The YIMBY case for upzoning is pretty simple: restrictive zoning creates a scarcity premium on high-density land. We should upzone until high-density land is no longer artificially scarce, and the scarcity premium is zero.

You may have heard that San Francisco has 70k unbuilt housing permits, therefore regulation is not a constraint on housing supply. The actual number is more like 4k. And even "building permit issued" is not construction-ready, since you still need construction documents.

Rollet finds that eliminating zoning reduces rents in NYC by 18%; when he turns off the migration response (so the population is constant), this becomes a 33% drop in rents. The actual 'market' is broader than NYC, so even a big reform in NYC is small relative to the market. 1/

What does it mean for zoning to be a constraint on the supply of housing? In a simple model, zoning restricts the total number of homes that can be built: the supply curve becomes vertical. Here, increased demand just raises prices, with no new quantity. 1/

Housing submarkets are interconnected: adding supply at the high-end reduces prices at the low end. You have to be a science denier to think otherwise.

Will left-NIMBYs be the kingmaker of housing policy debates? They care about affordability, but get the economics wrong. Will they update by joining YIMBYs, or by switching to caring about 'liveability' instead?

Will left-NIMBYs be the kingmaker of housing policy debates? They care about affordability, but get the economics wrong. Will they update by joining YIMBYs, or by switching to caring about 'liveability' instead?

Two goals for housing policy: 1) absorb demand from rich newcomers. This is necessary maintenance work to prevent a demand cascade from raising prices across the housing ladder. 2) provide immediate housing for poor people. 1/

Left-NIMBYs think that blocking new apartments stops gentrification. What actually happens: new demand is redirected to the existing housing stock. Instead of living in new apartments, rich newcomers buy up old homes and displace renters.

Left-NIMBYs think that blocking new apartments stops gentrification. What actually happens: new demand is redirected to the existing housing stock. Instead of living in new apartments, rich newcomers buy up old homes and displace renters.

Should our neighborhoods be exclusive and expensive, or dense and affordable? Current residents prefer the former, future residents prefer the latter.

Public hearings for new housing ask the current residents of a neighborhood whether they support a new apartment building. But this ignores all of the people who would benefit the most: the people who will actually live in the new homes.

Derek Thompson is worried that "California still hasn’t actually increased housing starts in the six months" since SB79. Let's take a look at how quickly the biggest upzonings increased construction. 1/

Vacancy chain: ⬆️ high-end housing supply, ⬇️ low-end home prices. Demand cascade: ⬆️ high-end housing demand, ⬆️ low-end home prices. Generally, housing submarkets are interconnected.

PSA: The canonical urban economics model (Alonso-Muth-Mills monocentric city) predicts that zoning restrictions do not change the metro-wide aggregate quantity of homes. Instead, zoning pushes people to live farther away from the city center, where they have longer commutes. 1/

Upzoning works by ⬆️ the supply of high-density land, which ⬇️ its price. This shifts the housing supply curve, which⬇️ home prices. But don't ⬇️ home prices lead to ⬇️ land prices? Yes, that's also true. But upzoning first ⬇️ land prices, which leads to ⬇️ home prices. 1/

The key mechanism driving the housing crisis is the demand cascade: Upper-class people move in and bid up the price of high-end homes, which pushes middle-class locals to compete for low-end homes, which forces the poor to take on roommates, move away, or become homeless. Someone study this!

To evaluate upzoning, don't look at the upzoned land itself. Instead, look at what happens to *existing* high-density land: because supply increases, its price falls. (And with lower land costs, housing gets cheaper.)

This would be the killer graph for upzoning: it reduces the price of high-density land, which means the net housing supply is increasing, which reduces home prices.

Is anyone familiar with São Paulo data on assessed land values (or prices) and zoning changes from the 2016 upzoning? Please reach out! We can show that upzoning reduces high-density land prices simply by tracking the price by zoning category over time. (BAR = built area ratio)

For your next rezoning public hearing: increased supply works by reducing the price of *existing* housing. Don't look at the new building, look at the effects on old buildings.

Probably more likely: upzoning increases a parcel's land value, but decreases the land cost per sqft of housing.

If you're a developer, you can't build apartments on single-family-zoned land. All you care about is apartment-zoned land. So to evaluate upzoning, you just look at the blue parcels. Whether SFH land gets cheaper or more expensive doesn't affect you.

Fun fact: upzoning can actually decrease a parcel's land value. If you upzone enough, you eliminate the land scarcity premium and increase housing supply so much that housing prices fall a lot. With lower home prices, developers reduce how much they're willing to pay for land.

PSA: Upzoning reduces housing prices by increasing the supply and decreasing the cost of high-density land, which reduces the cost of producing homes. Hence, expanding the urban growth boundary and upzoning to apartments both reduce housing prices. 1/3

Why increasing supply reduces prices: When the supply curve shifts right, and demand is unchanged, there is excess quantity supplied at the original price: at P1, suppliers produce Q2, but demand is Q1. To clear the market, the price must fall to P2, where supply = demand = Q3.

When we upzone one parcel from house- to apartment-zoning, there are two effects: 1) own-parcel: the upzoned parcel increases in value from P1H to P2A. 2) cross-parcel: increasing the stock of apartment-zoned land reduces its price from P1A to P2A. 1/

Two incorrect models of land and housing Left: land values and density increase 1-1, so land cost per sqft of housing is constant. This assumes perfectly elastic demand for land. Right: land prices are constant as density increases. This assumes zoning is not a constraint. 1/

Two views of upzoning: 1) parcel-level: upzoning lets you build more homes on the same land, which ⬇️ land costs per home. 2) market-level: upzoning ⬆️ the stock of apartment-zoned land, making it cheaper, which ⬆️ the supply of apartments. 1/

The logically consistent NIMBY:

Two views of upzoning: 1) parcel-level: upzoning lets you build more homes on the same land, which ⬇️ land costs per home. 2) market-level: upzoning ⬆️ the stock of apartment-zoned land, making it cheaper, which ⬆️ the supply of apartments. 1/

The real problem with inclusionary zoning is the lack of ambition: we can fund *so much* subsidized housing if we kept upzoning and creating more surplus land value to capture via IZ. Less focus on the IZ % per project, more focus on the number and size of projects.

Here's the key problem with zoned capacity: two cities can have the same total capacity, but one reaches it at much lower rents. If rents need to hit $7000 to unlock half of your zoned capacity, then that 'capacity' is totally irrelevant.

Here's the key problem with zoned capacity: two cities can have the same total capacity, but one reaches it at much lower rents. If rents need to hit $7000 to unlock half of your zoned capacity, then that 'capacity' is totally irrelevant.

Zoned capacity just measures the upper limit of the supply curve: it's the quantity of new housing that developers will produce when prices are infinitely high. I, for one, am not interested in paying $∞ for housing. 1/

A common framing for local housing supply papers is: supply effects vs. amenity effects. A new building adds supply, but it also adds new amenities, inducing demand. Net effect on rents: unclear. 1/

What's the AI site that lets you translate text into the voice of anyone?

Focusing on housing supply only in the city center is doubly flawed: 1) it doesn't capture the entire city 2) if the city follows a tall-and-sprawl planning regime, then the city center is actually *overbuilt* compared to a YIMBY regime.

Residual land value is not the market demand curve for land. RLV = price(housing) - construction costs. This is how much developers are willing to pay for a given parcel of land. So RLV is a bid, not a market-clearing price. 1/

Imagine you own a plot of apartment-zoned land. There are only a few other landowners like you, so developers have to offer $$$. Then the city upzones. Now there are hundreds of apartment-zoned landowners, and developers start bidding less: you get only $. 1/

Spot the fallacy: "banning people from living within 1km of the city center would not decrease total welfare, because people just pay less in rent to compensate for a longer commute".

Two very different ways for upzoning to *not* increase land values: A) maximize housing supply via high-density upzoning, which maximizes land values; then apply land value tax, so post-tax land lift =0. B) restrict density and add poison pills; here, pre-tax land lift =0. 1/

How to tell when zoning is *not* a binding constraint: when you upzone one more parcel, its land value stays the same (ie. 'land lift' =0). So if upzoning a parcel does increase its land value, then you know zoning is a constraint on housing supply. 1/

Saying zoning is not a constraint because some homes get permitted is like saying your personal budget is not a constraint because you bought some groceries.

Basic fallacy in this Groundwork report: it treats profitability and zoning as separate constraints on new housing. But zoning constrains supply *precisely by* making projects unprofitable! Strict zoning -> scarce apartment-zoned land -> expensive apartment-zoned land -> lower profits. 1/🧵

New housing supply enables filtering of *other* homes through vacancy chains: someone moves into the new home, which frees up their original old home for someone poorer to live in. The old home 'filters down' in the short run. The new home also filters down, but over decades.

As all economists know, removing zoning constraints (higher z̄) leads to lower prices (p*) because it increases housing supply:

New housing in the city allows a family living in the suburbs to sell their cars and move to the city. Since their transportation costs are much lower, they can now spend even more on housing. Has affordability improved?

In their study of Sao Paulo's upzoning, Anagol et al. assume that developer profits are 10% of new home prices. This is a strong assumption: - no entry of new developers to compete away profits - not accounting for losses from failed projects

If developers always build up to the maximum (density, height, etc.) that’s allowed in your city, that’s a sign that your zoning rules are substantially restricting housing supply.