What is Market Urbanism?

Market Urbanism is the subject of an exciting new book by Scott Beyer. Beyer created, curates, and writes for the Market Urbanism Report. Market Urbanism resulted from a three-year journalistic tour of U.S. cities Beyer undertook for Forbes, Governing Magazine, and HousingOnline.com. Beyer saw first-hand what problems confronted each city, what kind of solutions they were attempting, and how well various approaches worked. He promotes a vision of common-sense free-market solutions for some of the most intractable problems of urban planning and policy.

The major cause of high housing prices is the artificially low supply that results from restrictive zoning and urban policy that caters to established residents. Housing prices skyrocket because zoning restrictions prevent more units from being provided in urban centers where people want to live. The best urban environments provide incomparable amenities that enable residents to enjoy a high quality of life within walking distance, thus limiting transportation and parking needs. Zoning also makes new housing unaffordable by mandating minimum unit size, maximum densities, maximum height, parking requirements, etc., all of which add further to the cost of housing.

In typical U.S. cities, rents are too high, there is a shortage of low-cost housing combined with a homelessness problem, inadequate transportation, poor services, high taxes, and persistent quality of life issues. Homelessness aggravates all-too-real mental health and drug addiction problems. By itself, housing the homeless will not directly address these other problems, but it would remove a major stressor that impairs the mental health of many, and makes it easier for others to relapse.

Land-use zoning is a ubiquitous feature of U.S. cities and towns. This introduces an interesting failure of public choice. Established owners benefit from the higher home prices and rents caused by restrictive zoning. The incentive facing them is to keep zoning in place and make it even more restrictive over time, further driving up the value of their real estate. The unfortunates who want to buy into the market are forced to pay exorbitant prices, which may be even higher next year, or go elsewhere. The first group already lives in the municipality, votes, and benefits from zoning. The second group is effectively penalized by zoning when and if they buy in, and remain penalized until they incur the cost of buying in at an inflated price. New residents, including the homeless, either cannot afford to buy into the urban market, or if they can, their incentives then become the same as those of their neighbors, and they look to zoning to preserve and increase the value of the housing for which they have now paid so dearly.  

Zoning was first introduced to segregate incompatible uses, such as housing from heavy industry. Often there was an explicitly racist motivation. For example, San Francisco sought to restrict where Chinese laundries could be located. Rather than requiring developers to compensate property owners for the negative impact their use might have on neighboring property, zoning simply restricts or prohibits how land can be used. The most restrictive zoning category is single-occupancy residential, which is often combined with minimum lot sizes, not to mention parking requirements. Residential zoning restrictions that reflect how land was typically allocated around 1900, or 1950, are not likely to be a good guide to efficient land use today. Our needs have changed, population and demographic distributions have changed, and trying to keep land use patterns locked into an idealized historical paradigm is not going to make peoples’ lives better.

The greater the need for housing in particular cities, the more zoning constrains how housing shortages can be addressed, keeping housing needs from ever being satisfied. This results in low-income workers, who are often needed to perform essential service activities, having to pay exorbitant rents for substandard apartments, keeping their living standard low. Local governments try to address these problems by mandating the token provision of a limited number of low-income units. Not only are these mandates insufficient to satisfy more than the tiniest fraction of the needed low-income housing, the added cost of providing a limited number of low-rent units results in developers providing fewer new units overall, and ensures added costs are transferred to the buyers of the new units that are provided.

In Market Urbanism, Scott Beyer gives examples of how each of these widespread policies has impaired urban living in the United States, and how cities that have lifted these restrictions have benefitted their citizens, achieving more affordable housing and a more livable urban environment.

The alternative to market urbanism is our current regime of legislated planning. There is little question that urban planners can design an ideal, healthy, and attractive environment for a prespecified population supported by a given level of employment and productive activities, which in turn determine the appropriate composition and capacity for transportation and other infrastructure. Urban planning analysis is needed to support the design and installation of physical infrastructure, including power, communications, water, sewer, roads, etc. Unfortunately, the more a city succeeds, the more its population grows, its demographic distribution evolves, its industries undergo technological progress, etc. These unavoidable changes inevitably render the last decade’s zoning obsolete—let alone the last century’s—and at some point make it a barrier to growth. Much of our zoning and development processes date back many decades, and even where urban property can still be developed, each project has to pass through multiple rounds of review and comment. The cumbersome process of delay, delay, and delay, can have one of two results—either the property in question is never developed, or the exorbitant cost of developing it will be passed on to the buyer.

Allowing full play to market forces of supply and demand might not result in a perfect outcome, but it is difficult to believe that it would cause problems as severe as those already created by U.S. cities’ ubiquitous restrictive zoning. There is not enough housing, and what little housing there is, is too expensive. So government policy works overtime to limit housing density, mandate building codes, raise construction costs, mandate parking minimums, limit building heights, etc. Scott Beyer’s Market Urbanism offers welcome analysis and policy solutions, clearly explaining how free market alternatives can make our cities better for all their citizens.

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