Less restrictive zoning reduces housing prices—Pew study finds rents rose less steeply in reform areas.
Zoning rules that severely restrict the construction of new housing are a major violation of property rights, and also cause housing shortages that prevent millions of people from “moving to opportunity” and becoming more productive. There is already extensive research by economists and housing policy experts demonstrating these points. A new study by Alex Horowitz and Ryan Canavan, housing specialists at Pew Charitable Trusts, provides additional evidence:
A national housing shortage has driven up rents, leaving a record share of Americans spending more than 30% of their income on rent and making them what is known as rent-burdened. But in four jurisdictions—Minneapolis; New Rochelle, New York; Portland, Oregon; and Tysons, Virginia—new zoning rules to allow more housing have helped curtail rent growth, saving tenants thousands of dollars annually….
Research shows that rents rise when more people need housing relative to how many homes are available. Restrictive zoning policies make it harder and more expensive to build new housing for everyone who wants it, and most researchers have found that this drives up home prices and rents…..
But what happens to rents after new homes are built? Studies show that adding new housing supply slows rent growth—both nearby and regionally—by reducing competition among tenants for each available home and thereby lowering displacement pressures. This finding from the four jurisdictions examined supports the argument that updating zoning to allow more housing can improve affordability.
In all four places studied, the vast majority of new housing has been market rate, meaning rents are based on factors such as demand and prevailing construction and operating costs. Most rental homes do not receive government subsidies,… Policymakers have debated whether allowing more market-rate—meaning unsubsidized—housing improves overall affordability in a market. The evidence indicates that adding more housing of any kind helps slow rent growth. And the Pew analysis of these four places is consistent with that finding….
Each of these places kept rent growth minimal relative to the U.S. overall, even while demand for housing continued to grow. Between 2017 and 2021, the four jurisdictions saw their total number of households grow between 7% and 22%, while the total households nationally increased by 6%. More households require more homes, and a housing shortage relative to demand drives up rents….
During the period studied, rents nationwide increased by a whopping 31%, while, in the four reform jurisdictions, they only went up by 1% to 7%. That, despite the fact that all four experienced greater population growth than the national average. The success of Tysons, Virginia is particularly notable, because the northern Virginia area as a whole has experienced a major boom in housing prices over the last decade, driven by increased demand. Tysons’ experience bodes well for the impact of “missing middle” zoning reform recently enacted in nearby Arlington County, where I live.
The Pew analysis emphasize the benefits of lower rent, which is of obvious value to lower-income households. But at least equally important is the increased ability of people to “move to opportunity” in these jurisdictions, thereby improving both their own prospects and the productivity of the broader economy. Libertarians and other property rights advocates should also welcome the great expansion in property owners’ ability to decide what to build on their land.
Throughout much of the country, zoning is the single biggest constraint on property rights. Zoning is the biggest property rights issue of our time. I say that despite the fact that it isn’t in my interest to do so, given that I have devoted much more of my property scholarship to eminent domain.
“NIMBY” defenders of exclusionary zoning argue that it is necessary to protect the interests of current homeowners in places like Arlington—people like my wife and myself. But, in many ways, we too have much to gain from breaking down zoning restrictions—especially if we have children and we want them to be able to find affordable housing.
In recent years, valuable reforms have been enacted in a number of states and localities, and others are under consideration. But much remains to be done. The progress made in these four jurisdictions is an indication of what can potentially be achieved through broader reform.
Originally published by the Reason Foundation. Republished with permission.
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