Problems with Inclusionary Zoning

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Problems with Inclusionary Zoning
Presented by Elliot F. Eisenberg, Ph.D. National
Association of Home Builders October 18,
2006 Miami, FL
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Overview

• General observations about IZ
• Microeconomics of IZ
• Academic findings
• Alternative strategies
• Very brief review

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Part One General Observations
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• General Observations
• (median house prices, NAR)
• Many places have affordable housing
• Atlanta, GA (169,000)
• Dallas, TX (146,000)
• Indianapolis, IN (114,000)
• New Orleans, LA (175,000)
• Oklahoma City, OK (120,000)
• But, many do not
• Los Angeles, CA (564,000)
• Miami, FL (377,000)
• Montgomery Co., MD (440,000)
• Seattle, WA (339,000)

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• Why?
• Several reasons including artificial supply
  restrictions!!!
• or zoning, or more generally, government
  regulation

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• Proposed Solution
• Government regulation, specifically IZ
• Why
• The problem is very serious
• Politically, a solution must be found
• Regulations like IZ appear to be free easy!

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Is It Really?

• Do these solutions work?
• Rent control (loss of units)
• Minimum wage (loss of jobs)
• Price controls (undersupply, black market)
• Price supports (oversupply)
• Job security (reduced employment, France)
• Etc
• Why, ECONOMICS!!!!!

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Lets compare to other social concerns
Do we make GM give cars to the poor? Do local
governments require Wal-Mart to sell stuff to the
needy at reduced prices? Do we require grocery
stores to provide food to the needy at a
discount?
Why is workforce housing different?
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Part Two Microeconomics of IZ
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Microeconomics of IZ
Panel A
Panel B
Supply1
Supply1
Supply
P1
Supply
P1
P
Demand
Demand
Q
Q1
Q
Q1
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Microeconomics of IZ

• Inclusionary zoning is likely to
• A) Increase new house prices
• B) Decrease new housing supply
• C) Increase existing house prices
• D) Decrease land prices
• E) Push building outside IZ zone

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Who Bears the Burden of IZ?

• The only seven candidates are
• Suppliers, Workers, Builders, Developers,
  Landowners, Buyers, Renters
• Politicians/activists like to think builders pay.
  
• But, do they?
• In reality who pays depends on who is more
  mobile.
• Think about the elasticity of supply and demand.

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Part Three Academic Findings
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Academic Findings
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Academic Findings
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Part Four Alternative Strategies
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Alternative Strategies(Supply Side)

• Reform building codes (knocker vs. door bell)
• Relax design standards (no garage, small yard)
• Eliminate exclusionary zoning (smaller lot)
• Entitle a sufficient number of lots
• Treat it like economic development!
• But best of all, USE MARKET FORCES!

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Part Five Very Brief Review
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Review

• What is Success?
• Think about traffic safety
• A) Number of tickets issued, or
• B) Lives saved, fewer speeders
• Think about workforce housing
• A) Number of units built, or
• B) Low rents, enough low priced units

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• CONTACT ME!
• Elliot F. Eisenberg, Ph.D.
• National Association of Home Builders
• 1201 15th Street NW
• Washington, DC 20005
• eeisenberg_at_nahb.com
• Phone [phone]
• Fax [phone]
• THANK YOU VERY MUCH!