‘Upzoning’ & Affordable Housing: Correlation Does Not Equal Causation

“Upzoning” — also known as zoning reform — is getting renewed attention as a way to expand housing construction with market forces putting a damper on rents. The idea is to allow multiple-unit housing construction in areas that previously had been restricted to single-family buildings.

But evidence suggests that while it might work in some cases, it doesn’t in others, and it can be complicated to identify causality when things do improve.

The Biden administration recently took aim at local housing regulations.

“While some land-use regulations can be a reasonable part of community planning — for example, keeping factories away from schools or ensuring that parks are situated near residential areas — many other building regulations — for example, limiting housing density and building heights, or imposing minimum lot sizes or parking requirements — can create artificial barriers that hinder growth and drive up the cost of housing,” the White House wrote in a report.

“These policies arise naturally from a local decision-making process that is influenced by homeowners, who prefer higher home prices, and account for the local costs of increased housing, such as more congestion, but they fail to account for any regional or national benefits,” the report adds. ”This classic market failure negatively affects individuals in neighboring communities and potential new residents.”

The Arbor Realty Trust Affordable Housing Trends 2024 Report recently discussed zoning reform as having “emerged as a favored policy tool among both tenant and industry advocates searching for a solution to the ongoing housing supply shortage.” And in February, NPR called upzoning the “hottest trend in U.S. cities.”

Arbor Trust pointed to “roughly 20 municipal-level reforms being considered nationwide as of April 2024,” but that understates the amount of activity over the years. Data from the Othering & Belonging Institute at the University of California Berkeley showed 148 states or municipalities nationwide either are considering or have considered — whether deciding to or not — zoning reform.

There has been evidence from some cities that adding housing, as one might expect, can help tame rent growth. The Pew Charitable Trusts reported that timely policy changes restricted rent growth in four metropolitan areas — Minneapolis (1%); New Rochelle, New York (7%); Portland, Oregon (2%); and Tysons, Virginia (4%) —when the overall U.S. rent growth during the same period was 31%.

However, sorting out the mechanisms behind these statistics can be difficult. One of the Pew’s report authors, Alex Horowitz, director of the Pew Charitable Trust’s housing policy initiative, told Colorado Public Radio that the real driver of additional units wasn’t a change in single-family zoning. “The production of duplexes, triplexes and fourplexes has been very modest — just 53 units in 2021, for example — since the 2040 plan went into effect,” the station wrote.

“Rather, it appears that earlier parking reforms were responsible for a boom in new apartment buildings, and the subsequent rent moderation,” CPR wrote. “Minneapolis has eliminated minimum parking requirements for new developments — first for areas near frequent transit lines in 2015 and later for the entire city.”

“Added housing was overwhelmingly coming from mid-rise apartment buildings on commercial corridors and near transit,” Horowitz told CPR.

And in New York City, upzoning led to gentrification, and it was multifamily towers that increased residential density.