Zoning, Rights, and Prices

A recent and very interesting contribution to Liberty was “Why Are Housing Prices High?”, in which Randal O’Toole offered a new perspective on property rights in real estate.

Bruce Ramsey has now provided a contrasting view, and Randal O’Toole has replied. We are certain that you will be interested in all three treatments of the issue. — Liberty

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Bruce Ramsey writes:

Randal O’Toole argues against the abolition of single-family zoning, which he says “will not reduce housing prices” but will “betray the property rights of both urban homeowners and rural landowners.”

On the contrary, allowing for duplexes, triplexes, and fourplexes — which is the idea, at least where I live — would help moderate the rate of price inflation. Of course the new units would be expensive, because builders would build them only if they made a greater profit than building detached houses, but what matters is that multi-unit buildings would increase the supply of housing. And that would help.

I’m sure some people would feel that having a fourplex next door or across the street would “betray” their property rights. Their feelings aside, what property right would that be, exactly?

What matters is that multi-unit buildings would increase the supply of housing. And that would help.

As for O’Toole’s argument against growth boundaries, he’s right. In Seattle, where I live, the typical value of a middle-tier house, according to Zillow, is $900,000. The average rent for a one-bedroom here, according to Zumper, is $1,888 a month. A three-bedroom flat averages about $3,200. The reason for these high prices is that from 2010 to 2020, the city’s population increased from 608,660 to 737,015, and that during that time, the urban area was constricted by a growth boundary.

Allowing fourplexes in single-family zones will help ameliorate that. It won’t help anywhere near as much as getting rid of the growth boundary, but there is no political will to do that. The politicians who cater to renters and low-income people are all progressives, and progressives believe the growth boundary is helping save the environment. They won’t dare come out for “sprawl.” At least they are willing to talk about fourplexes. Take what you can get.

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Randal O’Toole writes:

It’s easy to imagine that increasing the supply of housing by building fourplexes where single-family homes once stood will make housing more affordable. However, it won’t — for several reasons.

First, people don’t want to live in fourplexes; they prefer single-family homes. Tearing down single-family homes and replacing them with fourplexes thus decreases the supply of housing that people want and increases the supply of housing that people don’t want. Shouldn’t people be allowed to choose the kind of house they want to live in without paying artificially high housing prices?

Second, housing becomes affordable when builders can construct thousands of homes in master-planned communities. The stereotype is Levittown, but better examples are the Woodlands and Sienna Plantation in the Houston area or Irvine in Orange County, California. Texas has scores of such master-planned communities being developed at any given time, but they are effectively forbidden by land-use laws in California, Oregon, and Washington. Building a few one-off quadraplexes can’t make housing affordable because there are no economies of scale.

Third, allowing for duplexes, triplexes, and fourplexes fails to solve the real problem, which is that urban-growth boundaries have made land expensive. The cost of a building lot in Seattle is more than four times greater than the cost of one in Dallas, so the land for each unit of a four-plex in Seattle is more expensive than the land for a single-family home Dallas.

Sometimes “taking what you can get” leads to something worse than what you had.

In addition, we have the experience of many urban areas that have increased their densities, including Portland, Seattle, San Francisco, and Los Angeles. All of them saw their housing affordability decline as densities increased. Densification is the cause of, not the solution to, housing affordability issues.

The fact that almost every housing development in the past century that was done in areas with no zoning came with protective covenants limiting what people could do with their land — covenants that developers added because they knew they would lead to more rapid sales of that land — shows that this can be a property right. It is a right to say, “I won’t develop my lot for more than a single-family home on the condition that my neighbors don’t either.” When single-family zoning was invented in about 1910, it was clearly to mimic that property right.

Sometimes “taking what you can get” leads to something worse than what you had. The land-use czars in California, Oregon, Washington, and a few other states have managed to put blinders on people to keep them from seeing the huge negative effects of growth boundaries. It is time to take those blinders off.