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Growth Boundaries, Permit Caps Pushing Up Home Costs
A recent study from the Brookings Institution suggests that growth controls and restrictive regulations are driving up home prices and rents.
The report, “From Traditional to Reformed: A Review of the Land Use Regulations in the Nation’s 50 Largest Metropolitan Areas,” is one of the most comprehensive assessments of land use regulation ever undertaken. It was written by Rolf Pendall and Jonathan Martin of Cornell University and Robert Puentes of Brookings’ Metropolitan Policy Program to establish a framework for assessing “alternatives between better and worse systems of land use regulation.”
While the report says that effective regulation can yield benefits, the approach to land use and the results vary across the country. “Metropolitan areas in the Northeast and Midwest tend to use regulations to exclude most types of growth,” the study says, “while those in the West employ regulations that accommodate and manage growth.”
For example, a hypothetical development with 40 units of two-story apartments on a five-acre lot would be allowed by right or permit in almost every jurisdiction surveyed in the West and banned entirely in almost every jurisdiction in the Northeast.
The study is based on a 2003 survey of jurisdictions with populations in 2000 of more than 10,000 located in the 50 largest metro areas. More than 58% of the 3,177 jurisdictions to which the authors mailed the survey participated.
Exclusionary jurisdictions, according to the study, are those that don’t allow more than eight dwelling units per acre anywhere and that would bar the hypothetical apartments. Under this definition, exclusionary land use is prevalent throughout the entire state of New Jersey, along with places in the Hartford, Conn. metro area and in the New Hampshire suburbs outside of Boston.
Dominating the list of the least exclusionary are jurisdictions in Western metro areas like San Diego, Salt Lake City, Seattle, Phoenix, Denver and San Francisco, as well as in Miami, Tampa and Jacksonville, Fla.
The report found that in nearly a quarter of the local governments surveyed the maximum permitted residential density in the zoning ordinance is less than four dwellings per acre, and another 16% restrict the maximum density to fewer than eight dwellings per acre. Together, they account for 38% of the local governments in the 50 largest metro areas.
By contrast, only about 12% of the jurisdictions have maximum allowable densities of greater than 30 units per acre, yet 48% of the metro population lives in these jurisdictions.
The survey also suggests that the maximum permitted density has generally remained the same over the last 10 years. Four-fifths of the jurisdictions were within 10% of their 1994 density in 2003.
“Total low density zoning, in particular, tends to exclude black and Hispanic residents from the jurisdictions that use it by reducing the supply of the types of housing that tend to be available for rent,” the study says.
Other forms of land use regulation include:
- After zoning, impact fees are the most common tool in the U.S. today for residential land use regulation, according to the researchers; they are imposed by 37% of jurisdictions containing 56% of the population and 46% of the land use area in the top 50 metro areas. Nearly 90% of Western jurisdictions use impact fees, twice as high as the share of jurisdictions in the South. The highest-scoring areas for impact fees are in Florida, which mandates concurrency between infrastructure and development. Phoenix and San Diego also score high. Lowest ranking are Indianapolis and places in Virginia where current law limits the use of impact fees to roads.
- Nationally, an estimated 16% of jurisdictions have urban containment programs, such as service boundaries, growth boundaries or greenbelts. These jurisdictions represent 27% of the total metropolitan population and 38% of the land in these metro areas. The highest-ranking metro areas for containment are in states where it is required: Portland, Ore.; Seattle and Nashville. Denver ranks very high in its jurisdictions using this approach, as well, because of greenbelts in Boulder County and a voluntary plan coordinated by the regional council of governments.
- Only about 2% of jurisdictions, with 4% of the residents and 3% of the land area, have permit caps. Nevertheless, permit caps have been adopted by 42% of the jurisdictions in metro Denver and an estimated 33% in Las Vegas, and are becoming more common around Boston, where 20% of the jurisdictions have them.
“Because several very high-cost housing markets have many jurisdictions that have experimented with permit caps, this leads many observers to conclude, probably correctly, that they create serious housing shortages,” the report says. “The professional and political backlash against them has therefore been intense. But beyond these metropolitan areas, growth caps are quite rare and in fact completely absent from 33 of the 50 metropolitan areas.”
“Both strict rent control and permit caps at their most extreme provide economists with textbook examples of overregulation and its negative effects, but neither regulation is all that common at the national level,” the report adds.
- And serious moratoria affect 2% of the jurisdictions with 6% of the population and land area.
The report finds that “growth control” areas that combine building permit caps with locally imposed and generally uncoordinated urban growth boundaries are associated with the highest housing costs in the country, led by San Francisco and followed by the Virginia suburbs of Washington, D.C. for rents and the New Haven, Conn. area for housing prices. Although costs are much lower in Denver, “the most ‘growth controlled’ parts of the Denver metropolitan area (Boulder County) have high prices that are balanced by lower prices elsewhere in the metropolitan area.”
The less regulated environments of Dallas-San Antonio and Houston had the lowest average house values of the metro areas that were examined.
For more information, e-mail Blake Smith, or call him at 800-368-5242 x8583.
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