While there are numerous ways zoning creates an unaffordable housing market, in this article, we will examine parking requirements, setback requirements, and minimum lot sizes. We will analyze these factors from an economic lens while also looking locally at the specifics of the City of Bonita Springs' Zoning Code. You will notice a theme—that many of these factors lead to a reduction in density, which in turn leads to a decrease in affordability. Through these articles, we will also examine how deed-restricted communities can offer housing options that cater to those seeking uniform neighborhoods with stricter rules and regulations, while maintaining a more affordable housing market for everyone, without restricting development opportunities for those who prefer less restrictive housing.
First, it should be mentioned that government intervention, even at the local level, is incredibly inefficient and drives up housing costs. The National Association of Homebuilders estimated that, “14.6 percent of the final [single-family] house price—is due to a higher price for a finished lot resulting from regulations imposed during the lot’s development.” One of the types of regulations imposed on developers are impact fees—fees levied on developers that are designed to compensate society for any externalities that the new development creates. For example, a newly built apartment complex will require access to utilities, new residents will utilize neighboring roads more often, which deteriorates them over time, the increase in density may create an increase in crime, etc. It is important to note this before diving into the various factors regarding how restrictive zoning contributes to housing unaffordability because people will often cite these externalities as a reason to support zoning. It is essential to understand that impact fees already compensate society for these externalities. Additional compensation is not required, so long as the impact fees that are being levied adequately compensate society for the negative externalities caused by new developments. Intervention is permissible as long as it compensates society for a negative externality, but this is not something that zoning does. Zoning restrictions take the housing market out of its natural equilibrium and create some winners at the expense of some losers, who are selected according to the regulations enacted by local zoning boards rather than the free market.
Parking Requirements
One of the first factors of zoning that leads to unaffordability is parking requirements. Since there is only so much land that can be developed, every square foot is valuable on any given lot. Parking requirements really only impact affordability when the minimum requirement set forth by a zoning board exceeds what the market equilibrium would suggest. Just like the minimum wage, where if market wages were above the minimum wage, there would be no impact on wages, since the market is already paying people more than the minimum that is required, and the same is true for parking requirements.
If tenants of a multifamily development, for example, demand a certain number of parking spaces per unit, developers ought to be the ones to decide how much parking to provide. If developers don’t provide enough parking, they will likely suffer in the form of lower occupancy or lower rents, as residents would want more parking availability. Residents would not want to move into an apartment or pay as much for an apartment if they knew that they would struggle to find parking every day. On the contrary, if developers oversupply parking—which they are capable of doing even with minimum parking requirements—they forgo the opportunity to use that land for other purposes, such as additional dwelling units or on-site amenities. This is what economists call an opportunity cost, or the next best thing someone would have done. In a market with the absence of parking requirements, developers would be rewarded for providing an adequate amount of parking and punished for not doing so. If the equilibrium quantity of parking (the amount of parking that market participants agree is desirable) is below the requirement that municipalities are mandating, then developers are forced to oversupply parking.
In Downtown Bonita Springs, the T4 and T5 districts both mandate 1 parking spot per dwelling unit. More research would need to be completed to confirm if this is below, at, or above the market equilibrium, but regardless, government intervention is unnecessary to adequately provide for residents. If the minimum parking requirement forces developers to provide more parking than is demanded by residents, developers are forced to make the undesirable decision of providing extra parking that will end up not being used—wasted space. By implementing a minimum parking requirement, the government portrays the idea that they can provide value and fulfill the demands of housing demanders (people like you and me) better than the suppliers of the free market (developers), who are financially motivated and incentivized to create the most possible value for housing demanders. Zoning officials are wrong in this respect and would be serving society better with less regulation.
Setback Requirements
Additionally, setback requirements limit the development potential of a site as they reduce the usable land area that can be built upon. Setback requirements mandate a certain amount of distance between a certain lot line and any building that is to be constructed. For example, a front setback of 5 feet would require that a building be no closer than 5 feet to the front lot line.
The T4 district in Downtown Bonita Springs has a front setback of between 5 and 10 feet, a side setback of no less than 5 feet for side streets, a side setback of at least 5 feet if an adjacent parcel has a side setback, and a rear setback of at least 15 feet. Imagine a 1-acre parcel of land in the downtown area of Downtown Bonita Springs, which would be the equivalent of approximately half of a block in Downtown Bonita Springs. The size would be 150 feet by 300 feet. With our example 150’ x 300’ lot, the T4 setback requirements would reduce the available area for development from 45,000 square feet to 37,700 square feet. This requirement creates a 16.22% reduction in the quantity of developable land on this example parcel; I would consider this to be a substantial amount. Smaller lots suffer a larger percent change in developable land area, holding setbacks constant. This reduction in developable land area translates to a reduction in possible density, which in turn drives up housing costs. With less land to build on, there is less opportunity and space to house buildings.
Proponents of setback requirements mention how they don’t want their neighbors’ houses to be too close to theirs—a common sentiment among single-family homeowners. In the case of a suburban single-family neighborhood, I understand wanting space between your house and your neighbors’ houses. This is where I think that deed-restricted communities come into play; for those in society who want these rules to exist, they can. For others in society who would rather have affordable housing and are willing to compromise the space between their house and their neighbors’ houses for the sake of affordable housing, they can have that too.
Deed-restricted communities allow an entire neighborhood to be governed by its own set of rules, which are unenforceable outside of each individual neighborhood. For example, if I wanted to live in a neighborhood that doesn’t allow homes to be built any closer than five feet from any of their lot lines (a five-foot setback), then I can move into such a neighborhood and enjoy that amenity without affecting the property rights of others outside the jurisdiction of my neighborhood. This would allow for housing to be built that meets the demand of all people, not just the ones served by zoning regulations. Outside of my neighborhood, housing can be built in a denser way, allowing for more supply of housing in less physical space.
Minimum Lot Sizes
Furthermore, minimum lot sizes, a restriction on how small a lot can be, create an unaffordable housing market as well. Minimum lot sizes have the largest impact on single-family homes in various forms of residential zoning districts. They mandate that lots be a minimum size, but why?
I grew up in a single-family home with a sizeable front yard and back yard; I enjoyed it a lot. What I struggle to understand is why lots actually need to have a minimum size. Why should all of society be forced to have a yard similar to the size of mine growing up? What if not everybody wants such a large lot? I’m sure some people would be perfectly happier with a smaller lot—they would have less yard to take care of, and their home would be more affordable too, as the underlying land value would be lower as a result of the smaller lot size.
People should be able to decide for themselves how to analyze the tradeoff between higher housing costs with a larger lot, or more affordable housing with a smaller lot. Some people may decide that they want a large lot that has more space for a yard, but they will have to pay more for that, as larger lots cost more than smaller lots, holding all else equal. Someone else may have a different preference and prefer to pay less for a smaller lot that has a smaller yard. The choice should be up to the open market, not the minds of local zoning boards. The free market has more power to adequately cater to the needs of all of society than any local zoning board does.
When minimum lot sizes exceed what some market participants would otherwise desire, it leads to a market inefficiency. People are forced to purchase or live in lots that are bigger than they otherwise would have desired. There then becomes less available land to develop for housing, which decreases the supply of housing and the supply of residential lots. Also, home prices and rents go up because underlying land values increase as a result of the increased lot sizes. Ceteris Paribus, a larger lot will sell or rent for more than a smaller lot. These factors lead to an increase in housing costs. Below is a list of minimum lot sizes for some residential zoning districts in the City of Bonita Springs. Descriptions of the purposes of the zoning districts can be found in the link at the end of this article.
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