July 14, 2020

Zoning — and its Tie to the Affordable Housing Shortage

Guest Opinion
By Donna Gundle-Krieg | Feb. 8, 2020

For many reasons, lack of affordable housing has long been a big issue in Traverse City. The problem has now spread to the surrounding areas, such as my town of Mancelona. As a real estate broker who works with housing issues daily, I do not see this housing shortage improving soon.

Lack of affordable housing obviously impacts families and their quality of life. In addition, many businesses are having a hard time hiring quality employees, partly because there is no place for their workers to live.
 
Our local leaders are attempting to solve this problem by creating more government regulations, such as restricting property rights for those who own vacation rental homes.  
 
However, I strongly believe that the problem of affordable housing could be solved with FEWER regulations, particularly in relation to zoning and building restrictions. Many communities across the country are easing these restrictions or even eliminating them. Traverse City and surrounding communities should do the same, as studies show that these regulations artificially inflate the price of housing and therefore price many people out of the market.

“The cost of the regulations reduces the supply of homes, driving up the cost of existing homes that are on the market,” according to economists Edward L. Glaeser and Joseph Gyourko, who wrote a paper titled “The Impact of Zoning on Housing Affordability.”

“Those who can afford to buy will pay a higher cost. Others who can’t will do without and continue to rent or even become homeless,” agreed UCLA economist Matthew Kahn.
 
Unfortunately, current homeowners have an incentive to keep the system in place, because it benefits them as their own home values rise, said Kahn. 
 
“If developers build too many homes, prices fall, and housing is many families' main asset," he said.
 
According to the U.S. Department of Labor, housing consumes 30% of most Americans’ income. However, those in the lowest 20% income bracket are paying almost 40% of their income for housing.

Zoning regulations and urban renewal have greatly reduced low-cost opportunities for these people. These lost opportunities include boarding houses and residential hotels, where 30% or more of the urban population once found shelter.

In my town of Mancelona, investors are eager to renovate historic downtown buildings into active storefronts and return the upper floors of these same buildings into much-needed housing. They are also snatching up older homes in need of repair and improving them for rent or resale.

However, every attempt to renovate these buildings has required time, money and navigating a frustrating bureaucracy. Even after jumping through all the government hoops, an investor for bigger projects won’t know if he/she will be approved until after submitting expensive architectural plans.

In fact, one of my investor clients recently told me that he is giving up on future projects because of the frustrating red tape.

It is the frustration factor that causes zoning and building restrictions to benefit politically well-connected developers, who are often the only ones to get construction permits in such an environment. 

Ironically, despite the harm these regulations inflict on the poor and disadvantaged, the nation’s most liberal cities tend to have the most restrictive zoning laws, according to Derek Thompson of The Atlantic, who wrote “Why Middle-Class Americans Can Not Afford to Live in Liberal Cities.”

Fortunately, these same communities across the country are now realizing the connection between zoning and lack of housing. Many laws have been enacted recently across the country to limit or eliminate zoning restrictions.

In 2018, Minneapolis became the first major U.S. city to eliminate single-family zoning in an effort to increase housing supply and density, reduce housing costs and create more racially and economically integrated neighborhoods, according to Solomon Greene and Jorge González of the Urban Institute, who wrote a paper entitled “How Communities Are Rethinking Zoning to Improve Housing Affordability and Access to Opportunity.”
 
Other communities, such as Washington, D.C. are allowing homeowners to add secondary housing, or in-law units, on their properties. Seattle recently rezoned several single-family neighborhoods to allow smaller, denser multi-family housing that provides more affordable options.
 
Communities such as Pinellas County, Florida and Austin, Texas have expedited their review processes for building projects and will waive fees if the project involves dedicated affordable housing.
 
The history of the original regulations is complex. Some laws are national, such as the American Disabilities Act. Building codes are not only statewide, but also subject to local interpretation.

The idea behind zoning laws, which are usually local, is to restrict certain activity to specific locations so as not to interfere with other forms of activity. For example, areas of manufacturing are zoned industrial, which separate residential units from factories, because they do not mix well.

Regardless of where these regulations originated, or what the original intent was, most people in the real estate and building industries agree that there is now an overreach in many areas. Many zoning and building rules and regulations have done more harm than good.

It is time for the leaders of northern Michigan communities to seriously consider modifying their zoning regulations and building restrictions in order to facilitate more affordable housing options.

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