COMMENT OF THE DAY: KEEP HOUSTON CHEAP “. . . low property values are a positive for the people of Houston and the city. Inflating property values with use restrictions just accrues big profits to established landowners, drives up rent, limits competitive experimentation to find the best use of property, and enriches politically connected individuals savvy enough to navigate the various agencies charged with approving exceptions. Ask any average person living in or thinking of moving to London to list things that are bad about the city, and the inflated property prices will be high on their list 9 times out of 10.” [Kevin, commenting on Did Weingarten Realty Just Bury the 1939 Art Deco Interior of the Alabama Theater in Concrete?]
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Don’t forget, this also keeps the commercial, retail, and office space relatively inexpensive in Houston, thereby allowing for a lower entry point to start or expand a business. For those who do want stringent developmental control, move to the suburbs which have de-facto zoning via deed restrictions.
Not so fast. Property prices in places like London, Paris, NY, San Fran, DC and Boston are high largely because there is a highly desirable urban area that attracts people from around the world who will pay top dollar to live in the area. As soon as you move away from the good part of town, property prices drop like a stone. And with the exception of Paris and London, there are natural land barriers in NY, San Fran and Boston that do far more to increase real estate prices than any restriction on putting a high rise in the middle of the Back Bay.
Houston’s property prices are low because Houston lacks any land barriers, has an ultra-cheap non-union construction labor force, and, thanks to state law restricting refinancing, avoided the kind of home value bubble that occurred in places like Fl, NV and CA.
Zoning has very little to do with it. Dallas and San Antonion have zoning, but there is little difference in median home prices between the two and Houston. Austin is more expensive due to high demand versus land barriers (hills, lakes, rivers) and water quality restrictions, but zoning has little to do with their higher land costs.
Kevin, your concept of Deed Restrictions is totally whack.
That’s like advising people not to maintain their cars so that their resale value will be lower for the next owner and the car industry will sell more cars.
Yes, maintaining Deed Restrictions is a big fat pain but prudent homeowners are willing to do it for sound reasons-more stable neighborhood + protecting your investment are not artificially inflated values
Harold Mandell: What you say about deed restrictions is true, but there is no denying that they distort property markets. Deed restrictions are zoning.
Old School …. While I agree with your analysis, I think it is important to differentiate between residential and commercial development. In commercial development, zoning and use restrictions absolutely drive up the cost of development therefore driving up the rental rates. I can tell you from personal experience it is a lot more expensive to develop a project in Sugar Land or Cinco Ranch vs. COH.
If you take the Houston blinders off for a minute, you’ll realize that “deed restrictions protect property values” and “zoning distorts property values” are the same statement.
Other things that “distort” property values are: having a functioning police force so you have a reasonable certainty that a band of pirates won’t come steal everything you own; having roads to connect your property to other things; being located in a country with a functioning economy; public support of decent schools; a public health system that prevents outbreaks of Ebola; lack of a brutal murderous dictatorial regime; and not living downwind of a sewage treatment plant.
Which of these are “evil planning” vs “sensible government” is, of course, determined by the political views of the speaker.
By whatever means it was achieved (no zoning, lotsa land, etc.) I’ll take the cheaper land and fewer regulations than the sewers run by lawyers and incumbent interests in other “more blessed” cities. My house is over 70 years old and the day I tear it down *on my dime* I won’t have to beg some historical committee of over-educated globalistas for permission.
I love Houston, but sometimes I really wonder what it would be like to live in a place where people make sense.
@Jim the real estate costs more because people are willing to pay for that.
(Which is the kind of the point of the whole cheap Houston real estate issue, which makes people forget economics. London costs a lot more because London is more desirable. I’m not saying that, the market is.)
@Old School lots of things contribute to property prices. In the original comment I was responding to a person who argued for higher property values, per se, and associated the high prices in some of the cities you list with those cities’ use restrictions. I was pointing out the effects of higher prices in order to challenge the assertion that high prices are a worthy end unto themselves. That’s why I wrote about “inflating property values with use restrictions.” If I’d been making a point about the propensity of use restrictions to inflate prices, I’d have written something like “use restrictions tend to inflate prices because…” but of course that would have been totally unresponsive to the other person’s comment since he already associated use restrictions with higher prices!
The headline “Keep Houston Cheap” truly fits my comment better than “Zoning inflates prices.” The discussion nevertheless instantly devolved into more of the usual.
houston’s cheap because it’s in texas, that covers a lot of it too
Come on, people. There’s a lot more to it than, “NYC costs more because it’s so desirable.” Demand is only half the equation. Supply is the other half. Houston’s development model allows for supply to keep up with demand. The simple fact of the matter is that is much more difficult, expensive and time consuming to develop properties in other many other cities.
@Kevin: fair enough. However, the argument for zoning isn’t that it will make property more valuable. It is that it will prevent incompatible uses from lowering the property value of those in the neighborhood who are negatively affected. Sure, zoning, like everything else, can be gamed to create scarcity and reward those who bought the land that gets a variance over those who do not. But, compared to the market pressures of pure demand (face it, more people want to live and do business in dreary London than in steamy Houston), natural land barriers and labor costs.
And while I used median home prices to make my point, the sq ft prices on office, retail and industrial are very similar between zoned cities and Houston. As for the burbs, the main driver in cost is that they actually require drainage detention. The City of Houston will look back several million years to the point when the earth’s crust first cooled to find prior impervious cover to let a developer get out of providing detention.
#6 for comment of the day. Nothing more needs to be said.
Demand seems like the best measure of desirability I can think of. At the latest counts I could find, NYC had about 3.3 million housing units to Houston’s 875,000. It’s not hard to conclude that a hell of a lot more people have to want to live in New York just to absorb the massively larger supply of housing. That they drive the prices up so dramatically indicates that there’s a lot of unmet demand relative to Houston. I’d call that a clear indication that residences in New York are more desirable by the best economic measure we’ve got than residences in Houston.
It’s funny how the biggest advocates of the semi-mythical “free market” are happy to ignore it when they don’t like what it tells them.
Look, I like Houston, most of you probably like Houston, but the idea that lots of people want to live here because of our cheap real estate is silly. If they did, it wouldn’t be cheap anymore. And while you’ll find people here talking about how expensive cities are undesirable, lots of people keep flocking to them and paying the higher prices to live there, which makes the underlying assumption, to be kind, suspect.
@John(another one), deed restrictions and zoning are very different. Deed restrictions are far more voluntary, and can be avoided by buying property that isn’t encumbered by them, thus allowing you to run your home based business. Zoning would be enforced by the police power of government, is subject to corruption and gaming, and can’t easily be avoided.
In Houston I can generally buy a large piece of property and do pretty much what I want with it. in other places, you have the various zoning entities telling you how to use your property, raising costs and generally making life difficult over little things. I would hate to see a Permit Raj revival here.
@Ross – of course deed restictions and zoning are different; did I suggest otherwise? They do, however, both affect (our “distort”) property values.
What they both are intended to do is make the future of your property more predictable by controlling the use of properties near it. Economically speaking predictability is a very good thing. There’s certainly a debate to be had over the best approach (and most American zoning is flawed in many ways) but the idea that zoning is what makes some of the cities here more expensive to live in than Houston is not something anyone has demonstrated (only asserted).
The difference between zoning and deed restrictions is that whereas deed restrictions can only be overcome by a supermajority referendum of the affected neighborhood…zoning is typically controlled by a small often-unelected board of disinterested individuals from all over a municipality, who wield power in obscurity. The latter can be more easily influenced by various pecuniary or nonpecuniary means.
It can get to where the process of undoing zoning is built into a developer’s pricing model for the land.
Ross said: “Deed restrictions are far more voluntary, and can be avoided by buying property that isn’t encumbered by them, thus allowing you to run your home based business.”
No one is forcing anyone to buy a house in a place with zoning–it is voluntary as well. Indeed, I would suggest that many people choose to live in Sugar Land in part because of its strict zoning rules, for the same reason people choose to live in deed restricted neighborhoods.
“Zoning would be enforced by the police power of government”
And deed restrictions are enforced by contract law (which is ultimately enforced by police power), and failure to abide by deed restrictions can result in forfeiture.
“Zoning […] is subject to corruption and gaming”
Are you suggesting that HOAs are models of moral rectitude? On the contrary, stories of nightmare HOAs are legion.
I don’t have any strong feelings about zoning. I don’t particularly support it in Houston, and feel that other land use rules in Houston (like minimum parking requirements) are not so great, either. But I understand why other people like zoning (in a place like Sugar Land) or deed restricted neighborhoods. I just think the distinctions that people draw between zoning and deed restrictions are spurious. The effect is the same.
Whatever.