The Cost of Zoning

After years of getting grief, mostly from the left, for its eschewing of zoning and land-use ordinances that more "enlightened" places like San Francisco and Portland are so famous for, residents of Houston are reaping the benefits of their historical Laissez Faire approach:

Houston's gains are nothing like those seen in the past decade in
the Northeast and California, but that may be the secret to Houston's
success and the reason a bubble is unlikely to develop here. Land here
is abundant, and the city has some of the least-restrictive land-use
and construction rules in the nation. Those factors help supply to keep
pace with demand and keep prices within reach of a broad range of
potential buyers.

"We haven't had a bad year in the past decade," says Lorraine
Abercrombie, chairwoman of the local Realtors group and marketing
director for Greenwood King Properties.

Houston's model is in stark contrast to cities such as Boston and
San Francisco, which have strict zoning, exacting building codes and
laws governing historical preservation. Some economists, including
Edward Glaeser of Harvard University, say excessive regulation in such
cities has slowed construction to the point where demand has
outstripped supply, fueling a run-up in home prices.

In the once-sizzling markets where home prices are falling, housing
costs are double, triple or even quadruple those of Houston. The
danger, says Dr. Glaeser, is such places have priced out today's highly
skilled "knowledge workers," forcing them to live in a more affordable
locale where their contribution to the economy might not be as great.
"These are places where only the elite can live," Dr. Glaeser says.

This issue is one of those great examples of the statist game to enlarge government.  Step 1:  Progressives argue for having government restrict land use and implement tight zoning.  Step 2:  Housing prices skyrocket, enriching the elite and making it tough for ordinary workers to own housing.  Step 3:  Progressives decry that lack of affordable housing represents a 'market failure' that must be addressed with more regulation.  For example, builders in the SF Bay Area are required to sell X number of below market rate 'affordable' homes for every Y homes they sell at market rates.  Step 4:  Builders costs go up from the new regulations, further reducing supply and increasing prices.  And the cycle just repeats, as bad outcomes from government regulation are blamed on free markets, and used to justify more regulation.

Here is a trick to try -- every time you see the word "sprawl" in an article, replace it with "affordable housing."  It makes for interesting reading.

Hat tip to Tom Kirkendall, who runs a great blog in Houston.

  • Excellent point! A couple of years back I read a report on the effects of rent control laws on varying cities in the U.S. and how rent control helps to create black markets, encourage corruption and leads to inflated increases in rents. It blew my mind. I think the report was from the CATO institute. Governmental regulation at just about every turn destroys local economies. I am both a beneficiary and a victim of rent control in that I lived in a unit at rent control rates and it was nice getting more for less, until the place needs repairs from aging, etc. Then the owner doesn't want to put in the proper resources to fix it up until I move out. If I move out, I will no doubt pay more in rent no matter where I go due to the high cost of building new developments, thanks to rent control and zoning. I'm in L.A. too so you know its bad out here.

    The people have to keep government out of the private sector at all costs. Great post.

  • faultolerant

    Bravo for Houston!

    There are up- and down-sides to every equation, however. Travelling to Houston fairly frequently one thing that does stand out: the city is an absolute mess. You'll have a lovely home (Obviously Big$$) next door to a hovel, next door to a liquor store, next door to....you get the picture. Of course, if that's what turns you on, then it's a dream come true!

    In Dallas we have lots and lots of little cookie-cutter communities. What's worse, even under the guise of "Private Deed Restrictions" there are builders/developers raping their buyers with stupid shit like "Private School Foundations" and other such nonsense.

    Oh well....that's the market for you.

  • Houston is often cited as an example that new urbanists are wrong about sprawl being the unnatural result of market-interfering regulations (zoning), but there are enough other regulations in Houston that effectively mandate low-density car-dependent development that you essentially get all the sprawl of a typical metropolitan area, just without the strict separation of uses.

    More here: http://mdahmus.monkeysystems.com/blog/archives/000363.html

  • Oh and as for housing costs - Houston shows what can happen if you have no geographic barriers, no interest in land preservation, and an excessive investment in highway capacity: you get very very very cheap housing, but you end up spending so much money and time on transportation that you're really not any better off: http://houstonstrategies.blogspot.com/2005/07/misleading-stpp-stats-on.html

    (note the link is from a skeptic - but it's fairly obviously a hand-wave; the STPP site itself is a PDF).

    Those land-use policies (or lack thereof in one case) can more than make up for any zoning effect.