Analysis: Localized Upzoning Less Effective

In a piece for Governing, Emily Hamilton explains why concerns that upzoning, or liberalizing land use regulations to accommodate more housing construction could actually raise the cost of land and housing are largely overblown.

These fears, Hamilton explains, come from the idea that upzoning lower-density parcels, particularly if limited to certain areas, will raise land values. However, “Abundant and diverse new housing construction pushes rents down. And because land’s value is ultimately determined by the stream of income it can produce, as more housing supply reduces rents across a region, it puts downward pressure on land values, too.”

Hamilton analyzed land values in Houston, where zoning reforms reduced minimum lot sizes over a span of decades. “Together, 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.” Meanwhile, a Chicago study  showed that limited upzoning near transit stations raised property values of some lots without yielding new housing.

Hamilton’s analysis shows that upzoning has the biggest positive impact when applies broadly over larger geographic areas. “The Houston case shows that when land-use liberalization leads to widespread and diverse housing construction, more people can live where they need to without an unnecessary spike in the price of existing houses.”