Zoning Reform Can't Fix Everything
Chicago's South Shore neighborhood, looking northward toward the Loop. Source: chuckmanplaces.wordpress.com
It's easy to find the critical flaw in the zoning reformer's argument, if you remember this truism -- there is greater variation within metro areas than between them.
I've written before in response to the growing position that strict land-use regulation, i.e., zoning, is keeping an unnecessary lid on housing construction and contributing to higher housing costs. Proponents of this view argue that allowing the market to determine the number of units to construct, rather than the imposition of arbitrary limits, would ease affordable housing problems in high-cost cities.
As ESPN's Lee Corso would say, not so fast, my friend.
It sounds perfectly reasonable to believe this. It has a seductive logic. And indeed, it might work as a solution in the most unaffordable of places. But in the many other cities around the nation that aren't New York or San Francisco, or Austin or Portland, doing so would not only be wrong, but it could damage cities even more than help them. Historical and social factors guide housing policy far more than market economics, and we need to understand the biases we hold before we take such action.
My recent post on the relationship between city density and housing vacancy bears this out. I examined the 25 largest cities by their density and housing vacancy, using 2010 U.S. Census data, and found they could be placed in one of four categories:
Low density/high vacancy (LD/HV)
Low density/low vacancy (LD/LV)
High density/high vacancy (HD/HV)
High density/low vacancy (HD/LV)
Much of the discussion on housing policy, and the possible solutions to implement, focuses on addressing the concerns of HD/LV cities, like New York, San Francisco and Boston, and to a lesser extent LD/LV cities, like San Jose or Austin. HD/LV and LD/LV cities represent a good chunk of the top 25 cities (14, to be exact), and allowing more units is a reasonable response for them. I mighty add, however, that the suburbs of HD/LV cities might bear a greater burden for adding units, while LD/LV cities will have to look long and hard at adding units within their boundaries.
But what of the others?
There are LD/HV cities (Houston, Dallas, Phoenix, Indianapolis, Memphis) and, curiously, HD/HV cities (Chicago, Philadelphia, Washington, DC) that don't fit the paradigm. It's in these cities where the impact of historical and social factors becomes apparent.
Let's look at Chicago. A year and a half ago, I wrote a piece I called Two Chicagos, Defined. In it, I described a Chicago that's stratified along economic lines. Using the 2007-2011 American Community Survey (I know, it's time to update), and focusing on just three factors -- median household income, median home value, and educational attainment, I found significant divides between what I called "Global Chicago", the rest of the city and the suburbs. The yellow areas on the map below are the 29 zip codes in Chicago that qualified as "Global Chicago", meaning they rank higher in the factors examined than the entire region:
And here's how they compared statistically in 2011:
My quick analysis at the time:
"Global Chicago" is on par with the Chicago suburbs and the metro area overall in terms of income, and has a lower percentage of minority residents compared to the metro area. Interestingly, "Global Chicago" has a much higher home value and educational attainment when compared to the metro area overall or the 'burbs. Meanwhile, "Rust Belt Chicago" lags far behind. "Rust Belt Chicago" has a large majority-minority population, has an income nearly one-half as much as the suburban households, and has only one-third as many college graduates as "Global Chicago".
In other words, it's clear that there are very different experiences depending on where you live in the region. And very different responses to your immediate environment.
I decided to extend that into an examination of housing vacancies. Using 2009-2013 American Community Survey data, I looked at housing vacancy figures for Chicago overall, the 29 "Global Chicago" zip codes, and the balance of Chicago without "Global Chicago". Here's how it looks:
In the aftermath of the Great Recession, the U.S. Census showed that the housing vacancy rate for Chicago was nearly 14 percent. For the 25 largest cities, the same figure was 11.2 percent. The downtown/north lakefront "Global Chicago" was just under 11 percent, demonstrating its desirability. But the rest of the city? It has a vacancy rate more than 1.5 times higher than "Global Chicago", at nearly 17 percent.
My point -- there is a housing affordability for part of Chicago, not all of it. Chicago, and cities like it, cannot implement supply-oriented zoning reform policies without addressing existing demand concerns.
This is where historical and social factors come in, and where the zoning reform advocates are often exposed.
Let's look at a couple examples. Zip code 60657 in Chicago, covering the Lincoln Park and Lakeview neighborhoods, had a vacancy rate of just 8.5 percent in 2013. The neighborhoods are well-known for their quality housing, walkable environments, excellent transit access and great amenities. Just ten miles to the south, however, lies the South Shore neighborhood -- a great lakefront location constructed at roughly the same time, similar in terms of housing stock, also highly walkable and with great transit access, ripe for revitalization but currently lacking the same amenities. Its vacancy rate? An astounding 22.3 percent -- 2.6 times higher than in the Lincoln Park/Lakeview area.
Why such a disparity? The South Side has earned a reputation among the class that's returning to cities as being off-limits -- crime-ridden, poor schools, crumbling infrastructure. In fact, it remains off the radar for most, who consider "Chicago" to be entirely that part of the city they are familiar with. There is incredible demand for the area they're most interested in, and in that context, a limited supply.
But Chicago is much more than that.
Any zoning reform in HD/HV cities or LD/HV cities will encounter a paradox. New measures will be put in place, presumably citywide, to allow more units as-of-right. However, new units will be built only in areas that have the greatest demand, and will likely be built only for the most profitable parts of the housing market -- the upper and upper-middle income slices of the market. What will emerge will be cities with concentrated development in the most in-demand areas, and continued sparse development in areas that lack the demand.
Historical and social factors will rule thousands of individual decisions and remake the city, under the guise of "impartial market forces."