2021 Was a Great Year for Zoning Reform

Jurisdictions around the world are trying to address high housing costs by eliminating regulations on new housing construction.

Zoning reform had a great year in 2021, with cities, states, and even an entire country passing laws that peel back restrictions on new housing construction. That should come as welcome news to the inhabitants of costly major metros who are once again experiencing the pain of rising rents after a brief, sharp decline in 2020.

The previous year's decline in big city rents has been chalked up to an exodus of urban workers who left behind a glut of empty apartments. As demand for city living returns, so too have ever-rising housing costs.

The hope of supply-side zoning reformers is that the laws they passed this year can replicate 2020's falling prices without the need for a demand-suppressing deadly pandemic. By legalizing more housing where people want to live, the thinking goes, we can grow supply to accommodate all that returning demand for urban living.

To that end, the California legislature passed two headline-grabbing bills that allow for more housing statewide and make it easier for local policy makers to legalize even more homes if they wish to.

The first, S.B. 9, allows duplexes on almost all residential land in the state and makes it easier for homeowners to divvy up their own land into two parcels. Those reforms allow up to four units of housing where, in many cases, only one is allowed today.

The University of California, Berkeley's Terner Center describes S.B. 9 as a "modest, incremental improvement" and projects it will lead to the creation of about 700,000 homes—most of those in Silicon Valley communities where high residential land prices, low-density zoning, and plentiful jobs make lot-splits and duplexes viable.

Much of the criticism of S.B. 9 is that it—like other, even more ambitious bills authored by state Sen. Scott Wiener (D–San Francisco)—usurps the powers of local governments which are in a better position to make housing decisions for their communities.

Perhaps to placate those critics, Wiener authored another successful bill this year, S.B. 10, that removes state-level restrictions on localities reforming their own zoning codes to allow for more housing.

Typically, when a local government rewrites its zoning code, state law requires that the government first performs environmental studies that examine the changes the zoning code will have on everything from traffic and air quality, to local animal species and cultural resources. It's a lengthy, expensive process that can be made longer still by the fact that third parties can appeal or sue if they think an environmental impact study wasn't thorough enough.

That can be enough to discourage even the most pro-housing city councils from trying to repeal their own restrictions on new housing production. S.B. 10 gives them an assist by exempting rezonings that permit up to 10-unit homes without having to go through that environmental review process.

"You can make a real argument that that kind of housing does not need the same kind of environmental scrutiny," Wiener told Reason in January. "It allows cities to do what they want to do, or need to do, quickly and not have to spend ten years doing [environmental impact reports] and getting sued."

Local governments are already looking to use these newfound powers to assist in their upzoning. San Francisco, for instance, is considering not one, not two, but three proposals to legalize fourplexes citywide—all of which could be passed more expeditiously thanks to S.B. 10.

These reforms got a lot of press, and understandably so given the high-profile, high-stakes fights over California's high housing costs and the appropriate policy solutions to them. By all accounts, it was a banner year for the state's YIMBY (yes in my backyard) movement, and its advocacy of repealing restrictions on density to ease affordability pressures.

Indeed, the Golden State wasn't the only one to embrace these YIMBY reforms. It wasn't even the first.

In June 2021, Connecticut also passed a wide-ranging suite of zoning reforms in the form of H.B 6107. The law makes a number of land use changes at state level, most of which free marketers will nod along in agreement with.

It legalizes accessory dwelling units—colloquially known as in-law suites or granny flats—statewide, and puts some limits on the kinds of regulations local governments can place on them. Similar reforms in California have produced a surprising amount of new housing.

Connecticut also put caps on how many parking spaces local governments could require for new housing. Parking minimums drive up new housing costs by requiring developers to use more land or build expensive garages that residents might not even be demanding. Requiring fewer spaces will hopefully lead to lower development costs, and thus lower rents and home prices.

Other policies included in Connecticut's zoning reform bill prevent local governments from requiring housing to be a minimum size, save for public health reasons.

America's constitutional arrangement generally precludes the federal government from getting involved in land-use regulations that are rightly left for states and local governments to hash out. And even if that weren't the case, our polarized politics would probably stop most serious, productive reforms from being adopted in Washington, D.C..

That's not the case in New Zealand where the country's two major parties, the left-wing Labor party and the conservative Nationals, came together to pass a nationwide upzoning bill earlier this month.

Similar to California's S.B. 9, New Zealand will now require most cities in the country to allow at least three-story, three-unit townhomes on residentially zoned land. The country is also requiring localities to allow six-story residential buildings on most urban land.

Better still, New Zealand's reforms also loosened other, wonkier density restrictions like setback limits, height limits, and floor-to-area ratios. When left untouched, these slightly more obscure regulations have often limited the impact of zoning reforms in places like Minneapolis by requiring newly legal duplexes and triplexes to fit inside the same "envelope" as the single-family homes that were once exclusively permitted. By addressing those bits of red tape simultaneously, New Zealand lawmakers are ensuring more of the townhomes being legalized will actually get built.

To be sure, none of these reforms are perfect.

California's reforms are positive, but they're also quite marginal compared to the scale of the housing crisis. Connecticut's zoning bill pairs its deregulatory reforms with new fair housing regulations and certification requirements for city planners.

New Zealand's libertarian(ish) party, ACT, took issue with the country's upzoning bill for leaving in place urban growth boundaries that prevent new suburban development in place. (They also seemed to have some more typically NIMBY concerns about the bill.)

But the perfect should be made the enemy of the good. This year saw jurisdictions around the world move toward a slightly more free market housing policy that will provide some relief from scandalously high urban housing costs. Here's hoping the momentum continues in 2022.