Examining the Relationship Between Land-Use Regulation and Affordable Housing - November 17th, 2016
Description
Students from the University of Guelph and I discuss issues regarding land-use regulation and affordable housing with Emily Hamilton. Emily is a policy research manager at the Mercatus Center at George Mason University. Our discussion draws from a recent paper that she, and her co-author wrote titled, "How Land-Use Regulation Undermines Affordable Housing."
Transcript
Brady Deaton: Welcome to FARE talk where we set out to provide enduring discussions on contemporary topics relevant to our economy with particular emphasis on food, agriculture and the environment. My name is Brady Deaton Junior of the Department of Food, Culture and Resource Economics at the University of Guelph. I will be your host. [music ends] Today is November 17 and we will be speaking to Emily Hamilton about her research on land regulation and its effect on affordable housing. Emily is a policy researcher at the Mercatus Center at George Mason University and she has written on this topic widely and we will actually be looking at a paper that she and her co-author Sanford Ikeda have written. A link to that article will be made available to you on the FARE Talk website. For those of you listening in, we will be talking because we are doing this podcast with Emily in a land economics course at the University of Guelph. Emily welcome to FARE Talk.
Emily Hamilton: Thank you very much for having me.
Brady: Emily, I just want to begin, a lot of the listeners may not be familiar with the issues that we're going to talk about today and part of our challenge is to kind of work through them, but if you got in an elevator with someone you didn't know and you had let's say three floors and they said ÒWhat's your research about? What's this paper that you've written about?Ó What would you tell them in general?
Emily: Sure. I'd say that a lot of well-intentioned regulations such as our minimum lot sizes and maximum density roles as well as newer smart growth regulations like urban growth boundaries or green belts all restrict the supply of housing over what we would see in a freer market, and the effects of this supply restriction of housing is felt most harshly by low income people and in our research we look at the regressive effects of these regulations, how they hurt low income people and how they reduce income mobility.
Brady: Alright, now sometimes I get in an elevator and I might be with a planner and if I've said something like that my guess is the pushback would be, ÒWell, but land-use planning is important, it stops conflicting land uses, it helps perhaps planning for urban infrastructure in those areas and it raises values because it makes places better to live in. What's you're kind of general, now you're going down the elevator and you've got two floors.
Emily: Yeah, I would say that there are plenty of justifications for many of these types of regulations. People need places to park their cars, so planners require that landowners set aside areas for parking. Plenty of these regulations have benefits, but their costs are often not considered or not considered sufficiently, so in this environment we tend to see overregulation over what we'd see in an environment where planners consider the costs of these roles in addition to the benefits.
Brady: Alright I should say we are going to be talking about affordable housing, most of your examples take place, in the paper that you've written, most of the literature you're reviewing are examples that take place in the United States, in Canada we might define affordable housing as spending about 30% of your or 30% or less of your income on housing. Is there a similar definition apply in the United States or is it?
Emily: Yes, that is a widely considered rule of thumb in the United States and when housing is required to be affordable for a certain income level, the 30% rule is what cities use to define affordable housing.
Brady: And in terms of thinking about this differences among income groups, do you have a general sense of say what the of the poorest 20% pay in terms of housing versus say the richest 20% or?
Emily: So typically in the US when city planners are looking at whether or not housing is affordable they look at what's called the Area Median Income and so that's the median income defined typically at the ZIP Code level so it varies very widely of across parts of the US and across cities, so in some places households earning over hundred thousand dollars per year would be eligible for affordable housing because their income level is low relative to others in their immediate neighbourhood.
Brady: I was looking at some of the data on this in Canada, just kind of preparing and I found, and I'll provide a link to this as well because seems quite high, but the Global News was reporting that, and I think I'll get this about right, that the poorest 20% in Canada pay more than 50% of their income on housing and of course there's a drastic difference for the reasons you mention in terms of the wealthiest 20% pay about 16% of their income on shelter, so the issue affordable housing and the effects that we're about to talk about really do matter perhaps differently to different groups.
Emily: Definitely.
Brady: What we're going to do now is I'm going to turn the questions for the remainder of this podcast over students and we're just going to try to walk through initially just understanding some of the specifics. One of things that I really enjoyed about the paper was all the specific examples of land regulation and zoning and so I'm going to turn it over to the students who will ask a question, there will be time for a follow-up and we'll just proceed like that.
Emily: Great.
Student: Hi Emily. In your paper you mention exclusionary zoning. Could you give us a bit of an example or a background on what this is and its effect on housing affordability for low-income households?
Emily: Sure. Exclusionary zoning is a term that people use to describe zoning rules that are implemented with the intent of limiting who can live in a neighbourhood. So for example rules that prevent any multifamily housing like apartment buildings being built within a neighbourhood could be considered exclusionary zoning if households can't afford to rent or purchase a whole house then they'll be excluded from a neighbourhood entirely. Other types of exclusionary zoning rules include minimum lot sizes and this was probably the first type of exclusionary zoning rule that was labeled as such and New Jersey townships have been some of the most studied areas for minimum lot sizes and some townships they are actually implemented minimum house sizes that were larger than the current average house size, so they're basically saying in the future only people who are on average wealthier than we are here are going to be able to move in, preventing low-income people from moving into the townships with those rules.
Student: Good morning Emily. I was interested in your discussion of inclusionary zoning. Could you briefly explain and describe what inclusionary zoning is and your findings regarding its capacity to address affordable housing challenges?
Emily: Yeah. Inclusionary zoning is a policy that's in the US has been tried in many different types of municipalities and it varies how it's implemented, but in general developers are either incentivized to provide housing that's at a below market rate by either subsidies or changes in regulations that allow them to build more housing if they include inclusionary zoning in their project and what it does is it sets a price cap on the cost of housing, but only for some units within a development. So for example an apartment building of 100 apartments might be required to have 20% of those apartments affordable to people who are earning say 50% of the Area Median Income. And inclusionary zoning sounds like a great idea because it's making housing more affordable to people who make less money than many of their neighbours and it also can make neighbourhoods more diverse than what they would be in a completely free market, which many people argue benefits everyone to have a diverse neighbourhood, but the problem with inclusionary zoning is that it changes what type of housing is going to be built. So if 20% of the apartments in a new building have to be rented at a lower than market rate the other 80% of those apartments are going to tend to be very expensive luxury apartments so that the developer can subsidize the below-market apartments with those high rents on the other apartments. And another problem with inclusionary zoning is it typically provides very few units of affordable housing so inclusionary zoning alone is certainly not enough to address the affordability problem in many expensive cities.
Student: Hi Emily. You touched already a little bit on minimum lot size zoning. Is there any way that you can explain exactly what minimum lot size zoning is and how it affects housing prices and specifically housing affordability?
Emily: Great question. So a minimum lot size rule might say that for example every house in a neighbourhood has to be built on at least a quarter acre of land, so that's setting of a floor on how much housing how much land must be dedicated to each house. So, if land is expensive it's going to directly make housing more expensive as compared to allowing houses to be built on say in eighth or a tenth of an acre of land.
Student: Morning Emily. I found your discussion on the effects of parking requirements to be thought provoking. Could you give us a brief summary of your findings as well as the research pertaining to it?
Emily: Sure. So in the US the vast
United States
