Yglesias and Postrel on zoning

This one from Matthew Yglesias is good, if a bit naive.

This one from Virginia Postrel has a good summary of the research documenting the steep price of California-style zoning:

Some of the higher price of L.A. real estate does reflect the intrinsic pleasure of living there, as I’m reminded every time I walk out my door into the perfect weather. Some of the price reflects the productivity advantages of being near others doing similar work (try selling a screenplay from Arlington, Texas). All of these benefits—and the negatives of traffic and smog—are reflected in the price of land.

But what exactly is that price? Consider two ways of computing the price of a quarter acre of land. You can compare the value of a house on a quarter acre with that of a similar house on a half acre. Or you can take the price of a house on a quarter acre and subtract the cost of the house itself—the price of construction. Either way, you get the value of an empty quarter acre. The two numbers should be roughly the same. But they aren’t. The second one is always bigger, because it includes not just the property but the right to build. Expanding your quarter-acre lot to a half acre doesn’t give you per- mission to add a second house.

In a 2003 article, Glaeser and Gyourko calculated the two different land values for 26 cities (using data from 1999). They found wide disparities. In Los Angeles, an extra quarter acre cost about $28,000—the pure price of land. But the cost of empty land isn’t the whole story, or even most of it. A quarter- acre lot minus the cost of the house came out to about $331,000—nearly 12 times as much as the extra quarter acre. The difference between the first and second prices, around $303,000, was what L.A. home buyers paid for local land-use controls in bureaucratic delays, density restrictions, fees, political contributions. That’s the cost of the right to build.

And that right costs much less in Dallas. There, adding an extra quarter acre ran about $2,300—raw land really is much cheaper—and a quarter acre minus the cost of construction was about $59,000. The right to build was nearly a quarter million dollars less than in L.A. Hence the huge difference in housing prices. Land is indeed more expensive in superstar cities. But getting permission to build is way, way more expensive. These cities, says Gyourko, “just control the heck out of land use.”

(Read it for this.  I don't agree with her "red-state/blue-state" theory of zoning.)

Update:  Postrel has posted a follow up to her article with some neat charts.

Comments

[M1EK]

Yes, she's completely off - there's as many or more restrictions in Dallas as in LA; Dallas just has a lot more land.

And PLEASE, nobody bring up Houston. Their combination of covenants, parking requirements, and minimum lot sizes is de-facto zoning as well.

[AC]

I don't think the only difference between LA and Dallas is that Dallas has a lot more land. One difference is in the non-zoning part of the land use regulations. A city can hinder new development in lots of ways, particularly in the subdivision and permitting processes. These can slow down new development even when there is no need for a zoning change. If you take average time from application to permit as your metric, you'll see that the delay is just a few months in places like Dallas and two years or more in places like Northern California. Those costs don't show up just by comparing zoning codes.

A second difference is that zoning is more binding in some places than others. Lots of towns have putatively strict zoning on the books, but there is no serious opposition to rezoning to accommodate new development when it comes along. In places like LA, zoning is just one tool for anti-growth activists from a large toolkit.

A related anti-growth technique is to under-zone everything, forcing developers to get permission for any economically viable project.

If the only difference between Dallas and LA were the difference in the amount of land, then the discrepancy in home prices should be reflected in the cost of land. But when you measure the value of land independently of the right to build, the land costs don't account for most of the difference -- that's the point of the research she discusses (its the Glaser and Gyourko paper in my sidebar)

[heyzeus]

You bring up Houston to tempt us!

Houston does NOT have zoning; what it does have is a handful of land use controls on setbacks and parking, and other quibbling items. This won't prevent an adult book store from going in on an residential street (happens all the time in Houston), or a 23 story high rise from going into a neighborhood of one or two story houses and apartments, as is happening in the Rice area there now. If either project has a sufficient number of parking spaces to meet Houston's code, there's nary a thing a neighbor can do. There isn't even a law requiring a traffic study (the city has to ask nicely)

[M1EK]

heyzeus,

Houston's code does in fact promote sprawl, whether you want to call it zoning or not. The parking requirements are enough to forestall most small projects; the big ones can get by, yes, but that's a small difference seeing how few developers have the kind of money to build something with that much structured parking.

I'm not particularly interested in the "use" argument. Although the minimum lot size thing does function there, too, as a use restriction in Houston.

Did you ever go read that dude's paper I pointed you to?

[heyzeus]

I didn't have time to read it at the time; if you post it on your blog though I'd be interested to read it.

[hlowe]

Building in Texas is a breeze compared to California.

[M1EK]

A couple of Houston links:

http://mdahmus.monkeysystems.com/blog/archives/000270.html

(can get back to the original paper in two clicks from that one, and it has an excerpt)

http://www.ctchouston.org/blogs/christof/2006/09/12/72/

(parking, specifically, from Christof Spieler)

[M1EK]

By the way, the captcha for comments here, which was already very hard, has just gotten even harder to discern. If you're not having a lot of attempts at spam, you might want to turn it off - it took me 5 attempts today to get it right.

[heyzeus]

M1EK, I've read most of the Lewin paper on Houston, and he has good points. Houston's on and off-street parking requirements and lot size requirements (relaxed but not abandoned in 1998) do take the form of sprawl-encouraging land use controls.

But he concedes that Houston does not have single-use zoning like other cities, focusing instead on the enforceability of restrictive covenants. (Most city neighborhoods don't have such covenants, those are generally in the suburbs and some enclaves). Back to my examples: Without single-use zoning, adult book stores can and often do open on residential blocks in Houston. Without other zoning, a 23 story tower can be built in the midst of 2 story houses and apartments without needing a variance or traffic study. And there are many, many high density developments are being built in Houston. I don't see any basis for your claim that "few developers have the kind of money to build something with structured parking," particularly in Houston.

[M1EK]

Re: uses: I've said that this isn't really relevant to the issue. I don't find it that important, in other words, whether the property contains a video store or a convenience store or a single-family house or an apartment building; I'm more interested in FORM.

Re: parking: Structured parking presents a huge fixed and much larger variable cost than does surface parking, which presents a much larger cost than street parking. Projects which can't project high levels of profitability can't sustain those costs. Yes, some will get built anyways, but many others won't - I find it hard to believe you don't understand this (look at the "High Cost Of Free Parking", for instance).

[heyzeus]

I find it hard to believe you don't understand that a beneficial feature of single-use zoning is that it prevents a 24 hour massage parlour from going next door to your house, which can and does happen in Houston despite your claim that its sparse plate of land use controls somehow approximate "zoning." If this happened on the block that you live, you might find it important.

[heyzeus]

Here, check out this article from today's Wall Street Journal on Houston's zoning that illustrates what I'm talking about.

http://online.wsj.com/article_email/SB119257756005161262-lMyQjAxMDE3OTEyNzUxNzc3Wj.html

[M1EK]

heyzeus,

I'm moderately but not completely against use-based zoning; but there are other ways to address the worst things on your list. The problem is that an awful lot of baby (good mixed uses) got thrown out with a very little bit of bathwater (the always-cited adult bookstore or factory examples).

For instance, a form-based zoning code could still have restrictions on hours of business for commercial establishments within the zone. Noise ordinances, although unenforced today in most cases, don't have to be (code enforcement resources could be redirected there). Etc.

[M1EK]

Forgot the most important point: Despite my moderate preference for form-based zoning over use-based zoning, the real reason I ever bring up Houston is to counter the inaccurate calls that the preponderance of sprawl in Houston is evidence that the zoning code doesn't have anything to do with suburban sprawl.

The parts of most cities' zoning codes which have the most to do with artificially cheapening sprawl (and expensivizing urban development) are most definitely there in Houston. Use-based zoning has little to do with it; it's the parking requirements; minimum lot sizes; street widths; block lengths; setback requirements; etc. that have the most impact, and Houston has all of those, and in some cases, more restrictive versions than does Austin.

So, yes, in Houston you could end up with an adult video store next to your house (if we take that claim as a given; I'm not sure I do). But you won't end up with urban townhomes; at best you'll get the suburban abominations infesting the exurbs of DC. You won't get as much moderate-intensity mixed-use because the parking requirements kill small projects. Etc.

[Chop Chop]

Hey, Zeus!

Where should we put 24-hour massage houses? Should we put them downtown? I doubt many would actually be able to afford the rent.

Should we put them at the edge of town? At the edge of town, car loads of drunk college boys will be forced to drive through surburban communities and back again.

Should we put them in strip malls in the first ring of suburburbia? Clearly the owners of the donut shop neighbor, already under pressure from Starbucks won't be happy.

Please tell me. Where is a good place to host the adult sex industry?