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More from David Schleicher

March 5, 2012

Mark Bergen at Forbes has an interesting interview with George Mason law professor David Schleicher, whose paper, City Unplanning, I discussed a couple of weeks ago.  Schleicher’s thinking hard about the political dynamics that lead large cities to systematically underzone. He correctly focuses attention on downzonings, which tend to occur quietly (if not stealthily):

1) Here’s the game theory part: Local legislators may prefer more development than we have now to less, but have stronger preferences for stopping development in their districts because these projects would hurt homeowners in their neighborhoods—either directly through things like increased traffic or indirectly through increasing the supply of housing, harming the value of existing houses.

This is a prisoner’s dilemma and absent a political party to organize the vote in local legislatures, one-by-one votes on projects will result in “defect” results, or situations where every legislator builds coalitions to block projects in their own district and nothing gets built. City Councils end up featuring what one journalist called the “ironclad principle of aldermanic privilege” or a norm that Members of the City Council have an absolute power to veto zoning changes in their district.

This makes a big city like a bunch of exclusive suburbs, at least for zoning purposes. Projects that would help the whole city, benefiting economic growth and reducing housing costs for newcomers or renters, lose out because the neighborhood in which they are located doesn’t want them and because each project is presented to the Council seriatim.

2) The process works differently for big developers and small ones. When a big new project is proposed, the politics look pretty ordinary, with a big developer fighting against local homeowners.

But big developers don’t care about “downzonings” or reductions in the size of the zoning envelope to current use, so that no one can build in a neighborhood as of right. The developers don’t care because they haven’t an investment yet, and the only concentrated and political powerful group are nearby homeowners who want to restrict development. These downzonings—which have become increasingly common—really matter because small developers can’t afford to go through the city planning process to get changes made.

Because we consider changes seriatim, small developers can’t piggyback on the lobbying strength of the big developers. Cities end up with a bunch of towers but strong limits on incremental housing growth—small new buildings, granny flats, and the like. This too pushes up housing costs.

That sounds a lot like Austin. Infill development in this town is conspicuous because the projects are so big. What you don’t see much of here are small new multi-family buildings or granny flats. Note that downzonings don’t have to be formal changes in zoning categories (i.e., from MF 3 to SF 3). The McMansion ordinance was a downzoning — by drastically restricting the floor space and envelope of buildings, it made granny flats, garage apartments and duplexes less desirable in single-family neighborhoods.  The “superduplex” ordinance was also a downzoning, because it made duplexes more difficult, or at least less attractive, to build.  Austin should be moving in the other direction to permit small, multi-family buildings as of right in more places.

Forbes will publish the second half of the conversation tomorrow.

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