Wednesday, February 13, 2019

How Zoning and Building Code Restrictions Increase CO2 Emissions

One of the biggest findings of an Obama Admin white paper on affordable housing is that local land use restrictions, particularly zoning ordinances and construction approval processes, is a major contributing factor to rising housing costs and its associated effects (i.e. urban sprawl and gentrification). The crux of the research draws on the widening gap between real construction costs and housing prices over the decades, particularly in the metropolitan areas of major cities like Los Angeles and New York. In fact, the manufactured housing crisis is almost exclusively a problem in metropolitan areas on the east and west coast. There are generally three types of housing markets: areas in which housing is priced below construction costs, areas in which housing prices are close to construction costs, and areas in which housing prices are significantly higher than construction costs (Glaeser & Gyourko, 2003). For the most of places in the U.S., housing markets fall into the first two categories (Glaeser & Gyourko, 2003). In some places, like California, there are almost no homes below or close to construction costs; in California, there are few homes priced below 1.4x the cost of construction (Glaeser & Gyourko, 2003). Mean housing prices in metropolitan areas haven risen at an average of 1.7% annually since 1950 (Glaeser, Gyourko, & Saks, 2005). Between 1950 and 1970 rising home costs mostly reflected improvements in construction quality; new home prices rose in an almost one to one ratio with physical construction costs (Glaeser et al., 2005). However, after 1970, housing prices continued to rise even as the cost of physical construction leveled off (Glaeser et al., 2005). For instance, construction costs in San Francisco only rose 4.6% and construction costs in Boston only rose 6.6% between 1970 and 2000. Over the same period, average house prices in San Francisco rose 270% while average home prices in Boston rose 120% (Glaeser et al., 2005). Rising land values and artificial restrictions on construction represented 75% of inflation in house prices (Glaeser et al., 2005). This was evident in diminishing rates of new construction. Between the 1950's and 1990's, the median rate of new construction in metropolitan areas fell from 40% to 14% (Glaeser et al., 2005). In Los Angeles, San Francisco and New York the median rate of new construction fell to well under 10% by the 1990s from previous highs of 60%, 30%, and 20%, respectively, in the 1960s (Glaeser et al., 2005). Higher house prices usually spur a surge in new construction, but burdensome land use restrictions prevented the housing market in metropolitan areas from meeting growing population demands.The rapid rise in housing prices and diminishing rates of new construction coincided with the rapid growth of land use regulations in metropolitan areas between 1970 and 1990 (Gyourko & Malloy, 2014). Population density only accounts for a small contribution to the declining rate of new construction and land only accounts for 20% of the value of new homes (Glaeser & Gyourko, 2003).

Metropolitan areas don't have low wage problems or overpopulation problems; they have zoning problems. In housing markets where prices far exceed construction costs, developers have to comply with multiple, and often conflicting, housing standards and regulations and are sometimes required to conduct separate appraisals, reviews and inspections for each source of funding (Jakabovics, Ross, Simpson, & Spotts, 2014). Developments that exceed zoning restrictions on the type and size of development must received approved variances and entitlements, which delays construction and adds to the overall costs (Jakabovics et al., 2014). Jurisdictions can also add density requirements, height maximums, size minimums and parking space minimums, which in aggregate reduce the supply of affordable housing units (Jakabovics et al., 2014). Parking space minimums also add to construction related costs and drive up rents; for instance, in San Francisco, the average parking space adds between $25,00 and $50,000 to construction costs (Jakabovics et al., 2014). In addition to these regulations, jurisdictions can also dictate where affordable housing can be located and can ban certain types of housing such as group homes, micro-units, and ADUs (Jakabovics et al., 2014). Building codes that dictate the type and size of certain amenities, as well as the aesthetic features of buildings, can also add to construction related costs (Jakabovics et al., 2014).

Implications for the Environment

The environmental implications of burdensome zoning ordinances should be obvious to everyone; it doesn't take a brainiac to figure this out. Rising housing costs push residents out of metropolitan areas resulting in longer commute times to work. In aggregate, longer commute times increases traffic resulting in more CO2 emissions. The Obama admin noted this very same conclusion in their white paper 'Housing Development Toolkit.'

The long commutes that result from workers seeking out affordable housing far from job centers place a drain on their families, their physical and mental well-being, and negatively impact the environment through increased gas emissions.

Any liberal effort (or democratic socialist as they are akin to calling themselves nowadays) to reduce greenhouse gas emissions and save the planet will be in vain if they don't address the affordable housing crisis in their own communities and it's manufactured cause of overly restrictive zoning ordinances. Electric cars aren't going to do us any good if people still have to drive 2 hours to work. Public transit isn't going to do us any good if people can't afford to live where it's available. The primary focus of any climate change agenda should be land reform.

References

Glaeser, E., & Gyourko, J. (2003). The impact of zoning on housing affordability.FRBNY Economic Policy Review, 21-37. doi:10.3386/w8835

Glaeser, E. L., Gyourko, J., & Saks, R. E. (2005). Why have housing prices gone up? American Economic Review, 95(2), 329-333. doi:10.1257/000282805774669961

Jakabovics, A., Ross, L. M., Simpson, M., & Spotts, M. (2014). Bending the cost curve: Solutions to expand the supply of affordable rentals.

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