Here’s a new study just out https://www.huduser.gov/portal/periodicals/cityscape/vol26num3/article9.html about the impact of upzoning on land and housing costs. The interesting conclusion – upzoning a broad area tends, over time, to drive down housing costs, while limited upzonings can cause property values to rise because they are now entitled for more intense development than their nearby neighbors.
A story in Governing by the study author https://www.governing.com/urban/how-u-s-cities-can-upzone-without-compromising-affordability notes:
Because upzoning increases a property owner’s rights to build on their land, it can also increase that land’s value. Imagine San Francisco policymakers upzoning a block of single-family houses and giving the owners the right to build skyscrapers, creating an option value worth far more than the existing (and nearby) houses.
But there are ways to mitigate this issue. Policymakers can implement upzoning that applies across all or most of the land in a larger region, in contrast to allowing more construction only in a small area.
The study looks at a large area “rezone” in Houston (wait! I thought Houston didn’t have zoning. It doesn’t, but it does have subdivision regulations, which includes how big lots must be), and compares that with a 2020 research paper that looked at the effects of much smaller rezones in Chicago. The study found that:
Houston’s 1998 and 2013 upzonings facilitated the construction of about 80,000 houses on lots less than 5,000 square feet. Small-lot development has allowed for less expensive housing than could otherwise be built and created opportunities for more people to live in desirable neighborhoods close to job centers.
The Chicago study, in contrast, found:
Chicago’s policy change allowed for denser multifamily housing to be built on about 6 percent of the city’s land close to certain train stations. The Chicago results indicate that the policy change — which has not led to an increase in housing supply so far — increased values of the upzoned properties because of their increased option value for potential future construction.
Hmmm. Not only does that auger negatively for small area rezonings if the goal is to increase affordability, but it specifically says upzoning near transit stations (like our Utah code now encourages) won’t do much to enhance affordability either. Not on its own, at least.
Interesting stuff. Many communities in Utah have expressed in their MIHPs their willingness to consider rezones of some areas to increase density, but unless such measures are applied to large areas or even the entire community, this study suggests that alone, they likely won’t help with affordability.