Reply to Overriding local zoning to allow multi-family units in suburban neighborhoods in VA

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[quote=Anonymous][quote=Anonymous]Economist here (not the PP). The Annenberg and Kung study has some nice features, but I wouldn't put much stock in its conclusions yet. I would characterize it as being more like a first step in setting some building blocks for future structural modeling.  There are still big gaps that need to be addressed.

The authors highlight the lack of migration in their model, and that's an important gap.  But, I think they have a bigger issue which is the lack of a model of amenities.  Their model concludes that is is more effective to improve amenities in lower-priced neighborhoods than to build more in high-priced neighborhoods, but housing is assumed to be of an identical form in LL locations, and amenities are implicitly assumed to be location-specific, but non-rival and therefore not a source of negative externalities.  In the real world, different types of neighborhoods have different types of amenities. Amenities in more urbanized areas tend to be effectively non-rival and non-excludable (sidewalks, public parks, coffee shops and restaurants).  But, these amenities are often only financially viable given sufficient density, and their utility to residents is itself often a function of density, because people like these things to be within walking distance.  Suburban areas have a very different set of amenities (larger private lots) that can impose large negative externalities on residents of other neighborhoods by using up much of the available land for private use.  Their model doesn't have anything to say about this, and their empirical methodology isn't able to take it into account at present.

In summary, amenities are heterogeneous, and spatial characteristics of different neighborhoods are heterogeneous in ways that are tightly linked to amenities. So, we can't really conclude much about the value of increasing density without constructing a model that also links the two.  My strong suspicion is that if you wrote down a monocentric city model that allowed for migration and for density to increase the quality of non-rival amenities, you'd fit the data at least as well as their model, but you'd also conclude that increases in density increase aggregate utility for both high-income and low-income residents. It would do this by improving amenities for high-income residents while also increasing affordability for lower-income residents who reside in more peripheral locations.[/quote]

It is linked but in one direction. The available amenities appear to control the rent pricing. The more heterogeneous the amenities, the greater the rent pricing difference. The only way to drive down the higher rents is to make the amenities comparable. However, with increasing density, you can't easily claim that amenities are non-rival and non-execludable. Public parks, especially in suburbs and urban areas, have a finite capacity. The lack of migration in their model is the most troublesome aspect, but given human nature, this may not be huge issue. People, in general, favor the status quo without significant motivation. Further, the group that needs affordable housing has the least mobility. [/quote]

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