Zoning Practice — March 2008

Ask the Author

Here are reader questions answered by Robert Parker, AICP, coauthor of the February 2008 Zoning Practice article "A National Survey of Development Standards and the Impact on Housing Affordability."

Question from Gina Gentle, Planner/Building Inspector:

I am a planner in a small municipality — the Town of Mesilla — which is a historic community of about 2,500 people, with an additional 300 people that were just added to the population in a recent annexation, making the population closer to 3,000 people. Historic preservation and agricultural preservation have been the goals of Mesilla since its incorporation back in 1958 (Mesilla has been a town unofficially since before 1848, but was only incorporated in 1958). In the town's efforts to maintain the agricultural, rural atmosphere of Mesilla, the town created zoning back in 1972 with a majority of the land zoned for a five-acre minimum lot size. The result of that today is McMansions, huge houses on 5–10 acre lots becoming more and more common. The rest of Mesilla is higher priced than the rest of the region, the Las Cruces area, and basically the town is becoming gentrified. We are looking at affordable housing techniques for Mesilla. I wanted to ask if any affordable housing techniques would be feasible for a small community like Mesilla, with other significant goals such as historic preservation and preservation of agriculture.

Answer from author Robert Parker:

This is a difficult question to respond to without a better understanding of the social, physical and political composition of your community. Dozens of affordable housing strategies exist that might be appropriate for your community. Given the large-lot zoning in your community, it is possible that land supply is an issue. Our study found that lot size and floor area requirements were the two biggest regulatory contributors to housing cost (see www.huduser.org/publications/commdevl/subdiv_report.html for a full copy of the report). Excessive lot size regulations can add thousands of dollars to the cost of a home.

Following is a summary of potential strategies based on previous work by our consulting firm, ECONorthwest (www.econw.com).

Figure 1 gives an example of the complexity of the interaction in an urban land market. It shows factors that influence the cost of real estate. A more complete model would have to be disaggregated by type of use (e.g., residential, industrial), type of product within each use (e.g., single-family dwelling, multi-family), and type of household or business with effective demand for those uses (e.g., by household size, age of household head, income).

Figure 1. Factors affecting housing price

Figure 1: Factors affecting housing price

Source: Reprinted from previous work ECONorthwest has done for the City of Eugene and the Governor's Task Force on Growth.

The identification of a set of land use policies that will lead to development of more affordable housing while achieving other community goals is difficult at best. Many jurisdictions in the United States are facing housing affordability problems. A considerable body of literature exists on land use policy and affordable housing that summarizes approaches that communities have used to address the housing affordability issue.

This section summarizes some of the policy approaches that communities can consider to address housing affordability. Much of the information is from Affordable Housing: Proactive and Reactive Planning Strategies, S. Mark White, American Planning Association Planning Advisory Service Report Number 441, 1992. Table 1 provides a summary of policy approaches. Not all of the approaches are appropriate or applicable to all metropolitan areas.

Table 1. Potential Affordable Housing Approaches

Measure Description Potential Issues
Proactive Measures: Land Use Controls
Inclusionary Zoning Inclusionary zoning policies tie development approval to, or provide regulatory incentives for, the provision of low- and moderate-income housing as part of a proposed development. Mandatory inclusionary zoning-requires developers to provide a certain percentage of low-income housing. Incentive-based inclusionary zoning-provides density or other types of incentives. Price of low-income housing passed on to purchasers of market-rate housing; inclusionary zoning impedes the "filtering" process where residents purchase new housing, freeing existing housing for lower-income residents.
Linkages Linkage ordinances require developers of office buildings or other forms of non-residential uses to build housing, pay a fee in lieu of construction into a housing trust fund, or make equity contributions to a low-income housing project. Potential constitutional issues of nexus and proportionality as established by Nollan v. California Coastal Commission. May discourage economic development.
Financing Affordable Housing A housing trust fund is generally defined as a "dedicated source of revenue available to help low- and moderate-income people achieve affordable housing." Sources of funds can include linkage payments, tax increment financing, endowments and grants, surplus funds from refinancing municipal bond issues, and taxes and fees. Developing reasonable revenue streams.
Promoting Infill Development Infill development promotes housing affordability by using existing infrastructure and services rather than extensions of services. Regulatory approaches include:
Administrative streamlining
Density bonuses
Elimination of overzoning for industrial uses
Accessory dwelling units
Impacts to existing property owners; density
Preserving Existing Housing Supply Housing preservation ordinances typically condition the demolition or replacement of certain housing types on the replacement of such housing elsewhere, fees in lieu of replacement, or payment for relocation expenses of existing tenants. Approaches include:
Housing preservation ordinances
Housing replacement ordinances
Rent control
Single-room-occupancy ordinances
Interference with local market; rent control discourages investment in new housing and maintenance
Reactive Measures: Modification of Regulatory Measures
Zoning and Subdivision Reform Development ordinances that regulate minimum lot size, setbacks, lot coverage, lot dimensions, street widths and other aspects of residential development contribute to housing costs. Approaches include:
Zero lot line zoning
Cluster zoning
Mixed-use zoning
Planned unit development
Street width
Lot coverage and dimension requirements
May lead to inconsistent development patterns; narrow streets may impede emergency vehicles
Adequate Public Facilities Ordinances Adequate Public Facilities Requirements (APFRs) help local governments avoid the negative impacts of rapid growth, such as insufficient sewer capacity and traffic congestion. The main objective of APFRs is to ensure that new development has adequate urban services. They serve to give local governments more control over the timing and location of new development. The impacts of a set of requirements can be difficult to predict; requiring high service levels may discourage certain types of development; the development approval process will be more complicated; APFRs will place new demands on capital improvement budgets
Administrative and Procedural Reforms Regulatory delay can be a major cost-inducing factor in development. Oregon has specific requirements for review of development applications, however, complicated projects frequently require additional analysis such as traffic impact studies, etc. How to streamline the review process and still achieve the intended objectives of local development policies.

Source: Matrix developed by ECONorthwest; information from Affordable Housing: Proactive and Reactive Strategies, White, 1992

The previous policies address housing affordability issues. Housing affordability, however, is not the only issue that cities face in regulating housing markets. Additional policies can be directed at the following objectives:

  • Increase densities
  • Increase redevelopment
  • Increase infill
  • Change housing type/ increases options
  • Provide affordable housing
  • Economic development
  • Make efficient use of infrastructure
  • Ensure efficient land uses
  • Urban design/ form
  • Prevent development in critical areas

Table 2 provides a list of potential policies and a summary of what the policy is intended to do. It is common for jurisdictions to adopt combinations of policies to manage growth and improve the efficiency and holding capacity of land uses. Such policy groupings, however, are not necessarily cumulative in their intent or impact. Polices that address similar issues may not be mutually reinforcing. For example, having policies in residential zones for maximum lot size and minimum density essentially address the same issue — underbuild in residential zones. Thus, communities should carefully consider their policy programs and evaluate each policy both individually and in consideration of other policies.

Table 2. Potential measures to increase density

Measures that increase Residential Capacity Measures that support increased densities Measures to mitigate the impact of density
Permit Accessory Dwelling Units (ADUs) in single-family zones. Encourage the Development of Urban Centers and Urban Villages Design Standards
Provide Multifamily Housing Tax Credits to Developers Allow Mixed Uses Urban Amenities for Increased Densities
Provide Density Bonuses to Developers Encourage Transit-Oriented Design Conduct community visioning exercises to determine how and where the community will grow
Transfer/Purchase of Development Rights Downtown Revitalization
Allow Clustered Residential Development Impose High Development Fees and Exactions Other Measures
Allow Co-housing Impose Restrictions on Physically Developable Land Mandate Low Densities in Rural and Resource Lands
Allow Duplexes, Townhomes, and Condominiums Require Adequate Public Facilities Urban Holding Zones
Increase Allowable Residential Densities Specific Development Plans Phasing Urban Growth
Mandate Maximum Lot Sizes Interim Development Standards Capital Facilities Investments
Mandate Minimum Residential Densities Encourage Transportation-Efficient Land Use Environmental Review and Mitigation Built into the Subarea Planning Process
Reduce Street Width Standards Create Annexation Plans
Allow Small Residential Lots Urban Growth Management Agreements Partner with nongovernmental organizations to preserve natural resource lands
Encourage Infill and Redevelopment Encourage developers to reduce off-street surface parking
Enact an inclusionary zoning ordinance for new housing developments Implement a program to identify and redevelop vacant and abandoned buildings
Plan and zone for affordable and manufactured housing development Concentrate critical services near homes, jobs, and transit
Locate civic buildings in existing communities rather than in greenfield areas
Implement a process to expedite plan and permit approval for smart growth projects

Source: ECONorthwest, 2002

In summary, it is important to define the problem before adopting policies. For example, if the problem is that lower-income households that rent cannot find housing, then a potential approach is to zone more land for multifamily housing. If the problem is workforce housing (e.g., households that make 80 percent to 100 percent of median income), then you may want to focus on measures to produce smaller lots for single-family dwellings (for example, in the 5,000 to 7,000 square foot range). Since many cities do not build housing, it is important that any measures you adopt (regulatory or incentives) work within the parameters of your local housing market.

Question from Robert Harris:

In 1989 families were spending only 18 percent of their income on housing, and since 2005 families spend an average of 35 percent of their income, and that includes renters. With this information and the information you provided in your write-up, what steps do you believe we should take to reduce these "excessive" costs?

Answer from author Robert Parker:

The ratio of housing cost is a commonly used, but somewhat limited indicator of affordability. HUD considers households that pay more than 30 percent of their income for housing as "cost burdened."

There are a variety of factors that have contributed to this increase. A simple explanation is that housing cost increased faster than income, particularly for ownership products. Our research suggests that lot size and housing size (floor area) regulations are the regulations that contribute the most to housing cost. Data from the Census Current Construction reports suggests that housing size has increased consistently for well over a decade. In 1989, 26 percent of new single-family homes were more than 2,400 square feet. This figure increased to 44 percent by 2006 (see www.census.gov/const/www/charindex.html#singlecomplete). Given the small percentage of jurisdictions in our sample that regulate minimum floor area, this is more a function of consumer demand than of regulation. One interpretation is that American households are willing to trade money for space.

At the same time, lot sizes for single-family dwellings have decreased. In 1989, 29 percent of single-family homes were on lots less than 7,000 square feet. By 2006, this percentage increased to 35 percent.

The availability of credit has also been a big factor in increasing cost burden. Relaxed credit standards allowed more households to purchase more housing than in 1989. This fueled demand and created a speculative market that resulted in rapid cost increases (particularly for ownership products) in most U.S. markets. We're now on the other side of that cycle and seeing tighter credit and decreasing values in most U.S. markets.

With respect to the question of reducing excessive costs, there are no good answers. My assessment is that what households want and what they can reasonably afford shifted during this period. I anticipate that this will correct somewhat through this current housing contraction we're experiencing. With respect to policy, our research suggests that strategies that require smaller homes on smaller lots would be the most effective way to reduce costs. The problem is that such policies lack political support in many communities.

You should also review my response to Gina Gentile's question above about affordable housing strategies. The Joint Center for Housing Studies at Harvard also has a number of useful publications (www.jchs.harvard.edu/) that address national housing trends.

Question from Travis Reeves:

Are there data showing the difference between the additional cost of a home associated with excessive lot sizes and the added value of the home due to the increased lot size?

Answer from author Robert Parker:

Yes. The authors collaborated with the National Association of Homebuilders in a study funded by HUD that addresses the impact of subdivision regulation on housing cost (the foundation for the Zoning Practice article). This is the first study we are aware of that attempts to estimate the housing cost impacts of "excessive" land use regulation. The study titled "Study of Subdivision Requirements as a Regulatory Barrier" is available on the HUD User website: www.huduser.org/rbc/rbcNews/subdvsn_req.html. According to the HUD website "the study found that almost all communities have at least one requirement that exceeds what is necessary — the most common being excessive lot size. Nationwide, the study also found that land planning jurisdictions enforce larger lot size requirements, resulting in a regulatory cost of up to $12,000 per lot."

Question from Heather Ballash, Washington Department of Community, Trade, and Economic Development:

I am working on developing a regional transfer of development rights (TDR) program in Washington State. One of the issues that we need to address is the possible impact of a TDR program on affordable housing. Are you aware of any studies that have looked at this?

Answer from author Robert Parker:

It's not clear what impacts you are referring to, although I would assume that at least one is removing housing development capacity from Urban Growth Areas. Some TDR programs focus on affordable housing (see Seattle case study: www.mass.gov/envir/smart_growth_toolkit/pages/CS-tdr-seattle.html), and many ordinances include language that refers to affordable housing as a purpose of the TDR program. I am not aware of any empirical studies that directly address the impacts of TDR programs on housing affordability.

Question from Barbara E. Wilson, Seattle Planning Commission:

Are there any studies or evidence that you are aware of that consider the impacts (or costs) of large amounts of land zoned for exclusive single-family housing. For instance, In Seattle where we have very tight land constraints and high demand for housing, over 65 percent of our total land acreage is zoned exclusively for single-family housing whereas only a small portion is available for multifamily housing development.

Answer from author Robert Parker:

The short answer is yes. The longer answer is that there is a substantial body of literature on this topic. While somewhat dated, one of the more thorough treatments on this subject is the Transportation Research Board's publication "The Costs of Sprawl Revisited." (Transit Cooperative Research Program (TCRP) Report 39. Transportation Research Board, November 1998: www.trb.org/news/blurb_detail.asp?id=2578. Part C (Chapter 6) synthesizes the literature on the topic in the context of purported impacts of sprawl.

To address the second part of your question, in our experience it is common for cities to have a lot more land designated for single-family housing than for multifamily housing. The following example explains why.

According to the 2000 Census, approximately 50 percent of Seattle's housing was single-family. For the sake of this example, let's assume that single-family densities average seven dwelling units per net acre and multifamily densities average 15 dwelling units per net acre. Table 1 shows the result: using these assumptions about 68 percent of the land need would be for single-family and 32 percent for multifamily.

Table 1. Simple residential land need estimate

Thus, if the city were allocating land for new dwelling units using the assumed single-family/multifamily mix and the assumed densities, more land would be needed to accommodate single-family housing types. The difference is a function of lower densities achieved by single-family housing types.