Wednesday, April 22, 2015

How exclusionary zoning keeps people out and harms the poor

The Washington D.C. zoning commission just gave us a classic example of how a government undermines itself with bad policy.

"The D.C. Zoning Commission took its first action this week against developers of the city’s growing number of “pop-up” homes, voting to reduce the maximum by-right height of ­single-family rowhouses from 40 to 35 feet in some of the city’s gentrifying neighborhoods, including Capitol Hill, Shaw and Columbia Heights."

So called "pop-up" homes are simply tall homes being built in some of the city's most expensive neighborhoods. In order to make room for these homes developers are tearing down older, less desirable homes and then building the new homes on the empty lots. But the residents of the area don't really like this:

"Many residents in those neighborhoods get angry when developers buy an old two-story rowhouse and plop a third story on top, or when they raze the rowhouse and construct a brand new three-story residence. Longtime residents argue that pop-ups clash with the established character of their communities, or simply block their sunlight, their solar panels, or even their chimneys."

So established residents want to use the power of the government to keep a certain type of housing out of their neighborhood. This is a form of exclusionary zoning and it is used to do just that, exclude people.

The developers would also like to be able to split up the homes into multiple units that can be rented out. This would increase the supply of housing in these neighborhoods by replacing single family homes with multiple units. A simple supply and demand model can show that when you increase the supply of housing the equilibrium rent will decrease, all else equal. Lower rent in some of the city's most desirable neighborhoods would be a good thing for the relatively poor residents of one of the nations most expensive cities. In fact, the D.C. zoning commission appears to agree that the city needs more housing for relatively poor residents:

"In a split vote Monday night, the five-member commission decided to allow developers to convert their pop-ups into condominium buildings with up to four units, with one reserved for families that earn no more than 80 percent of the Washington region’s median family income of $109,200."

So on the one hand the city artificially limits the size of the buildings and number of units by capping their height and the number of stories, and on the other hand they acknowledge that poorer people need a place to live.So they increase the price of rent by artificially restricting the supply of housing and then they throw some scraps to the people most harmed by this policy by mandating that if developers want a fourth unit it must go to a lower income family. (Note that this policy does not mandate that developers actually build this 4th unit, so it is not clear whether any will be built.).

Government officials of all types do this far too often; they intervene in a market, cause a problem, and then try to fix the problem with more intervention, never giving any thought to the idea that maybe things would be better if they just got out of the way.

Much of the relatively high price of housing in cities like D.C. is due to government restrictions on building. Less onerous zoning rules would lead to an increase in the supply of housing, which would lower rents and help poorer families find better housing. Government officials realize this but ultimately they are concerned with staying in power, not helping people.

No comments:

Post a Comment