Phony Height Act Reform Is Dead! Long Live Real Reform!

A blog about business and economics.
Nov. 22 2013 1:55 PM

Phony Height Act Reform Is Dead! Long Live Real Reform!  

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Earlier this week, hopes for modifications of the Height of Buildings Act limiting most downtown DC structures to 130 feet died as the National Capital Planning Commission voted in favor of the status quo. A number of people have asked me since why I didn't leap to comment on this turn of events, since I take a keen interest in such matters.

The main reason is that, frankly, the reforms being proposed were kind of weasely ridiculous and small-bore. I wish they had happened because it would have been change for the better. But I don't want to spend too much time lamenting reform's failure, because the proposals reflected a fundamentally failed strategy.

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Given the natural status quo bias of the political system and human beings' natural tendency toward arbitrary psychological anchoring around the status quo, there's a bit of a paradox. When it comes to reforms like this, it's actually easier to get major reform done than minor reform. Any reform of the Height Act, no matter how large or how trivial, will encounter a roughly similar level of opposition from people who like things as they are and who see real estate development as fundamentally something to be feared. To overcome that opposition, you need a powerful and diverse coalition that includes labor unions, construction firms, major employers, federal stakeholders, low-income community leaders, and others who unite around a vision of large-scale building, cheaper rents, and a gusher of tax revenue.

The case for reform necessarily involves the case for meaningful reform, meaning genuine office and apartment towers in the central business district.

Here's the case. Right now, land is so scarce downtown that any time an office building ages the only reasonable thing to do with it is renovate it to restore its Class A status and obtain maximum rent. Under a regime of bold reform, that will no longer be the case. Some current commercial structures will age, and then be knocked down and replaced by much taller buildings full of expensive Class A office space. After that happens two or three times, some owners of commercial buildings will think twice about incurring that vast expense. Now some buildings will simply be allowed to age and command cheaper rents (when Jane Jacobs said "new ideas need old buildings" this is the dynamic she's referring to) that are friendlier to both new startups and thrifty nonprofits. In the next cycle, you'll see some more office towers get built but also some landlords considering third and forth strategies. Perhaps you replace an old mid-sized office with a new giant condo tower rather than a new office? Or maybe a new hotel? 

A large number of benefits flow from this:

  • More direct jobs building the new buildings.
  • More indirect jobs as cheaper office space allows for more hiring.
  • More tax revenue due to the increase in building and employment.
  • More new residents of the city who can be accommodated without unleashing displacement dynamics in existing neighborhoods.
  • More customers for city retailers due to the increase in residents, commuters, and tourists. 

It would be, I think, a huge win. More than enough of a win to offset the downsides with the most obvious one being that a large increase in tax revenue would help finance improved transportation infrastructure. Maybe the relevant coalition can't be built. But the underlying fundamentals are so positive that I really believe it can be. What we learned this week is that even very small changes produce an enormous amount of knee-jerk opposition. To overcome that opposition you need changes that are big enough to produce a countervailing quantity of enthusiasm. Tinkering around the edges doesn't get the job done.

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