Jun 21, 2019

Housing Trends

Affordability, Zoning, & A Path To Sustained Growth

Regulation is a necessary evil to maintain reasonable and sustained growth, but any economist will tell you, artificial scarcities can lead to problems. Below are three pro-development case studies that examine zoning’s upward pressure on prices and how changing existing code could tackle affordability issues.
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Zoning and land-use regulation control development in order to preserve the integrity of a city. This could mean restricting density, dictating land use, and even influencing aesthetics and design. In doing so, the constraints often limit development. A study looking at regulation shows that:

20% of the variation in housing growth can be attributed to density regulations.The regulations can also push prices higher.

Lower mortgage rates help the affordability equation, but collaboration between cities, builders, and developers is needed to sustain housing growth. The following three sections describe three-such changes in different regions of the US.

Longmont: Minimize Sprawl and Increase Density

Longmont has long been a haven for those looking to enjoy Colorado’s quality of life without the hustle and bustle of Denver, an hour south. Longmont has changed in recent years as Denver’s nationwide appeal spills over into nearby cities. According to Zonda:
  • Single-family existing homes average $420,000, just 5% below the city of Denver at $440,000. The median household income in Longmont is nearly 5% above Denver.
  • Local home prices are up 12% in two years.
  • There are 45% more active projects in Longmont in 2019 compared to 2017.
Longmont officials, looking to preserve the appeal of the metro and accommodate a growing population, updated its zoning and land development codes for the first time in 17 years last September.

Under the revisions, the city identified five key mixed-used pockets where officials would like to see new housing efforts concentrated. Within the regions, the city is incentivizing four-story buildings, greater density, and more affordable housing. The end goal for Longmont is a lively city with walkable corridors strategically planned to avoid sprawl and preserve open space. 

Austin: Zoning Will Be Modified If…

Austin is the standout star this cycle for net-migration, job growth, and a resilient housing market. With all the success, however, has come with unprecedented local affordability challenges. The city, in an effort to support working and middle-class residents, passed a new plan to encourage more affordable housing that applies to both for-sale and for-rent development. 

Dubbed Affordability Unlocked, the new program in Austin trades relaxed rules on density, setbacks, height, and parking for at least 50% of units to classify as affordable based on the area’s median family income. In cases where the entire project is classified as affordable, developers are able to build 50% taller than the current code. In theory, the program will reduce the cost of building affordable units, while also increasing market-rate supply.

Minneapolis: Remove Single-Family Designation

With a median home price of $250,000, it is hard for some across the country to have sympathy for the affordability problems hitting Minneapolis today. Relative to itself, however, the new home affordability ratio of 33% is below even the level seen during the mid-2000s housing boom. This, plus years of perceived racial segregation, pushed officials to think big about the city’s future. 

Enter: Minneapolis 2040. Minneapolis 2040 covers the city’s future plans ranging from transportation to public services and housing. The changes to housing are vast. For example, the city voted to remove single-family zoning and instead opened each neighborhood to residential construction of up to three units. By allowing triplexes in areas once designated for a single-family home, the new policy can, in theory, triple the potential housing supply. 

Charlotte city planners, California under Governor Newsom, Atlanta, and other areas across the country are working on creative ways to increase supply across product types. Working with and learning from leaders who have already taken positive steps can help expedite the process, but we are still far away from uniformly finding the right balance of controlled growth. 
 
Contact us to discuss how we can help you meet today's housing demands.

Featured Writers

We cover topics around housing, policy, markets, and technology.

Ali Wolf

Director, Economic Research

Ali Wolf

Director, Economic Research


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