Reply to Is there a coherent argument that loosening zoning laws will lead to affordable housing in DC?

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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]Nobody “needs” a SFH. Just because you are able to afford one thanks to your white privilege and generational wealth, does not make it right.

There needs to be more options in expensive areas for marginalized people and low income families. It’s not fair to keep building McMansions to keep people of color out of neighborhoods.

The sooner we can stop building new SFH’s, the better for society. [/quote]

This is all such a lie.

The only people pushing to get rid of single-family homes are 30-year old white guys who don't want to have to move into predominantly black neighborhoods, where affordable housing is plentiful. [/quote]

I am a married white guy in my 40s who agrees with the idea of ending SFH zoning in my neighborhood in Ward 3 so more marginalized and poor people can afford to live here. Do I disprove your theory?[/quote]

No, because you're either a liar or a fool or both. The idea this is going to lead to affordable housing is completely and totally preposterous. No one can even explain how that would happen. [/quote]

I mean, there are 22 pages of posts here, some of which do go into explaining exactly how that would happen, but I guess if you see anyone who disagrees with you as either a liar or a fool, it's easy to dismiss those.[/quote]

I've read every post, and there isn't a single one that offers a coherent explanation of how any of this leads to affordable housing.

If any of this was actually true, why can't anyone explain it?

It's not an outrageous request to say tell me how that would work. [/quote]

Since you're asking for a more precise explanation, here is the one that I posted I the other thread about single-family zoning that is currently active.  Happy to answer questions.

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Economist here, I posted far up-thread about this proposal. Just wanted to chime back in on the whole "If building more housing reduces prices, then why are the densest cities in the U.S. also the most expensive?" question. This is a somewhat technical answer, but if people actually claim to want answers to the questions they ask, then this is what they get. Feel free to ask questions, I'm not a complete expert but this is a topic of interest to me so I'm happy to delve into the literature.

Urban economists have a long history of building stylized models of cities, then using what are called comparative statics to analyze how things propagate through the model when you change just one thing at a time. Because cities are not simple to model, and these models are designed to be tractable, they have to make a lot of simplifying assumptions. But, that makes it easier to understand what is going on in the model. One of the most unintuitive (but largely necessary) of these assumptions is that there are no housing market frictions. That is, they model housing consumption as something that people have complete freedom to choose an amount of in any location. In other words, I can in principle live in any size house in any place (though I will have to pay for it), while the "optimal" house size that consumers will choose for any place is something that arises in equilibrium. If we think that zoning regulations are binding, that is akin to saying that people cannot in fact consume the amount of space that they would consume in equilibrium. In the context of upzoning, this is usually meant to assume that people are required to consume more land if they live in a particular location than they might otherwise choose.

What follows is loosely based on Brueckner (1987). In the classic monocentric city model, identical people (same preferences, same income) consume a combination of housing and everything else, and they pay commuting costs to get to work in the city center that are increasing in distance. Because everyone is ex ante identical and because housing markets are competitive, everyone achieves the same utility wherever they live. But, closer-in residents consume less housing (live in denser conditions). This is because the price per square foot of closer-in housing ends up being higher, since people are willing to pay to avoid commuting costs. Moreover, the larger the city, the more dense its center becomes, and the higher the prices in the center become, absent regulatory restrictions.

Loosely speaking, in this baseline model, you can think of removing a binding zoning constraint in part of the city by upzoning as similar to adding a bunch of potentially usable space to the city in that one particular location with one particular commuting cost (this isn't quite exact, but the mechanics operate the same way). Assume, for simplicity, that we have a "closed city" with no migration from other cities. Then, upzoning means that there is now, in effect, more space to populate that is closer to the city. But, the "size" of the city (distance of its furthest resident to the center city) is pinned down by the marginal cost of commuting further (which is constant) equaling the marginal benefit of commuting further (value of increased possible consumption of housing and other things). So, what happens is that the city actually shrinks in space (i.e. less exurban expansion). The most distant person can consume the same amount of housing as before, but they commute less, and that means that they must be better off. Therefore, because everyone achieves the same utility as that most distant person, everyone must be better off. This "reduction in city size" effect is partially offset, however, because land prices actually fall, and that allows everyone who lives in the non-upzoned area to afford a bit more housing. But, on net, everyone is better off, prices fall everywhere, and most people actually get to consume more housing because we have freed up land that was not being put to its most productive use. That remains true even though the places with the densest housing are also the most expensive.

This model is very simple, so you might ask what happens when you change a few things:

- If you add migration across cities to the model, then larger cities are larger either because they offer higher incomes (likely), better non-housing amenities (likely in many cases), or lower commuting costs (unlikely). The cities that end up being largest are the most expensive and the densest cities. The mechanics of what happens under upzoning still work the same way. However, since people migrate to the places where zoning regulations are relaxed, the utility benefits of upzoning (though still positive) may be much smaller for local residents. This is because the benefit of upzoning in one city is now shared among residents of all cities.
- If you add congestion costs (increasing density increases commuting costs), then the shape of the location-price curve will look different, and the city may look more compact in equilibrium. However, the basic results of the model still hold. The gains from upzoning are likely to be smaller because they are offset by increased commuting costs, but the comparative statics still hold.
- If you change the model to allow people to have different incomes, then all else equal, people with higher incomes will tend to live further away from the urban center. That matches pretty well to U.S. cities of the 1970s and 1980s when that model was developed, but it doesn't match European cities, nor the trend in American cities of today. However, this can be easily explained by the existence of local amenities within a city (e.g. restaurants, the symphony, etc.), which draw higher-income people who are able to consume those amenities back into the city (Gaigne et al 2017; See and Lin 2018). All else equal, high-amenity locations will have higher prices, and if the highest-amenity locations are also dense, then this will exacerbate the relationship between high density and high price. However, the comparative statics of upzoning do not change.
- One argument that has been commonly made in recent literature is that increased density may actually _make_ people more productive because of what are called agglomeration effects. For example, car manufacturers may find it easier to find and retain the people people for each job opening in a city that is dense with car manufacturers. And, engineers and inventors may be able to learn from each other more easily. As shown by Eeckhout, Pinheiro, and Schmidheiny (2014), these effects are likely to benefit both high-skilled and low-skilled workers within the city. And, if this is the case, then upzoning may actually lead to increased productivity, and therefore higher incomes and increased welfare overall, even though the most productive cities may still have the highest housing costs. Hsieh and Moretti (2019) suggest that this effect is quite large, claiming that supply restrictions have lowered aggregate growth in the U.S. by more than one third since the 1960s.

Hope this helps clear some things up![/quote]

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