Happy Tuesday, and welcome to another edition of Rent Free.
When we started this newsletter last December, I was somewhat worried that I'd run out of housing news to cover. Fortunately, that has not been the case at all.
This past year has produced almost too much activity in the wider universe of housing and land use policy for one person to write about. Even better, much of that news is good news. America's cities and states are showing a budding interest in fixing their (largely self-imposed) housing crisis.
Still, as YIMBYs open doors, NIMBYs close windows.
For this week's newsletter, it would be helpful to review the most important trends in housing policy over the past year, divided into the good, the bad, and the ugly.
But first, let's ground ourselves by looking at the latest numbers on how many homes the country is putting up this year.
More Homes Are Being Built, Just Not in the Epicenters of the Housing Crisis
In the aggregate, the housing picture appears to be moving in the right direction.
America is on track to complete 1.6 million homes in 2024, according to the latest data release from the U.S. Census Bureau. The country is predicted to complete 10 percent more homes this year than in 2023, when 1.44 million homes were finished.
This good news looks even better when one zooms out a bit. Homebuilding has been rising steadily from the rock bottom rates we saw in the aftermath of the Great Recession. The country is on schedule to build about three times as many homes as we did in 2011.
High mortgage rates, supply chain disruptions, high inflation, and general pandemic-era chaos did not fundamentally alter this slow, steady upward trend.
Zoom out even more and things look somewhat less rosy.
Average homebuilding rates in the 2020s are about on par with homebuilding rates in the 1980s and 1990s. We're undershooting the 1970s by a considerable margin. This is despite the U.S. population being larger today, home prices and rents being higher, household size being smaller, and the stock of pre-existing homes continuing to deteriorate (as the law of entropy would suggest it would).
One would assume we'd be building a lot because of those factors.
National aggregates also mask significant regional variation. The American South is building close to its historic highs. Meanwhile, the rest of the country is largely falling behind.
On a city-by-city level, these differences look even more extreme.
Booming Austin, Texas, is building about ten times the number of homes as San Francisco, California. The New York and Dallas metros are building roughly the same number of apartments, despite the former having roughly six times the population of the latter.
This is not simply a result of investment and construction activity chasing higher demand and higher prices. Home prices in low-building San Francisco and New York are well above Austin and Dallas. Nevertheless, it's in Austin and Dallas where builders are in a frenzy to add more supply.
To be sure, the reason that Texas is booming and California is stagnating isn't because the Lone Star State recently adopted a bunch of YIMBY/supply-side/deregulatory land use policies. Its growth and affordability are nevertheless vindications of the standard YIMBY story.
Texas never erected a slow-growth land use regime. It doesn't have an environmental review law that anti-growth activists can use to drag out project approvals for years. Its counties aren't allowed to do zoning. Its largest city—Houston—doesn't have zoning either. There are no urban growth boundaries. Rent control is banned. So is "inclusionary zoning." Trade unions don't have a lot of state laws helping them coerce builders into paying above-market wages.
Not everything is perfect in Texas or other sunbelt states, obviously. There are still lots of low-density zoning and parking mandates. NIMBY lawsuits can still stop upzoning initiatives. The more Sunbelt cities grow, the more those restrictions will really bite.
But the country's high-growth, still-affordable areas show that a better world is possible.
Now, onto the trends.
The Good News: YIMBY Reformers Have the Initiative
This past year, Colorado passed a suite of reforms that permit accessory dwelling units (ADUs) in single-family-only areas, upzone land near transit lines, and eliminate parking minimums for residential development in urban communities.
Arizona enacted laws requiring cities with populations above 75,000 to permit small multi-family units near their central business districts and allow accessory dwelling units in single-family zones.
In May, Austin, Texas, shrank its minimum lot sizes, passed some wonky upzonings of land near transit lines, and reformed its even wonkier "compatibility standards" to allow larger apartments and commercial developments nearer to single-family neighborhoods.
In December, New York City closed out the year by passing its much-debated "City of Yes" initiative, which is estimated to lead to the production of another 80,000 housing units.
None of these reforms are truly revolutionary. A few even have counterproductive compromises included within them.
But for the most part, they're all pretty good. Better yet, they're proof that the momentum is on the side of people who want looser zoning rules, more property rights, and more homebuilding.
We can expect 2025 to yield a similar number of states and cities passing productive, liberalizing zoning reforms.
The practical politics of reform is still hard and the results it produces are, for the moment, still insufficient to truly get America's cities building again. When it comes to the housing crisis, however, basically every jurisdiction has decided to stop digging.
The war is not won, but the battle lines are shifting in the right direction.
The Bad News: Courts Have a NIMBY Problem
Successful legislative efforts to peal back zoning regulations at the local and state level have regrettably revealed another obstacle to liberalized land use rules: the courts.
This past October, a judge in Arlington County, Virginia, overturned a unanimously passed, relatively modest "missing middle" reform that allowed property owners to build up to six housing units in formerly single-family zones.
Arlington's process for producing that "missing middle" ordinance took roughly eight years. But the judge ruled that they had failed to check all the procedural boxes when passing the policy.
It's not an isolated incident. In the past 14 months, judges in Montana, California, and Minnesota have vacated zoning reforms that upzone formerly single-family-only areas to permit smaller multifamily buildings. Some of the legal reasoning in these decisions is truly wild.
Over the past century, courts have taken a pretty permissive view of local land use regulations. As long as they were stripping private property owners of their freedom to develop their land, the nation's jurists typically rejected legal challenges to zoning laws.
Pass an ordinance allowing one home to be turned into two homes, however, and the courts suddenly rediscover their skepticism.
"It would appear there's a recent trend of at least some trial courts subjecting upzoning, increases in density, to a test that's different than what's been applied to zoning in general," Charles Gardner, an attorney and research fellow at George Mason University's Mercatus Center told Reason earlier this year.
In one sense at least, this string of court decisions rejecting zoning reforms is good news. You can't strike down something that hasn't passed yet. Several of the above-mentioned rulings are being appealed. State legislatures have also intervened to override court decisions striking down zoning reforms.
Nevertheless, it would obviously be better if judges were (at a minimum) letting city councils and state legislatures liberalize their zoning codes without interference. As more zoning reforms pass in more places, we can expect more courts to find some problem with them and strike them down.
The Ugly News: Local Governments Keep Trying To Shut Down Homeless Shelters
This past week, the U.S. Department of Justice sued a Georgia community for trying to use its zoning laws to shut down a local Christian church's homeless service center. The week before, a state court in Ohio ruled in favor of a local government trying to prevent their local church from sheltering the homeless inside.
A few weeks prior to that, a town in Washington State was trying to prevent a local warming center from hosting people overnight. A few weeks before that, a town in Montana went so far as to yank a permit from its local warming center.
Earlier this year, the U.S. Supreme Court reversed a pair of decisions by the U.S. Court of Appeals for the 9th Circuit, which prevented local governments from punishing people for sleeping on public property when there was no available shelter capacity.
In writing for the majority in Grants Pass v. Johnson, Justice Neil Gorsuch said that local governments need every "tool in the toolbox" to help get people off the street.
When left to their own devices, local governments like to use their tools to shut down the shelters that give people an option other than sleeping on the streets (and maybe violating a local camping ordinance in the process).
In communities across the country, the Good Samaritan's biggest obstacle is often the local zoning code and its enforcers. Time and again, churches and non-religious non-profits are threatened with fines (and even criminal charges) just for letting people sleep on their property.
This newsletter covered a few too many of these cases in 2024. With record numbers of people sleeping on the street, we can expect more cases still in the new year.
Quick Links
- New Yorkers are stressed about having to place their trash in trash cans.
- Over at Works in Progress, Salim Furth explains why lower housing costs keep people who make no money off the street.
- A small, wealthy California town has nearly bankrupted itself fighting against state-mandated upzonings.
- The only thing worse than having too little housing? Having too much housing. Bloomberg reports on China's collapsing, supply-saturated real estate market.
- New rent control laws in the Maryland suburban counties surrounding Washington, D.C., have successfully squeezed out new housing investment.
The post Housing Policy 2024: the Good, the Bad, and the Ugly appeared first on Reason.com.
