KEY POINTS:
- City Hall has long claimed that upzoning neighborhoods across Austin will improve affordability
- A growing number of researchers and urban planners now reject that theory
- Recent studies have shown that blanket upzoning may actually make prosperous cities like Austin more expensive
The City of Austin’s failed CodeNEXT initiative and the “transition zone” plan that followed it had the same goal: to broadly expand zoning entitlements through the deregulation of Austin’s land development code.
The plans’ supporters claim the added density will make our community more affordable:
The idea behind a code overhaul—which has gone under multiple names, including CodeNext—is to allow more dense development, which is intended to produce housing units at more affordable rates.
Here’s the problem: The idea that urban densification leads to affordability is a myth.
Even Richard Florida, the famed urban planner once regarded as urban density’s biggest champion, now admits the “build more” argument for density is “too good to be true”:
Build more. That’s what a growing number of urbanists hail as the solution to the surging home prices and stark inequality of America’s superstar cities and tech hubs. They want to relax regulations that limit the supply of housing in already expensive cities, and start building taller and denser. It’s supply and demand at work, they argue. … A new paper by two leading economic geographers suggests this argument is simply too good to be true. … [A]s [one of the paper’s authors] told me via email: “Upzoning is far from the progressive policy tool it has been sold to be. It mainly leads to building high-end housing in desirable locations.”
— Richard Florida
Bloomberg CityLab, May 9, 2019
In the study Florida cites, economic geographers Andrés Rodríguez-Pose and Michael Storper took a close look at residential development in cities like Austin, where housing demand is dominated by high-income technology workers. They found that developers fail to provide homes for middle- and lower-income residents, concentrating instead on higher-end, more profitable housing.
Rodríguez-Pose and Storper discovered that upzoning plans like CodeNEXT not only fail to create affordability, but also “unleash market forces that serve high income earners, [and] are therefore likely to reinforce the effects of income inequality rather than tempering them.”
In other words, blanket upzoning doesn’t just fail to deliver affordability—it may actually make communities like Austin less affordable and more inequitable than they were before. In the name of progress, proponents are making matters worse.
Rodríguez-Pose and Storper have a pair of explanations for why this happens:
- Housing markets are more complicated than markets for standard goods and services, and the forces of supply and demand interact differently within them. “[H]ousing markets are not like standard markets,” the authors explain. They work differently “because the internal plumbing of housing markets—succession, migration, and occupation patterns—are full of frictions, sunk costs, barriers and externalities that make the effects of aggregate supply increases highly uneven, and in many cases involve unintended or contradictory effects.” Put simply, an increase in housing supply doesn’t always lead to lower prices.
- In housing markets like Austin’s, demand from high-income buyers overpowers demand from everyone else. The causes of housing unaffordability cannot be understood by focusing only on the level of supply, because housing comes in different types—and the type of housing built in a market is determined by the type of demand driving it. Demand form high-income buyers dominate markets like Austin’s, and Rodríguez-Pose and Storper argue that “aggregate increases in supply do not translate in any straightforward way to decreases in price.”
The authors explain that the underlying structural causes of the housing crisis in prosperous metro areas are “high demand from highly-skilled, high-income people; increasing income inequality; and a rise in construction and land costs consequent upon the growth and maturation of metropolitan regions and demands for a higher-quality urban environment.”
They conclude that none of these effects are abated by blanket housing-supply policies, but rather these policies perversely increase housing costs, gentrification, and displacement.
Rodríguez-Pose and Storper aren’t the only researchers who have made conclusions like these. In a study of high-density, “New Urbanist” developments, University of Chicago professor and urban planner Emily Talen reported that only 15% were affordable for residents earning the area’s median income.
We’ll dispel more myths about zoning and Austin’s land development code in the coming weeks. Stay tuned!
For a more detailed discussion, check out “MYTH: Upzoning Will Increase the Supply of Affordable Housing,” available on Community Not Commodity’s Resources page.