I’m later to this discussion but I was brought here by a recent Facebook post that is getting considerable engagement.
I think a lot of this conversation operates under a few assumptions that are intuitive to me but I haven’t yet had time to dig into the research on:
1. A large number of people need or want to live within a certain distance of large city centers.
2. There is a potential demand for walkable urban neighborhoods and moderate density “street car suburb” type neighborhoods that is being unmet because structural/policy factors are keeping the price of such neighborhoods too high for many people who would like to live there and/or limiting new development in and around these places.
3. Because proximity to population centers is a key factor increased density in well situated but “underdeveloped” neighborhoods is the only way to increase the supply of this type of housing.
Obviously the are many underlying cultural and personal biases underpinning these assumptions, but the basic structural critique is that certain types of desirable neighborhoods are inherently constrained by geography and transportation infrastructure and thus must become more dense if more people are going to have access to them.
If there are large amounts of unused or “banked” parcels in these existing areas a different angle could be addressing the incentives that prevent more development
You could argue that free markets should determine land use rather than paternalistic ideas of what type of neighborhood is desirable, which is a fair critique, but the current system in most places is full or government restrictions and incentives so the debate seems to be about whose vision for land use is better for cities/counties/regions in the long run.
Does allowing higher densities in result in more homes being produced, most of the time, on average, all else being equal?
As a Vancouverite, I appreciate calling out the conflation of the concepts and optimistic estimates, but we had single family zoning right around downtown for a long time and only recently are relaxing that. Seems clear that more homes in the city requires a zoning change.
Sure. More homes AT a specific location often requires zoning changes. Zoning regulates where different types of uses can locate. But the total quantity of homes across all possible locations is a different thing, resulting from the rate of production decisions of property owners at all locations.
The lack of basic financial literacy in this discussion really should eliminate many commentators from the debate but unfortunately their "influencer" status leaves us with many commentators that are ill equipped to help the situation. Thanks for your coherent discussion.
Also in defense of blanket upzoning ... if they were a relatively stable production rate, then upzoning might (accidentally) increase production (assuming that rate) for the few sites in which 1.) owners chose to re-develop and 2.) were previously zoning constrained.
Yes it is artless. Shooting a squirrel with a shotgun. And its likely that any accidental uptick in production would be lost in the noise of real the variability of the production rate. It also defeats the entire concept of zoning which suggests placing density in those locations where it makes sense to do so because of infrastructure support etc.
A good example is the SB9-like rezonings that allow duplexes and quadplexes in large tracts of single family homes. These have resulted in very little new production. In part because these densities don't maximize price in the few opportunities that exist where single-family owners are willing to trade their land.
But you have to understand, regulatory-only government is stuck pretending to solve a problem largely out of its control. In many US locales, the only tool it has is a regulatory tool, and the only real option is to de-regulate not increase regulation. So government officials pretend to do something by creating a myth -- supply (production rate) is zoning constrained-- and by taking a government action -- deregulation-- to increase supply (production rate.) And, once we say it properly we see through it immediately.
Unfortunately too many officials and housing advocates believe the myth.
Good comment. I think people also see removing zoning as a "free" policy. But of course, economically, the cost is exactly what is given up. And in a world where charging a price for extra property value from zoning changes is possible, it costs the budget dollar for dollar the exact amount that it increases property values by.
"Property owners don’t choose a density to maximise... you can adjust the number of projects to meet a rate of production that overall maximises returns."
A bit unclear. Can you clarify?
Property owners individually seek profit-maximizing site densities and collectively undermine them with profit-minimizing production rates? (i.e. they don't collectively choose to flood markets)?
Maybe to use your words, what I mean is that "Property owners individually seek profit-maximizing site densities and also individually choose profit-maximising production rates amongst their own portfolios of potential projects"
The sum of individual profit-maximising rates is also the collective profit-maximising production rate.
>Supply "is not a quantity of existing homes nor a rate of production of new homes"
Supply is a curve, not a quantity. We have other words for those quantities. We call them and "inventory" and "production."
This not just for homes and not just supply. When ppl say "demand increased," they usually just mean that…spending increased, not that the demand curve moved or changed slope. How would they even know if it had?
Ha! Yep. The training in economics perpetuates this loose thinking/writing. If we were more strict about units of measurement, like engineers, we would have a lot more success I think.
I’m later to this discussion but I was brought here by a recent Facebook post that is getting considerable engagement.
I think a lot of this conversation operates under a few assumptions that are intuitive to me but I haven’t yet had time to dig into the research on:
1. A large number of people need or want to live within a certain distance of large city centers.
2. There is a potential demand for walkable urban neighborhoods and moderate density “street car suburb” type neighborhoods that is being unmet because structural/policy factors are keeping the price of such neighborhoods too high for many people who would like to live there and/or limiting new development in and around these places.
3. Because proximity to population centers is a key factor increased density in well situated but “underdeveloped” neighborhoods is the only way to increase the supply of this type of housing.
Obviously the are many underlying cultural and personal biases underpinning these assumptions, but the basic structural critique is that certain types of desirable neighborhoods are inherently constrained by geography and transportation infrastructure and thus must become more dense if more people are going to have access to them.
If there are large amounts of unused or “banked” parcels in these existing areas a different angle could be addressing the incentives that prevent more development
You could argue that free markets should determine land use rather than paternalistic ideas of what type of neighborhood is desirable, which is a fair critique, but the current system in most places is full or government restrictions and incentives so the debate seems to be about whose vision for land use is better for cities/counties/regions in the long run.
That all sounds fair to me. Got a link to that Facebook post?
Does allowing higher densities in result in more homes being produced, most of the time, on average, all else being equal?
As a Vancouverite, I appreciate calling out the conflation of the concepts and optimistic estimates, but we had single family zoning right around downtown for a long time and only recently are relaxing that. Seems clear that more homes in the city requires a zoning change.
Sure. More homes AT a specific location often requires zoning changes. Zoning regulates where different types of uses can locate. But the total quantity of homes across all possible locations is a different thing, resulting from the rate of production decisions of property owners at all locations.
The lack of basic financial literacy in this discussion really should eliminate many commentators from the debate but unfortunately their "influencer" status leaves us with many commentators that are ill equipped to help the situation. Thanks for your coherent discussion.
Also in defense of blanket upzoning ... if they were a relatively stable production rate, then upzoning might (accidentally) increase production (assuming that rate) for the few sites in which 1.) owners chose to re-develop and 2.) were previously zoning constrained.
Yes it is artless. Shooting a squirrel with a shotgun. And its likely that any accidental uptick in production would be lost in the noise of real the variability of the production rate. It also defeats the entire concept of zoning which suggests placing density in those locations where it makes sense to do so because of infrastructure support etc.
A good example is the SB9-like rezonings that allow duplexes and quadplexes in large tracts of single family homes. These have resulted in very little new production. In part because these densities don't maximize price in the few opportunities that exist where single-family owners are willing to trade their land.
But you have to understand, regulatory-only government is stuck pretending to solve a problem largely out of its control. In many US locales, the only tool it has is a regulatory tool, and the only real option is to de-regulate not increase regulation. So government officials pretend to do something by creating a myth -- supply (production rate) is zoning constrained-- and by taking a government action -- deregulation-- to increase supply (production rate.) And, once we say it properly we see through it immediately.
Unfortunately too many officials and housing advocates believe the myth.
It's largely another act in political theater, that creates opportunities for unintended consequences. Here is one of them. 400' towers in a single family neighborhood in a small town, Menlo Park, in the Bay Area: https://www.almanacnews.com/menlo-park/2024/06/22/menlo-park-deems-builders-remedy-application-for-controversial-sunset-magazine-campus-development-incomplete/
Good comment. I think people also see removing zoning as a "free" policy. But of course, economically, the cost is exactly what is given up. And in a world where charging a price for extra property value from zoning changes is possible, it costs the budget dollar for dollar the exact amount that it increases property values by.
"Property owners don’t choose a density to maximise... you can adjust the number of projects to meet a rate of production that overall maximises returns."
A bit unclear. Can you clarify?
Property owners individually seek profit-maximizing site densities and collectively undermine them with profit-minimizing production rates? (i.e. they don't collectively choose to flood markets)?
I'm not 100% clear what you are missing.
Maybe to use your words, what I mean is that "Property owners individually seek profit-maximizing site densities and also individually choose profit-maximising production rates amongst their own portfolios of potential projects"
The sum of individual profit-maximising rates is also the collective profit-maximising production rate.
The last line nails it. Property owners manipulate both. Site densities and production rates.
Exactly:
>Supply "is not a quantity of existing homes nor a rate of production of new homes"
Supply is a curve, not a quantity. We have other words for those quantities. We call them and "inventory" and "production."
This not just for homes and not just supply. When ppl say "demand increased," they usually just mean that…spending increased, not that the demand curve moved or changed slope. How would they even know if it had?
You're right. There should be a different word for each different concept or dimension here. A huge problem in economics generally, as you know!
Blame Keynes as much as anyone. As far as I can tell, “effective demand” just means…spending.
Ha! Yep. The training in economics perpetuates this loose thinking/writing. If we were more strict about units of measurement, like engineers, we would have a lot more success I think.