Rapidly increasing housing costs over the last few months underscore the need for zoning reform. By breaking down regulatory barriers to new housing construction, we can greatly reduce the cost of housing and also enable large numbers of people to move to places where there are better job and educational opportunities. We can also empower more people to “vote with their feet” for state and local government policies that best fit their needs.
But zoning reform is often stymied by fears that it is inimical to the interests of current homeowners. They worry that allowing more housing construction in the area will diminish the value of their current homes, and also enable the construction of new buildings they object to on esthetic grounds. Thus, we get the classic conflict between “NIMBYs” (many of them current homeowners) opposed to new construction, and “YIMBYs” who favor it because it would benefit people who are currently shut out of various neighborhoods. This framing has some validity. But it overlooks key ways in which zoning deregulation can actually benefit existing homeowners.
Classic NIMBY concerns are not without some basis. If deregulation allows extensive new housing construction in an given area, that is likely to lower housing costs, and in the process also lower the price of existing houses. Such price reductions are actually a feature, not a bug! Making housing cheaper is one of the main reasons why advocates of zoning reform support it in the first place. There are some situations where deregulation can increase housing construction and lower prices, while simultaneously maintaining or even increasing the value of land occupied by already existing homes. But, if we YIMBYs get our way, there are likely to be many places where the price of existing homes does indeed go down.
Deregulation will also sometimes result in construction that current residents dislike for esthetic reasons. If you hate the sight of duplexes, eliminating single-family zoning in your area is likely to ensure you see more of them. The good people of Santa Fe might no longer be able to prevent George R.R. Martin from building a castle there, perhaps even one complete with “Jon Snow and a couple of dragons.” Personally, I would love to have a castle in my neighborhood! But your tastes might well differ. Finally, some people object to an influx of new residents who differ from them on race, ethnicity, or socioeconomic class. Such preferences have declined over time. But they haven’t completely disappeared.
But these possible downsides of YIMBYism for current homeowners are counterbalanced by enormous potential benefits, which are often ignored in public debates over the issue. There is widespread cross-ideological agreement among experts that zoning deregulation would greatly increase growth and economic productivity, because large numbers of people would move to places where they can be more productive. New evidence suggests that reducing zoning could increase US GDP by as much as 36% over time. That extra productivity would disproportionately benefit the poor and disadvantaged who get to move to areas from which they are now excluded. But such enormous increases in growth and production would also provide large benefits to current homeowners, as well.
The latter would get cheaper, higher quality, and more innovative goods and services in a wide range of areas. A rising tide this large may not quite lift all boats. But it would lift a great many, including large numbers of current homeowners.
The economic benefits here aren’t limited merely to incremental improvements in the price and quality of currently available goods and services. They also involve increased innovations leading to entirely new products. People newly empowered to migrate to opportunity could engage in scientific and entrepreneurial innovation that would have been impossible in their previous locations.
I have previously highlighted this point when it comes to international migration. For example, the developers of the first two successful Covid vaccines were immigrants or children of immigrants from poor nations, who could not have made their vital contributions to these life-saving innovations, if they or their parents had been confined to their countries of origin.
The same point applies to domestic migration. A child born in a dysfunctional inner city neighborhood or a declining community in Appalachia is far more likely to grow up to be a great scientist or entrepreneur if his or her family is able to move to a place with greater opportunities. As with international migrants, only a very small percentage of internal foot voters will become great innovators. But that small percentage can still generate enormous progress, that benefits current homeowners, as well as everyone else. The kid whose family moves into the duplex next door – made possible by zoning reform – might grow up to cure a disease that would otherwise have put you in an early grave!
Housing deregulation can enable many millions of people to move to opportunity. Even if only a tiny fraction of them (say 1 in 50,000), go on to make major entrepreneurial or scientific innovations, that’s still an enormous amount of innovation in the aggregate. And current homeowners will reap the benefits, along with everyone else.
Economist Bryan Caplan points out several other ways in which current homeowners can benefit from housing deregulation, even if the price of their current homes goes down:
1. Homeowners who own little or no equity could walk away from their small, expensive home in favor of a larger, cheaper home.
2. Homeowners who eventually planned to move to a larger, more expensive home could easily find that their losses on their old home are smaller than their savings on their new home. And they wouldn’t have to wait as many years to upgrade.
3. The grown children of settled homeowners could much more easily afford to live near their parents – and wouldn’t need so much help for a down payment.
4. Yes, higher local population means more congestion. Yet it also means better shopping, entertainment and employment opportunities. What’s the net value of all the good effects of more people bundled with all the bad effects of more people? The very fact that prices are much higher in densely-population areas strongly suggests that the net value is highly positive. “New York would be great without all the people” is sadly naive, because without all the people, New York would no longer be great.
5. If you’re willing to move, improve, or subdivide, deregulation allows even established owners with lots of equity to readily profit. If you suddenly gain the right to legally subdivide your lot into three homesites, a 50% fall in the value of the home you own is a fair price to pay. The same goes if you can now build up. Replace your home with a 10-story apartment and pocket the difference. Cha-ching.
The point about children is worth expanding on. Many homeowners have children, and care about their interests at least as much as they do their own. My wife and I live in expensive Arlington, Virginia, which we can afford to do because I am a law professor and she is a lawyer, thereby putting our household income in the top 5% of US the income distribution, or so. But we would like our kids (ages 6 and 4) to be able to live in a similar location even if they choose less lucrative professions.
My 6-year-old daughter says she wants to be “a lawyer like Mommy,” because “that’s the most important job in the world.” Still, I want her to be able to live in a place like Arlington even if her career plans change. I suspect many other homeowning parents have similar aspirations.
Of course, we can potentially provide for our kids by leaving them a huge inheritance when we pass away. The more zoning restrictions inflate the value of our house, the bigger the inheritance will be! But I, for one, hope to live for many more years, and I don’t want the kids to have to wait that long before they can afford to live in this area and others like it. We could instead sell the house when the kids grow up, move to a much smaller one, and give the kids the profit earned from the sale. But that option, too, has obvious downsides. Ditto for putting a second or third mortgage on your expensive house, and then letting the kids use the money.
All in all, I’d much rather that my kids benefit from a decline in housing costs, even if that means a reduction in the value of my own house. Not all parents will feel the same way. But I suspect a great many do.
None of the above proves that all current homeowners stand to benefit from zoning reform. If you’re a homeowner who doesn’t have kids (or doesn’t care about their housing costs), doesn’t care much about economic growth and scientific progress, and have a very strong desire to ensure that the “character” of your neighborhood never changes, the points made here are unlikely to wean you away from NIMBYism. But these considerations do show that a great many owners would be net beneficiaries of housing deregulation – even if the value of their property goes down, as a result.
That point is worth emphasizing. As Matt Yglesias points out, survey data suggests that the economic growth argument for zoning reform has broader appeal than traditional arguments emphasizing racial justice and gains for minority movers. YIMBY policies can create huge benefits even for the kinds of people most likely to be NIMBYs.
The post Beyond NIMBY vs. YIMBY – How Current Homeowners Can Benefit from Zoning Deregulation appeared first on Reason.com.
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