neighborhood) with housing associations and property taxes (a fine for merely trying to have something nice).

A lot of people are incentivized to keep these rules in place to keep their property values up. Artificial scarcity hurts those not in the game the most.

Local governments are particularly incentivized to keep prices high because it means more revenue without an increase in services demand.

What’s the reason for minimum set back rules? Is it just aesthetics

Aesthetics is a lot of it, but also the ability to build things like sidewalks or other public infrastructure. If people can build up to the property line, you’re going to have a hard time making many neighborhoods accessible or healthy without having to move structures.

I don’t think I’ve ever seen a neighborhood that made any particular public accessible use of the area between the sidewalk and the buildings. There are occasional utility easements, but those don’t need much space. Some neighborhoods have no fences and let pedestrians walk between the houses. Other than that, setbacks seem to be mostly for aesthetics and front yards.

It’s definitely both but it comes up all of the time where I live because the white-flight suburbs didn’t have that and either don’t have sidewalks at all or have these tiny sidewalks which aren’t contiguous and any attempt to fill the gaps or widen them to be comfortable for wheelchairs or strollers has problems with built structures.

Also for light and shadow management. This is most pronounced in Manhattan where tall vertical buildings right at the property line would create deep dark canyons. This is still true (to a much lesser extent) in suburbia.

This is absolutely true, but also another way of saying: "Housing is expensive because people who make the rules want it expensive. People who make the rules want it expensive because they own houses."

To solve this you either have to convince homeowners to not want what they want, or get non homeowners to vote.

Neither solution is really tenable. People vote where their money is and non-homeowners -- a minority in the U.S. -- are subject to externalities which prevent them from forming efficient voting blocks.

The most realistic path out of this situation is that homeownership becomes increasingly inaccessible to the point where it hurts more people than it helps (i.e.: when the majority of voters cannot afford to own property). This will take a long time on the macro scale, considering the current 65% homeownership rate and the generational nature of property transfers. The micro scale will change faster wherever unattainable homeownership is already the reality, but it will ultimately be bottlenecked by state-level legislation. City governments lack the resources/authority to meaningfully incentivize developers or otherwise remove obsolete building codes.

An alternate way of phrasing that is "citizens cooperate to preserve and increase the value of their biggest asset--their homes."

Sure, your home price would be reduced if somebody could build a pig farm, or a heavy-metal processing plant next to your house.

And it's not just an advantage for people who already own houses. Imagine how much of a down-payment you'd have to have--and how expensive mortgages would be--if the banker had no assurances that the value of your house wouldn't suddenly plunge to zero.

People can't afford houses because they are not making enough money. The solution isn't to make their biggest asset less valuable. And the solution isn't to make owning such a large asset even more risky to own.

That can be easily dealt with by graded industry/farm zones. As this report clearly notes, it has usually been done to practice racism under disguise.

> The solution isn't ...

so what _is_ the solution then? Because people aren't making enough money, and this is unlikely to change any time soon. The value of a person's economic contribution is decreasing, as more automation and more AI is introduced. The old method to "counter" automation was population growth, but it isn't happening as much today.

> if somebody could build a pig farm, or a heavy-metal processing plant next to your house.

This is called a strawman. Please try better arguments.

People love to talk absurd nonsense about how zoning reform is a slippery slope to having toxic uranium mines dug next to their driveway.

What they really mean is "There will be more traffic, less parking, more noise, more public transit blah blah if someone builds a 3-storey apartment building in my neighborhood." It's understandable to desire this not happen but, like, you don't own the street, and you don't own the lot next door. Stop getting the government to impose your personal preferences on other people's property. If you want the neighborhood to stay unchanged, buy it and do what you want. Neighborhoods are for people to live in. Any zoning reform that allows them to do so safely and comfortably (note: but not necessarily stay the same) should be allowed.

And a suburban housing development would be a stupid place to put a pig farm or heavy-metal processing plant anyway.

Maybe that's what people complain about where you live. In my city folks complain about having to live next to "the poors". The only thing keeping their property values up is not living next to poor people. It's beyond the pale.

>In my city folks complain about having to live next to "the poors"

That's exactly what the real issue is almost everywhere in America where there's resistance to changing zoning code. All the other stuff is just strawman arguments so these people don't have to openly admit that they don't want to live next to "those people".

I was being charitable to the person I responded to. But also, high-end condo complexes don't bring "the poors" and yet cause problems for single family home owners living nearby.

I can’t use government to impose my personal preferences, but government exists to impose collective preferences.

We prefer to not have murders, so we make a law. We prefer to not have thefts, so we make a law. Land use policies don’t seem so different.

> to impose collective preferences

So why is zoning a city issue? Homelessness, poverty, and blight are a national concern. Let's do it federally, right?

> Land use policies don’t seem so different [from murder and theft]

I'm astonished that you'd make that comparison but whatever. Land use policies strike at the very foundation of property rights. In a way, they are theft. For the collective good, most people agree that some policies are necessary and important. But they've been weaponized to enrich a few at the expense of the many - the very opposite of collective good.

> Let's do it federally, right?

Find a way to fit it into the enumerated powers of the federal government? Then sure.

I’d hope that land would never be considered interstate commerce, but after recent rulings, I’m not sure the Constitution is even readable by the Court any more.

Legalism when it's something you disagree with, but "collective preference" when it's something you agree with.

The collective preference or legalism that’s in effect currently is that zoning is not a federal power.

For those who would prefer to change the status quo, there’s a documented process to recenter the country onto a new collective preference.

For the vast majority of citizens the most valuable asset they own is the future income earning potential of their own body and the value of that asset is being siphoned away through ever more expensive housing.

The irony is that this is true even for current homeowners who are betting on the rise of their home values, because past homeowners made housing more expensive than it needs to be and current homeowners are now stuck with large 30 year mortgages.

If people made more money it wouldn’t help

You have 100 houses and 200 people wanting to live there. They out of each other until they run out of money

Double the wages and it just means they can bid more, and those already owning the houses have more value in their assets.

You either need to reduce demand or increase supply.

The government is the cause of most of the things people complain about:

- high housing — zoning and government mortgages, low interest, etc

- high student debt — guaranteed loans, unnecessary pushing of college to the detriment of trade schools,etc

The list goes on. Sadly people are in denial and want more intervention.

The government is the problem only in the sense that it could fix these things, but refuses to. If you waved a magic wand and disappeared zoning laws then you'd get the other end of asinine layouts. Instead of pathologic low-density you'd have a Kowloon Walled City hodgepodge that maximizes business interests over livability. Likewise if you just stopped guaranteeing student loans you'd end up with a less educated population as people were priced out of higher learning and pushed right into trades or service work. An educated populace is a hard prerequisite for a functioning democracy, and for a developed economy. Current solutions are bad, but removing them would make things even worse unless they were replaced with better-managed city planning and some other method to guarantee access to education.

Water is wet.

its mafia racketeering thats increasing prices, lack of government oversight (due to them being the mafia) and algorithmic price fixing. youre welcome. all this talk about monetary policy, supply and demand, and interest rates is cute.

and where is your evidence for this conspiracy theory? I have an unending amount of data that shows it's a supply issue.

having been labeled a conspirator, i decline! you see, having been placed in that detestable set, my words would mean nothing, even if i wanted them to. but i see a small opportunity still yet to salvage something from this quagmire. for you have in your possession "an unending amount of data"... show me the power of market forces!!!

> my words would mean nothing

your words might not mean much but evidence would. I can only assume that you don't have any otherwise.

> for you have in your possession "an unending amount of data"... show me the power of market forces!!!

see my other comment: https://news.ycombinator.com/item?id=42515602

[1] https://news.ycombinator.com/item?id=41452781

[2] https://news.ycombinator.com/item?id=41330007

rental price fixing (not sales)

some other related facts

in australia

- you can buy a house for cash no questions asked (not 100% sure if this changed in 2006 or not with AML/CTF Act and whether or not real estate agents are bound by it or if they have found a way to ignore it in practice).

- politicians can declare no interest in property, but have their (declared) trust take care of (undeclared) property matters for them.

- one or two monopoly real estate aggregator services dominate the industry (one of them owned by murdoch - and frankly anything that guy has a hand in is trash, [3] https://www.crikey.com.au/2023/08/30/murdoch-century-many-wa...)

whole industry looks corrupt, hence my largely negative and aggravated response to anything regarding real estate.

perhaps you are correct.

that supply and demand is the simple formula for determining prices, but if that is the case, there is no incentive to remove barriers on supply. everyone with an interest in the industry is invested in having prices go up indefinitely.

i dont know why people continue with simplistic debates about one or two issues without looking at the larger picture. sure supply and demand. yay. costs of materials and labour. yay. no one wants to look at market manipulation, when its quite possible and in fact likely that is an issue as well. which brings me back to my OP, which i stated in fewer words but you triggered me into writing all this extra crap.

> everyone with an interest in the industry is invested in having prices go up indefinitely.

You're missing a huge group - homeowners. NIMBY homeowners are a huge driving factor in things never changing. They vote against anything that would help the housing crisis because they only care about their home prices (or sorry - the "character" of the neighborhood).

It doesn't even make sense that industry is against building more housing - how do you imagine they make money if they don't do what they make money from - building?

> no one wants to look at market manipulation

because no one (including you) has any evidence it's a significant issue.

Reply on news.ycombinator.com