Piano Tuner Defeats Casino Agency — But Why?

Here’s some good news: in New Jersey, the government can’t take your land for a public purpose unless it has, actually, um, specified a public purpose. That’s good. But here’s the bad news: in Atlantic City, a state agency called the Casino Reinvestment Development Authority has spent the past five years trying to do precisely that, to a local couple. Specifically, the agency tried to leverage the state’s power of eminent domain to take away Charles and Linda Birnbaum’s three-story building and “bank” it for an unspecified future use.

Here’s some human context about the decision, from Amy Rosenberg at the Philadelphia Inquirer:

Birnbaum retained the right to keep the home his parents, who were Holocaust survivors, bought in 1969, because the state’s Casino Reinvestment Development Authority could not provide assurance that its plans for the property and surrounding area “would proceed in the reasonably foreseeable future,” the court ruled…. Birnbaum’s mother, Dora, lived in the house on Oriental Avenue until 1998, when she was killed during a home invasion. Birnbaum, who lives in Hammonton with his wife, rents out the upper floors and uses the first floor for his piano-tuning business.

Your tax dollars at work, New Jersey. It’s good that the court said no. But maybe this case is a signal that it’s time for the state to stop acting as a legal henchman for casino developers. Casino gambling has failed to bring back Atlantic City, after more than four decades. It has, however, destroyed much of what once remained of the traditional seaside urbanism of America’s prime Victorian-era beach resort. And it has resulted in perverse scenarios like the one at the center of this lawsuit.

Minneapolis 2040: Have the YIMBYs Already Won?

Two historic houses in Minneapolis. Photo: McGhiever via Wikimedia Commons

Time to note a major victory: the City of Minneapolis is on board with YIMBYism in a serious, substantial way. Minneapolis has become the first major U.S. city to adopt a comprehensive plan that eliminates single-family-only zoning districts. And, although its amended zoning still caps out development of many parcels at just three units, it will still (in broad theoretical terms) allow builders to triple the number of housing units within those neighborhoods. That’s impressive. And since housing markets are more regional than municipal, and Minneapolis is the largest city in its region, I predict this legislation (presuming it passes the remaining hurdles) will have a salutary effect on housing affordability throughout the Twin Cities, for years to come. This really is great news.

In a related story, the Oregon Legislature may soon consider a Democratic bill to eliminate single-family-only zoning districts in cities with a population of 10,000 or more. The fact that the lead sponsor is the House Speaker indicates the degree of acceptance that our kind of zoning analysis has attained, politically, in a very short time. Of course, there is pushback, as there always is in politics. But once it comes into focus, the picture is pretty clear, and economy, equity, and the environment all call for one basic solution: expanding the latitude of property owners to build more housing in response to the need for … more housing. People see the need to stop protecting a calcified status quo that is working for fewer and fewer people.

When I first started writing here about exclusionary zoning laws and their distortion of housing prices (way back in 2010, when I was a law student at Rutgers) it remained a very arcane issue. The basic nexus between restrictive land use policies and declining affordability had been well documented in New Jersey case law through the Mount Laurel decisions of the 1970s and 80s. But outside the local community of housing activists, the slow crisis of an artificial, regulatory shortage of housing units in growing metropolitan regions was hardly on anyone’s radar. Today, housing activists on both right and left accept this common-sense analysis: zoning laws that limit development of new units play a major part in the lack of housing affordability in growing cities.

I got into this issue because I saw people being displaced from their long-term neighborhoods across the New York & New Jersey region in the late 1990s and early 2000s — and nobody with a voice seemed to be noticing. Since then, the soaring cost of housing options in metropolitan America has become, perhaps, the most glossed-over factor among the myriad economic challenges facing Millennials. Now, finally, we are making some real progress, and although we’re not there yet, I am more optimistic than ever.

Cheers to everyone who is out there working on the front lines.

More SROs, Shared Housing in Urban America

The Marlton Hotel in New York City.

The Times has a story about how cities are taking a new look at shared housing situations in light of the increasing cost of individual units in many places. Single-room occupancies and variations on the SRO model get some positive attention.

I lived in an SRO in New York (above) when I was a freshman at the New School. Apart from the fact that the rooms were incredibly small, it was a good living arrangement. In our case, the building was almost entirely occupied by private college students, which may or may not have been a good thing. (However, there was one old man whose long-term tenancy could not be terminated and who was reputed to have been, um, a procurer, in his productive years.)

Today, the same building has been converted to a luxury hotel, trading on its history as place where famous people lived while they were still striving. (I apparently missed being neighbors with Lillian Gish by a mere 85 years.) The renovation is beautiful, and the building is much better appointed today than it ever was when it housed workers, or artists, or students. But where could those kinds of people, on their own dime, sleep in Manhattan tonight?

All this is to say that such arrangements can be fine, and can even have salutary effects for civilization when they create spaces in our great cities for those who arrive with more dreams and talent than riches. There are bad rooming houses, too, of course. So it’s case by case. But as a matter of equity, the need for efficiency accommodations that are genuinely affordable for working people and young people is not being met. SROs and other sharing arrangements can work in that space, and permitting a lot more of them could be part of the solution.

Missing the Point?

This is what affordable housing once looked like.

Incredibly, Bryce Covert, in a long article at The Nation about the supposed roots of America’s affordable-housing crisis, manages to go on for nearly 5,000 words about the history of American affordability programs and initiatives — while offering only one, almost offhand mention of zoning. And while the focus of the piece is the situation in Los Angeles, migration patterns to Southern California — a huge part of the story there, from post-war internal migration to more recent immigration –don’t even get a passing nod.

The ebb and flow of public monies for housing construction certainly makes for an interesting angle about the changing political philosophies of the United States over the past century. And, to be sure, large-scale federal housing initiatives backed by the power of eminent domain created a lot of new, often spacious units during the post-war period. But that the story of such initiatives, and their decline or disappearance, provides a satisfactory explanation for the current housing crisis is not accurate.

The private housing market has always provided the overwhelming majority of housing units in the United States. (For decades, it has also been heavily subsidized by taxpayers through the mortgage-interest deduction, as well as other elements of federal, state, and local tax policy — but that’s a separate issue.) And until fairly recently, the private housing market has produced sufficient housing to meet demand. What has changed is that, as population has grown, and the remaining land within commuting distance of major cities has dwindled, markets have collided with local zoning policies that prevent new construction. This has chronically limited the number of units, placing a premium on each and every one. Without new units, subsidies to individual households will only push rents even higher.

The argument that poor people cannot afford the carrying costs of new construction is also missing the point. When land prices are not artificially inflated by a policy-imposed scarcity, middle-class and wealthy households, by and large, can afford the carrying charges for new units. Cheaper units then “filter” into the market in older buildings, whose construction costs have been paid off; a knock on effect is that these cheaper units in older buildings, when they exist, can provide a counterweight to forces that might encourage an upward spiral toward exorbitant prices for newer units.

This entire dynamic, which works relatively well in a mixed market, has been distorted by a chronic, artificial shortage of housing units because of restrictive zoning laws. As an aside, some of the public monies now being used to support marginally effective (drop in the bucket) programs could potentially support infrastructure projects, instead, if private development were freed to meet a more meaningful proportion of the current pent-up housing demand.

The Defeat of California’s SB-827

Sad to report that a promising and important piece of legislation went down to defeat this week in the California State House. SB-827 , placed in the hopper by Senator Scott Wiener (D-San Francisco), would have superseded municipal zoning ordinances to permit five-story housing development within half a mile of most railroad stations, and within a quarter mile of certain major bus routes.

California, of course, has some of the highest home prices in the world. More than its booming tech economy, a resistance to new development, combined with decades of population growth, has driven the crisis. Local political resistance comes from two sources: sentiment and shrewdness. Between residents who hate change, and those who realize that their own property values are inflated (at least while the music keeps playing) by an artificial shortage, it is usually possible to muster opposition to any new proposed development if the permission-granting institution is only accountable to municipal residents. SB-827 would have overridden the local political resistance to new development in the parcels most able to support higher densities than what is presently allowed.

The shortage of affordable housing in the metropolitan regions of California — as in the regions surrounding New York City, Washington, and several of the capitals of Western Europe — is perhaps the most salient driving force behind rising inequality in the West. High housing costs block people from moving to the cities where the opportunities exist; they shut people out of opportunities to build equity in real estate; and they enshrine the economic advantages of those who inherit, or can afford to purchase, real estate in hot markets. Ryan Avent wrote about this phenomenon at length in his well-written piece, The Gated City. LT has belabored it for years. And my recent article advocating for a left-right consensus on zoning reform is focused on the costs of bad zoning policy.

The good news is that, although SB-827 has been defeated, it has also significantly raised the profile of the nexus between zoning and housing supplies. The expectation (and certainly my hope) is that a revised version of the bill will be presented soon. It is a hopeful sign that in the California State House, even the bill’s opponents were forced to concede that the diagnosis was accurate, even as they rejected the prescription. This issue is not going away, and neither is the impetus to address it. I don’t think we can (or should) be returning to a Victorian-era, common-law land use policy, where bare-bones building codes, private covenants, and nuisance lawsuits are the only restraints on private development. BUT, we do need to move in the direction of significantly liberalizing the density restrictions on housing development in competitive real estate markets. SB-827 would have been a major step in that direction; and with the heightened awareness that its debate has caused, creative variations on the proposal can now be tested in the laboratories of democracy.

Only with a lot more supply — new units — can the cost of housing be returned to some sort of equilibrium with people’s incomes. And only with such a change can we hope to create in the economic centers of the West a tangibly more egalitarian economy.

Time for a Left-Right Consensus on Zoning Reform?

Early “use-district” map of Midtown New York. Source: NYPL.

My latest piece — in which I venture into more political writing for TAC — argues that the failures of Euclidean zoning antagonize some of the most fundamental priorities of American traditions on both the Left and the Right; and that there may be an opening for some agreement between people with a broad range of philosophies. For example:

During the postwar era—when suburbs and cars were the way of the future, and cheap, undeveloped land surrounded all our cities—the postwar type of zoning seemed a reasonable trade-off for many conservatives. While it regulated the private land market, it was locally enacted. In addition, its intent was to protect a broad base of individual, private owners.

Today, things have changed. Many of our most prosperous regions have been effectively built-out—few undeveloped lots remain—and laws preserve building patterns from the less populous 1950s and 1960s. This in turn has created an artificial shortage of housing units to which local markets cannot respond. Property owners who could benefit from making more intense use of their parcels find their hands tied by local zoning. Families and individuals are priced out of regions where opportunities are strongest. Personal potential and mobility are limited. And local governments become powerful fiefdoms, selectively approving lucrative projects for (often) politically-connected developers while preventing smaller owners from similarly maximizing returns.

Meanwhile, from the Left:

If local zoning had simply permitted [working-class neighborhoods in major cities] to absorb growth as it occurred, it is likely many longtime residents would never have been priced out by rising rents or property taxes. This means that more young people could have remained in their home communities and benefited from deep ties to family, social networks, and local wealth; and space could also have been made for new immigrants (and internally-migrating Americans) on much friendlier terms. Instead, our inability to accommodate change at the neighborhood level has resulted in the attenuation of countless social ties; the loss of myriad old communities; and an increased degree of hostility and resentment between competing, but similarly powerless groups, over space that never needed to be so scarce. If anything should outrage even the most nominal leftist, it is a bureaucratic policy that pointlessly pits the American working class against new immigrants over something as fundamental as the need for decent housing.

Feel free to join in the discussion at the bottom.

Single-Family Houses and the Affordability Crisis

A zoning map from East Rockaway, New York, shows the abiding prevalence of single-family housing zones (Residence A) in a highly competitive land market.

This Times article, I think, really takes aim at the largest zoning-related cause of the housing crisis. Single-family neighborhoods will have to give way to multifamily development, one way or another, if we are ever going to build enough housing units to absorb demand in the places where economic opportunity exists. The California law facilitating “granny flats” is one step in the right direction. New Jersey’s Mount Laurel doctrine is based on a prescient, 1970s recognition of the exclusionary role of zoning. (Unfortunately, it has not done nearly enough to counter the zoning-driven shortage of affordable housing, especially in Northern New Jersey.

What other measures will come, based on the principle (which we have often recited) that restrictive zoning is creating artificial housing shortages? Innovation in this realm cannot happen soon enough. At some point, the dam is going to break. There will either be more housing; or there will be a dampening of the regional economies in places that cannot provide a housing equilibrium. What worries me, next, is that the artificial shortage of housing may have become such a chronic, long-term situation in our most affluent regions that we may have reached a point where the economy is dependent upon an artificial shortage being preserved.

Zoned for single-family.

That is to say, so many mortgages have been written on the assumption that astronomically high prices are stable; so much private wealth is now sunk into ultra-high-cost real estate. If the regulatory barriers came down, and builders were able to begin to catch up with market demand in places like New York City and California, then how much wealth would gradually begin to evaporate as prices trended toward a healthier equilibrium? The saving grace is that — absent a watershed court decision — the gears of this change will probably be quite slow to turn.

 

Limited Equity: Stable Communities, Affordable Housing

The Amalgamated Dwellings in New York City. Photo: Theo Mackey Pollack.

I have a new article published at TAC’s New Urbs blog, about the history and legal structure of New York City’s limited-equity housing cooperatives, which continue to provide surprisingly affordable, high-quality housing units in one of the most expensive real estate markets in the United States. The piece tells the story about how limited-equity co-ops got started; their philosophical roots; their early successes; why the model declined in popularity; and how an approach that recovers its best qualities might be be compatible with various subsets of the polarized political landscape of contemporary America.

I think there’s little question that the shortage of affordable housing in the regions with the best economies is a major driving force in the structural inequality that characterizes our current moment; and that the biggest beneficiaries of this status quo are rent seekers, rather than actors who contribute anything dynamic or innovative to the economy. Taking the role of speculation out of the equation can do a lot to keep prices in line with what residents can actually afford. For the reasons described in my article, I think this is an important idea that deserves to be recovered and applied in today’s metropolitan real estate economies.