You Can't Talk Housing Costs Without Talking About Zoning

Moneybox
A blog about business and economics.
Dec. 10 2013 8:50 AM

You Can't Talk Housing Costs Without Talking About Zoning

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Columbia Heights back in 2005.

Photo by PAUL J.RICHARDS/AFP/Getty Images

Annie Lowrey did an interesting piece yesterday about the increasingly dear price of rental housing for the large minority of Americans who are renters, backed up with statistics and with reporting from the Columbia Heights neighborhood in Washington, D.C. She even quotes my favorite private sector housing economist:

“Builders always are aiming at that higher end,” said Jed Kolko, the chief economist at Trulia. “And eventually, as those new units age, they trickle down to lower-income borrowers.”

But not now. With demand surging, inventories are shrinking, vacancy rates are falling and rents are rising at the low end.
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Still, there are two questions unanswered by this. One: With demand surging, why doesn't construction surge enough to keep vacancy rates roughly stable. The other: If builders are always aiming at that high end, why are they building in Columbia Heights rather than in the traditionally fancier and more expensive neighborhoods west of Rock Creek Park.

The answers are "zoning" and "zoning."

After speaking to some local people over the past few months, I think that in my previous writing I've given unduly short shrift to the second aspect of this. Low income people in a gentrifying neighborhood see both new luxury construction and rising rents and it's difficult to persuade them that even more construction is the answer. But that's because we've so firmly shut the door on the idea of adding housing supply in the neighborhood that are already the priciest ones in town. Once the focus of the conversation settles narrowly on a handful of transitional neighborhoods, it's almost too late to have a sensible conversation. But you have a twofold limitation on supply. On the one hand, the total number of new units is capped so people only want to build luxury. On the other hand, new construction in the fancy neighborhoods is absolutely prohibited.

So you get an apparent invasion of luxury buildings into poor neighborhoods and even more vigorous efforts to restrict supply. We can do better than this.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.