Does Upzoning Cause or Reduce Housing Affordability and Racial Inequality?

This argument is most pronounced in New York but is repeated also in London.

One the one side of the camp are those who might be described as Critical Urbanists – the most well known example Zoned Out by Professors Tom Angotti and Sylvia Morse – for these upzoning puts upward pressure on rents and causes displacement of poor and ethnic communities. They point at census evidence of displacement in upzoned neighbourhoods with increases of white residents and reductions of other ethnic groups contrary to city wide trends.

The opposite case is put by a group you might call the Market Urbanists – for these the cause of high rent is not upzoning but overly restrictive zoning. Prominent authors include Edward Glaeser of Harvard and Joe Gyourko of the University of Pennsylvania as well as Matt Yglesias, Ryan Avent, and Noah Smith. This is a diverse group. Some critical urbanist authors have described them as ‘supply side shrills’ or ‘friends of Ayan Rands spawn ‘, however few are anti-planner neo-liberals. Most are progressive liberals arguing for zoning reform and inclusive affordable housing policy, rather than no zoning.

These two camps tend to talk past each other. The former tend to use institutional and experiential area based studies. Before and after in a neighborhood; aided by the incredible fidelity of US census tract data where the race of geographical specific units to the household are discernable. This is criticised by the latter who tend to use more economic based methods. Looking longitudinally at households over a long period of time and the impact on price on new supply both inside and outside a study area. The latter also mention filtering theory which we have covered on here before. This looks at the impact of a new householder withdrawing from competition at the margin once they occupy a net new unit making it cheaper for less affluent householders elsewhere to afford. This is related to the so called ‘fish tank affect’ stressed by Noah Smith, by keeping affluent incomers in big glass tanks (apartments) they don’t push up prices elsewhere.

There is also concern about what is being claimed.

Economist Noah Smith, a supporter of the YIMBY framework, says that progressives simply do not understand economics:

….[I]t has become an article of faith that building market-rate housing raises rents, rather than lowers them.  The logic of Econ 101 — that an increase in supply lowers price — is alien to many progressives, both in the Bay Area and around the country.

You often here that downzoning pushes up prices in affluent neighbourhoods (like Prospect Park Brooklyn) but so does upzoning (like West Shore Brooklyn) which is it, both or neither – the overwhelming forces of gentrification in Brooklyn possibly the main factor whether or not areas are upzoned, downzoned or not at all? This points also to the need for greater rigor in studies, what is the expected sign of change (null hypothesis) and how does the study methodology distinguish this from underlying socio-demographic change in a neighbourhood and net impact of a zoning change on prices across a whole housing market area (through filtering effects) not just inside a rezoned area.

A good bibliography on studies which claim there is no impact on displacement is here. But argument still rages over measurement, by population or individuals. The following study by NYC itself looks at direct additional to general and inclusionary housing stock directly alongside demographic shifts across the entire area it states there was no decrease in residents of hipanic origin across the study period. . There have been an increasing number of studies looking at impact of upzoning and new construction on price and longtitudinal effects on individuals. The evidence goes both ways however increasingly they are leading towards evidence that new apartment construction does put downward pressure on prices and this downward pressure leads to less not more displacement. There are also disputes on measurement of the proportionate impact of strictness of zoning and the proportionate impact of land constraints (more on the coast and peninsulas such as San Francisco making it harder for cities to expand). Also impact on price can come from one of two causes – a supply effect – the impact of increased supply on price and an amenity effect, the increased cachet of gentrification lending to more demand for inmigration. Not all studies distinguish the two but those that do seem to show the supply effect is far more important than the amenity effect. Care also needs to be taken with dispacement that is involuntary and replacement where someone moves out and is replaced by someone who is more affluent and/or of a different race. This disctinction can only be made with individual longtidunanl data.

The issue of methodology is crucial especially if some form of racial impact assessment is mandated. Which it might by if New York mandates its proposed comprehensive planning reforms.

The worry is that both camps research looks past each other. The market urbanists research tends to ignore institutional factors, not look at racial impacts, the critical urbanists being too anecdotal and data light.

If increasing supply raises a price it is either a Giffin Good (low cost) or Veblen Good (luxury). In high value areas it is not impossible that luxury houses like luxury cars or yachts are veblen goods, and also that this causes speculation (see Cameron Murrays work here on housing development rights being a speculative option good) and lack of transmission of upzoning potential to new construction – as in this study from Chicago.

Veblen goods contradict the basic law of demand, which states that quantity demanded has an inverse relationship with price, because of their exclusivity appeal. This may mean that in exclusive neighbourhoods where previous lack of supply caused by exclusionary zoning there may be pent up demand which cannot be satisfied on the market which is then released once new construction takes place. This increased number of residents may push prices up as the ‘brand’ value of the neighborhood increases. including from existing houses – however the ‘fish tank effect’ and filtering may actually push down prices and reduce displacement in poorer neighbourhoods elsewhere, which seems to be supported by the data.

Also there are huge economic distortions in New York caused by rent control stock. Rent control, as all the studies show, throttles the new supply and turnover of new stock. But it does benefit existing residents. One of the few ways to get around it is to demolish existing stock. The answer here may be less rent control, or ensuring no net loss of affordable housing supply through adding them to inclusionary zoning requirements. Loss of rent control stock is not an argument against upzoning but ensuring that zoning works alongside a reformed set of regulations as a whole, including inclusionary zoning.

The two sides in this debate need to stop talking past each other and trash talking. Housing in cities is an unusual, segmented and distorted market. You cant ignore racial impact and it does you no good to quote loaded rabid anti planner type ‘research’ such as that from Randall-o-Toole. Crude rules of supply and demand wont work and canny rules require a sophisticated and progressive supporting zoning framework. Add vastly more required reports to the 800 page plus and ridiculous 8 step zoning review process in New York (the most complicated and pointless in the world) wont help, wheras comprehsivive border to border zoning reform focussed on increasing supply of all homes and affordable homes in particular will.

Ministerial Statement Keep Calm and Carry on Planning

Hansard – Statement made by Lord Greenhalgh 19th Jan 2021

My Rt. Hon. Friend, the Minister of State for Housing (Christopher Pincher) has today made the following Written Ministerial Statement:

The country needs more, better and greener homes in the right places.

This Government’s ambition is to deliver 300,000 homes per year by the mid 2020s and one million homes over this Parliament. Increasing the number of up-to-date Local Plans across England is central to achieving that goal. Local Plans not only unlock land for development and ensure that the right number of new homes are being built in the right places, they also provide local communities with an opportunity to have their say on how their local areas will change over the coming years, and how the local environment can be protected and enhanced.

91% of local planning authorities have now adopted a Local Plan, but we know that many of them are not being kept up to date. In March 2020, the Government set a clear deadline of December 2023 for all authorities to have up-to-date Local Plans in place.

It is critical that work should continue to advance Local Plans through to adoption by the end of 2023 to help ensure that the economy can rebound strongly from the COVID-19 pandemic. Completing Local Plans will help to ensure that we can build back better and continue to deliver the homes that are needed across England.

To support this, we recently rolled forward temporary changes that we made over the summer to ensure the planning system continues to operate effectively during the pandemic. In addition, we announced changes to the methodology for assessing Local Housing Need and published the 2020 Housing Delivery Test measurement. This should help to provide greater certainty for authorities who are currently preparing Local Plans. The Government recently issued a formal direction in relation to South Oxfordshire District Council’s Local Plan to ensure it continued to adoption. Where necessary, we remain committed to using all powers available to Government in order to ensure that progress on plan making is maintained.

We also want to see Neighbourhood Plans continue to make progress with the support of local planning authorities, to give more communities a greater role in shaping the development and growth of their local areas.

The Planning for the Future White Paper consultation closed in October. The White Paper sets out proposals to deliver a significantly simpler, faster and more predictable system. These proposals will need further development. Authorities should not use this period as a reason to delay plan-making activities. Authorities who have an up-to-date plan in place will be in the best possible position to adapt to the new plan-making system.

I will consider contacting those authorities where delays to plan-making have occurred to discuss the reasons why this has happened and actions to be undertaken.

This Written Ministerial Statement only covers England.

‘Will need further development’

Another Government U Turn – Future Homes Standard and Planning

Local Planning Authorities have had a confusing time on what to out in development plans about decarbonising buildings stock and energy to buildings.

A useful summary of the many zig zags is the UK Green Building Council New Homes Policy Playbook

We had the Planning and Building Act legalising setting standards in advance of the Building regs, a deregulation order removing it but no regs implementing the order and a consultation as part of the Future Homes standard on whether to introduce the order.

Hence LPAS have been confused, introducing policies, then withdrawing them or adding notes to ther websites that they no longer apply.

At last some clarity. The Government has published a lengthy document on the Future Homes Standard.

Responding to a consultation on the Future Homes Standard, the government has set out plans to radically improve the energy performance of new homes, with all homes to be highly energy efficient, with low carbon heating and be zero carbon ready by 2025.

These homes are expected to produce 75-80% lower carbon emissions compared to current levels. To ensure industry is ready to meet the new standards by 2025, new homes will be expected to produce 31% lower carbon emissions from 2021.

lets look at the phasing in.

First is an interim uplift in Part M standards.

Subject to the outcome of the second Part L consultation published alongside this response document, our aim is now for the interim Part L(Conservation of fuel and power), Part F (Ventilation) and Overheating
Regulations outlined in both consultations, with associated guidance, to be
regulated for in late 2021, coming into effect in 2022.

…a typical semi-detached home built to the 2021 version of Part L will emit 31% less CO2 than one built to current standards – and will act as a first step towards the Future Homes Standard.

In terms of interim measures by local planning authorities.

We recognise that there is a need to provide local authorities with a renewed understanding of the role that Government expects local plans to play in creating a greener built environment; and to provide developers with the confidence that they need to invest in the skills and supply chains needed to deliver new homes from 2021 onwards. To provide some certainty in the immediate term, the Government will not amend the Planning and Energy Act 2008, which means that local planning authorities will retain powers to set local energy efficiency standards for new homes. (para 2.40)

… as we move to ever higher levels of energy efficiency standards for new homes with the 2021 Part L uplift and Future Homes Standard,it is less likely that local authorities will need to set local energy efficiency standards in order to achieve our shared net zero goal. (para 2.41)

In terms of the roadmap to the Future Homes Standard

In their most recent annual progress report to Parliament, the Committee for Climate Change recommended that the Government commits to a robust definition of the Future Homes Standard, which is legislated for well ahead of 2025.10

Through consultation we received similar feedback from stakeholders, many of whom requested an early consultation on the technical detail of the standard and aclearer pathway to full implementation.
• We have listened to these calls for a swifter and more certain pathway. Our
work on a full technical specification for the Future Homes Standard has been
accelerated and we will consult on this in 2023.
• We intend to introduce the necessary legislation in 2024, ahead of full
implementation of the Future Homes Standard in 2025.

A draft future homes standard is included. Note this is somewhat stricter in home insultation than the previous zero carbon standard and low carbon heating (i.e. no gas biolers) are insisted upon.

Now how are LPAS to respond. The new approach is somewhat different than the zero carbon homes plan. The Phasing out of Natural Gas will mean there is less ‘Gap’ (residualn and unregulated emissions) to be filled – requiring approprate solutions (such as tree planting) for example. However the means of filling the low carbon hearing gap (heat pumps, zero carbon district heating etc.) is left open.

Looking at the proposed phasing in terms of planning policy we have

  • Now to 2022 (introduction of interim part L)
  • 2022 to 2025
  • 2025 – Introduction of Future Homes Standard

Only a few weeks ago the UKGBC reccomended LPAS to chance it with the following policy.

A 31% reduction on the Dwelling Emission Rate (DER) against the Target Emission Rate
(TER) based on the 2013 Edition of the 2010 Building Regulations (Part L). A fabric first
approach shall be prioritised, ensuring that at a minimum the thermal performance of
the whole envelope exceeds that of the notional specification by 5%.
The energy use intensity for new homes should be reported on a kWh/m2/year gross
internal area (GIA) basis.

This is the standard already flagged up and which almost all housebuilders have already adjusted to. It is entirely reasonable to apply it between now and when revised Part L comes into force.

LPAs could also apply a stricter standard from 2022 to 2025, 50% reduction is reasonable, 75% will kick in after 2025.

I would strongly recommend that LPAs define the baseline as per the above there are many ways this is defined some throwing in total emissions and unregulated appliances. This is confusing and in terms of building fabric many SAP calculators will struggle. To deal with low energy heating and residual, unregulated and total emissions it is much better to have a separate policy (as the UKGBC recommends) to deal with this, a combination of large site based technology and contributions to carbon offsetting. This will avoid having to have complex SPGs which deal wit matters in duplicative and conflicting ways to the building regulations.

As a streaching target the UKGBC recommend

An energy use intensity (EUI) target of <70 kWh/m2/year operational energy use in GIA excluding renewable energy contribution shall be met. This target includes both regulated and unregulated energy consumption. New build homes shall deliver ultra-high levels of energy efficiency consistent with a space heat demand of 15-20kWh/m2 /year. Designers shall evaluate the operational energy use using realistic information on the intended use, occupancy, and operation of the building to minimise any performance gap. They shall demonstrate this through compliance with the above targets using a design for performance methodology such as Passivhaus PHPP or CIBSE TM54 Operational Energy

And in terms of residual emmissions

Where it is clearly demonstrated that net zero carbon cannot be fully achieved through
on-site measures, all developments shall be required to make a financial contribution
to the LPA’s carbon tax fund equal to the residual regulated emissions at a rate of
£X/tCO2 over 30 years.
Alternatively, developments can make up the shortfall off-site by funding a carbon
reduction or removal project directly, provided the LPA has approved this approach.

They also include a Merton rule type policy for 40% renewable, but i doubt this is necessary or sensible. 30% of ultra low emissions development might output far less carbon than 40% of a high carbon development. It is much better to set carbon targets and encourage maximisation of renewable potential than set arbitrary % targets.

Lets hope the UKGBC update their guide to deal with the new government announcements ASAP.