Rarely does one see such unambiguous good news as this:
The Berkeley City Council has unanimously voted to become the first Bay Area city to end single-family zoning. . . .
Berkeley was the first city in the country to enact single-family zoning more than 100 years ago.
Opponents of single-family zoning say it was used to exclude people of color from moving into certain neighborhoods.
Who wins?
1. Conservatives that favor local control of zoning decisions.
2. Conservatives that favor deregulation and free markets.
3. Progressives worried about housing affordability for the poor and minorities.
4. Urbanists worried that suburbia creates isolated, atomistic people, unconnected to their neighbors.
5. Environmentalists worried about urban sprawl.
Congratulations to Berkeley for ending 100 years of solitude.
READER COMMENTS
Jonathan S
Feb 24 2021 at 10:26pm
Important question: will Berkeley prevent HOAs from implementing single family land uses?
Jonathan S
Feb 24 2021 at 10:29pm
I’ll clarify: will Berkeley prevent HOAs from implementing single family *only* land uses?
robc
Feb 25 2021 at 6:46am
I am of two minds on deed restrictions. On one hand, if you want to enter a contract with the HOA restricting your lot to single family, okay. On the other hand, property taxes still exist and the HOA/developer/etc who put in the deed restriction still owns a small part of the property (the part allowing you to build multi-units) and should be paying property tax on the value of that part of the property. On the gripping hand, I don’t buy natural law land rights theory so a little utilitarian government meddling into deeds doesn’t bother me — the perfect compromise to me is to restrict deed restrictions to a single generation, they expire after 25 years.
So a developer could build a neighborhood with a single family only HOA, but after 25 years it would go away. At that point, only zoning would matter (and I would prefer either no zoning at all, or, at worst, two zones: Industrial and Mixed-Use).
Matthias
Feb 25 2021 at 8:41pm
Compare also Japanese zoning:
http://urbankchoze.blogspot.com/2014/04/japanese-zoning.html?m=1
robc
Feb 26 2021 at 9:14am
Yes, it isn’t a bad step in between where we are now and where we want to be.
Frank
Feb 24 2021 at 11:43pm
Transcending Berkeley, the question is who owns the rules by which land may be used. Clearly, the Berkeley City Council believes that current residents will benefit — the value of their property will rise!
It’s only ever a question of ownership.
robc
Feb 25 2021 at 6:41am
I am guessing that it is still zoned residential instead of mixed-use?
A step in the right direction, but more to go.
MarkW
Feb 25 2021 at 7:38am
For #5, the results may be mixed in that when it’s no longer possible to buy a city house with a guarantee that no apartment block will pop up just beyond your back fence, then people with means may show greater preference for homes in ‘sprawl land’ and beyond (as they’ve apparently already been doing due to Covid, the availability of remote work options, riots, and the rise in urban crime rates). The result may be more density with a tradeoff of more concentrated poverty.
Lizard Man
Mar 5 2021 at 2:00am
Unless there is some kind of technological revolution that brings down building costs by an order of magnitude, it is very unlikely that redevelopment of properties in urban areas in the US would ever get to that place.
I have personally looked into trying to do some redevelopment in neighborhoods with rapidly increasing prices, and even if the permits were easy to obtain, it looked to me like it would be a very good way to light large piles of cash on fire.
Consider this (hypothetical) example:
A developer is able to obtain ten contiguous parcels (one block), of single family homes in an urban area at $500k apiece. So that is $5 million just to start. Let’s just suppose that getting the permits is easy, so that it doesn’t add too much expense to building on that land (hahaha!). The developer then puts up a four story condo building with 40 units, each unit having 2000 sq. ft. and each unit having 1.5 parking spaces in the parking garage in the basement of the building. Assume that it costs $100/sq. ft. to build those units and finish everything with the property, including the parking garage (hahahaha!). That is another $8 million invested.
Let’s just ignore selling costs (I personally never made it that far in my own analysis before seeing that it property redevelopment would be a waste of my time and money). In this analysis, each unit would have to sell for $325k just for the developer to break even.
However, the developer isn’t looking just to break even, they want a good risk adjusted rate of return. So let’s assume that they won’t even start a project that doesn’t pencil out to a 30% ROI (ignoring the timing of cash flows to simplify things). That would come to an average sales price of $422.5k per unit, again ignoring selling costs.
Now let’s just assume that selling costs are a fixed $7.5k per unit to make the price of the condos a nice, round, $430k. After all of that construction and work, prices for a home on that block are now a whopping 14% more affordable than before the redevelopment. And that doesn’t include the costs of upkeep of shared spaces that come with condos or townhomes, so the units are at best marginally more affordable.
After looking a bit into property redevelopment myself, I realized part of the reason why new townhomes and condos in my neighborhood sell at a substantial premium over single family homes. The developers would lose money if they didn’t! I still don’t quite understand why people are willing to pay more for a condo or townhome in the neighborhood, though I suspect that the price difference narrows quite a bit if you factor in the expected costs of replacing a roof, siding, major appliances and HVAC components, and upgrading fixtures and floors to the standards of the new construction.
Michael Sandifer
Feb 25 2021 at 10:24am
Shooting from the hip, would a property tax rate that increases with the value of property help in situations in which local homeowners, either through municipal governments or HOAs, want to restrict development, and particularly, higher density development?32
For example, how about an escalating tax rate that, after a certain limit of capital appreciation, effectively wipes out capital appreciation for homeowners?
MarkW
Feb 25 2021 at 12:26pm
What’s your goal — to get rid of single-family homes and neighborhoods in cities? And to induce the kinds of people who prefer the same to go somewhere else? Would that make cities more or less livable? More or less financially stable? In principle, I’m in favor of eliminating zoning. At the same time, I’m not interested in living in or among apartment buildings (which would be mostly full of students — I live in a college town). But I can afford to move, and I don’t demand that the current ‘neighborhood character’ be preserved in amber for my benefit.
But is there any risk of knocking down Chesterton fences here? If you get rid of single-family zoning and HOAs, then isn’t the obvious solution for a prospective homeowner who prefers peace & quiet to buy a piece of land far enough out that multifamily housing development is unlikely and/or on a big enough plot of land to provide a buffer? With the events of the last few years, aren’t we already seeing signs of a re-run of 20th century urban flight?
Michael Sandifer
Feb 26 2021 at 6:51am
The goal is just to try to think of ways of addressing housing shortages do to local zoning laws when such laws are overwhelming supported by self-interested voters who are literally beginning to kill some of our must important cities economically, while pricing poor and average people out of opportunities in those cities.
Michael Sandifer
Feb 26 2021 at 6:52am
“due to local zoning laws” that is.
MarkW
Feb 28 2021 at 7:24am
I believe those economic opportunities in San Francisco that poor and average people are being priced out of are a mirage. Yes, its true that all kinds of working class jobs pay more in the Bay Area than, say, Indianapolis, but they only pay more because it’s so much more expensive to live in the Bay Area. The wages are essentially ‘hazard pay’ for putting up with long commutes and cramped living conditions. If enlightened housing policies somehow brought Bay Area housing costs down to the national median, the wages being offered would decline in tandem. If houses in San Francisco cost the same as in Indianapolis, then plumbers would be paid the same in San Francisco as Indianapolis. Actually, they might be paid less as some workers would surely be willing to take part of their pay in the form of a weather/cultural amenities/natural beauty premium.
Scott Sumner
Feb 25 2021 at 3:09pm
Some cities (like NYC) actually have regressive property tax rates—much lower rates on very expensive properties. At a minimum, we should make the tax rate proportional.
MarkW
Mar 1 2021 at 12:58pm
Detroit, too. New and rehab construction has been enabled by enormous tax breaks (hardly anybody would build in Detroit otherwise), so some owners of penthouse condos pay just a few hundred $$ in annual property taxes.
Miguel Madeira
Feb 25 2021 at 2:23pm
“4. Urbanists worried that suburbia creates isolated, atomistic people, unconnected to their neighbors.”
But, in contrast, people worried that bid density cities creates isolated, atomistic people, unconnected to their neighbors (a concern that I think that makes more sense than the opposite) will lose.
Lizard Man
Mar 5 2021 at 2:04am
I don’t think that the density is the causal factor. Haredim live in pretty dense settlements in NYC, it’s suburbs, and in Israel.
TMC
Mar 1 2021 at 11:41am
If only they could set up zones where the residents could vote on theses things. Frankly, I’d limit it to property owners who actually have skin in the game. Democracy and property rights can co-exist.
Comments are closed.