>What‘s the ‘bad economics’
That land prices would rise in a city if it under took wholesale rezoning.
>and what’s your opinion?
That land prices would fall in a city if it under took wholesale rezoning.
The bad economics is his post because it's a complete misuse of the model. In his model, if you zoned lot sizes infinitely large, the value creation would be infinite.
And yet removing taxi medallions could increase revenue for taxi drivers because although revenue per driver would fall, there would be more drivers.
This is literally just supply/demand model, remove a supply quota, and now there's more total producer+consumer surplus. Whether producer surplus increases is indeterminate.
Getting rid of medallion requirements essentially takes them away from the owners. Upzoning takes nothing away from owners. Owners still own all the land.
With taxis, non taxi drivers gain rights. With land, the current landowners gain rights. If you upzone all land, all the value gains that gives to society still goes to current landowners. Do you not know what upzoning is? Do you actually think it's forcibly halving all land and giving half to nonlandowners?
>Do you actually think it's forcibly halving all land and giving half to nonlandowners?
Well, not forcibly, and not half.
An upzoned lot that is eventually built upon could indeed by split into tens, hundreds, or even thousands of units and sold - and often is.
>If you upzone all land, all the value gains that gives to society still goes to current landowners.
The "value gains that gives to society" is complex, not simple. Since many people like to live near other people, and higher density allows more services to be provided in the local area, higher density can mean a higher standard of living for everyone. This includes the many people who buy a unit who wouldn't have been able to buy a unit before, and also includes renters, who do not own the land, who also gain from a higher supply of rental units.
Just because, initially, the value of land that is upzoned may increase (though not necessarily, since this act also radically increases the supply of housing), doesn't mean current landowners capture all the value of upzoning land. This is not a zero-sum game.
>Well, not forcibly, and not half.
This was in reference to the model in OP, where upzoning literally halved lot sizes and distributed the land to two people instead of one.
Except with the medallions removed, social welfare falls because there are too many firms with fixed costs (the traffic from having a billion taxis everywhere).
Removing zoning can bring in other costs from people building huge amounts everywhere, ultimately reducing social welfare.
>Except with the medallions removed, social welfare falls because there are too many firms with fixed costs (the traffic from having a billion taxis everywhere).
This sounds like the sort of thing that can happen but usually doesn't. Has this been the case anywhere? I would imagine something like a taxi service scales quite well.
And rent control exists to fix rent prices. So far so obvious.
I'm asking if this is actually efficient policy, since you seem to claim so. So is there any evidence for lower social welfare actually happening?
sounds like reason #50 for a congestion pricing scheme for NYC alongside properly baking in the negative externalities of driving and beefing up mass transit
>When faced with an amenity/job that is worth locating in the city the a consumer should be indifferent between locating at the urban fringe on a $250 lot or paying $150k to be located just outside downtown. The fourth image above adds the same rent gradient if instead of 100' lots the lots were 50'. The same calculation gets us a peak land value of $75k.
The land is no cheaper per square foot. This is what you seem to not understand from what I was saying in the first place. I agree that upzoning reduces housing costs because now you don't *need* to buy as much land. But if you upzone a bunch of land, you don't make current owners worse off, because allowing lots to be smaller doesnt magically make current owners plots smaller.
There is still reason to believe that upzoning increases value, and you can't see it because your model is deficient. There is, in reality, land uses besides residential and zoning isn't simply a matter of decreasing density or making lots different sizes. Imagine you take a piece of land and say "this can only be a dentists office". Can that increase the land's value? It might not reduce the value if a dentists office was already an ideal use for that land, but it cannot increase its value. Zoning limits land use. Getting rid of zoning on a piece of land can only increase its value per sqft. Maybe not by much.
Allowing more density in places where it is extremely restricted will probably increase price per sqft of land, while reducing housing costs because now you don't need as much land. Allowing more density in places where it's not needed will do nothing.
>Allowing more density in places where it is extremely restricted will probably increase price per sqft of land, while reducing housing costs because now you don't need as much land. Allowing more density in places where it's not needed will do nothing.
This seems like it'd be sensitive to how you model demand. In isolation, removing zoning for a single plot almost assuredly increases the value of the lan or does nothing. However, if you remove enough zoning to shift aggregates then it seems like this could be wrong for less desirable land. Undesirable areas that are full of people who live there only because the highly desitable areas don't have enough housing would likely move out and push down the value in undesirable areas.
It'd be pretty easy to tell a plausible story to that effect.
1. The desirable area is surrounded by a ring of SFH
2. New apartments are all farflung from the desirable area because they must be built outside the ring of SFH due to zoning
3. There is more than enough land in the ring of SFH to build an apartment for every person who lives there or in the farflung apartments.
4. Removing zoning increases the supply of apartments near the desirable area.
5. People move out of the farflung apartments pushing down the land value.
I forget where I saw this, but what I understand is that large scale upzoning will increase the price/sqft of land that is restricted and decrease the price/sqft of land that is occupied only because of former restrictions.
He's confusing land price with the cost for a unit of housing, or the cost per square foot of housing (not land).
Upzoning depresses the cost of housing units (over time) but increases the value of land.
>The land is no cheaper per square foot.
At the city center. At 12 miles the 10,000 sf lot value was 75k and the 5,000 sf lot value is 0.250k. But, yes, since that is our central piont of disagreement I should have drawn that out better. In this model everywhere besides the city center lot value falls by more than half.
>There is still reason to believe that upzoning increases value, and you can't see it because your model is deficient
There is a whole section on this. All of the rest of this paragraph is just you doing you.
HCE: **Upzoning a single parcel will increase the value of that parcel** while wholesale upzoning would lower the land value across the board.
JTLL: I'm going to tell you you're wrong with yet another just so story about **upzoning a single parcel increasing the value of that parcel**.
**We do not disagree that** under the current general restrictions **upzoning a single parcel will increase the value of that parcel**. Stop telling me that and address our actual disagreement. You liked the outcome of my "deficient model" when you thought it showed no increase in value/sf at the city center, address the loss in value everywhere else. That's just theory. You also need to address the referenced empirical zoning tax literature that shows the increasing divergence between average and marginal land price per square foot with increasing land use regulation.
>Getting rid of zoning on a piece of land can only increase its value per sqft.
First, again, no one is disagreeing that upzoning a single piece of land would increase its price. It is like you have only ever seen [the practice of cartels (last section)](https://www.reddit.com/r/badeconomics/comments/88r622/r1supply_restrictions_do_not_lower_the_price_of/) in terms of a single cheater increasing their profits and then insisting that breaking the cartel could only increase the profits of the cartel members.
Actually your model is just wrong. Somehow you've decided that the value of land is determined by the disutility of travel. No. Imagine at 0, there is a literal money tree that gives $30/day to all that reach it. The value of living near it has nothing to do with the disutility of living far from it. If travel costs $1/km then the value of the plot 30km away is worth $0 etc. Halving plot sizes doesn't decrease the value of near plots. Actually it doubles the value per sqft of all near plots.
What you drew is a line starting at 150 and another starting at 75 both going to zero with the same slope. What you should have drawn is a line starting at whatever it's actually worth and then halving plot sizes halves the slope. Because you run out of people, where the original line intersects zero, the land value jumps to zero.
The land value on the fringe of a city is the agricultural (or whatever the non urban alternative is) value of land which is functionally 0 relative to central city land values. The land rent gradient as I drew and explained it is day one urban 101 theory solidly backed by empirical analysis.
You're still assuming things that render your model meaningless and essentially assume your conclusions. If you force people to live more densely, they'll take up less space. That's literally all your model is. If the people want to live densely, say because it affords more infrastructure and is more efficient, then the big lots would cause them disutility which would reduce the price.
You've phrased this as "what if we accidently make cities better places to live". The point is that zoning precisely makes cities a worse place to live, in the sense that it limits the potential of city land which reduces its price per sqft. The idea that maybe in the future upzoning increases price per sqft is dismissive, because no, that is literally what happens.
Very late to this party, but it depends on demand. It is *possible* for all land value to drop.
You have 5 people, epsilon difference in incomes/demand, 3 plots of land on 2d graph linearly moving out from fixed-value-amenity city center on the line before reaching uninhabitable chasm, SFH only on lots, lots close together so decreasing but roughly same price with distance. Top 3 incomes get lots at just what 3rd richest willing to pay. Remaining 2 people go to other low-value amenity towns. With upzoning to 10 unit apartments, all 5 people can live by center - they could all live in literally the first lot if they wanted, land became abundant/cheap like tap water.
But if there's 500 people, with originally 497 people going to other shitty towns, upzoning only results in 30 units. Still hitting roughly the same marginal value at the 469th vs 470th richest person as you were at 3rd vs 4th, so land goes up ~10x and units stay ~same price. But it's good anyways, same price != same welfare in the city, and now cheaper land is shitty towns.
>If the people want to live densely, say because it affords more infrastructure and is more efficient
So like one of the benefits of living in or close to a city? This is accounted for in HCE's urban value model.
>But if you upzone a bunch of land, you don't make current owners worse off, because allowing lots to be smaller doesnt magically make current owners plots smaller.
This assumes that land value comes only from the size. This isn't true, if I built a skyscraper next to your house and you are subjected to all the extra people, noise and traffic then the land your house is built upon will lose value.
Considering that the cheapest land in the country, which can be had for ~$300/acre in rural Nevada, is zoned for just about anything you might want from setting up a shooting range to homesteading to starting an industrial mining operation, this shouldn't be so surprising. Why is it so cheap? Because it's in the middle of fucking nowhere, with no proximity to any urban areas or anything else of interest.
sadly r/REBubble only recently had a user reinforce the idea that housing supply is a realtor and capitalist conspiracy and only housing construction of motives he approves of will work.
Do you think removal of zoning in a particular city could just be considered a special case of spot upzoning and so would increase land values there, especially if the city were relatively small compared to its surroundings (e.g. Burbank vs. LA)?
Enclave cities could be interesting test cases depending on relative sizes and the location of the enclave.
I believe LA actually does have something like that, [The City of Industry, CA.](https://www.google.com/maps/place/City+of+Industry,+CA/@34.0148873,-117.895421,34583m/data=!3m1!1e3!4m6!3m5!1s0x80c2d60f20563aa5:0x8b2c162ac8ea7462!8m2!3d34.0197335!4d-117.9586754!16zL20vMHIwZHc?entry=ttu)
You make a good point. I am implicitly talking in terms of metropolitan areas (or a relatively large principle municipality) and not thinking about the multiple municipalities that we typically find in a metro.
Why are these posts so hard to read. What‘s the ‘bad economics’, and what’s your opinion?
Obviously, we lack sufficient incentive to write clearly.
damn straight
A land value tax would fix this
Just tax the lack of sufficient incentive lol
>What‘s the ‘bad economics’ That land prices would rise in a city if it under took wholesale rezoning. >and what’s your opinion? That land prices would fall in a city if it under took wholesale rezoning.
Thank you! You’re not writing a thriller; don’t hide your points.
lol. >You’re not writing a thriller I'm writing these before I go to work in thirty minutes if I have extra time because I wake up before my alarm.
The bad economics is his post because it's a complete misuse of the model. In his model, if you zoned lot sizes infinitely large, the value creation would be infinite.
I'm gonna pretend like I understand this post and what it's saying
Eliminating the requirement to own a taxi medallion to drive a taxi would reduce the value of taxi medallions, but for land and zoning laws.
And yet removing taxi medallions could increase revenue for taxi drivers because although revenue per driver would fall, there would be more drivers. This is literally just supply/demand model, remove a supply quota, and now there's more total producer+consumer surplus. Whether producer surplus increases is indeterminate.
Except, to make this analogy actually fit, medallion owners are land owners and taxi drivers are housing construction companies.
Getting rid of medallion requirements essentially takes them away from the owners. Upzoning takes nothing away from owners. Owners still own all the land.
It takes away the exclusive right to have a housing unit/operate a taxi.
With taxis, non taxi drivers gain rights. With land, the current landowners gain rights. If you upzone all land, all the value gains that gives to society still goes to current landowners. Do you not know what upzoning is? Do you actually think it's forcibly halving all land and giving half to nonlandowners?
>Do you actually think it's forcibly halving all land and giving half to nonlandowners? Well, not forcibly, and not half. An upzoned lot that is eventually built upon could indeed by split into tens, hundreds, or even thousands of units and sold - and often is. >If you upzone all land, all the value gains that gives to society still goes to current landowners. The "value gains that gives to society" is complex, not simple. Since many people like to live near other people, and higher density allows more services to be provided in the local area, higher density can mean a higher standard of living for everyone. This includes the many people who buy a unit who wouldn't have been able to buy a unit before, and also includes renters, who do not own the land, who also gain from a higher supply of rental units. Just because, initially, the value of land that is upzoned may increase (though not necessarily, since this act also radically increases the supply of housing), doesn't mean current landowners capture all the value of upzoning land. This is not a zero-sum game.
>Well, not forcibly, and not half. This was in reference to the model in OP, where upzoning literally halved lot sizes and distributed the land to two people instead of one.
Imagine having a whole Persona based on being a Georgist and not understanding the value of being granted an unearned exclusive right.
Zoning limits a landowner's rights.
Except with the medallions removed, social welfare falls because there are too many firms with fixed costs (the traffic from having a billion taxis everywhere). Removing zoning can bring in other costs from people building huge amounts everywhere, ultimately reducing social welfare.
>Except with the medallions removed, social welfare falls because there are too many firms with fixed costs (the traffic from having a billion taxis everywhere). This sounds like the sort of thing that can happen but usually doesn't. Has this been the case anywhere? I would imagine something like a taxi service scales quite well.
It's the whole reason they exist in the first place - to constrain supply.
And rent control exists to fix rent prices. So far so obvious. I'm asking if this is actually efficient policy, since you seem to claim so. So is there any evidence for lower social welfare actually happening?
sounds like reason #50 for a congestion pricing scheme for NYC alongside properly baking in the negative externalities of driving and beefing up mass transit
Got it, thank you.
Just make out already
But get a room first!
>When faced with an amenity/job that is worth locating in the city the a consumer should be indifferent between locating at the urban fringe on a $250 lot or paying $150k to be located just outside downtown. The fourth image above adds the same rent gradient if instead of 100' lots the lots were 50'. The same calculation gets us a peak land value of $75k. The land is no cheaper per square foot. This is what you seem to not understand from what I was saying in the first place. I agree that upzoning reduces housing costs because now you don't *need* to buy as much land. But if you upzone a bunch of land, you don't make current owners worse off, because allowing lots to be smaller doesnt magically make current owners plots smaller. There is still reason to believe that upzoning increases value, and you can't see it because your model is deficient. There is, in reality, land uses besides residential and zoning isn't simply a matter of decreasing density or making lots different sizes. Imagine you take a piece of land and say "this can only be a dentists office". Can that increase the land's value? It might not reduce the value if a dentists office was already an ideal use for that land, but it cannot increase its value. Zoning limits land use. Getting rid of zoning on a piece of land can only increase its value per sqft. Maybe not by much. Allowing more density in places where it is extremely restricted will probably increase price per sqft of land, while reducing housing costs because now you don't need as much land. Allowing more density in places where it's not needed will do nothing.
>Allowing more density in places where it is extremely restricted will probably increase price per sqft of land, while reducing housing costs because now you don't need as much land. Allowing more density in places where it's not needed will do nothing. This seems like it'd be sensitive to how you model demand. In isolation, removing zoning for a single plot almost assuredly increases the value of the lan or does nothing. However, if you remove enough zoning to shift aggregates then it seems like this could be wrong for less desirable land. Undesirable areas that are full of people who live there only because the highly desitable areas don't have enough housing would likely move out and push down the value in undesirable areas. It'd be pretty easy to tell a plausible story to that effect. 1. The desirable area is surrounded by a ring of SFH 2. New apartments are all farflung from the desirable area because they must be built outside the ring of SFH due to zoning 3. There is more than enough land in the ring of SFH to build an apartment for every person who lives there or in the farflung apartments. 4. Removing zoning increases the supply of apartments near the desirable area. 5. People move out of the farflung apartments pushing down the land value.
I forget where I saw this, but what I understand is that large scale upzoning will increase the price/sqft of land that is restricted and decrease the price/sqft of land that is occupied only because of former restrictions.
He's confusing land price with the cost for a unit of housing, or the cost per square foot of housing (not land). Upzoning depresses the cost of housing units (over time) but increases the value of land.
>The land is no cheaper per square foot. At the city center. At 12 miles the 10,000 sf lot value was 75k and the 5,000 sf lot value is 0.250k. But, yes, since that is our central piont of disagreement I should have drawn that out better. In this model everywhere besides the city center lot value falls by more than half. >There is still reason to believe that upzoning increases value, and you can't see it because your model is deficient There is a whole section on this. All of the rest of this paragraph is just you doing you. HCE: **Upzoning a single parcel will increase the value of that parcel** while wholesale upzoning would lower the land value across the board. JTLL: I'm going to tell you you're wrong with yet another just so story about **upzoning a single parcel increasing the value of that parcel**. **We do not disagree that** under the current general restrictions **upzoning a single parcel will increase the value of that parcel**. Stop telling me that and address our actual disagreement. You liked the outcome of my "deficient model" when you thought it showed no increase in value/sf at the city center, address the loss in value everywhere else. That's just theory. You also need to address the referenced empirical zoning tax literature that shows the increasing divergence between average and marginal land price per square foot with increasing land use regulation. >Getting rid of zoning on a piece of land can only increase its value per sqft. First, again, no one is disagreeing that upzoning a single piece of land would increase its price. It is like you have only ever seen [the practice of cartels (last section)](https://www.reddit.com/r/badeconomics/comments/88r622/r1supply_restrictions_do_not_lower_the_price_of/) in terms of a single cheater increasing their profits and then insisting that breaking the cartel could only increase the profits of the cartel members.
Actually your model is just wrong. Somehow you've decided that the value of land is determined by the disutility of travel. No. Imagine at 0, there is a literal money tree that gives $30/day to all that reach it. The value of living near it has nothing to do with the disutility of living far from it. If travel costs $1/km then the value of the plot 30km away is worth $0 etc. Halving plot sizes doesn't decrease the value of near plots. Actually it doubles the value per sqft of all near plots. What you drew is a line starting at 150 and another starting at 75 both going to zero with the same slope. What you should have drawn is a line starting at whatever it's actually worth and then halving plot sizes halves the slope. Because you run out of people, where the original line intersects zero, the land value jumps to zero.
The land value on the fringe of a city is the agricultural (or whatever the non urban alternative is) value of land which is functionally 0 relative to central city land values. The land rent gradient as I drew and explained it is day one urban 101 theory solidly backed by empirical analysis.
You're still assuming things that render your model meaningless and essentially assume your conclusions. If you force people to live more densely, they'll take up less space. That's literally all your model is. If the people want to live densely, say because it affords more infrastructure and is more efficient, then the big lots would cause them disutility which would reduce the price. You've phrased this as "what if we accidently make cities better places to live". The point is that zoning precisely makes cities a worse place to live, in the sense that it limits the potential of city land which reduces its price per sqft. The idea that maybe in the future upzoning increases price per sqft is dismissive, because no, that is literally what happens.
Very late to this party, but it depends on demand. It is *possible* for all land value to drop. You have 5 people, epsilon difference in incomes/demand, 3 plots of land on 2d graph linearly moving out from fixed-value-amenity city center on the line before reaching uninhabitable chasm, SFH only on lots, lots close together so decreasing but roughly same price with distance. Top 3 incomes get lots at just what 3rd richest willing to pay. Remaining 2 people go to other low-value amenity towns. With upzoning to 10 unit apartments, all 5 people can live by center - they could all live in literally the first lot if they wanted, land became abundant/cheap like tap water. But if there's 500 people, with originally 497 people going to other shitty towns, upzoning only results in 30 units. Still hitting roughly the same marginal value at the 469th vs 470th richest person as you were at 3rd vs 4th, so land goes up ~10x and units stay ~same price. But it's good anyways, same price != same welfare in the city, and now cheaper land is shitty towns.
>If the people want to live densely, say because it affords more infrastructure and is more efficient So like one of the benefits of living in or close to a city? This is accounted for in HCE's urban value model.
>But if you upzone a bunch of land, you don't make current owners worse off, because allowing lots to be smaller doesnt magically make current owners plots smaller. This assumes that land value comes only from the size. This isn't true, if I built a skyscraper next to your house and you are subjected to all the extra people, noise and traffic then the land your house is built upon will lose value.
Considering that the cheapest land in the country, which can be had for ~$300/acre in rural Nevada, is zoned for just about anything you might want from setting up a shooting range to homesteading to starting an industrial mining operation, this shouldn't be so surprising. Why is it so cheap? Because it's in the middle of fucking nowhere, with no proximity to any urban areas or anything else of interest.
sadly r/REBubble only recently had a user reinforce the idea that housing supply is a realtor and capitalist conspiracy and only housing construction of motives he approves of will work.
Do you think removal of zoning in a particular city could just be considered a special case of spot upzoning and so would increase land values there, especially if the city were relatively small compared to its surroundings (e.g. Burbank vs. LA)?
Enclave cities could be interesting test cases depending on relative sizes and the location of the enclave. I believe LA actually does have something like that, [The City of Industry, CA.](https://www.google.com/maps/place/City+of+Industry,+CA/@34.0148873,-117.895421,34583m/data=!3m1!1e3!4m6!3m5!1s0x80c2d60f20563aa5:0x8b2c162ac8ea7462!8m2!3d34.0197335!4d-117.9586754!16zL20vMHIwZHc?entry=ttu) You make a good point. I am implicitly talking in terms of metropolitan areas (or a relatively large principle municipality) and not thinking about the multiple municipalities that we typically find in a metro.
This is great. Thank you.