We provide evidence of intensified discriminatory behavior by landlords in the rental housing market during the eviction moratoria instituted during the COVID-19 pandemic. Using data collected from an experiment that involved more than 25,000 inquiries of landlords in the 50 largest cities in the United States in the spring and summer of 2020, our analysis shows that the implementation of an eviction moratorium significantly disadvantaged African Americans in the housing search process. A housing search model explains this result, showing that discrimination is worsened when landlords cannot evict tenants for the duration of the eviction moratorium.

Alina Arefeva, Kay Jowers, Qihui Hu & Christopher Timmins

The paper is “Discrimination During Eviction Moratoria”, released as an NBER working paper this month.

The post No Solutions, Just Tradeoffs appeared first on Market Urbanism.

The narrow ruling reflects the sound principle that, when dealing with constitutional questions, a court shouldn’t address hypotheticals or other issues not in direct contention among the parties. Nonetheless, the majority felt compelled to state that it would not address “whether a permit condition imposed on a class of properties must be tailored with the same degree of specificity as a permit condition that targets a particular development,” which seems to leave open the possibility that the answer might be “no.” Justice Gorsuch, in his concurrence, was astonished by this statement, wondering how a court which had just endorsed the universal applicability of the takings clause could stumble into another arbitrary distinction with no basis in common sense or constitutional law.

The court’s concern was not a jurisprudential one, but apparently a policy one: in another concurrence, Justices Kavanaugh, Kagan and Jackson note that “[i]mportantly, therefore, today’s decision does not address or prohibit the common government practice of imposing permit conditions, such as impact fees, on new developments . . . .”  The justices’ impression that applying the current Nollan/Dolan formula to impact fees would or even could “prohibit” them is unfounded.  As Emily Hamilton and I wrote in our amicus brief, Florida’s courts have adopted an even stricter test than in Nollan/Dolan, requiring a specific nexus between the government services that impact fees will fund and the needs of new construction, yet impact fees are ubiquitous there. It’s worth underlining: impact fees themselves aren’t the enemy, and Nollan/Dolan doesn’t forbid them.

The absence of mention of the experience of the many state courts which have addressed these same questions going back 30 years is puzzling.  After all, the constitutional question in Sheetz has been pending since at least 1995, when the Supreme Court denied certiorari in Parking Association of Georgia v. City of Atlanta, 264 Ga. 764, 450 S.E.2d 200 (1994), cert. den. 515 U.S. 1116, 115 S.Ct. 2268, 132 L.Ed.2d 273 (1995).  Justice Thomas, dissenting from the denial of certiorari in that case along with Justice O’Connor, noted “confusion in the lower courts” even at that time, just a year after Dolan had been issued.  That the question has been left to fester for so long is unfortunate, particularly where the answer was so straightforward as to command a concise, 9-0 opinion.  Writing at the Inverse Condemnation blog in 2017,  attorney Robert H. Thomas reasonably surmised than certiorari on the same issue had failed that year as well due to uncertain support for a reversal among the justices, but that now seems difficult to reconcile with the unanimous result in Sheetz.

Underlining the court’s lack of familiarity with state experience is the limited list of cases cited to establish a split in authority. Apart from the California case under petition, the majority lists only four cases, from Ohio, Illinois, Alabama and Arizona, omitting many other applicable cases from states including Florida, Nebraska, Oregon, Colorado, Maryland, Arkansas, Minnesota, Kentucky, Tennessee and North Carolina. Even the Parking Association case from 1995 which resulted in a published opinion is nowhere mentioned. The lack of discussion of this context obscures the experience of many of these states with applying the Nollan/Dolan test to permit conditions and makes the decision perhaps appear more consequential and further reaching than it actually is.

Even in those states where Sheetz overrules precedent – California, Arizona, Nebraska, Alabama, Maryland, Georgia, Oregon, Washington and possibly others – the impact of the decision is likely to be modest, at least in the near term. Starting with the California courts, where the housing stakes are highest, lower courts, courts of appeals and state supreme courts will need to revisit prior decisions and determine how to apply Nollan/Dolan to legislative permit conditions. Fortunately, they have a wealth of jurisprudence from other states to consider in their analysis.* If at least one court accepts the majority’s invitation to apply a watered-down version of the test to legislative exactions, yet another split in authority will emerge. 

State courts which do apply the Nollan/Dolan doctrine faithfully will, if Florida is any indication, help unshackle housing production by shifting generalized municipal cost burdens off new construction while still allowing new development to account for any directly related and immediate costs. For California, that result would go a long way to addressing the unjust situation that George Sheetz found himself in years ago, and which adds to the cost and detracts from the production of so much other housing.

*For examples, see Anderson Creek Partners, L.P. v. Cnty. of Harnett, 2022-NCSC-93, 382 N.C. 1, 876 S.E.2d 476, reh’g denied, 878 S.E.2d 145 (N.C. 2022); Home Builders Ass’n of Dayton & the Miami Valley v. Beavercreek, 2000-Ohio-115, 89 Ohio St. 3d 121, 127, 729 N.E.2d 349, 355; Knight v. Metro. Gov’t of Nashville & Davidson Cnty., Tennessee, 67 F.4th 816 (6th Cir. 2023), Kottschade v. City of Rochester, 537 N.W.2d 301, 308 (Minn. Ct. App. 1995); Amoco Oil Co. v. Village of Schaumburg, 277 Ill.App.3d 926, 214 Ill.Dec. 526, 661 N.E.2d 380 (1995), cert. den. 519 U.S. 976, 117 S.Ct. 413, 136 L.Ed.2d 325 (1996); St. Johns Cnty. v. Ne. Fla. Builders Ass’n, Inc., 583 So. 2d 635, 637 (Fla. 1991); William J. (Jack) Jones Ins. Tr. v. City of Fort Smith, Ark., 731 F. Supp. 912, 914 (W.D. Ark. 1990).

The post Ruminating on Sheetz appeared first on Market Urbanism.

I pulled American Community Survey data via IPUMS to get a better grasp of the numbers and the geography. Nationally, the rate of owner occupancy drops from 15% to 5% for multifamily units built in the 2000s to 2010s:

The easiest explanation for any change is composition. But that doesn’t appear to be the case.

The state of the states

One suspect is condo defect law, which has (at least in some states) swung so far that most builders and insurers won’t touch condos. Another is the fact that older condos have appreciated less than houses over time suggests that it’s not just construction problems.

Going to the data, I’ll use owner occupancy rate as a proxy for condo status. It’s imperfect: some condos are rented out; some owner-occupants in smaller buildings own the entire structure. But it’s broadly available and allows comparisons across buildings of different vintages.

The most striking piece of data is the extreme variation in owner occupancy of newish multifamily (5+) buildings:

Hawaii is in a league of its own: 40% of multifamily units are owner-occupied. The next highest are New York, at 15%, and Illinois and DC at 12%. I left out 11 states that had fewer than 150 relevant respondents in the ACS.

Learning from Hawaii?

If state-level changes are to blame, we should see big differences in the declines across states; if it’s mostly tax or mortgage policy driving the decline, we’d expect declines everywhere.

We can look at the same data in percentage terms:

A few states worth are worth flagging:

• Hawaii and New York are strong condo states that barely declined. If I were going to research condo defect laws that work for both buyers and sellers, I’d start here. Utah and Iowa also good candidates.
• Florida, Connecticut, Illinois, Massachusetts, and New Jersey were all strong condo states where that market has drastically collapsed.
• Washington is the state where I’ve heard the most about condo defect law – it passed reforms in 2019 and 2023 intended to restart condo creation, but it remains to be seen if that will work.
• Other than New York and Hawaii, the states with small declines in owner occupancy were mostly places with low base rates.
  • Texas is among those – it build condos at a much lower rate than peers such as Florida, Arizona, and Utah. Among the big Texas metros, Austin is the only one where new owner-occupant multifamily units exceed 1.5%.

Research agenda

There’s room for more explanatory and policy research on this topic. Why did the collapse hit Florida so hard? Have condos underperformed houses in appreciation terms everywhere? Why has Texas never built a significant number of condos? What can we learn from Utah about crafting a balanced condo-defect law? This won’t be my next project – but if it’s yours, let me know.

The post The sudden death of the American condo appeared first on Market Urbanism.

Let’s take as a given that sprawl is “bad” urbanism, mediocre at best. Realistically, it’s rarely going to be transit-oriented, highly walkable, or architecturally profound.

So the question is whether outward, greenfield growth is necessary to achieve affordability. And the answer from urban economics is yes. You can’t get far in making a city affordable without letting it grow outward.

Model 1: All hands on deck

Let’s start with a nonspatial model where people demand housing space and it’s provided by both existing and new housing. Existing housing doesn’t easily disappear, so the supply curve is kinked.

A citywide supply curve is the sum of a million little property-level supply curves. We can split it into two groups: infill and greenfield, which we add horizontally.

If demand rises to the new purple line, you can see that the equilibrium point where both infill & greenfield are active is at a lower price & higher quantity than the infill-only line. The only way to get some infill growth to replace some greenfield growth, in this model, is to raise the overall price level. And even then, the replacement is less than 1-for-1.

Of course, this is just a core YIMBY idea reversed! In most U.S. cities, greenfield growth has been allowed and infill growth sharply constrained, so that prices are higher, total growth is lower, and greenfield growth is higher than if infill were also allowed.

At the most basic level, greenfield growth is simply one of the ways to meet demand. With fewer pumps working, you’ll drain less of the flood.

Model 2: Paying for what you demolish

Now let’s look at a spatial model where people will pay more per square foot when they are closer to downtown. (If the jobs are evenly dispersed everywhere, the place with the best job access is…the center. So the math is the same for a job-seeker.)

Of course, builders won’t supply new housing unless the price comes in above their construction cost. In general, more intensive types of building cost more per square foot. And building on large greenfield sites costs less (both via scale efficiencies and ease of access/staging) than small-site, infill growth. Finally, infill growth usually has to replace an existing land use.

Taking a specific transect across the city, let’s suppose that the existing value of parcels* as built is shown by the brown line.

[*existing value here has to be expressed in dollars per hypothetical square foot of the parcel as redeveloped. This is weird, but not hard to calculate in a model.]

To generate growth, the cost of development has to fit between the black willingness-to-pay line and the brown existing-value line. And infill typologies are often more expensive, per square foot, than greenfield ones.

What will infill housing cost? First, it will cost more than housing at the fringe, but that’s OK – the people at the core are benefiting in terms of commute time and job access. Paying more to be close to downtown is like paying more for a bigger house – you can’t complain.

Second, infill housing won’t be able to push the price per square foot of new construction below the cost of construction plus the value of existing development. As infill development runs out of abandoned warehouses and parking lots, that wedge will rise.

A successful YIMBY strategy via infill would run into a shrinking gap between falling prices and a rising existing-value wedge. If it got that far, I’d actually be surprised and impressed – but the point of this second model is that the price floor is higher.

Model 3: The tyranny of circles

What neither of the first two models could really tell us is how much greenfield matters as a quantitative matter. The first model shows how all supply channels are additive, the second shows that infill has a higher price floor. The final boss is the circle.

Back in model 2, it looked like there was about as much room for new development at that sharp dip just to the left of downtown (an old warehouse district, say) as in the greenfield areas at the edges. But cities don’t exist on a line – they usually approximate a circle.

In this map of DC, there’s a circle about 2 miles from the center and another about 20 miles from the center. How much more land does the outer one contain?

You don’t need pi for the answer: the outer circle is 100 times bigger in area. And it’s not even at the fringe in most places.

In most debates about the merits of the infill and greenfield, there’s an implicit “acres to acres” comparison – a parcel here versus a parcel there. But that misses the forest: the power of greenfield development is the incredible amount of land that is available for relatively low-cost conversion.

Counterarguments

Don’t greenfield infrastructure costs make it more expensive? If we didn’t subsidize sprawl, wouldn’t it mostly stop?

There are certainly gains from re-using existing urban infrastructure. But the dominance of horizontal growth across civilizations using a huge range of transportation technologies, taxation schemes, regulatory approaches, and infrastructure norms belies the idea that horizontal growth is mostly a subsidy phenomenon.

Cities also come with significant infrastructure costs that intensify with built and human density. I’m skeptical that a full, accurate accounting of costs can be done at the micro level. And the macro-level indicators, like overall tax rates, certainly don’t suggest large savings from density.

Can’t we build greenfield development that’s fully urban and transit-oriented?

There’s a huge variation in the quality of greenfield growth, and we can all applaud developers who are doing interesting things and building suburbs that have the bones for continued growth. But in American cities, transit is almost utterly useless to people living at the edge. It’s the tyranny of circles again: How many transit lines would need to reach the 20-mile radius perimeter to put everyone within a mile of transit? And how long will those commutes take?

Can we allow housing at the urban fringe but ban new highways?

This is just a recipe for stroads. Places like Northern Virginia that failed to build a network of limited-access highways instead have 6-lane arterials with traffic lights that mean they always run at half capacity. For a major city with serious demand pressure, building new highways or parkways is a good and necessary part of greenfield growth.

This is just part of a bigger principle for greenfield growth: Your suburb is never the last one. Much U.S. sprawl is built badly in the specific way that every town, every subdivision pretends that it will always be the last thing before farms and forests.

Yes In My Greenfield

The YIMBY movement is and should remain focused on re-legalizing infill growth. Strong Towns offers good principles for fiscal responsibility in moderate-demand places. There’s room for another policy movement focused on greenfield growth – getting the financing and governance right, planning for future growth, learning from successes and failures, promoting quality design that’s cheap enough for low-end development, and so on. If and when that movement arises, YIMBYs should greet it as a friend and ally: both are important to a future where housing is affordable.

The post The urban economics of sprawl appeared first on Market Urbanism.

Burlington – the largest city in Vermont, at 45,000 inhabitants – has not escaped the housing crisis affecting the country. Burlington was an attractive destination for new residents during the pandemic and the rise of remote work; severe flooding last year put additional pressure on the housing supply. Policymakers statewide were well aware of the challenge and last year passed S.100, a sweeping package of housing reforms. Now Burlington, led by a pro-housing mayor, Miro Weinberger, has taken action at the local level.

Burlington’s reform, known as the Neighborhood Code, is a welcome simplification of the city’s zoning. The Neighborhood Code eliminates the city’s ‘waterfront’ zoning districts and a ‘dense housing overlay’, adding a higher-density ‘residential corridor’ district, for a total of four residential zones.

There are also significant increases in allowed density across the city. The Neighborhood Code allows up to fourplexes in all residential districts, allows townhouses everywhere but the low-density residential zone, and expands the option to create a cottage court or add a second freestanding unit on the same lot. The new code also limits requirements for minimum lot size, lot coverage, and setbacks. The reforms took some haircuts before final passage in response to pushback from organized groups of residents, but remain a meaningful change.

In their report presenting the Neighborhood Code, Burlington’s city planning department reviews the city’s history. Planners explain that much of Burlington’s housing stock predates its zoning code, and in particular many existing lots are smaller than the official minimum lot size. Also, in Burlington’s first era of zoning, the city had a single residential district which permitted a variety of uses including apartments, but in 1973 the city partitioned the residential district into five and added many of the current restrictions, further downzoning the city in 1994. Despite reforms in the 2008 ordinance which recognized the need to accommodate growth, the city was still less permissive than it was in 1947. One of the priorities of the new code is to legalize construction similar to what’s already in place – a philosophy more places should emulate. It’s hard to argue that new construction is out of scale with the neighborhood if buildings on the same scale have been standing in the neighborhood for decades.

Perhaps as significant as the upzoning itself is the city’s motivation to pare down what things it regulates. The report frames the Neighborhood Code as a shift away from regulating residential density qua density; in the higher-density districts, the Neighborhood Code does away with statutory density limits altogether, regulating density only by building dimensions. 

If this heralds a shift in local politics away from baroque housing regulations that clutter municipal codes, that in itself is a positive sign. Local legislators throughout America’s calamitous century-long experiment with zoning have been diabolically thorough in closing any loophole that might allow someone to put up an apartment building. You don’t have to be a radical like me, who wants zoning to be small enough to drown in the proverbial bathtub, to see the value of clear and easy-to-understand rules, applied consistently. We need to see more legislators limit themselves to only a few regulations on building scale; hopefully Burlington’s reforms are a sign of more to come nationwide.

The post YIMBY wins again in Vermont appeared first on Market Urbanism.

Affordability

The basic case for zoning reform, across the political spectrum, is that the rent is too damn high. Michael Manville, Michael Lens, and Paavo Monkkonen give a combative and accessible review of the evidence in their Urban Studies paper (2020). The principal drawback is that it is rapidly becoming dated, as evidence and research come in from more recent reforms. The most important of those may be Auckland’s, which Ryan Greenaway-McGrevy has reported in a few papers, including this Economic Policy Center working paper (2023). Using a synthetic control method (which is not perfect, to be sure), Greenaway-McGrevy finds that upzoned areas had 21 to 33 percentage points less rent growth.

A new candidate for the best review of the evidence on zoning reform and affordability is Vicki Been, Ingrid Gould Ellen, and Katherine M. O’Regan’s late 2023 working paper, “Supply Skepticism Revisited.”

Racial integration

Many authors from different disciplines have shown that both the intent and effect of zoning as practiced in the U.S. were racist and classist. That is, zoning policies have separated people by race, homeownership status, and income more than would have occurred in an unregulated market. Allison Shertzer, Tate Twinam, and Randall Walsh’s review of the evidence in Regional Science and Urban Economics (2022) is concise and helpful.

However, fewer authors have attempted to show that removing specific zoning restrictions reduces existing patterns of segregation. One is Edward Goetz, in Urban Affairs Review (2021). He makes a qualitative argument. I’m unaware of a good causal, quantitative paper showing how broad upzoning impacts local integration (but I would happily commission it if anyone wants to write it!)

Environment & climate

Along some dimensions, it is quite straightforward to argue that zoning reform benefits the environment. In other contexts, there’s more tension between environmentalism and other goals of liberalization. Does allowing denser subdivisions on the edge of Texas cities increase or reduce carbon emissions relative to baseline? I don’t know.

The IPCC chapter on urbanism (2022) stands out as a consensus summary if not as a model of persuasive prose.

Prosperity

Zoning reform can deliver a large boost to economic growth and living standards. I hesitate to accept any particular number, but the best work is clearly in Gilles Duranton and Diego Puga’s Econometrica paper (2023). From their conclusion:

Rights

Zoning directly constrains the right to use real property. It’s hard to turn that obvious statement into meaningful research. Bob Ellickson has done so as effectively as anyone, including in a widely-cited exploration of alternative, lighter-handed approaches to solving the problems zoning is purported to solve (University of Chicago Law Review, 1973).

There’s also a strain of thought around “the right to the city” and self-expression through activities from art to business, which need to take place somewhere. These literatures include interesting gems, like Beckers and Kloosterman’s 2014 study of pre- and post-war Dutch neighborhoods, but none that can make for real inclusion here.

Corruption

Property developers are almost always among the top donors to city councilmembers’ campaigns. As with segregation, this is a place where the problem is clearer than the solution. No recent paper can best Jesse Dukeminier and Clyde Stapleton’s 1961 classic in the Kentucky Law Journal, “The Zoning Board of Adjustment: A Case Study in Misrule.” I would welcome (and commission!) a paper testing whether broad upzoning (perhaps via state preemption) reduced corruption.

What else?

Add your own nominees in the comments!

The post And the Oscar for best paper goes to… appeared first on Market Urbanism.

To put it another way, to compare Chicago and New York you should look at comparable neighborhoods rather than regionwide averages.

For example, one reasonable comparison might be between Chicago’s reasonably desirable inner suburbs and New York’s. I picked four suburbs that I have visited and that are reasonably close to city boundaries: Great Neck and Cedarhurst on the New York Side, Skokie and Evanston on the Chicago side. According to Trulia.com, the cheapest two bedroom condo* (other than one that clearly needs major renovations) in Evanston sells for $115,000 and the cheapest in Skokie for $165,000. By contrast, Great Neck condos start at around $350,000, and Cedarhurst prices are similar.

Similarly, elite intown areas are cheaper in Chicago. I looked at Chicago’s Lakeview, where I spent part of my honeymoon five years ago; two-bedroom units there start at $235,000. By contrast, in Manhattan’s Upper West Side such units start at $730,000 (not counting units that require extensive renovation or are income-restricted).

To sum up: regional averages do seem to reflect the reality of housing costs, at least in these two cities.

*I picked two bedroom condos for the somewhat arbitrary reason that I currently live in a two-bedroom apartment.

*

The post Apples to apples housing cost comparisons appeared first on Market Urbanism.

But it seems to me that there’s an assumption hidden behind this idea: that the neediest people are the ones who are ordinarily most stable, and thus do not suffer from rising housing costs as long as they are protected by rent control or similar measures. For example, law professor Richard Schragger complains that pro-housing zoning reform will “redound to the benefits of investors and developers and not to those residents with limited resources who seek to afford to remain in place.” (emphasis added) In the next sentence, he adds that “those in the market for housing- including middle-class families, recent college graduates, and young families– are often priced out of high-cost urban markets. But reforms should be careful not to equate their interests with those of the working class and especially minority poor…” (emphasis added)* In other words, the “working class” and “minority poor” and people “in the market for housing” are somehow two separate groups.

This assumption might be persuasive if poor people moved less often than other people. But neither common sense nor data support this idea. If you are poor, you might be less likely to have steady employment, which means that your income is likely to be unstable. Thus, you are more likely than other Americans to be evicted or to move voluntarily even if rents are stable. Even if you rely on government transfer payments, you are at risk for bureaucrats questioning your eligibility.

What do the data show? Census Table S0701 shows that over the five year period between 2017 and 2022, 10.6 percent of persons with incomes below the poverty level moved recently within the same county, as opposed to only 6.1 percent of persons with incomes at or above 150 percent of the poverty level. 7 percent of poor Americans switched counties or states, as opposed to 4.7 percent of persons with incomes over 150 percent of the poverty level. Thus, a total of 13.1 percent of the poor moved, as opposed to 10.8 percent of the nonpoor. This is not a new development: between 2011 and 2016, 14.6 percent of the poor moved within a county and 7.2 percent switched counties or states, as opposed to 6.9 percent and 4.4 percent for persons with incomes over 150 percent of the poverty level.

What about in cities with extensive rent control? In New York City, everyone moved less, but poor people still move more. 10 percent of the poor moved within a county or switched counties or states, as opposed to 8.5 percent of persons with incomes over 150 percent of the poverty level. In San Francisco, 15.9 percent of the poor moved, and 13.6 percent of the nonpoor. (These statistics only include people who move into these cities, not people forced out by rising rents).

*My quotes are from page 129 of this article.

The post Poor People Move Too appeared first on Market Urbanism.