Stack and packs versus the suburbs: Let the market decide

In a recent Wall Street Journal op-ed, President Donald TrumpDonald John TrumpObama calls on Senate not to fill Ginsburg's vacancy until after election Planned Parenthood: 'The fate of our rights' depends on Ginsburg replacement Progressive group to spend M in ad campaign on Supreme Court vacancy MORE and Housing and Urban Development (HUD) Secretary Ben CarsonBenjamin (Ben) Solomon CarsonBiden cannot keep letting Trump set the agenda The Hill's 12:30 Report: Trump heads to New Hampshire after renomination speech Five takeaways on GOP's norm-breaking convention MORE promised to “protect America’s suburbs” from “a relentless push for more high-density housing in single-family residential neighborhoods.” This seems to be a reversal from Carson’s earlier advocacy for using the federal government to loosen local zoning laws.

As with most public policies, the issues are too complex to be distilled into simple left vs. right, us vs. them, or even NIMBY vs. YIMBY. But if we had to simplify them, the clearest divide here is the conflict between choice and coercion.

This debate is playing out across the country, and recent policies enacted in Portland, Ore., show the tensions between coercion and choice even among those in favor of more density and development. The Portland region, along with other west coast cities, have some of the most highly regulated housing markets in the U.S. and has some of the worst housing affordability in the country.

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Last year, the Oregon Legislature took a small step toward loosening regulations with a law requiring cities with a population over 25,000 to allow construction of duplexes on properties initially zoned for single homes. In the Portland metro area the law requires cities and counties to allow the building of denser housing such as quadplexes and “cottage clusters” of homes around common yards.

When laws such as Oregon’s are passed, headlines celebrate (or jeer) the legislation as a “ban” that “eliminates” or “outlaws” single-family homes. That’s a crude—and false—simplification.

Oregon’s law does not eliminate single-family homes. Before the law, property owners in single-family zoned areas could build only one house per lot. The new law provides property owners the option to build single- or multi-family developments. The law freed up opportunities for property owners. This freedom has value and will be reflected in higher land values and cheaper housing. It’s one of those rare progressive policies that increase choice and possibly wealth.

But, there’s a darker, coercive side to this push. Forcing neighborhoods to allow more types of housing isn't forcing anyone to do anything – quite the opposite, since it gives people more freedom to use their property rights in the way they decide. But some jurisdictions are turning what should be a removal of coercion into coercion of a different kind.

For example, when the city of Portland revised its zoning codes to comply with the law, it imposed new restrictions on housing. New single family homes are now limited to a maximum of 2,500 square feet and duplexes are limited to a total of 3,000 square feet. With 3- and 4-plexes limited to a total 3,500 square feet, the city’s getting into stack-and-pack territory, stifling choice and reducing wealth. Planners and policymakers have mixed emotions about the free market. On the one hand, they trust the market enough to lift restrictions on the number of units built. On the other hand, they don’t trust the market enough to build units small enough to fulfill their high density dreams.

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It’s this distrust that drives higher housing prices and reduces affordability. Recent research published by the National Bureau of Economic Research shows stricter land use regulations go a long way toward explaining reductions in housing affordability.

Increased density conveys clear benefits, imposes clear costs. Denser neighborhoods tend to have more opportunities for shopping and dining within walking distance. They usually bear smaller per-unit costs on infrastructure. At the same time, denser neighborhoods can be cluttered with on-street parking and traffic congestion. They can place burdens on crowded public schools. People know the tradeoffs, and they should be allowed the choice to face the tradeoffs in building what they want and buying where they want.

But, city-wide restrictions on the size of new housing are a very costly and crude way to force that choice. Some people want a house that’s larger than 2,500 square feet. Some multi-generational families feel they need a larger home. On the other hand, some households may relish the idea of sharing a common yard with others. It shouldn’t be up to bureaucrats, planners, and policy makers to decide how to “right size” our living arrangements.

Good housing policy shouldn’t force people to choose between suburbs and density. It’s a false choice: we can have both. The problem is policy that tries to force all of one or the other on people who don’t want it. The solution is not to force density on suburbs. The solution is to free the market system to allow for density for cities and suburbs alike, while still allowing single-family homes for those who don’t like sharing a wall or a patch of lawn with their neighbors.

Eric Fruits, Ph.D. chief economist at the International Center for Law and Economics and an adjunct professor of economics at Portland State University, where he is also editor of the Center for Real Estate Quarterly Report.