Foot voting and the problem of artificially inflated housing prices caused by zoning

In a recent post, I pointed out that large numbers of Americans are voting with their feet for states and localities with less restrictive zoning policies, and against cities where zoning artificially inflates housing costs. NYU law professor Rick Hills is skeptical that foot voting can really solve this problem, because would-be movers’ options are constrained by agglomeration effects:

The problem with Ilya’s solution, as David [Schleicher] has noted, is that cities create “agglomeration economies” by bringing large numbers of people in close proximity with each other. Dispersion through foot-voting destroys these agglomeration benefits. The productivity of, say, an adman, actor, banker, accountant, lawyer, or anyone else with high human capital investments is greater in NYC than in Tulsa, because there are more people in the former locale with whom they can network, from whom they can learn their craft, and through whom they can insure against loss from risky educational investments. An aspiring musician in NYC has hundreds of venues with which to ply their craft. An aspiring musician in Oklahoma City might have a dozen — which means that they just might stop aspiring and instead opt for an office job. That’s fine if they really suck — but they might actually be diverted from their highest and best calling by the constricted character of the local market to which they have been consigned.

Rick contends that the problems caused by urban planning are best alleviated by more “comprehensive” planning. In my view, In my view he both underestimates the benefits of foot voting, and overestimates the likely effectiveness of comprehensive planning.


I. Why Foot Voting Alleviates the Negative Effects of Excessive Zoning Restrictions.

I don’t doubt that agglomeration effects matter. Even if housing in the Mojave desert is really cheap, few people can move there without suffering a massive decline in their incomes. But the agglomeration critique of foot voting is not as strong as Rick and David believe. For many professions, there are multiple different jurisdictions where the agglomeration effects are large enough for practitioners to achieve professional success. New York City has large agglomeration benefits. But the same is true of cities like Houston, Phoenix, Dallas, and others that have weaker zoning restrictions than New York does or none at all. While an aspiring musician might find things difficult in Tulsa, he will find plenty of opportunities in many other relatively low-cost cities, including the ones listed above. There are indeed a few professions where there are only a handful of places where you can do well. But such cases are the exception rather than the rule.

This explains why hundreds of thousands of people have in fact successfully voted with their feet for lower-cost jurisdictions, as I noted in my earlier post. But I certainly do not claim that foot voting completely solves the problem of excessive zoning. Indeed, in previous work, I explained in some detail why it will not fully address the problem of state and local government exploitation of immobile assets, such as property rights in land.
I merely believe that by enabling large numbers of people to escape restrictive jurisdictions, it makes the situation significantly better than it would be otherwise. But foot voting is not, by itself, a complete solution.

II. Can the Problem be Solved by “Comprehensive” Land Use Planning?

Rick suggests that the best way to alleviating the housing crunch caused by restrictive zoning is “comprehensive” land use planning:

One reform that could ameliorate the NIMBYism of big cities and their suspicious brown-stoners is comprehensive planning. Libertarians traditionally have disliked planners, so it might seem odd to tout the comprehensive plan as a de-regulatory device. David and I argue, however, that binding land-use plans could help solve two distinct problems that contribute to the restrictiveness of Big City zoning.

First, big cities lack competitive political parties, which means that landuse politics in the local legislature tends to disintegrate into an orgy of mutual, non-ideological log-rolling…..

The comprehensive plan can mitigate this problem by facilitating inter-neighborhood deals, all of which are contained in a single plan, passed under a closed (non-amendable) rule. Think of the plan as akin to the military base closing commission that solved the problem of Congress’ clinging to obsolete bases by presenting a single take-it-or-leave-it package of closures for up-or-down approval.

Second, plans increase zoning transparency and thereby enlarge the market of developers willing to bid on projects. Right now, NYC zones are essentially requests for proposals: Swathes of land are in zoning classifications like non-cumulative manufacturing that everyone knows need to be re-negotiated. The process of negotiating an up-zoning, however, is a matter of insider knowledge, with a few well-connected players massaging the process through lengthy backroom deals at the “pre-certification” stage and protracted public acrimony during the various public hearings.

I am very skeptical that this approach will work. At least in principle, NYC and many other cities with restrictive zoning policies already have “comprehensive” land use planning. Current New York law requires localities to follow a “comprehensive plan” in setting their zoning policies. Indeed, NYC was the first city to enact a comprehensive zoning resolution back in 1916, as NYC’s Department of City Planning proudly notes on its website. In theory, comprehensive planning allows officials to create a plan that fully considers the needs of the entire city, and avoids favoritism towards narrow interest groups. In reality, does little to prevent a variety of narrow interest groups from influencing the planning process, including by using it to restrict development that might compete with existing land uses, such as new housing construction that would drive down the value of apartments owned by existing landlords. It also does little to prevent NIMBY-minded neighborhoods from lobbying to prevent new construction in their areas (the problem that concerns Rick).

Rick would like the plans to be more systematic and more fully integrated into a single document. But even if a different planning process might facilitate inter-neighborhood deals, as Rick suggests, that might simply make it easier for interest groups to commit to supporting building restrictions in other neighborhoods in exchange for the other areas’ backing for their own restrictions. I am similarly skeptical that comprehensive planning is likely to increase transparency. To the contrary, the more issues are contained within a single plan, the more complicated it will be and the greater the advantage of well-connected insiders in influencing its content.

Ultimately, more and better planning is unlikely to solve the problems created by planning in the first place. A much better solution to the problems caused by zoning is to abolish zoning entirely, as Houston has done, or at least severely restrict it (as is the policy in some other low-cost cities). As Harvard economist Edward Glaeser explains, these approaches have a proven track record of successfully reducing housing costs.

UPDATE: Rick offers a brief rejoinder in an update to his original post:

I agree wholeheartedly with [Ilya’s] statement that foot-voting “makes the situation [of restrictive zoning] significantly better than it would be otherwise.” But I think that Ilya errs in stating that “NYC and many other cities with restrictive zoning policies already have ‘comprehensive’ land use planning.” In fact, New York courts (like courts in most states) have long construed the statutory requirement that zoning be “consistent with a comprehensive plan” to mean nothing more than that zoning amendments have a rational basis — a test that places no practical limit on ad hoc deal-making.

I don’t think this is entirely correct, especially when it comes to New York. As this official New York state government publication points out, the New York Court of Appeals in fact interprets the “comprehensive plan” requirement as forbidding what the court described in a 1973 decision as “special interest, irrational ad hocery” in zoning. Instead, zoning regulations must “be consonant with a total planning strategy, reflecting consideration of the needs of the community.” To be sure, provisions that look like efforts to promote the public interest may in reality be the result of ad hoc deals between interest groups. New York courts probably often fail to tell the difference between the two, and sometimes may not even try very hard to do so. But this is true regardless of whether the special-interest deals are all embodied in a single planning document, or whether they are each adopted independently.

Ilya Somin is Professor of Law at George Mason University. His research focuses on constitutional law, property law, and popular political participation. He is the author of "The Grasping Hand: Kelo v. City of New London and the Limits of Eminent Domain" and "Democracy and Political Ignorance: Why Smaller Government is Smarter."
Comments
Show Comments
Most Read National

national

volokh-conspiracy

Success! Check your inbox for details.

See all newsletters