Where is the Evidence in Support of “City of Yes?” (not in Austin, Minneapolis or Vancouver)
The Adams Administration’s proposed City of Yes of Housing Opportunity is the latest attempt by the City to tackle the affordable housing crisis by relaxing zoning controls. The hope is that, if you allow even bigger development, everyone will be able to sit back and watch the market work its magic, producing market rate construction to alleviate the cost of housing for all. It’s good to dream; but sooner or later we have to wake up from this Econ 101 fantasy and face the housing affordability problems as they exist in the waking world. Proponents of the City of Yes approach may insist that housing scholars and advocates unanimously agree that lack of housing supply is the problem, and more supply is the solution. But this claim is false, and the reality is far more complex. If the academic research on the matter shows anything, it is that the relationship between zoning, housing supply, and housing affordability is contingent and context-specific. In New York City, where the number of housing units added has consistently outpaced the number of households added for years, there seems to be no housing shortage in general; just a lack of affordable housing for low- and very low-income households. So the question is twofold: 1) whether relaxing zoning controls will lead to a construction boom in market rate housing, and 2) whether that boom will then alleviate the burden of housing costs for those households in need of the help. As we’ve documented here, here, here, and here, there are numerous reasons to doubt that either would be the case.
Notwithstanding the above evidence, supporters of City of Yes point to cities like Vancouver, Austin, and Minneapolis as cases that prove the merits of the proposal’s supply-side affordable housing policy strategy. So, to leave no stone unturned, we consulted with experts who have studied housing in each of those cities. As it turns out, none of them prove the soundness of the City of Yes approach. At best, they illustrate the complexity of housing market dynamics and the advisability of applying a fine-grained approach to zoning regulation (a lesson that the City of Yes authors should have taken to heart). Otherwise, they demonstrate the ineffectiveness of trying to increase housing affordability by boosting market rate housing construction.
In Vancouver, increases in allowable density resulted in immediate increases in land value, keeping the ratio between land and building value constant, and yielding no decreases in per unit housing costs. Nor has the dramatic expansion in that city’s housing stock done much to temper prices. Vancouver has tripled its housing stock since 1960, outpacing household formation every decade. And yet, it has the third highest housing prices in the world relative to local average income. You can see our program on Vancouver housing here.
Like Vancouver, Austin has also seen explosive growth in its population and housing stock over the past thirty years. It has also seen a sharp increase in the share of its households paying more than 30% and more than 50% of their income toward housing. Rents doubled there between 2010 and 2022 and spiked during the pandemic. A surge in multifamily construction followed and did soften the market, but only for luxury housing. Concurrently, however, the city experienced a loss in older, inexpensive housing. Those who point to Austin as a housing policy model to follow point to the coincidence of the increase in housing development and the decline in housing costs since the pandemic spike. Relative, however, to pre-pandemic levels, Austin has experienced an increase in housing prices for all kinds of housing, and this effect has been especially pronounced in submarkets that have seen the most new construction. You can see our program on Austin housing here.
The story of Minneapolis is hardly more encouraging. First, a study finds that the effect of market rate new construction on housing prices varies by submarket, reducing the prices of existing high-end housing but also increasing those of existing lower-end housing. Second, an ongoing study by the Federal Reserve Bank of Minneapolis finds that the upzoning passed in 2019 has not had a discernible effect on housing construction. Reports that present Minneapolis as having solved its housing affordability problems make a logical leap, linking the upzoning to a decrease in housing prices. They overlook the fact that those decreases are only at the top of the market and likely resulted from a stagnant population and declining demand. Since 2019, the affordability problems in Minneapolis have actually worsened and evictions have increased. You can see our program on Minneapolis housing here.
In short, even the cases and evidence trumpeted by proponents of City of Yes contradict the claim that the stimulation of new market-rate construction through upzonings will address the need for affordable housing. One could cherry pick studies that find an association between increases in housing construction and decreases in housing costs. But these findings would form a poor basis for an affordable housing policy, and they stand against extensive evidence of upzonings exacerbating the problem. And yet we continue doubling down on this ill-advised approach, because it is all too convenient for government officials to pretend that policies that enrich powerful constituencies like developers somehow redound to the benefit of the public. The City Council, however, has not yet voted on City of Yes; so there is still time to make your voices heard, and you can do so here. But even after it has voted on it, you’d still do well to call, because you can bet that there is probably another ill-conceived “affordable housing” developer giveaway coming down the pike.