Housing Policy: Stacking Epicycles on Epicycles

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An epicycle is the name for the path made by a small circle rotating around the circumference of a larger one. Nothing negative there.

But ever since pre-Copernican astronomers had to keep adding epicycles — and epicycles upon epicycles — to make their model of how the Sun and the other planets moved through the earth-centered universe fit with what they actually observed by looking at the way the planets appeared to move, epicycles now call to mind a more modern engineering term — “kludge” — which is defined in Wikipedia as follows:

A kludge (or kluge) (/klʌdʒ/, /kluːʒ/, /kluːdʒ/) is a workaround or quick-and-dirty solution that is clumsy, inelegant, inefficient, difficult to extend and hard to maintain. This term is used in diverse fields such as computer science, aerospace engineering, internet slang, evolutionary neuroscience, and government.

Epicycles come to mind when thinking about housing policy in Oregon, as we try to layer fix upon fix to a fundamentally flawed system instead of interrogating our model for how we think a housing market should work and deciding if our model and reality are at all congruent.  If one needs motivation to think about something as seemingly boring as housing policy, the poignant, powerful, and potent book “EVICTED: Poverty and Profit in the American City,” is all the motivation one could ask for. 

Two essays by Chuck Marohn, founder and president of Strong Towns, have a lot to say about the problems and consequences of how we do zoning, which is the deep structure of the dysfunction so brilliantly described in EVICTED.  These essays and the many embedded links to others — provide a movable feast on housing policy epicycles. A few hours spent with the many posts here, and a reading of EVICTED — which is hard to put down — will forever change the way you go through the world and think about the ongoing crisis in housing affordability.


POTUS: Zoning Sucks

September 27, 2016
by Charles Marohn
 
So much for all that Agenda 21 paranoia.
 
Yesterday the White House released something they called a Housing Development Toolkit. It took aim at many of the worst practices of local government, from a resistance to incremental development to mandatory parking minimums. It provided an outline for local governments looking to “modernize” their land use regulations. As a feign at bully pulpit rhetoric for policy geeks, it was a fun read.
 
The toolkit listed the benefits of “modernizing” — I keep putting that word in quotes because I find it strange yet it is the word they used — and, while many advocates are focusing on a transportation recommendation for more transit use, I actually found the report’s first observation to be more interesting and relevant:
 
Housing regulation that allows supply to respond elastically to demand helps cities protect homeowners and home values while maintaining housing affordability.
 
“Allowing supply to respond elastically to demand…..” That’s a really painful way to describe what is commonly thought of as a market. Yes, when the market is able to respond to a lack of supply and an increase of demand by building more housing, it helps bring supply and demand into balance at lower prices. Zoning regulations, especially those that seek to preserve neighborhoods under glass once they are established, distort the feedback mechanism of the housing market. I’m in.
 
What’s odd is their inclusion of “protect homeowners and home values” in that thought. I would agree that having freer markets for housing construction would bring prices down in many parts of the country. I don’t think it’s clear that we can do that and simultaneously maintain the inflated home values we are trying to artificially sustain. In fact, re-inflating the housing bubble has been the policy goal of this administration as well as the Federal Reserve leading to a string of policies that benefit current homeowners and debtors at the expense of prospective buyers and savers.
 
Of course, it could be that the Obama administration has some covert Austrian economists who are seeking to protect homeowners from government-induced housing bubbles, but I doubt it. It’s more likely that this is an attempt at a politically-happy spin on the difficult policy paradox of local zoning: Our debt economy needs inflated housing prices yet inflated housing prices have terrible economic consequences over the long term. It might be too much to hope that they would bite that one off.
 
Still, the document has a lot of things straight out of the Strong Towns playbook (it actually reminded me of Andrew Burleson’s 10 Steps to Fix a City). The first five are absolute no-brainers; if you’re not doing these things already, your city is falling behind. Here they are with some related stuff we’ve written along the way.

1. Establishing by-right development
 
    Strong Towns Strength Test
    Housing affordability is the result of articifial scarcity by Andrew Price
    A case for height restrictions by Charles Marohn
 
2. Taxing vacant land or donating it to non-profit developers (YouTube)

3. Streamlining or shortening permitting processes and timelines
 
    From the Mayor’s Office by Charles Marohn
    Stop. Inventory. Prioritize. Process. by Seth Zeren
 
4. Eliminate off-street parking requirements
 
We’ve done a ton of work on this, so much so that we have an entire landing page devoted to the topic. We also organize an annual Black Friday Parking event to draw awareness and maintain a map of cities that have eliminated their off-street parking requirements.

5. Allowing accessory dwelling units
 
    Strong Towns Strength Test
    The Challenge of Building Rental Housing by Spencer Gardner
    The Trials of Tiny Homebuilding by Rachel Quednau
    A Strong Towns Response to Homelessness by Rachel Quednau
    Affordable Housing that Might Have Been by Johnny Sanphillippo
 
The remaining five recommendations are quite a bit more wonky and are big-time subject to planner/zoner unforced error. For example, Establish Density Bonuses, which certainly can make sense in some places but is more often just a license for planners to do some awful things. If you’ve been with us any appreciable amount of time, you probably know what I think of density as a metric of success.
 
Still, for as much hype as this document is getting in the circles we frequent, I found it rather revealing — and a little depressing — for what wasn’t included. Obviously, the federal government can’t do much to make these things come about beyond bribing cities with money it doesn’t have. It could, however, make some changes to federal policy that would be really significant. How about we eliminate the distorting effects of federal housing subsidies?  How about we stop subsidizing the horizontal expansion of cities through our transportation policies? What if we balanced our obsession with growth with policies that promoted stability?
 
All of that gives this White House document the feel of looking at the splinter in your neighbor’s eye while ignoring the beam in your own. Still, I’d rather have it than not and, if it inspires more cities to start building Strong Towns, it should be seen as a positive. Given what we are all suffering through this election season, it may be a long time before we get back to even this small hill of coherency.
 
6. ENACTING HIGH-DENSITY AND MULTIFAMILY ZONING

Here’s the context that the toolkit provides for this recommendation: 

Local zoning code changes that allow for the development of higher-density and multifamily housing, especially in transit zones, can help to alleviate some of the pressure of the growing population in many city centers.

That is a true statement. That is also a statement that begins by accepting a really messed up reality for a premise, a reality created by some really messed up federal policies.

Let me rephrase the statement to highlight the inherent problem:

Local zoning code changes that allow for the development of higher-density and multifamily housing, especially in places where we’ve built expensive transit systems in an effort to induce growth and development, can help all those living in single family homes that don’t want their neighborhoods to ever change to continue to have their lifestyle subsidized by everyone else, particularly the poor.

Now, to be fair, there are areas in Washington DC, New York, Chicago and San Francisco — in Washington DC policy circles this is otherwise known as simply Civilized America — where there are neighborhoods near massive transit investments that are stuck because of zoning. The chicken/egg argument of build-it-and-they-will-come was decided in favor of build long ago. What government hath sown in these neighborhoods it must now reap and so, yes, the difficult conversations about how a neighborhood with so much public investment must be allowed to evolve and change must now be had. Better that those conversations had taken place before the massive investment, but the world is not perfect.

“This is like trying to put out a fire with truckloads of champagne, a fire that was intentionally set by the champagne distributor.”

For the rest of the country — and we could be talking about billion dollar rail investments here in Minnesota or others like Salt Lake City, Kansas City or Austin — the issue is slightly more problematic. In these places, transit investments have largely acquiesced to the commuter model (following the federal funding). In short, how do we move people from low density residential areas to high density employment areas through transit and do this as a mechanism to alleviate automobile congestion? Fiscally, this is like trying to put out a fire with truckloads of champagne, a fire that was intentionally set by the champagne distributor.

Nodes of high density (amid the park-and-rides) may help these areas be slightly less financially insane, but it also distracts from the real work of a broad thickening up that needs to happen if these cities are to become somewhat solvent over time. It’s also a convenient way to concentrate those people in ways that make us feel socially justified yet fail to make things better over the long term.

Finally, the term “density” is a trigger word for broad swaths of our population. That includes those who live in auto-oriented housing smeared across the landscape enjoying ignorance of their actual insolvency and unaware of the pending financial day-of-reckoning. It also includes planners, zoners and other meddlers of the orderly but dumb variety that believe enough in their own skills and infallibility to direct the complexity of humanity towards what they find to be a simple metric of success. Reality is a cure for ignorance but there is no easy fix for delusion.

Here’s a smattering of essays we’ve produced on this topic:


7. ESTABLISHING DENSITY BONUSES

The general concept the White House describes here is an effort to get developers to take a loss on some of their housing units — and, again, we’re talking apartment complexes and the other intense building types that would be applicable in less than 0.1% of the land mass of North America — in exchange for allowing them to recoup that loss by building a lot more units (quantity over quality development strategy).

I’ve always struggled with these schemes, not only because it’s not a market with any real feedback, but because of all the distortions it represents. If that level of housing intensity works well there, why not allow it to be built without the incentive of a bonus? If that level of intensity does not work well there, why allow it under any circumstances? Are we that out of ideas that we have to build a lot of things we don’t want, just to get a little bit of something we do?

It’s a little like rent controls, the magic weight loss pill of housing policy. Aren’t you simply acknowledging that your market is totally messed up but, for whatever reason, you are never going to take the diet and exercise kind of steps necessary to address it? You are just going to pop a regulatory pill and trust that will take the edge off the worst of it?

“Density will happen as a byproduct of success, but we must be humble enough to recognize that we really don’t know where that will be, where all those complex variables that make a place work will come together.”

I once got a tour of Vail, Colorado, from a team of the city’s planners. They told me all this money was being spent by the state and the region to improve transit and transportation systems because none of the workers in Vail could afford to live there. Workers had to live in a neighboring town and get bused in. My thought: If these rich people can’t pay enough in wages for a necessary worker to afford to live in their city, then they can wash their own dishes. Seriously, why is it now someone else’s problem to solve? If they can’t find enough workers, wages will either need to go up or housing prices will need to go down, the level of inconvenience from not having enough employees being the feedback pressure forcing the change. That’s not some libertarian creed; it’s basic supply/demand.

Outside of a few places (mentioned above) where we’ve made massive transit investments that depend on future growth to make them less financially ridiculous, we don’t need more artificial concentrations of housing. What we need is incremental growth over a broad area over a long period of time. I’ve called this thickening. Density will happen as a byproduct of success, but we must be humble enough to recognize that we really don’t know where that will be, where all those complex variables that make a place work will come together. I’m not a fan of the planner as urban god approach.

What might be an expedient band aid in a few of our largest urban cities is a weapon of fiscal mass destruction throughout the rest of the country. I’m not a fan of density bonuses as a form a bribery.

Here are some related Strong Towns essays:


8. Employing inclusionary zoning

Functionally, this is density bonuses (see above) through coercion instead of bribery. The misgivings I listed above largely apply here as well. This policy is only taken seriously becuase we’ve used zoning to freeze our neighborhoods. Instead of dealing with that problem — which would require a deep cultural conversation — we deal with it through regulation. And because we are regulating people who have money (developers), they use their influence and acquiescence in that regulatory process to limit competition and drive up prices. How perverse.

I’m not going to say that there are no instances of inclusionary zoning making the world a better place. I am going to say that, in a world of cause and effect, I’m more than a little skeptical that the net result of this approach is a market equilibrium that meets the needs of poor people. I’ll also argue that it doesn’t deal with the underlying problem, which is our abandonment of incremental development. Here are two pertinent terms that we use often at Strong Towns:

Suburban Experiment: The approach to growth and development that has become dominant in North America during the 20th Century. There are two distinguishing characteristics of this approach that differentiate it from the Traditional Development Pattern. They are: (1) New growth happens at a large scale and (2) Construction is done to a finished state; there is no further growth anticipated after the initial construction.

Traditional Development Pattern
: The approach to growth and development that humans used for thousands of years across different cultures, continents and latitudes. There are two distinguishing characteristics of this pattern that differentiate it from the Suburban Experiment. They are: (1) Growth happens incrementally over time and (2) All neighborhoods are on a continuum of improvement.

Instead of adding more regulation to development, add more options in your marketplace of developers. Here’s some related content on that this topic:


9. Establishing development tax or value capture incentives

10. Using property tax abatements

I’ll put these two together under the heading: Paying developers to pretend to solve your problems.

I realize that planners and policy wonks love these things — they work so well in theory and they vest a lot of power in the bureaucracy to make deals — but in a world where no city bothers to actually calculate return-on-investment, giveaways like these are even more problematic. And again, while they attempt to address the symptoms of bad land use, transportation and finance policies, they don’t come near addressing the underlying problem. If you want to read more on this topic, check out these essays:

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