Thursday, September 29, 2011

Is NIMBYism a problem for density?

There is a lot of chatter about the perils of NIMBYism floating around these days, largely due to Ryan Avent’s recent ebook, The Gated City, and related pieces in the NY Times  and The Atlantic Cities. Avent’s arguments are that density is good for economic health and productivity, and the reason there isn’t more dense residential development is, in large part, due to NIMBYism (Not In My Back Yard) that prevents new construction. I’m sympathetic to Avent’s arguments, but I’m not sold on his diagnoses. The economic literature Avent relies on for his 'density leads to productivity' arguments measures employment or firm density, not residential. You can have a dense commercial center without dense residential development, and this is an important point because it challenges the NIMBYism premise.

If NIMBYism is preventing dense development, we should see evidence (not just anecdotes in the local papers) that developers are bringing plans to the city and getting struck down by the local community.  Local regulations prevent dense residential development, but NIMBYism is not the same as zoning restrictions. Certainly communities block drug treatment centers, wind farms and other types of uses all the time, but there is not really much evidence that NIMBYs block residential development based on density. So what do we know about NIMBYism and local regulations, and are they preventing productivity gains by limiting development?

Other than economists, two groups of scholars have explored the role of NIMBYs and zoning in preventing development, which are legal scholars and urban planners.  One of the better known and well regarded legal scholars is William Fischel, who in his 2007 book The Homevoter Hypothesis argued that NIMBYism can work itself into long range planning efforts and excessive local zoning, and these types of effects start to occur when about two-thirds of the households are homeowners. Fischel also points out that renters are rarely NIMBYs as they are not overly concerned with maintaining their investment because they can simply move if they don’t like the direction of the neighborhood.  Homeowners, by contrast, worry about outcomes that may potentially reduce the value of their properties, and these property owners tend to overestimate the likelihood of lousy outcomes. In this sense they are acting rationally to protect their real estate, and Fischel argues that the way to resolve this is to guarantee a minimum value to insure against any losses. (He wrote the book before the housing market crashed, which was a time pretty much everyone thought home prices only go up.) Fischel also argues that NIMBYism is equally against commercial and residential construction, and his examples largely use opposition to detatched single family homes rather than large apartment buildings.
In the scenarios described by Fischel NIMBYism is a problem but can be solved through compensation to those expecting harm. Avent, in the Gated City, argues that the potential developers should be compensated by those who want to block development. Avent’s solution is unworkable, but Fischel’s turns out to be closer to how NIMBYism actually works. In a 2001 paper in Urban Studies, Anthony Matejczyk looks at how NIMBYism plays out in Saint Paul, Minnesota. What he finds is that developers and communities tend to cooperate and compromise far more often than abandon the projects due to opposition. This changes the projects, and maybe reduces the size of projects, but hardly prevents any new, dense development.

Jonathan Levine is one of the few scholars who have looked at developer preferences. In his book Zoned Out he uses data from Boston and Atlanta to model how the zoning code limits development. He finds that the zoning code is more restrictive than developers prefer in central cities and close-in suburbs. More distant suburbs have zoning that more closely matches developer interests.
So it is really the zoning code and local land use regulations that restrict development more than an active NIMBY opposition. The origins of local officials supporting restrictive zoning are important, and under considered by Avent’s (and others’) critiques. Let’s look at Palo Alto, which Avent uses as a poster for the harmful effects from NIMBYism and an example of potential lost productivity. In the 1960s Palo Alto was growing like crazy, as was the Bay Area, and the number of housing units grew by 21 percent during the decade, and most of that growth was between 1965 and 1970 in multi-family units. In 1970 Palo Alto commissioned a report on how to develop the 7,500 acres it acquired ten years earlier that sat in the foothills. It was expected that this land would be developed with residential uses, and probably in low-density detached homes. Then three things happened. First, the Ramapo decision occurred, broadening the rights of cities to restrict development. Second, the Palo Alto report came back (years later) with a “no build” option that was economically favorable. Prior to this report development was always assumed, and now “no build” is standard operating procedure. Third, Proposition 13 came around and reduced the ability of local government to raise money through the property tax. (Another related phenomenon was that during this period of time the wounds of urban renewal and heavy fisted, failed development were still fresh. People legitimately and rightly wanted to prevent that kind of development from happening again and viewed real estate developers as the problem.)

These three occurrences provide ample fodder for restricting development. Cities do not actually want too much residential development because residents are expensive. Kids want to go to school, families expect 24-hour police protection, and so on. In addition, restrictions on property taxes make sales and other local option taxes more important. Palo Alto was doing great with commercial development associated with Stanford, and any new residents would reduce their financial health and increase obligations. It should be noted that Palo Alto has been restricting development for decades now and has done quite well economically. In any event, broad new powers to restrict growth, preservation of open space, limiting the number of expensive residents and promoting commercial uses all add up to less growth than some may hope, but these are all perfectly rational bureaucratic decisions that, at least in my opinion, do not amount to NIMBYism. Like Fischel, I expect that opposition can be bought off, and this happens all the time through exactions, direct payments to the community, and other compromises. The real menace is regulations and decades old incentive structures that distort the zoning choices public officials make. And where NIMBYism is problematic, the effects are often quite local as dense development can occur elsewhere in the city or region. If NIMBYism was a leading deterrent to desirable development we would see some cities within a region embrace development and capture the benefits. Yet we don’t see that. We see similar growth restrictions through metro areas, and I agree that these are less than optimal. NIMBYism is a problem, but not likely a leading obstacle to development according to the published research. 

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