Zoning and the Housing Bubble
The Anti-Planner links an article by a Federal Reserve Bank economist on the housing market in Houston and how it is affected by zoning:
"Given that Houstonians had access to the same new types of
mortgages as the rest of the country and that Houston has had greater
population growth than other large metros, we might expect price
appreciation to be stronger in Houston than elsewhere," says the
article. "However, the opposite has been true."The reason? Houston's lack of zoning and its large supply of land
available for development allowed builders to respond to easy credit by
increasing the pace of construction. Slow and unpredictable permitting
processes prevented builders in many other regions, including Florida
and the Pacific Coast states, from similarly stepping up production.While some cities and regions have further delayed construction by imposing adequate public facilities or concurrency ordinances, Houston allows developers to create their own municipal utility districts.
Through these districts, the developers install the sewer, water, and
other facilities needed by their developments and charge the property
owners over time.The result is that housing prices did not bubble, and they are not
significantly declining today. As of the fourth quarter of 2007, in
fact, they were still increasing. Anecdotal evidence from local
realtors and developers indicates that the tightening credit market has
soften the demand for homes under $200,000, but homes above that price
are still selling well.Whatever correction Houston faces, says the article, "takes place in
the context of prices that are squarely in line with local construction
costs and without the painful supply-induced downturn under way in many
other markets." This leaves Houston relatively immune to the ups and
downs of housing prices experienced in regions with planning-induced
housing shortages.
I need to think a bit about how that relates to this.
Jeff:
As a native Houstonian, let me add one important piece of information to this. We don't have zoning, but we do have deed restrictions and very powerful homeowners associations (HOA). So it's not a complete free-for-all. But I'll take deed restrictions and HOA's. Zoning is a much more political process than HOA's and restricts what happens AFTER the property has been developed. It doesn't restrict what happens to raw, un-subdivided land.
We're seeing home values stay steady so far this year, but it's dependent on the number of foreclosures in your neighborhood. We still had our share of people getting zero-down, no-doc loans that had borrowed way too much money.
Jeff
May 21, 2008, 9:49 amKyle Bennett:
I find it hilarious that this article comes from the Fed. It's almost like they're saying "Hey, don't blame us, it's them zoning laws". They're half right.
May 21, 2008, 2:14 pmmiklos.hollender@gmail.com:
Offtopic:
Coyote: here's something you might wan to comment on:
http://www.wired.com/culture/lifestyle/news/2008/05/modern_moonshine
"John Spidell misses the moonshine tradition. A former federal revenuer, the 65-year-old spent the first half of the '70s "busting up" illegal stills in North Carolina. His job sometimes required living in a sleeping bag under a piece of canvas for weeks at a time, watching a big still, waiting for the owner to appear. Smaller stills got less attention.
"A five- or six-hundred-gallon outfit wasn't worth wasting time on," he says. "I'd go back to my vehicle, get the C4 explosives and blasting caps, and I'd blow it up. There were only so many of us, and only so much time."
May 21, 2008, 3:08 pmdiz:
Despite being sympathetic to the argument, having lived in Houston I think that drawing conclusions from it requires some care.
Houston has an abundance of land surrounding it, and I would guess a relatively small percent of people who work downtown. New housing subdivisions spring up in areas that used to be on the fringes, those areas develop restaurants, malls offices and other infrastructure. Then, with all this new infrastructure and jobs in new areas further out, the fringes get redefined and new subdivisions go up a little further out.
May 22, 2008, 8:59 amJohn Dewey:
Diz,
I think you are implying that it's incorrect to compare Houston with those cities which have geographic impediments to growth - oceans, mountain ranges, etc. However, there are still many cities and counties nationwide which have available land for development but which have restricted its use. For example, my Dallas-Fort Worth suburb of Flower Mound has zoned half of its very large land area as either extremely low density (2 acre lots) or rural (no development whatsoever). This is a city connected by a 5 mile, 6 lane highway to one of the world's busiest airports. Fortunately for homebuyers, most cities adjacent to Flower Mound have not adopted its Yankee-led growth restrictions.
One more thing, the development pattern you referred to - of increasingly dispersed edge cities or even edgeless cities - is now common across the nation where allowed. What smart growth restrictionists fail to accept is:
- the overwhelmingly majority of the nation is not going to give up single-family, detached housing;
- "Sprawl", the geographic dispersement of workplaces and housing, allows more many commuters to live close to workplaces in the type housing they desire (and demand).
Sprawl is our friend.
May 23, 2008, 6:50 amYoshidad1:
Trying to understand land-use planning as currently constituted in the U.S. is a little like inviting bees to come live in your head. Both irritating and annoying -- and, as the discussion here demonstrates, not a model of comprehensive understanding or clarity.
For example, without a discussion of what subsidies exist in the current setup, *and* a conversation about what constitutes sensible civic design, the growth/no-growth argument or a conversation about "affordability" is just a waste of time.
About current city planning practice, one authority says this: "The pseudo science of planning seems almost neurotic in its determination to imitate empiric failure and ignore empiric success. ...to put it bluntly, [planners] are all in the same stage of elaborately learned superstition as medical science was early in the last century, when physicians put their faith in bloodletting." — Jane Jacobs
Subsidies:
Subsidies are critical to development as it occurs now. The iron law of architecture is not Frank Lloyd Wright's "Form follows function," it's "Form follows finance."
Consider how development occurs in California (my home state). A land speculator (the accurate description of a "developer," at least here) purchases some agricultural land for a few thousand dollars an acre, then persuades (or suborns) some local government to grant him development rights. Presto! that same land is now worth as much as a hundred times more than he paid for it.
If you don't think this is the impetus for some enormous crookedness, well, you're naive.
The poster child for the awful development prompted by this setup is North Natomas -- some godforesaken 20-foot-under-water floodplain surrounded by weak levees just north of downtown Sacramento. To give you an idea of how unsuited to development this land was: When the regional sewer plant got a federal grant to expand its capacity, the feds said they knew it would encourage increased development, but said "If you develop North Natomas with that capacity, you'll also have to pay a $6 million penalty" -- and $6 million was real money at the time.
The speculators controlling this land didn't bat an eye. They went all the way to then-Vice-President G.H.W. Bush and got the penalty transformed into a pay-as-you-develop installment plan, rather than the prohibitive up-front fee it was originally. They also got $43 million in levee improvement money.
On the face of it, that's a terrific deal. Where do I get to pay $6 to get $43? But wait, there's more!
When they started selling the land, the speculators made literally 10,000% gross profit, and they had a few expenses. They had bought the Sacramento Kings to drum up a constituency clamoring for the rezone, and they had to pay the chump change in planning fees and the real estate taxes on the ag land. But they 1031 exchanged out of the land into new investments, so they paid literally zero in income taxes on the profit.
So...thousands of percent profit based on public policies, and they're tax free. Oh yes, and they stiffed the school district. North Natomas Schools were 10% short of the needed funding -- this at a time when Sacramento City schools were trying to find the money to pay to fix leaky roofs, etc.
I couldn't make this up.
For a contrast: In Germany, developers have to sell the ag land to the local government at the ag land price, then re-purchase it at the (much more expensive) development land price. And the schools in Germany don't have to sell lollipops so they can have after school programs. The arts budget for the City of Berlin exceeds the outlays from the entire U.S. National Endowment for the Arts.
The extraordinarily crooked U.S. model leads to what we have now: dysfunctional cities (Detroit!), a de-funded public realm, and some extremely favorable treatment for a small oligarchy of land speculators and commercial interests.
There's more about this in David Cay Johnston's "Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense (and Stick You with the Bill)." Check it out.
Design:
It's one thing to develop land, but another to develop it with dysfunctional design. Suburban sprawl -- the Phoenix model, or basically most of what has been built since 1950 -- is the poster child for such bad design.
As most sprawl dwellers are finding out since the recent rise in gas prices, every single trip of any significance must be in an automobile. Sprawl builds in long commutes.
And U.S. petroleum use reflects that: 70% of U.S. petroleum use is for transportation. So the U.S. ratio of transportation to everything else (petroleum feedstocks, home heating, etc.) is 2-to-1. In the rest of the world, that ratio is 1-to-2. It's one of the reasons Europe and Japan use half as much petroleum per dollar of GDP as the U.S.
Traditional cities, by way of contrast, offer a variety of ways to get around. Their streets designs favor not just for vehicles, but pedestrians too. Neighborhoods in such traditional cities offer a mix of uses. Neighbors can walk to work, or to shop, or to school. If those alternatives are not immediately available, they can walk to transit.
In contrast, sprawl forbids all of this. It is single-use (all residences, all commerce, all offices, etc.) As for transit, sprawl typically does not have enough potential customers within a walk of the transit stops, and even if it did, the sidewalks or other pedestrian connection (footpaths) are either dangerous because they're immediately adjacent to fast-flowing traffic, or they're non-existent. (FYI, Sacramento estimates it would need $50 million just to connect all the disconnected sidewalks.)
In traditional neighborhoods, parks, shopping streets and other civic monuments are not dominated by commerce (as is the mall), or by parking lots. People can actually experience what it means to be a member of society, rather than an atom in a traffic jam.
Portland has made a few feeble steps in the direction of returning to traditional neighborhoods, but the structure of subsidy and design has been infected by the models that led to sprawl (of which it has plenty).
And for those who believe Houston has no planning -- that is correct only if you believe zoning is the only kind of planning. Houston enforces sprawl street design standards and minimum lot sizes to achieve sprawl, sprawl, and more sprawl. It may not be intended in the sense that it's planned, but it's what has happened there.
If you want to see the alternative, take a look at http://www.dpz.com/transect.aspx
Finally, for the "conservatives" still reading: No, the market does not request sprawl, any more than the voting public requests corrupt politicians. Inertia and ignorance -- and the collusion of some powerful interests -- is what keeps sprawl as the default. The acceptance of old and new traditional neighborhoods remains much stronger than sprawl. Sales prices typically include premiums for traditional neighborhoods.
The most valuable real estate in the Sacramento region is in such a neighborhood (McKinley Park). Newer traditional neighborhoods typically get premiums of 40% (e.g. Orenco Station in Portland, or Kentlands in Md, or Celebration, FL). The pioneers of this movement are Duany-Plater Zyberk (dpz.com). Their Seaside development in Florida (the set for "The Truman Show") gets 500% premium for interior lots when compared to neighboring sprawl developments.
Finally: Security! "But I don't want to live in a more compact neighborhood like they did in the old days! Criminals are everywhere and are provoked by proximity!"...says the sprawl dweller.
The facts say otherwise: Per capita crime is lower in NY City than in Phoenix or Sacramento (sprawl cities).
No less profound thinker than Peter Drucker lamented the typical Americans' willingness to think locally, but act globally. We need a comprehensive look at this problem, or we're just re-arranging the deck chairs on the Titanic.
May 23, 2008, 11:04 amYoshidad1:
Trying to understand land-use planning as currently constituted in the U.S. is a little like inviting bees to come live in your head. Both irritating and annoying -- and, as the discussion here demonstrates, not a model of comprehensive understanding or clarity.
For example, without a discussion of what subsidies exist in the current setup, *and* a conversation about what constitutes sensible civic design, the growth/no-growth argument or a conversation about "affordability" is just a waste of time.
About current city planning practice, one authority says this: "The pseudo science of planning seems almost neurotic in its determination to imitate empiric failure and ignore empiric success. ...to put it bluntly, [planners] are all in the same stage of elaborately learned superstition as medical science was early in the last century, when physicians put their faith in bloodletting." — Jane Jacobs
Subsidies:
Subsidies are critical to development as it occurs now. The iron law of architecture is not Frank Lloyd Wright's "Form follows function," it's "Form follows finance."
Consider how development occurs in California (my home state). A land speculator (the accurate description of a "developer," at least here) purchases some agricultural land for a few thousand dollars an acre, then persuades (or suborns) some local government to grant him development rights. Presto! that same land is now worth as much as a hundred times more than he paid for it.
If you don't think this is the impetus for some enormous crookedness, well, you're naive.
The poster child for the awful development prompted by this setup is North Natomas -- some godforesaken 20-foot-under-water floodplain surrounded by weak levees just north of downtown Sacramento. To give you an idea of how unsuited to development this land was: When the regional sewer plant got a federal grant to expand its capacity, the feds said they knew it would encourage increased development, but said "If you develop North Natomas with that capacity, you'll also have to pay a $6 million penalty" -- and $6 million was real money at the time.
The speculators controlling this land didn't bat an eye. They went all the way to then-Vice-President G.H.W. Bush and got the penalty transformed into a pay-as-you-develop installment plan, rather than the prohibitive up-front fee it was originally. They also got $43 million in levee improvement money.
On the face of it, that's a terrific deal. Where do I get to pay $6 to get $43? But wait, there's more!
When they started selling the land, the speculators made literally 10,000% gross profit, and they had a few expenses. They had bought the Sacramento Kings to drum up a constituency clamoring for the rezone, and they had to pay the chump change in planning fees and the real estate taxes on the ag land. But they 1031 exchanged out of the land into new investments, so they paid literally zero in income taxes on the profit.
So...thousands of percent profit based on public policies, and they're tax free. Oh yes, and they stiffed the school district. North Natomas Schools were 10% short of the needed funding -- this at a time when Sacramento City schools were trying to find the money to pay to fix leaky roofs, etc.
I couldn't make this up.
For a contrast: In Germany, developers have to sell the ag land to the local government at the ag land price, then re-purchase it at the (much more expensive) development land price. And the schools in Germany don't have to sell lollipops so they can have after school programs. The arts budget for the City of Berlin exceeds the outlays from the entire U.S. National Endowment for the Arts.
The extraordinarily crooked U.S. model leads to what we have now: dysfunctional cities (Detroit!), a de-funded public realm, and some extremely favorable treatment for a small oligarchy of land speculators and commercial interests.
There's more about this in David Cay Johnston's "Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense (and Stick You with the Bill)." Check it out.
Design:
It's one thing to develop land, but another to develop it with dysfunctional design. Suburban sprawl -- the Phoenix model, or basically most of what has been built since 1950 -- is the poster child for such bad design.
As most sprawl dwellers are finding out since the recent rise in gas prices, every single trip of any significance must be in an automobile. Sprawl builds in long commutes.
And U.S. petroleum use reflects that: 70% of U.S. petroleum use is for transportation. So the U.S. ratio of transportation to everything else (petroleum feedstocks, home heating, etc.) is 2-to-1. In the rest of the world, that ratio is 1-to-2. It's one of the reasons Europe and Japan use half as much petroleum per dollar of GDP as the U.S.
Traditional cities, by way of contrast, offer a variety of ways to get around. Their streets designs favor not just for vehicles, but pedestrians too. Neighborhoods in such traditional cities offer a mix of uses. Neighbors can walk to work, or to shop, or to school. If those alternatives are not immediately available, they can walk to transit.
In contrast, sprawl forbids all of this. It is single-use (all residences, all commerce, all offices, etc.) As for transit, sprawl typically does not have enough potential customers within a walk of the transit stops, and even if it did, the sidewalks or other pedestrian connection (footpaths) are either dangerous because they're immediately adjacent to fast-flowing traffic, or they're non-existent. (FYI, Sacramento estimates it would need $50 million just to connect all the disconnected sidewalks.)
In traditional neighborhoods, parks, shopping streets and other civic monuments are not dominated by commerce (as is the mall), or by parking lots. People can actually experience what it means to be a member of society, rather than an atom in a traffic jam.
Portland has made a few feeble steps in the direction of returning to traditional neighborhoods, but the structure of subsidy and design has been infected by the models that led to sprawl (of which it has plenty).
And for those who believe Houston has no planning -- that is correct only if you believe zoning is the only kind of planning. Houston enforces sprawl street design standards and minimum lot sizes to achieve sprawl, sprawl, and more sprawl. It may not be intended in the sense that it's planned, but it's what has happened there.
If you want to see the alternative, take a look at http://www.dpz.com/transect.aspx
Finally, for the "conservatives" still reading: No, the market does not request sprawl, any more than the voting public requests corrupt politicians. Inertia and ignorance -- and the collusion of some powerful interests -- is what keeps sprawl as the default. The acceptance of old and new traditional neighborhoods remains much stronger than sprawl. Sales prices typically include premiums for traditional neighborhoods.
The most valuable real estate in the Sacramento region is in such a neighborhood (McKinley Park). Newer traditional neighborhoods typically get premiums of 40% (e.g. Orenco Station in Portland, or Kentlands in Md, or Celebration, FL). The pioneers of this movement are Duany-Plater Zyberk (dpz.com). Their Seaside development in Florida (the set for "The Truman Show") gets 500% premium for interior lots when compared to neighboring sprawl developments.
Finally: Security! "But I don't want to live in a more compact neighborhood like they did in the old days! Criminals are everywhere and are provoked by proximity!"...says the sprawl dweller.
The facts say otherwise: Per capita crime is lower in NY City than in Phoenix or Sacramento (sprawl cities).
No less profound thinker than Peter Drucker lamented the typical Americans' willingness to think locally, but act globally. We need a comprehensive look at this problem, or we're just re-arranging the deck chairs on the Titanic.
May 23, 2008, 11:04 amJohn Dewey:
Yoshidad1: "Sprawl builds in long commutes."
I could not disagree more. Dispersement of housing AND workplaces enables shorter commutes. Such dispersement allows workers to live very close to their employment location, in the type housing they prefer, at a price they can afford.
Smart growth proponents are fighting a city form that has been obselete for at least two decades - the central business district ringed by bedroom communities. That's not what the modern metropolic looks like anymore.
Planners cannot force workers to live close to their workplaces, of course. As long as energy remained cheap, households could ignore commuting costs and commute long distances from one suburb to another. Economics of transport will force change. But it is the sprawled metropolises of the U.S. will make the transition to short commutes very simple. Rather than commute from one suburban city to another, workers will shift either place of residence or place of employment.
The so-called "traditional neighborhood" concept is a joke as a prescription for the whole U.S. Small retailers will never match the economies of scale of big box retailers. Homeowners will continue to favor low-price grocery and non-durable goods at the expense of transport costs.
Modern families will also value time much more than proponents of "traditional neighborhoods" are willing to believe. Shopping trips will continue to be once-a-week, large volume purchases. Who would walk to a Kroger's to pick up a shopping cart full of groceries and then dash home in 90 degree weather to ensure refrigerated goods will not spoil? So-called "good" designers who believe Americans are going to walk to work and to shop and to school events are simply out-of-touch with the value Americans place on their time.
May 23, 2008, 12:22 pmJohn Dewey:
Yoshidad1: "The facts say otherwise: Per capita crime is lower in NY City than in Phoenix or Sacramento (sprawl cities)."
Oh, come on! Many factors that influence reported crime rates. For someone to use crime rates for three data points in "proving" that sprawl does not allow families to escape crime is a bit silly, isn't it?
Crime rates vary immensely throughout an MSA. The Dallas MSA may have a high violent crime rate relative to some denser MSA's. But crime in the sprawled Dallas suburbs is much lower than crime in the dense, "traditional neighborhoods" of Dallas City itself. The City of Phoenix and the Phoenix MSA - close to illegal border drug and people smuggling activity - may have higher overall vilent crime rates than the New York MSA. But the sprawled suburbs of Phoenix - Scottsdale, Carefree, Queen Creek, and others - have very low crime rates.
Crime reporting is not uniform across the U.S., and inter-city crime comparisons other than murder are certainly suspect. Further, the level of police funding likely impacts crime rates far more than the degree of sprawl or density. As long as cities such as Dallas continue to underfund their police departments relative to cities such as New York, crime will undoubtedly be higher.
Anyone who has lived in both cities and in sprawled suburbs knows suburbs are far safer. Cooking crime statistics to try to prove otherwise won't fool anyone.
May 23, 2008, 1:23 pm