State and Local Policy Tensions Focus Zoning Reforms
(Source: Minnesota 2040.)
The new year is a good time to step back and evaluate the status of recent, high-profile zoning reforms. Since 2018, a number of American jurisdictions have taken steps to ease regulatory barriers to new housing. While each of our laboratories of democracy has followed a particular path, these measures have a common theme: In growing regions, land use rules should promote, not hinder, the construction of an adequate supply of homes.
This legislative push is the product of grassroots efforts, nationwide, led by housing and “Yes in My Backyard” (YIMBY) groups. It combines elements of progressive idealism and traditional common sense. It has forerunners in jurisprudence, including New Jersey’s Mount Laurel doctrine and traditional property doctrines that shaped our neighborhoods before zoning. It is also grounded in building customs as old as time. Three interesting recent examples come from Minneapolis, Oregon, and California.
Minneapolis
In 2018, Minneapolis, Minnesota, took a key first step. In an effort to encourage the freer development of affordable new homes, the city adopted a comprehensive plan, Minneapolis 2040, that eliminated single-family zoning districts. This did not mean that one-family homes would henceforth be banned, as some have falsely claimed; merely, that the city’s zoning ordinance would no longer prohibit homeowners from developing a second unit, or even a triplex, on lots that had previously been zoned only for one-family homes. Updated zoning went into effect in November 2019.
By September 2020, reporters discovered that proposals for some newly legalized building types were few, with just three permits for triplexes. Had the reform failed? No. Putting aside the fact that nine months is a relatively short timeframe for any novel development to go from concept to permitting (not to mention that this particular nine-month period had spanned both the early, uncertain months of COVID-19), one could identify other factors that contributed to the dearth of early proposals.
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Foremost among these, city massing requirements—how a building fits into its immediate surroundings—continued to restrict the dimensions of allowable structures with limits that had been optimized in accordance with the prior zoning (for single-family homes). Accordingly, while new construction permits for duplexes and triplexes could now be approved, many of the lots upon which such housing had been legalized still had building envelopes that were not conducive to multi-unit homes. This shows that unit counts, alone, do not dictate the parameters of new homes. Increasing them may be a prerequisite if one wishes to grow the number of homes in a given area—but ensuring adequate building envelopes is also necessary.
In 2021, a study by Daniel Kuhlmann, an assistant professor of urban planning at Iowa State University, examined the short-term impacts of the Minneapolis zoning reform on residential sale prices and discerned a modest, three-to-five percent increase in sales prices (over a baseline of comparable transactions that preceded the city’s 2018 adoption of the comprehensive plan). He reports that his “analysis, though preliminary, suggests that there is indeed demand for denser development in the city [as evidenced by rising values]. But the price increases associated with the upzoning redounds most directly to relatively small properties and those in inexpensive neighborhoods.”
The author posits that rising property values in tandem with new development potential is not surprising—offering a potential short-term benefit to skeptical homeowners—even if, over time, the resultant growth of the city’s total number of homes could modulate scarcity premiums of Minneapolis housing costs. One wonders if urban land values in the city might have jumped more quickly, in response to the plan, had massing requirements been coordinated to encourage investment in newly allowable homes.
Oregon
In 2019, the State of Oregon adopted a zoning reform law that echoed some of the priorities that had shaped the Minneapolis plan. HB-2001 used a combination of geography and municipal population as thresholds. Cities of more than 10,000 were required to permit two-family homes in single-family zones, while cities of more than 25,000 were required to allow three- and four-family homes in residential districts, as well. In the Portland region, which is subject to an unusual urban growth boundary (set by the state), these policies were extended to a variety of smaller and unincorporated locales, too.
One could quibble with the evidently arbitrary nature of using geography and population statistics to define the limits of such a policy, but this approach attempts to ensure (albeit, in a rude manner) that established population centers can respond to market pressure for new homes, while exempting smaller, rural municipalities from a policy that may not fit. Presently, the process of implementation is ongoing, with municipalities required to adopt updated codes by June 30, 2022. Those that fail to adopt a plan will be subject to a state model code.
Mixed-use zoning in Santa Ana, CA. (Source: Flickr.)
California
It is no secret that California suffers from extraordinary housing costs. (To be precise, much of California suffers—though not the cohort who purchased homes in the state’s affluent regions a generation or more ago. By and large, those Californians have made out like bandits.) Several factors have contributed to stratospheric housing costs, but the most important has been the fabled Golden State’s ability—until very recently—to keep attracting new residents. Upon arrival, newcomers compete with the state’s existing, largest-in-the-nation population for places to live. In response to growth, the supply of homes has expanded sluggishly, and expensively, under a morass of anti-growth regulations.
For years, the politics of this issue have been toxic. Those with the most political clout (older, long-term property owners) saw their appraisals go up while a familiar status quo was preserved. But in recent years, something began to shift. In 2021, the California Legislature enacted a package of statutory reforms, centered on SB-9, designed to supersede certain provisions of municipal zoning. These changes should help ease the shortage of housing by allowing construction of more units, including through the splitting of parcels large enough to sustain additional structures.
As Strong Towns described in a piece by Daniel Herriges last fall:
Now, statewide reform, which faltered in the Golden State for several years running, has passed in the form of Senate Bill 9 (SB 9), which effectively ends single-family zoning in California. The new law allows up to four homes on most single-family lots statewide. In general, an owner may build one additional home, or—here's the interesting twist—split their lot in two and have two homes on each. Fire zones and historic districts (and a few other conditions) are exempted, and you cannot demolish or alter a home that has had a rental tenant in the past 3 years.
This is significant. Allowing owners to build one to four new homes on most of California’s residential lots will unlock a large market for potential home development.
Notably, homeowners will see an economic incentive to develop such units and will have to do so at a neighborhood-compatible scale. These factors should temper the negativity that outside developers often face when proposing larger multifamily projects. Moreover, in cases where new units are rentals, homeowners will retain some discretion over tenant selection, mitigating a fear that rental homes will bring bad neighbors.
To the extent that homeowners respond to the pent-up demand for housing with new units, California’s chronic scarcity will ease. Home prices will likely trend toward an equilibrium that better addresses local pricing and spatial requirements. As an added benefit, the provision allowing homeowners to divide large lots in two will encourage the market to make room for new households with a lower degree of sprawl. This resourceful use of land will be more consistent with traditional, incremental urban growth patterns that once prevailed; and that have been halted, in many cases, by calcified zoning.
Current Proposals
Remarkably, bipartisan sympathy can be found for these kinds of reforms. Chronic barriers to adequate new housing have begun to antagonize cherished priorities of the left, right, and center: economic fairness, private property rights, and the American ideal of mobility all hang in the balance. New York’s Democratic governor has called for more housing near transit, and Massachusetts, under a Republican governor, recently enacted legislation to promote this end. The Biden administration has signaled federal support, as well.
Some have asked whether zoning reforms can (or should) be enacted locally, rather than through state legislation. Minneapolis has shown that substantial reform can start at the local level. In fact, local initiatives may be preferable when they foster more fine-tuned solutions. In a large and varied polity (with limited regard for compromise), there is a strong case for subsidiarity. Still, it is important to bear in mind that zoning powers are typically granted by states. State legislators have an entirely legitimate interest in ensuring powers they have assigned are exercised in ways that promote the state’s overall interests. If local policies are contributing to a shortage of housing, lack of opportunity, or environmental blight, then legislatures have both moral and constitutional grounds to reshape them.
It remains too early to know just how and when markets will respond to new opportunities that zoning reforms have created. That said, we can take the experience in Minneapolis to ensure that, in future cases, in addition to unit-count limits, any concomitant regulatory obstacles are removed. Once the development potential of less restrictive zoning has crystallized, it will still be necessary for individual builders (or investors) to prove a variety of concepts before a discernible market response can take shape. This will likely happen on a case-by-case basis, in each jurisdiction, as builders respond to its particular opportunities. In many places, changes will be gradual: zoning reform is a necessary, long-term solution to the need for more homes in metropolitan America. Done right, it will allow our urbanism to recover its incremental and responsive qualities. This will be a good change, but the results may take time to show.
Theo Mackey Pollack, AICP, is a senior urban planner at Insight Civil in New York City. He has previously worked in academic research and on post-Hurricane Sandy recovery efforts, and he has also practiced law. His essays have appeared in a variety of publications including City Journal and The American Conservative. He blogs at legaltowns.com.