Is there any evidence that relaxing zoning restrictions drastically reduces housing prices in a somewhat short timespan?
Wouldn't developers stop investing in new projects as soon as prices became stable or started dropping slightly, causing the same cycle to start again when demand catches up in a few years?
Developers would stop investing in projects as soon as projects became forecasted to be unprofitable. If the housing supply is being artificially restricted below its clearing price, there's a gap between minimum profitable housing unit, and the housing units that can currently be sold. The idea behind lifting the zoning restrictions is to allow supply to reach market clearance.
And if it turns out that if new housing wouldn't be profitable, there won't be any changes. (Though a pattern we see in cities with less strict zoning (see: Montreal) is that we get expensive, cramped apartments near the city center, with lots of empty land around the edges. This is okay too! It's good for other reasons, by reducing commute times and making mass transit more affordable. Density is good!)
I don’t see where the paper you provided implies what you say it does. In fact, from the conclusion:
“As we have documented, despite many careful and thorough empirical analyses, drawing firm general conclusions about the linkage between local regulations and housing prices is not possible. Many careful analyses report some effect of regulation on housing prices, but many exceptions exist.”
The pro-market argument falls on deaf ears. We don’t need to deregulate, we need to regulate smarter. Low density uses such as low rises and houses are wasteful and unsustainable, and should be as difficult to get approval for as skyscrapers are today. Public policy should not back down. It should seek to lower-bound density rather than upper-bound it.
I think there’s a decent contingent of YIMBYs who do oppose development - the suburban kind. I think it would be productive to reframe as pro-density rather than pro-market.
Tokyo is a case study in how zoning and deregulation on developments in urban centers has created a healthier real estate market:
In Minato ward — a desirable 20 sq km slice of central
Tokyo — the population is up 66 per cent over the past 20
years, from 145,000 to 241,000, an increase of about
100,000 residents. In the 121 sq km of San Francisco, the
population grew by about the same number over 20 years,
from 746,000 to 865,000 — a rise of 16 per cent. Yet
whereas the price of a home in San Francisco and London
has increased 231 per cent and 441 per cent respectively,
Minato ward has absorbed its population boom with price
rises of just 45 per cent.
And this is for a particularly popular part of Tokyo.
In the 1980s, Japanese cities were experiencing the same
inflated housing bubbles that U.S. cities are today. Their
planning methods, moreover, were rooted in Western notions
about separating uses and limiting density. The federal
government recognized that these regulations were the
problem, so in 2002, it passed the Urban Renaissance Law.
The law stripped municipalities of the ability to control
private property. As a result, owners can build a variety
of uses on their land, regardless of resistance from local
bureaucrats or neighbors.
It's less deregulation (Japan still has strict zoning and housing regs) and more improved regulations e.g. less exclusive zoning (no zoning for only single-occupancy, residential zoning allowing small commercial buildings like offices & shops, …)
This is in fact completely western zoning, just not american zoning which I expect is what Forbes really means when they talk about "Western notions about separating uses and limiting density": these concerns exist in european zonings but not even remotely to the extent that they do in "Euclidian" US zoning.
Japan has had a falling population for a long time now.
London has added 1.7 million people in that time period.
Property in Japan also isn't as attractive to foreign buyers.
People seem to forget that property isn't like other investment classes. Everyone needs somewhere to live and it can only be built on land which is very scarce where the jobs are.
A little disingenuous to compare London to Japan. Population in Tokyo has also been increasing yet house prices not so much (1)
Japan and Tokyo do housing right. Pricing largely stays the same, quality of living increases.
I absolutely don't mean this about you, but the general sense that I get is people largely don't want to admit someone else is doing things better. People are convinced that their city/state/country is really special and any problem they have are just problems that clearly have no solution. If a solution did exists, obviously, they'd have it. It's ego and pride.
People seem to forget that property isn't like other
investment classes.
Other investment classes provide value from services or production.
Speculative real estate relies on artificial scarcity (local laws preventing building upward) is extracting value from suppressing more construction for more people.
>Other investment classes provide value from services or production.
Like gold or bitcoin?
>Speculative real estate relies on artificial scarcity (local laws preventing building upward) is extracting value from suppressing more construction for more people.
There are many cities where they build upwards massively but the property prices increase massively. See Beijing or Shanghai. Actually compare China now to Japan in the 80s and you see lots of similarities.
When I say property isn't like other investment classes I mean it shouldn't be. People need places to live and if left to the market the lower end of the market will just be left out on the street or in horrific housing conditions. The only solution will be government building of housing. IE compare Singapore with Hong Kong.
If development were a monopoly out behaved similarly then they might collude to reduce housing stock from the efficient amount, but even then it's likely at a significantly higher amount of stock than there is now.
Actual developer response would depend on how much price changes with supply.
Wouldn't developers stop investing in new projects as soon as prices became stable or started dropping slightly, causing the same cycle to start again when demand catches up in a few years?