How Does NIMBYism Affect Values?

Just as a warning to everyone this is sort of similar to one of those affordability in West Coast and East Cost posts. If you are curious read on, if not no problem. 

Developers, politicians, citizens often talk about NIMBYism and the reasons people do not want more housing in their backyard. One of those reasons can be that they want to hold property values and more housing will cause values to go down. We have thought this to be true given more supply in a supply constrained market. However, in most markets especially growing ones (Austin, Nashville, Raleigh, etc) it seems like with more housing mainly demanded through population growth and job growth, more housing is pushing values higher.

This might be a stupid question but wouldnt apartment development in these NIMBYish cities such as SF and LA potentially cause values to stay the same and maybe increase especially if you are developing rental apartments and not condos? Or, are these cities seeing rapid decline opposite to markets mentioned above, but they are so supply constrained given CEQA and NIMBYism? Feel free to shit on this question but it has bothered me

 
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A LOT, I would argue the entire affordability crisis in this country has to do with NIMBYISM. Is it 100% Nimbyism? No, as you have other forms of regulation such as building code and LEED which increase the cost of construction. You also have to factor in govt agencies such as FHA, Fannie Mae, Freddie Mac, etc which provides hundreds of billions in liquidity to the housing market each year, which, in turn, allows for more homeowners. But prior to the creation of the FHA, it was not uncommon to have to put down 40%-60% down, thus significantly reducing the amount of people who can afford homes. Regardless, if you had a city with 0 zoning laws and developers could build as high and as dense as they wanted, we would not have an affordability crisis and prices would drastically come down. From a quick google search, the census bureau estimates that there are ~143mm units of housing in the US...to take things to extreme, imagine if there were 500mm units of housing...that would solve the affordability issue pretty quickly and bring prices down

As for cities like Raleigh, Austin, etc...I don't know the zoning laws in these cities. I've heard that states like Texas don't have zoning laws, but I find this hard to believe (no way you can build a nuclear power plant or 60 story building next to a SFH). Also over time, especially as people start to own homes, they begin to push for more zoning regulation. So these cities you name may be slowly enacting zoning laws over time

This might be a stupid question but wouldnt apartment development in these NIMBYish cities such as SF and LA potentially cause values to stay the same and maybe increase especially if you are developing rental apartments and not condos?

 Correlation does not imply causation. Values in raleigh/Austin etc are going up because of population growth and ultimately demand. Developers are building more there because of this demand. It's not because developers are building there that values are increasing. Similarly in SF/LA, prices would go up regardless of developers building their or not because people continue to want to live in LA/SF but housing supply remains the same. Developers just can't build at a pace even remotely fast enough to keep up with demand and there is decades of pent up demand, so it would appear that more housing doesn't bring values down. That's like saying if you have a population of 1,000,000 people and 1 house was built and sold for $10mm, then by your logic, that house is the reason prices are so high and not the 1mm people

 

Thanks so do you think California will ever be close to fulfilling demand? More importantly, who will be able to live in California in 10+ years if supply doesnt increase enough? Net incomes are not much higher in California than they are in states like Texas. Seems like you are going to have a massive wealth gap to the point that homelessness and crime make it an unlivable state for anybody but the uber rich

 

Ever be close? I mean the Roman Empire was around for roughly 1000 years and the US is only about 1/4 of that, so I don't think its crazy to think that sometime in the next 750 years California corrects the housing crisis. But the major assumption you're making is that people care enough to actually do something about it. Who care if California doesn't figure it out? There are 2 ways to solve the housing issue 1.) increase supply of housing 2.) decrease demand. Obviously the increasing housing supply isn't working ie they arent doing it, so lets talk about decreasing demand or at least limiting it. With all the restrictive regulations such as zoning laws, rent control etc...which exacerbates the housing crisis, eventually people won't want/cant afford to live there, so demand will either decrease or at a minimum plateau. Who will be able to live in California 10 years from now? The same people as today...those who can afford it.

 

I think long-term the state is realizing it must change to fulfill demand. They've enacted broad ADU laws as an example. Another hindrance in California is prop 13 which I believe there is virtually zero political will to ever get rid of.

 

Realizing vs actually being able to do something about it are two different things. Everyone understands the need for more affordable housing and they want to solve the problem in theory, but when you tell people, especially homeowners that the way to solve the problem is more/denser development in their neighborhood, then they are opposed to it. That's what NIMBYISM is. People recognize the need for more housing, but they want it elsewhere, so that it doesn't affect them. It's a circular problem, homeowners should have a say in what happens in their neighborhood, ultimately through voting, but once you give homeowners this power, then they oppose new/more development which creates a housing crisis. And the neighborhoods which need housing the most are the most expensive ones (that's why they are so expensive to begin with), but the more expensive a neighborhood is, the more powerful the homeowners are i.e. when Steph Curry opposed a new townhouse development in Atherton.

 

Houston doesn't have zoning laws. Other Texas cities absolutely do. They are terrible in Austin where you basically can't get density anywhere other than downtown which makes it incredibly difficult to build more housing for the explosive population growth. Many of Austin's most infill submarkets were designed for single family and now that makes it super hard to build multifamily housing (lack of land plus a lot of the land is impacted by compatibility requirements that harshly restrict how much height you can build within 60 - 90 feet of single family homes). 

 

Can you or someone else chime in when you say "Houston doesn't have zoning laws." Whenever I've tried to research in the past, I get very confused. Some sources will claim Houston doesn't have zoning laws per say but has other laws that virtually act like zoning laws. Any color?

 

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