Opinion: The Lack of Evidence Behind Austin’s HOME Initiative

I was recently asked to prepare a review of the latest research on housing price dynamics in light of the HOME initiative, the local proposal for loosening zoning and other land use regulations intended to increase housing supply and decrease housing prices. I was especially asked to look into the question of how allowing more housing units on less land will differently impact low- vs. high-income neighborhoods and neighborhoods historically home to communities of color.

The evidence does not support the argument that loosening land use regulations across Austin will produce more affordable housing, especially for the bottom half of the income spectrum.

Increasing the supply of new housing may slightly lessen price increases for higher-income residents, but it is very unlikely, in the current context, to help the rest of us. This is because in a high-demand, high-growth city like Austin – the empirical evidence shows – the “filtering” of housing “reverses.”

In theory, if more high-end housing is built, then older units become vacant and “filter down” to lower-income residents. If you look around Austin, you’ll notice that older homes and apartments do not necessarily go down in price as they age (one example: the 1,200-square-foot house, built in 1948, across the street from me that sold a couple of years ago for $1 million in cash). This is “upward” or “reverse” filtering.

Furthermore, because so many people have been moving to Austin, new units are often occupied by newcomers, so no chain of vacancies is sparked that results in units filtering down to lower-income folks. Evidence tells us that filtering is not reliable for policy purposes in places like Austin.

Looking at the whole body of research – instead of a few case studies – shows that evidence points in several directions at once. New housing supply, which supposedly moderates prices, sometimes does and sometimes doesn’t, depending on the context. It is not possible to construct a universal theory applicable to all cities or all neighborhoods. Policies based on simplistic ideas of supply and demand are wishful thinking and not based on empirical evidence. In general, promises about increasing affordability citywide through new construction are not borne out by the totality of evidence.

Research does suggest that deregulation of land use/zoning is likely to increase land values in general and to impact neighborhoods vulnerable to gentrification the most. HOME is unlikely to increase affordability for most Austinites, but it may moderate price increases in certain above-medium-income submarkets.

The recent increases in land and housing prices in Austin are consistent with what is expected of a high-demand, high-growth city, based on well-known dynamics of urban land markets. They are the outcomes of market processes, not a distortion of them; deregulating land use and zoning would only enhance the effects of these market processes, not mitigate them.

There are indeed benefits to density, such as walkability, increased use of public transit, and lessening climate impacts. But affordability is not one of them. Furthermore, we should not be enacting policy to increase density at the expense of low-income people who then become at risk of displacement – and are then unable to take advantage of public transit or walkability, among other things, as they are forced out to the sprawling periphery. This merely shuffles and sorts who gets privileged access to new amenities and who gets shunted aside.

A major problem is that we are unwilling, politically, to put in place meaningful anti-displacement measures that may mitigate some of the harm to vulnerable communities from land use deregulation. City Council also appears unwilling to include targeted exemptions for vulnerable neighborhoods or opt-out provisions, which even Houston had when it increased units per lot. Blanket deregulation without protections will hurt Austin’s remaining lower-income neighborhoods and communities of color.

Sophisticated statistical models created by economists to show that zoning regulations increase housing prices cannot predict the results of land use deregulation in every circumstance. Cities are not controlled environments like chemistry experiments; they are complex, open, dynamic, human creations that cannot be captured by a single model. Urban economies do not behave like chemicals in a beaker, even if some economists want us to think so.

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Rich Heyman holds a Ph.D. in urban geography and has taught at UT since 2006. His full report is available at utexas.box.com/v/heyman-home-report.