Planning an Affordable City

• Author: Roderick M. Hills & David Schleicher
• Position: William T. Comfort, III, Professor of Law, New York University Law School/Associate Professor, Yale Law School
• Pages: 91-136

Planning an Affordable City Roderick M. Hills, Jr.  & David Schleicher  ABSTRACT: In many of the biggest and richest cities in America, there is a housing affordability crisis. Housing prices in these cities have appreciated well beyond the cost of construction and even faster than rising incomes. These price increases are a direct result of zoning rules that limit the ability of new supply to meet rising demand. The high cost of housing imposes a heavy burden on poorer and younger residents and, by forcing residents away from these human capital rich areas, has even reduced regional and national economic growth. While scholars have done a great deal to identify the problem, solutions are hard to come by, particularly given the strong influence of neighborhood “NIMBY” groups in the land-use process that resist any relaxation of zoning limits on housing supply. In this Article, we argue that binding and comprehensive urban planning, one of the most criticized ideas in land-use law, could be part of an antidote for regulatory barriers strangling our housing supply. In the middle of the last century, several prominent scholars argued that courts should find zoning amendments that were contrary to city plans ultra vires. This idea was, however, largely rejected by courts and scholars alike, with leading academic figures arguing that parcel-specific zoning amendments, or “deals,” provide space for the give-and-take of democracy and lead to an efficient amount of development by encouraging negotiations between developers and residents regarding externalities from new building projects. We argue, by contrast, that the dismissal of plans contributed to the excessive strictness of zoning in our richest and most productive cities and regions. In contrast with both planning’s critics and supporters, we argue that plans and comprehensive remappings are best understood as citywide deals that promote housing. Plans and remappings facilitate trades between city councilmembers who understand the need for new development but refuse to have their  William T. Comfort, III, Professor of Law, New York University Law School.  Associate Professor, Yale Law School. Many thanks are due to Vicki Been, Annie Decker, Bob Ellickson, Chris Elmendorf, David Fontana, Heather Gerken, John Mangin, Carol Rose, Kenneth Stahl, John Witt, Thomas Witt, Katrina Wyman, and participants at workshops at Yale Law School and the Furman Center for Real Estate and Urban Policy for their comments. Also to Jeremy Greenberg, Daniel Rauch, and Bryn Williams for their terrific research assistance. 92 IOWA LAW REVIEW [Vol. 101:91 neighborhoods be dumping grounds for all new construction. Further, by setting forth what can be constructed as of right, plans reduce the information costs borne by purchasers of land and developers, broadening the market for new construction. We argue that land-use law should embrace binding plans that package together policies and sets of zoning changes in a number of neighborhoods simultaneously, making such packages difficult to unwind. The ironic result of such greater centralization of land-use procedure will be more liberal land-use law and lower housing prices. I. INTRODUCTION ............................................................................... 93 II. THE DEBATE OVER PLANS AS IMPERMANENT CONSTITUTIONS ....... 96 A. C HARLES H AAR ’ S C ASE FOR THE “I MPERMANENT C ONSTITUTIONS ” OF P LANNING ............................................................................ 97 B. T HE L AW ’ S E QUIVOCAL A DOPTION OF THE P LAN AS I MPERMANENT C ONSTITUTION ........................................................................ 100 C. T HE C ASE A GAINST P LANS AS “I MPERMANENT C ONSTITUTIONS ” .................................................................... 104 1. Carol Rose and the Case Against the Politics of Planning ......................................................................... 104 2. Fischel, Nelson, and the Economic Case Against Planning ......................................................................... 106 III. A REVISED CASE FOR PLANS: PLANS AS CITYWIDE BARGAINS TO INCREASE THE MARKETABILITY OF URBAN PROPERTY ................... 108 A. P LANS AS A M ECHANISM FOR E NFORCING C ITYWIDE D EALS ....... 111 1. Distributive Politics in Land Use .................................. 111 2. Plans as a Solution to the “Ironclad Rule of Aldermanic Privilege” ........................................................................ 112 3. Why Sorting Doesn’t Solve the Problems of Excessive Land-Use Restriction ..................................................... 115 B. P LANS AS A M EANS TO I NCREASE THE M ARKET FOR P ROPERTY : T HE R OLE OF P LANS IN R EDUCING I NFORMATION C OSTS FOR B UYERS ................................................................................... 116 1. Property Law and Information Costs: From Bundles of Sticks to the Greatest Grid ............................................ 117 2. The Case for Plans as a Method of Reducing Information Costs and Increasing the Marketability of Land ............................................................................... 120 2015] PLANNING AN AFFORDABLE CITY 93 IV. MECHANISMS FOR CITYWIDE DEALS AND GREATER CERTAINTY IN LAND USE ...................................................................................... 123 A. T HE P LAN AS A C ITYWIDE D EAL : B UDGETING P RINCIPLES FOR P LANNERS ............................................................................... 124 B. S TANDARD “P RICE S HEET ” FOR D ENSITY I NCREASES .................. 129 V. CONCLUSION: WHAT HAPPENED TO REAL PROPERTY IN MODERN PROPERTY LAW THEORY? .............................................................. 134 “Plans are worthless, but planning is everything.”—Dwight D. Eisenhower 1 I. INTRODUCTION America faces a housing affordability crisis in its most economically dynamic cities, including metropolises like New York City, San Francisco, Los Angeles, and Boston where prices are rising faster than construction costs. 2 Over the past three decades, the price of housing and office space in many of the biggest and richest cities in America has increased wildly, a result of both increasing demand and substantial zoning and other restrictions on new construction. 3 Such cities increasingly look like collections of exclusive suburbs, with neighborhoods filled with homeowners stopping the construction of needed commercial and residential development. 4 The result is that working- and middle-class citizens cannot afford to live where their labor would be most productive, instead settling for cities where housing is cheaper but human capital spillovers are lower and jobs are less plentiful and less remunerative. 5 Moreover, accumulating evidence demonstrates that these 1. President Dwight Eisenhower, Speech to the National Defense Executive Reserve Conference in Washington, D.C. (Nov. 14, 1957), in NAT’L ARCHIVES & RECORDS SERV., PUBLIC PAPERS OF THE PRESIDENTS OF THE UNITED STATES: DWIGHT D. EISENHOWER 818 (1957). 2. See EDWARD GLAESER, TRIUMPH OF THE CITY: HOW OUR GREATEST INVENTION MAKES US RICHER, SMARTER, GREENER, HEALTHIER, AND HAPPIER 184–93, 240–42 (2011); Edward L. Glaeser et al., Why Is Manhattan So Expensive? Regulation and the Rise in Housing Prices , 48 J.L. & ECON. 331, 331–33 (2005); David Schleicher, City Unplanning , 122 YALE L.J. 1670, 1692–98 (2013). 3. See RYAN AVENT, THE GATED CITY loc. 860–81 (2011) (ebook); Roderick M. Hills, Jr. & David N. Schleicher, Balancing the “Zoning Budget , ” 62 CASE W. RES. L. REV. 81, 85 (2011); Schleicher, supra note 2, at 1692–98. 4. This is stark contrast with the long-dominant belief that big cities are dominated by “growth machine” coalitions of developers and allies in labor and elsewhere, as famously argued by Harvey Molotch. See Harvey Molotch, The City as a Growth Machine: Toward a Political Economy of Place , 82 AM. J. SOC. 309, 309–10 (1976). Molotch’s view was pretty universally held until a few years ago. See Schleicher, supra note 2, at 1672–73. For empirical evidence that many big cities do not look like growth machines, see generally Vicki Been et al., Urban Land-Use Regulation: Are Homevoters Overtaking the Growth Machine? , 11 J. EMPIRICAL LEGAL STUD. 227 (2014). 5. See AVENT, supra note 3, at loc. 883–98; Schleicher, supra note 2, at 1692–98; Peter Ganong & Daniel Shoag, Why Has Regional Income Convergence in the U.S. Declined? 1 (Harvard 94 IOWA LAW REVIEW [Vol. 101:91 zoning restrictions do not produce benefits that offset their burdens on prospective buyers and renters. 6 Big-city land-use constraints have also had a serious negative effect on the efficiency of regional property markets and even on national economic growth. The solution to this housing crisis is economically simple but politically difficult. As a matter of economic rationality, local governments should deregulate their housing markets to allow an increased housing supply to meet a rising demand for housing. As a political matter, however, incumbent residents who already own housing vociferously and effectively protest against the reduction of zoning restrictions. How, then, to free up urban land markets from the stranglehold of zoning driven by NIMBY (not-in-my-back-yard) 7 neighbors? We argue, paradoxically, that the solution to excessive zoning is centralized, comprehensive, and binding land-use planning. Our position that binding, centralized plans can serve the goal of libertarian deregulation of land markets is, admittedly, counterintuitive. As we explain in Part II, although comprehensive planning was once defended by scholars like Charles Haar and Daniel Mandelker as the “constitution” that ought to undergird zoning, it is now scholarly conventional wisdom that comprehensive planning is based on an unwarranted hubris that bureaucrats can outperform markets. Economists like Bill Fischel and Robert Nelson have argued...