Michael Wiebe
@michaelwiebe
Economics (PhD UBC), yimby, replication, effective altruism. blog.michaelwiebe.com
Auckland and São Paulo both upzoned in 2016, and by similar amounts: 31% and 35% increase in density. But Auckland increased the housing stock by 8% over seven years, while for São Paulo we predict only a 2% increase over ten years. What's going on? 1/
Also, this didn't happen in Auckland. Rents started falling immediately after upzoning. onlinelibrary.wiley.com/doi/10.1111/...
What does increase supply is replacing a property tax/development charge with an LVT, in the case where zoning is not a constraint. Decreasing a tax on housing (the building component of a property tax) leads to more housing.
A common idea is that a land value tax will increase housing supply. But when zoning is a constraint, LVT has no effect on the housing market. (Though it does act as value capture on scarcity rents in land.) blog.michaelwiebe.com/p/a-model-of...
Supply and demand explainer of Jevons' paradox: Left (AI services): improved algorithms shifts supply, which reduces the price of AI and increases quantity. Right (GPUs): when demand for AI is elastic, the demand curve for GPUs shifts right, increasing GPU usage. Paradox! 1/
"Growth pays for growth" means defecting on the urban social contract, where each generation pays to maintain infrastructure capacity for the next generation. Higher property values are caused by growth, so they should be captured to pay for growth.
When land is zoned for a single house, apartment developers don't even bid on it. The land price is low. When we upzone for apartments, developers do bid, and the land price goes up. 3/
As an apartment developer, you need to outbid house builders for land. So if detached house prices go up, house builders can bid more. This increases the cost of acquiring land for apartments. Higher land values = higher costs. 2/
Feasible zoned capacity: tear down a bungalow to build a 5-storey apartment building. Infeasible zoned capacity: tear down four 4-storey buildings to rebuild at 5-storeys. Both add four floors of allowed housing, but only one will actually get built.
Auckland upzoned broadly, allowing townhomes and apartments on 75% of residential land. These development rights were valuable, and not hindered by poison pills. Despite the broad upzoning, land values increased. www.buildingabundance.ca/p/upzoning 2/
Looking at the raw data, we can see that Auckland rents were a clear outlier before 2016, and then fell to the same level as Wellington. This is a causal effect in the wild, folks! 6/6
This large increase in supply led to a decrease in housing prices. Rents in Auckland fell compared to the control group. 5/
And the new permits were issued inside the urban core, as you'd expect when zoning is preventing new housing close to jobs. 4/
As you'd expect, the increase in permits was driven by the newly legalized townhomes and apartments (attached dwellings). 3/
Using a synthetic control, the increase in housing permits shows up clearly when we compare Auckland to the control group. 2/
Auckland's 2016 upzoning gives us a real-world example of a clean causal effect. First, building permits increased dramatically in upzoned areas. 1/
A city is voting on allowing a new grocery store. But only existing store owners get to vote, and shoppers don't get a voice. Owners don't want competition, so they block the new store. This is how housing works. Existing homeowners get a vote, future residents don't.
If Manhattan replaced its apartment buildings with detached houses, while keeping office buildings the same, then land values would fall a lot, while housing prices would be much higher. When driven by zoning changes, higher land values are correlated with lower housing prices.
A common NIMBY trope is that zoning is not constraining housing supply, therefore we don't need to upzone. Here's how to actually measure zoning constraints: - do developers build more after upzoning? - is apartment-zoned land more valuable than house-zoned land? 1/
Auckland gives us stunning evidence that upzoning reduced land cost per home, increased housing permits, and reduced rents. The results show that a 1% increase in housing stock reduces rents by 3.6%. 5/
🚨New literature review post: upzoning🚨 A deep dive into how zoning affects land prices, when zoning is a constraint on housing supply, whether zoned capacity makes sense, and a close look at Auckland's 2016 upzoning. 1/