- We Need an Abundance Agenda
- Feeding 8 Billion People Has Never Been Easier
- The Greatness of Growth
- Testing Freedom
- A Successful Abundance Agenda Must Address Americans’ Anxieties
- Time to End the Manufactured Shortages in K-12 Education
- The Abundance Agenda: A Radical Response to Populist Protectionism
- Why We Need To Achieve Housing Abundance
- Getting to Housing Abundance in the Shadow of History
- Making Transportation Faster, Cheaper and Safer
- General-Purpose Technologies Are Key To Unleashing Economic Growth
- Zoning Out American Families
- Abundance Is About More Than Stuff
- Prometheus Unbound
- High Anxiety, Low Abundance
- An Abundance Agenda Promotes Social Mobility
- The Role of Sound Monetary Policy in an Abundance Agenda
- The Abundance Agenda: Energy, the Master Resource
In the first part of this essay, I argued that the benefits of pursuing housing abundance via a major regulatory reform effort greatly outweigh the costs. Indeed, it is hard to imagine an abundance agenda succeeding without tackling the problem of housing scarcity. In this part, I’ll discuss how land use regulation limits housing supply and what reforms might best lead to greater housing abundance.
How Land Use Regulation Works
Several thousand cities, counties, towns and villages regulate the possible uses and building dimensions of almost all land in the U.S. The word “zoning” is a shorthand for the many overlapping regulations governing use and dimensions. Unlike building codes, which are mostly the same nationwide, zoning codes have a bewildering variety, even within the same jurisdiction.
Zoning codes usually list every conceivable land use—“two-family living,” “bowling alleys,” “manufacture of electric devices,” “bakery stores”—making them predictably bulky. Any use not explicitly allowed by a zoning code is presumably prohibited.
Dimensional regulations crisscross each property with imaginary lines that the owner cannot build across, including height limits and minimum setbacks from each property line. They also specify how much land each lot must occupy, creating explicit limits on density.
In addition to use and building dimensions, zoning codes usually require a specific number of parking spaces on each lot and sometimes include aesthetic restrictions, such as bans on vinyl siding.
These rules establish a “by right” baseline: Pick an approved use and build inside the imaginary lines, and you’re all set. But the regulators also leave themselves immense wiggle room. They issue variances, allowing some (but not all) applicants to bend the rules. And they rezone, or even write bespoke zoning rules, in response to applications.
As early as 1961, two law professors called zoning boards “a case study in misrule.” By setting stringent rules and then issuing exceptions whenever it suits them, zoning board members can effectively regulate on an ad hoc basis. At that time, the ad hoc approach to zoning was quite permissive in most places. But the NIMBY revolution of the 1970s changed the stance of most regulators. They began to tighten the written rules and issue less-generous exceptions, particularly in neighborhoods of single-family houses.
The Three Neighborhoods You Meet in Hell
After a half-century of governance built implicitly on the belief that residents should have veto power over development near their homes, the metropolitan United States can reasonably be divided into three zones: shrink-wrapped neighborhoods, zoning-on-demand zones and future sprawl.
Most readers probably grew up, like me, in the shrink-wrap zone. In shrink-wrapped neighborhoods that predated zoning, regulators abandoned any pretense of urban planning and wrote zoning codes that enshrined the existing land use and made substantial change impossible. In newer areas, zoning and development were often made to match, like a guitar and its case.
Any change that occurs in the shrink-wrap zone is subject to a series of hostile hearings where a handful of neighbors can exercise a veto. The shrink-wrap zone covers most suburbs and, more surprisingly, large sections of most core cities.
At interstices within the shrink-wrap zone—in major urban centers, along congested state highways and at the outskirts of some cities—lies the zoning-on-demand zone. These areas are not considered neighborhoods, although they might include busy apartment complexes and mobile home parks alongside office buildings, self-storage units and strip malls. In the zoning-on-demand zone, cities freely rezone whenever a developer brings a favorable proposal. This is freedom for the city, not freedom for the builder—the city can turn down unwanted uses, such as family-friendly apartment buildings that will add a fiscal obligation to the local schools.
Just as in the shrink-wrap zone, some zoning-on-demand districts are delightful showpiece districts, where urban planners get to show what their craft can accomplish. Regulation in showpiece districts is usually enacted via bespoke “planned unit development” agreements, written in collaboration with developers.
Finally, at the edges of metro areas in the eastern U.S. stretches an expanse of mandatory future sprawl. These areas may be rural and have ample land still to develop. The details vary by region, but regulations in this zone are written by people who don’t live there and who largely wish no one would live there. Unlike on the West Coast, where state regulators are willing to impose large greenbelts, eastern towns and counties do what they can, demanding large lots or wide swaths of open space in new developments. Those who were happy to buy into this low-density development pattern are now happy to defend it, so that it graduates seamlessly to the shrink-wrap zone.
The Financial Stack
In fairness, rigid regulations and selective permissiveness are not the entire story. Development is a serious business, where lenders and investors risk money up front. Business models have evolved to match the conventional approaches to development, which must meet the demands of both the regulator and the consumer.
The financial side of development is a “stack,” where each contributor builds on the work of those below it. (Developers usually use this term to describe one portion of the big-picture stack I describe here.) In his book “Last Harvest,” Witold Rybczynski describes part of the relatively simple financial stack for an exurban subdivision. It starts with a family ready to sell a piece of farmland. Next is a developer, whose fundamental business is aggregating and selling risk. He must front some of his own money for an option on the property. Then he must pitch the site and his vision to other investors. With money in hand, he can hire a series of professionals to plat the site, pilot the project through the discretionary local regulatory process and physically prepare the site. If any of these steps falls through, the entire project may be lost. In the “Last Harvest” case study, the major risk is water—will a promised water main be complete in time to serve the houses?
The developer does not build the houses, though: He sells batches of lots to a few competing builders, large-scale companies with house designs they repeat in subdivision after subdivision. The builders, like the developer, take on substantial risk. They promote pre-sales and allow buyers to choose options. But buyers often back out, especially in a declining economy. The longer the whole process takes, the likelier it is that economic conditions change before the moving vans arrive.
The stack extends farther, beyond the scope of “Last Harvest”: each buyer must obtain a mortgage from a broker, who then turns around and sells it to another institution, such as the federally backed giants Fannie Mae and Freddie Mac, which package mortgages into new securities for resale.
The complexity of the system makes it a powerful force for uniformity. For example, a mortgage broker with no experience underwriting duplexes or mixed-use buildings will demand a higher return in exchange for the uncertainty and extra work involved. Experience creates productivity. The lower productivity of America’s financial stack in creating unconventional building types is no less real than the lower productivity of inexperienced carpenters relative to experienced ones.
The existing financial stack implies that quick results will follow some types of land use regulatory reform, namely, those that make it easier to build familiar forms in new places. Other reforms, such as those that enable uncommon building types, may only pay off over decades as each layer in the financial stack accrues relevant experience.
Upzoning and Streamlining
There are basically two ways to make it easier for homebuilders to obtain permission to build: Either allow more types of housing to be built “by right” in more locations, or alter the approval process to reduce uncertainty and delays for housing development proposals.
The first approach—upzoning—is necessary to achieve housing abundance. Many states and cities have already taken major steps to allow significantly denser housing in more areas. Auburn, Maine, is in the process of rezoning to a true “all of the above” residential code: Its new zoning has no restrictions on the number of housing units that a particular parcel can hold. Construction must merely fit within relatively generous dimensional lines, such as a 3.5-story height limit.
To date, no other city or state has enacted such sweeping liberalization. Minneapolis drew attention for allowing duplexes and triplexes on residential lots that were previously limited to single-family homes. That reform has resulted in very little new construction. By contrast, Minneapolis’ more conventional upzoning along major corridors appears to be paying off with a steady stream of midsized apartment buildings. The divided outcome in Minneapolis underscores the value, at least in the near term, of including in reforms housing types for which the existing financial stack has high productivity.
Some novel housing types have flourished, at least in circumstances where prices are high enough to justify the learning curve. California’s statewide legalization of accessory dwelling units has allowed tens of thousands of new small homes to be built in the garages and backyards of shrink-wrapped neighborhoods. Inspired by Minneapolis and California, small-scale upzoning reforms have gone viral, popping up in Florida, Montana, New Hampshire, Utah and elsewhere.
A second approach to increasing permissions is to streamline homebuilding by reducing uncertainty and delay. Doing so cuts down on the risk involved in development, making it much more likely that construction pencils out.
New Rochelle, New York, dramatically demonstrates the results of effective streamlining. After decades of failing to lure investment to its aging downtown, it worked with a “master developer” to rewrite its permitting process. In the old system, a builder who proposed a new building in downtown New Rochelle—a classic zoning-on-demand district—would face major uncertainties from both the city and the state. The city could demand generous “community benefit” contributions if the development seemed especially profitable, sabotaging its own investment goals. And the state’s environmental review process could delay projects for months or years with no guaranteed outcome—despite the environmental friendliness of building in a walkable downtown a 20-minute train ride from Manhattan.
The streamlined system dispensed with those uncertainties. The city published a menu of community benefit contributions on a sliding scale. Developers still have to cover that cost, but the uncertainty is gone. And the master developer undertook a district-wide “generic environmental impact statement” that provided umbrella approval for thousands of subsequent downtown apartments—plus offices, retail and community space.
Since these reforms, which were primarily intended to wring uncertainty out of the system, development has boomed. As of 2021, 7,000 apartments had been approved. Many of those are now completed and occupied, a beacon of abundance in a region where vacant apartments are scarce and pricey.
But unlike the zoning code, which anyone can look up, delays and uncertainty in the process differ from place to place and are difficult to document. Their costs are often invisible. An Austin builder of affordable starter homes (who prefers to remain anonymous) reports that he backs out of about half the potential developments he investigates because an obscure Texas law enables a handful of neighbors to block rezoning with a “valid petition.” He doesn’t want to risk the application costs when neighbors are hostile, so their veto remains invisible.
As a result, streamlining reforms have not gone viral in the same way that upzoning has. A great deal of work remains merely to identify the specific sources of uncertainty in each state and city and craft appropriate reforms.
A Higher Power
Both upzoning and streamlining can be accomplished either at the city level or via appeal to a higher power: the state. The YIMBY movement early recognized the value of state legislative action to achieve sweeping change. In Portland, Oregon, for example, a mild upzoning proposal was deadlocked in a debate between moderate and extreme progressives. Only when the Oregon state legislature forced the issue did the city logjam break.
Many streamlining reforms are naturally state-level issues. Recall that part of New Rochelle’s problem was the ponderous state environmental law. The city’s end run was clever, but legislative reform is a surer path to statewide housing abundance. On the opposite coast, California has passed several laws easing development by creating a series of housing-friendly exemptions from its own Kafkaesque environmental law. These new loopholes will ease shortages in key areas, but it is difficult to imagine California achieving abundance—in housing or any other aspect of its built environment—without an entirely new approach to environmental protection.
State laws can also institute broad, shallow upzonings. For example, Connecticut recently limited how much parking its towns can require for new multifamily buildings (although developers often build more than is required). And North Carolina has banned its cities and counties from requiring large houses.
But this direct state upzoning has practical limits: Statutory rules have to be broadly applicable. Few if any legislators want to get into the business of block-by-block zoning. And if city zoning authorities have proven systematically unable to enact zoning in anything resembling a “rational” manner, why would we expect better from state-level authorities?
Finally, some states have used a “fair share” approach, requiring that each local jurisdiction approve or plan for some amount of housing, but leaving implementation to the locals. In theory, this approach reaps the benefits of local knowledge while meeting big-picture goals.
In practice, fair share systems have to overcome three significant problems. First, state bureaucrats cannot possibly know how much housing is needed in each city, so they have to take educated guesses or set arbitrary thresholds. Second, cities try to game the system, such as by shunting new housing to inconvenient locations or slow-walking development until builders give up. Third, the schemes only work if governors and legislators are willing to punish noncompliant cities, which might create election-day liabilities.
Fair share schemes have been in place in California and Massachusetts since 1969 with limited success. Recent bills in both states have added tougher requirements, but it is too early to evaluate the results. In New Jersey, a series of court cases beginning in 1975 has yielded the nation’s strongest fair share regime. However, the decades of wrangling and litigation make New Jersey’s approach an unattractive model for policymakers elsewhere.
Getting to Abundance
Zoning reform advocates have shown an admirable willingness to try every conceivable avenue to loosen up the regulatory constraints on housing. Sonja Trauss, a YIMBY movement founder, called her early San Francisco-based organization a “do-ocracy”: If you want to be in charge of something, start doing it. That spirit persists.
More recently, economist Jenny Schuetz has begun an important discussion about evaluating the policy victories that YIMBYs have recently celebrated. If zoning reform continues to expand in the next few years, the lessons from those first reforms will carry great weight. Whether, in five years, zoning reformers are focused on upzoning or streamlining ought to depend heavily on the results of early rezonings of each type.
History has proven to be a harsh judge of housing reform movements. Each generation of activists has been reasonably successful in addressing the problems it identified: Jacob Riis’ generation, over several decades, made cities vastly cleaner and greener. Jane Jacobs’ generation ended urban renewal and demoted the urban planner from master to public servant. But today we see just as clearly the harm they did along the way. Likewise, our descendants will judge the YIMBY movement by not only whether it can deliver on its promise to alleviate housing scarcity, but whether it can do so without accidentally creating something worse.