On Zoning Reform: A Thought Experiment

The “New Donut” Development Model, as illustrated by Aaron Renn.  Source: urbanophile.com  (As a friend, Aaron, I hope you don’t mind me using your image here.  Trust me, it’s relevant.  Thanks in advance.)

In the wake of my most recent post, and subsequent counters to it, I came across some interesting pieces that raise concerns about what’s happening in our nation’s metropolitan areas.

In Chuck Marohn’s measured piece on Ferguson, MO three weeks ago, he raised some interesting points about inner ring suburbs that ring true.  He spent some time viewing Ferguson on Google Earth (as I have) and found significant evidence of a community deep in the decline phase of an inner ring suburb (as I did).  Here’s what he said:

“Decline isn’t a result of poverty. The converse is actually true: poverty is the result of decline. Once you understand that decline is baked into the process of building auto-oriented places, the poverty aspect of it becomes fairly predictable. The streets, the sidewalks, the houses and even the appliances were all built in the same time window. They all are going to go bad at roughly the same time.”

Marohn often talks about suburbs having phases of development, each lasting about a generation — a growth phase, a plateau phase, a decline phase and a collapse phase.  A growth phase means new homes and businesses are built, as well as the infrastructure to support them; the plateau phase means the initial burst of growth has stopped.  The decline phase is critical, because it’s here when suburban leaders find that their development pattern is unsustainable without more growth.  It’s here also that suburban leaders tend to double down on more growth, or in the case of a place like Ferguson, do their best to insulate themselves from the inevitable decline.  The collapse phase, well, is self-evident.

I also came across a Tumblr page where an Atlanta doctoral student who writes about education in the Atlanta area comments on the impact of migratory shifts in his region.  Ten days ago, he wrote:

The youngest generation of middle class Metro Atlantans have abandoned large swaths of (suburban Atlanta’s) Cobb County, leaving behind their aging parents and the poorer families most recent to arrive.  Rather than staying close to their childhood homes, they have gone one of two ways.  Some have moved further out to join new exurban developments while others have moved intown.  This transition has left much of Cobb County and many of its schools in a drastically different state than most might have imagined in the early 1990’s.”

Both pieces document what appear to be rather tenuous times for suburbs, particularly inner ring suburbs, and fall in line with my thinking on the future of suburbs.  

One response to this phenomenon, and to the pressures placed on in-demand city neighborhoods undergoing gentrification, is zoning reform that would eliminate exclusionary zoning practices by municipalities.  Many urbanists and economists, and a growing number of other social scientists, say that the the elimination of exclusionary zoning policies would generate a greater supply of housing, reduce housing costs and reduce the kind of wealth and social inequality that plagues our nation.

I am in the minority on this, but such a policy would be fraught with unintended consequences.  Advocates of this policy idea are wrong.

My thinking on this is ripe for academic study and scrutiny.  I hope at some point someone picks this idea up and tests its veracity.  In the meantime, the best way for me to explain my reasoning is through a thought experiment.

Let’s say that exclusionary zoning receives a legal challenge and proceeds all the way to the Supreme Court.  Let’s even say that by 2020, exclusionary zoning practices by municipalities are struck down by the Supreme Court as unconstitutional, and municipalities across the country are told that they must include a diverse and holistic mix of housing types within their jurisdiction.

In the wake of such an unprecedented decision, municipalities would be thinking of ways to meet the new standard.  My guess: most municipalities would look to increase the housing supply by allowing accessory units in single-family detached residential districts (i.e., “granny flats”), allow more attached housing development as-of-right (duplexes and townhouses), and allow for more moderate density, 2-4 unit structures in existing single-family districts.  Doing this would mean you could rather dramatically increase the number of units in a municipality, without dramatically altering the character of the municipality.  And let’s say, for argument’s sake, that doing this will increase potential housing supply by as much as 25%.  We now have cities and suburbs with the ability to create more affordable housing units.

Now, let’s look at the development community’s response to this.  They will be ecstatic, and rightfully so — the cap on the amount of housing that could be built has been raised.  There will be a race among them to build where they can, and it will be guided by this development principle:

Developers build housing for mid-market and high-market residential where the demand for such housing is strongest.  Developers will race to build new housing in the most in-demand city and suburban locations in the metro area.  Unfortunately, they generally will not build low-income housing.  Why?  Because the creation of low-income housing is guided by another principle:

Low-income housing is most often created through extraction, not new development.  Except for the efforts of public housing agencies, nonprofit community developers, and for-profit developers seeking affordable housing incentives, the supply of low-income housing is created through the weakened demand for existing housing.  When more mid-market and high-market housing comes on line, value is extracted from the existing housing that can’t compete with the newer models.  Yes, public housing agencies, nonprofit community developers and even for-profit developers are creating some affordable units, but it’s usually a drop in the bucket compared to everyone chasing the maximum profit that mid-market and high-market housing would provide.  This, by the way, is what is happening in today’s outlying city neighborhoods and inner ring suburbs.

Following these principles will lead to some very clear winners and losers in the metropolitan area.  Cities and suburbs that enjoy strong demand for mid-market and high-market housing will get a new infusion of housing, and likely begin to look much more like what many urbanists, like myself, enjoy about cities — a pedestrian orientation and a mix of uses.  Those that will do best will have transit access.  City neighborhoods and suburbs that don’t enjoy such demand will have to wait until the demand to do something within their boundaries develops.  As I’ve written before, that demand may be lost for good for some communities.

These two principles would lead to different impacts in different places.  To get an idea of how I think this might play out, let’s consider five Chicago community areas and five Chicago area suburbs.  To those who would be angered by my characterizations of their neighborhood or suburb, I apologize in advance.  But I see the following happening if exclusionary zoning measures are overthrown, without addressing the root causes of metropolitan area segregation and inequality:

Here’s where the thought experiment leads me.  A city neighborhood like Englewood, with an already-high 34 percent housing vacancy rate, would theoretically see its supply for new housing rise even higher under the proposed zoning reform.  Demand is already at rock-bottom for the community, meaning that the development response will be negligible and the impact, as I say, would be minimal.  Washington Heights, the community where the Jackie Robinson West Little League team plays its games, is a built-up community with few vacancies.  However, demand for housing there is also low, so development response and impact would be minimal there as well.  Lake View and Rogers Park I view as having low housing supplies that even zoning reform would have difficulty in addressing, but they do have differences in demand.  The development response and impact would be strong in Lake View and moderate in Rogers Park.  Forest Glen, on the far northwest side of the city, is the most suburban in scale of the communities here.  It would likely get an modest increase in housing units due to zoning reform and have a moderate impact.

How would this look for suburbs?  Again, apologies in advance if you don’t like my characterization, but here goes:

Inner ring suburbs like Oak Lawn and Elmhurst would have a low supply of potential new housing; perhaps Oak Lawn is unable to do much about it and Elmhurst does, but the impact will be minimal.  Carol Stream and Bartlett would get a boost in supply but are not exactly high-demand communities; they would have a modest impact.  A community like Oswego would likely get a dramatic boost in potential housing supply due to zoning reform.  Added units on existing lots would be coupled with potential units on currently undeveloped sites to greatly increase the inventory.  Developers may interpret this as a signal for increased demand on the metropolitan periphery, and the impact could be huge.

What emerges is a picture of a metropolitan area that becomes very strong in the center, weak in the middle and strong again at the edges.  Housing is built where demand is strongest — in metro Chicago’s case, the constellation of lakefront communities, but also at the suburban edges.  Little happens in between.  And who profits most from that development?  Not the low-income residents needing housing, or minorities facing issues of segregation or inequality.  The winners will be the middle income and high-income renters and buyers who can choose between quality urban living or New Urbanist-style suburban development on the periphery.

I don’t think that’s the outcome most people who support this thinks will happen.

In fact, our metro areas are already approaching this development model.  Just this morning Aaron Renn called attention to what he called the “new donut” model:

“In this model, the old donut (impoverished city surrounded by affluent suburbs) is inverted. What used to be the ring of health – the outer areas of the city and the inner suburban regions – are now struggling. Whereas the downtown is in pretty good shape, and the newer suburban areas are booming. (You might add in a fourth outer ring with troubles – these were the exurbs where very low-end housing proliferated because development standards were very low).”

And here’s Aaron’s take on the challenges inherent in this new development model:

“We’ve got three decades of experience in downtown revitalization, but much less in dealing with this newer challenge zone. I’ve said that suburban revitalization may prove to be the big 21st century “urban” challenge. This is where it is happening in many cases. These areas have an inferior housing stock (often small post-war worker cottages or ranches), sometimes poor basic infrastructure, and are sometimes independent municipalities that, like Ferguson, MO, are often overlooked unless something really bad happens. Unlike the major downtown, they are often “out of sight, out of mind” for most regional movers and shakers.

What’s more, while downtown provides a concentrated location for massive public investment, this more spread out area is too big to fix by throwing money at it. And how many stadiums and convention centers does a region need in any event?”

I’ll say it again — I know I’m in the minority on this, and I think this is something that requires academic scrutiny.  This idea screams for modeling and testing.  I will also say that I realize that every metro area is not Chicago, and that different metro areas would generate different outcomes.  However, until I see research that states otherwise, I remain persuaded that addressing problems of segregation and inequality cannot be done solely through the elimination of exclusionary zoning practices.

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