12 Increasingly Off-the-Wall Housing Reforms
Happy Tuesday and happy holidays to all Rent Free readers who've helped make the newsletter a success right out of the gate. To close out 2023, I wanted to try something a little more in the Christmas spirit than the normal rundown of the week's top housing and urbanism stories.
December 26 is when many are feeling a bit of a holiday hangover (and maybe an actual hangover) after the excitement of Christmas Day.
Of course, if you are familiar with the lyrics of the classic "Twelve Days of Christmas" song, you'll know that the season is only just getting started. Over the next few days, you can expect a series of increasingly outlandish gifts from your true love.
Now, it's beyond my means to send every reader a partridge in a pear tree. The next best thing I can offer is the following list of increasingly off-the-wall ideas for making our cities more affordable, functional, and free.
Some of these are more grounded in actual white papers than others. A few still need a couple of details worked out. One or two are more thought experiments than anything else. But they hopefully will provide some food for thought as you polish off the last remaining dregs of eggnog.
This past year saw a lot of practical, incremental housing reforms get passed. In 2024, we should try some more out-of-the-box thinking.
(And check back next Tuesday when we return to regular programming.)
12 Increasingly Off-the-Wall Ideas for Making Cities More Affordable, Functional, and Free
Price-Based Builder's Remedy
California has a policy called the "builder's remedy," which allows developers to build residential projects of unlimited density in communities that are out of compliance with state housing law, local zoning be damned.
It's supposed to be a weapon of last resort against cities that refuse to permit their fair share of housing.
To date, however, no one's gotten one of these builder's remedy projects approved. One reason is that California housing law and related court decisions make it anyone's guess when a city is actually out of compliance with state housing law.
One exceedingly modest off-the-wall idea to clear up this confusion, and make the system more market-oriented, would be to adopt a price-based builder's remedy law.
Let's make communities eligible for builder's remedy projects when rents or home values go above a certain price level.
Setting an objective standard for when builder's remedy projects apply would route around a lot of bureaucracy. Basing that objective standard on housing prices would allow home construction in places where demand for it is highest. Cities that wanted to avoid "builder's remedy" megaprojects would have to reform their zoning codes until they'd achieved broad-based affordability.
Block Voting
America's housing shortage is often blamed on an excess of local control. Could hyper-local control be part of the solution?
One modestly off-the-wall idea that's gaining currency in the United Kingdom is "block voting" or "street voting." Basically, this policy allows small collections of property owners on the block level to vote to upzone themselves without the need to get approval from city hall.
Incumbent homeowners often oppose upzoning that allows new housing because they get nothing from the new housing except more noise, more traffic, and potentially lower property values.
You can say that's a bad attitude. The idea behind block voting is that it's bad economics too. Homeowners should support upzoning, because increasing the development potential of their land should make their land more valuable.
If small collections of homeowners were given the opportunity to upzone their own land, odds are many would do it, and sell it off to the next developer who comes knocking. The homeowners get more money, and the city gets more housing. Everyone wins!
Secret Upzoning
Bills that allow duplexes in single-family zones or mid-rise apartments near transit stops can turn into knock-down, drag-out fights that suck up everyone's effort and time. Wouldn't it be easier to just slip these reforms through without anyone noticing?
That might sound really off the wall. It's more or less what the Florida Legislature did this year when it passed the Live Local Act.
The law is mostly a grab bag of mortgage subsidies and developer tax credits. Tucked inside is a provision allowing developers to build housing in commercial and industrial areas, provided they include a set percentage of affordable housing. The residential projects allowed by the Live Local Act can also be as tall as the highest building within a mile.
For much of the state's suburban areas, that's not too dramatic a change. A disused strip mall can be turned into a low-slung apartment building.
In a place like Miami Beach, property owners are claiming the law gives them the ability to turn low-slung, landmarked hotels into residential skyscrapers.
If people grokked how much upzoning the Live Local Act really allowed when it was first proposed, it's possible it wouldn't have passed. One lesson for future YIMBYs is they should write their reforms in a way that will produce a lot of housing, without catching the attention of their NIMBY opposition before everything's signed into law.
USPS: Real Estate Titan
The United States Postal Service (USPS) has been in the red for decades, necessitating constant subsidies from taxpayers. Those same taxpayers, meanwhile, are suffering the full brunt of America's housing cost crisis.
One midrange off-the-wall idea to solve both these problems at once would be to make the Postal Service into a real estate titan.
In a 2020 op-ed, infrastructure researcher Nick Zaiac and California YIMBY Research Director (and occasional Reason contributor) M. Nolan Gray noted that USPS owns 8,400 facilities totaling 900 million square feet of land and that much of it is in highly desirable, highly expensive urban areas. And because this is federally owned land, it's exempt from local zoning laws.
USPS should take advantage of both facts by selling off the development rights to build housing on top of existing postal properties. That would shore up the postal service's finances while adding thousands of new homes. As a bonus, people living on top of their post office would probably get their mail a lot faster too.
Legalize Corruption
In January, a former Los Angeles city councilmember pled guilty to federal charges stemming from bribes he accepted from a developer. In June, a sitting Los Angeles councilmember was indicted for a similar scheme.
This is hardly a phenomenon confined to Los Angeles. Odds are, by the time you're done reading this list, some local official somewhere will have been arrested for taking bribes from a developer.
The frequency of real estate–related corruption scandals at city hall is a real shame. It's also real evidence of just how costly zoning regulations can be.
Profit-maximizing developers are willing to shell out exorbitant bribes only because the rules they're trying to route around cost them even more. Public officials will risk prison accepting those bribes because their power to say yes or no to new housing is really that valuable.
Lawlessness isn't good. It's also inefficient.
Instead of forcing developers and city council members to illegally swap favors in smoke-filled rooms, let's bring the whole process above ground. Let's "legalize" corruption by letting developers pay a cash price for regulatory relief.
If a developer wants to build a taller building than the zoning code allows or put apartments in an exclusively commercial zone, there should be a set price they can pay to get their permits. Politicians could get a percentage of this money for their personal use, while the rest goes into the public treasury.
This is a solidly off-the-wall idea but it could be a big boon for housing.
With legalized corruption, developers will make more money building larger, less-regulated projects. The public will get more housing and more tax revenue. The politicians will get smaller bribes, yes, but they'll also avoid going to prison.
Economist Gordon Tullock argued that in the short term corruption could improve the efficiency of systems with bad rules. But over the long run, Tullock said, politicians would make the rules even worse to maximize the bribes people pay to escape the bad rules.
A system of formally legalized corruption would likely produce the same result. But it would at least make the cost of bad rules all the more apparent.
Zoning (Japanese-Style)
In America, localities have carte blanche to write their zoning codes from start to finish. The result is a bewildering patchwork of bespoke local processes, one-off special districts, and arcane definitions. Because these rules are written by the level of government least interested in growth, they tend to be pretty restrictive too.
An off-the-wall idea to fix this problem would be to do zoning Japanese-style.
In the land of the rising sun, the national government is responsible for coming up with zoning districts. While an individual American city might have dozens of districts and overlays, the entire nation of Japan has just 12. The rules for each are also more flexible: Housing can go in commercial districts, shops can be built in residential areas, etc.
Local governments are still responsible for mapping which zones cover which properties. But they have to use those nationally created zoning districts.
Thanks to this system, Japanese cities are remarkably affordable places brimming with mixed commercial/residential areas. We could have that here too.
Abolish Zoning
Notwithstanding all the nice things I just said about Japanese zoning, we really should just get rid of zoning altogether. That sounds pretty off the wall when you first hear it. After all, zoning laws are something most people just kind of accept, as a fish accepts the water it swims in.
But zoning is the real off-the-wall idea when you start to think about it. And not in a good way.
Anyone with a free market bone in his body should realize how crazy it is that we entrust city hall to scientifically plot out which kinds of buildings will go where, and then decide what's allowed to happen in each one.
Less libertarian observers still can, and indeed have, looked at the results of zoning in terms of higher home prices, longer commutes, higher rates of homelessness, less economic dynamism, and more, and decided the whole system has to go.
I make a more elaborate case for this in my "Zoning Theory of Everything" essay from earlier this year.
Gray also wrote a whole book about how a world without zoning would more easily deal with the things we think zoning is supposed to solve: noise, pollution, neighborhood character, etc.
Abolish Building Codes
Most of the housing and housing affordability discussion focuses on the zoning code. Less attention gets paid to the building code, which tells you how buildings actually have to be built.
While zoning has no merit whatsoever, the building code does have some value in protecting health and safety. But it can still cause lots of problems.
For instance, antiquated building code requirements that apartment buildings have two staircases make smaller garden apartments hard or impossible to build, and ruin the layout of family-sized apartments, for instance. Oftentimes, the building code requires the use of expensive materials that do nothing to protect human life, but do drive up construction costs.
An admittedly pretty off-the-wall idea would be to get rid of the building code too. In its place, we could rely on insurance companies to set more market-driven, and more rational, health and safety standards for new construction. Ensuring builders are liable, civilly and criminally, for shoddy work would enforce good behavior.
In return, builders would have more flexibility, people would have cheaper housing, and taxpayers could redirect all the money they spend on building inspectors into something more useful.
Freedom Cities (Sort of)
Former President Donald Trump has promised that, if elected to a second term, he'll kickstart the construction of beautiful "freedom cities" on federal land, where housing will be affordable and cars will fly.
The specifics of what Trump is proposing are indeed off the wall—so much so that I can't truly recommend the idea. That said, a more modest version of freedom cities would be a great idea.
The federal government owns vast tracts of undeveloped land in western states. A lot of that land exists on the exurban fringes of thriving cities, where it functions as a de facto urban growth boundary.
Given the post-COVID boom in Mountain West home prices, there's clearly a lot of demand for developing this exurban land. And if someone wants to take a chance on building a real freedom city out in the middle of nowhere, they should have that right too.
Opening up federal lands to residential development would require congressional action. Fortunately, Sen. Mike Lee (R–Utah) already has a bill to get the job done.
If Congress really wanted to do something to help more Americans own a home, they should drop their efforts to impose rent control on the whole country and take up Lee's bill to make (sort of) freedom cities a real possibility.
Play God, Build Land
A pithy piece of investment advice Tony Soprano gives his son is to buy land because God isn't making any more of it.
Perhaps He isn't. But that doesn't mean man can't step in to do that job instead. An exceedingly off-the-wall idea for making cities affordable is to bring back land reclamation.
From Manhattan to Amsterdam, some of the world's greatest cities have been built atop land that used to be water until humans started piling dirt on top of it. Today, some of this manmade mud is the most valuable real estate in the world.
We hardly lost the ability to do land reclamation. Surely if 14th century Dutchmen figured it out, so can we. A lot of environmental laws would have to be tweaked and reworked to make this a possibility. But that's certainly no reason not to do it.
Indeed, since the most expensive land is typically coastal land, there'd be a huge financial return on building more of it.
We could go a long way toward making cities affordable by liberalizing the regulations we have on land that already exists. But if we want to go all the way toward making urban areas the best they can be, we'd benefit from adding more land too.
That doesn't necessarily mean we should fill in San Francisco Bay tomorrow. But we should at least consider the possibility of filling in part of it someday soon.
Homeless Homesteading
Homeless encampments are a depressingly common sight in American cities. They persist despite no one wanting them there. There's nevertheless a fierce debate about whether local officials should clear them or leave them be.
Some say yes to clearing encampments, citing the costs of concentrated vagrancy and loss of public amenities like parks. Others say no, arguing that encampment sweeps still leave people homeless, are expensive in their own right, and typically involve serious rights violations of the homeless.
I think both sides have pretty good points, and it doesn't seem like there's an easy answer. Until now.
Perhaps the way to solve homeless encampments is the incredibly off-the-wall idea of just giving the homeless property rights to the park or underpass or wherever they've occupied. Once they have secure title, some Coasian bargaining can begin.
If the homeless encampment truly is a severe blight on the neighborhood, nearby property owners could purchase the land from the homeless and return it to a functioning park. The homeless themselves would then have enough cash in hand to get more traditional accommodations of their own.
And if nearby property owners aren't willing to pay the price the homeless are asking, that's evidence that the value of using the land as a homeless encampment is higher than any negative externality it creates.
The homeless people's secure property rights would over time enable them to improve the encampment into a more permanent shanty town, which in turn would give way to more established, commodious dwellings.
The economist Hernando de Soto has argued that a cure for extreme poverty in the Global South is to give the poor secure title to their land. I think that's a great idea. If it would work in the slums of Harare, I see no reason it can't be applied to L.A.'s Skid Row or Washington, D.C.'s McPherson Square.
The Cube
When working on a tough problem, sometimes it helps to work backward. Imagine where it is you want to be, and then figure out what steps you need to take to get there. Applied to housing issues, this means thinking long and hard about what policy reforms will get us "The Cube."
You know The Cube. It's the single building that will house the entire human race in one ultradense, megalopolis where every neighborhood has a walk score of 100 million and every job in the world is a short elevator ride away.
No one will want for shelter when one big building houses all of humanity. Space in such a dense environment will be quite expensive, but the high wages produced by locating a 7-billion-person labor market under one roof will make up for that. If they don't, no worries. We'll just make The Cube even bigger!
It's all well and good to abolish zoning and building codes, but these are merely intermediary steps toward our ultimate goal of building The Cube. Endless other regulations will likely also have to be repealed as well to ensure we're able to engineer, finance, and construct The Cube.
People will likely raise objections about the desirability and feasibility of The Cube. Selling The Cube will be hard. That's why it tops out as our most off-the-wall idea. But once it's built, everyone will be happy to have it.
Freedom is a good thing in and of itself. Freedom is also a tool that gets us other things we really want. And what we really want here at Rent Free is The Cube.
The post 12 Increasingly Off-the-Wall Housing Reforms appeared first on Reason.com.
