Federal Policy | Analysis | Exclusionary Zoning | Local Policy | Research | September 11, 2020

New Research Confirms the Benefits of “Light Touch” Density

Written by Mike Kingsella and Edward J. Pinto

Reading time: 7 minutes

The nation is in the midst of a major housing crisis, putting tremendous strain on families, individuals, and the economy. At the core of the crisis is a severe undersupply of homes, particularly in job and amenity-rich areas. Up for Growth research found that from 2000 – 2015, the U.S. fell 7.3 million homes short relative to housing demand. Such high levels of underproduction drive up prices – especially for entry level homes – to unsustainable levels, increases inequity, negatively impacts the environment, and has short- and long-term economic consequences.

The underproduction of homes is the result of many policy decisions and economic factors that cumulatively reduce the supply of homes and drive up housing costs. Restrictive zoning laws that ban duplexes, triplexes, quadplexes, and other so-called “missing middle” homes, however, have outsized impact on housing underproduction. A well-functioning housing market allows for the creation of diverse housing products, but restrictive zoning means that it is often illegal to provide a diverse housing stock, even when need for it is high. By creating an artificial scarcity of land, housing costs are driven up. Land is a key cost component of both new and existing homes.

New research by the American Enterprise Institute (AEI) Housing Center helps to quantify the true impacts of restrictive zoning. Using its Housing Market Indicators data, AEI conducted a case study that quantifies the impact that restrictive zoning laws have on the housing supply and cost of homes. The towns in Bergen County, New Jersey feature a wide variety of zoning codes, making the northern New Jersey county an ideal natural experiment for exploring the impacts that restrictive zoning has on the supply of homes.

One of the towns considered in the analysis, Palisades Park, has allowed for duplexes and single-detached homes “by right” since its zoning code was adopted in 1939. As a result, it has been able to respond to a growing need for housing supply, increasing its housing supply by 30% from 2000 to 2010. The relatively open zoning laws in Palisades Park allowed for population growth in a job and amenity-rich area, just two miles from Manhattan. The key was cutting land cost in half, by allowing two homes on single lots. Neighboring towns like Leonia and Teaneck legally restricted lots to one unit.

Other towns, like Ridgefield and Ridgefield Park, put so many restrictions on the ability to build 2-family homes that they were made economically infeasible. These towns with more restrictive zoning regulations saw flat population growth and higher property taxes relative to Palisades Park. Leonia is the borough that most clearly implemented policies diametrically opposite to those of Palisades Park. In 1997 Palisades Park and Leonia had about the same property tax rate. By 2018, Leonia was virtually unchanged, while Palisades Park’s had dropped by 40%. The AEI study also noted that those purchasing relatively newly built homes in Palisades Park have on average around $15,000 lower incomes than those purchasing existing homes in Leonia.

The benefits of light touch density are vast. It spreads the increasing cost of land across more units, lowering per-unit land cost. Building new missing middle housing allows more people to access quality jobs, transit, education, and other resources. Light touch density can increase housing options that adequately address the needs of an aging population and a growing population of single adults. Perhaps counter intuitively, enabling more housing options can increase property values because the market – not restrictive zoning and land use regulation – determines the highest and best use of an extremely limited resource such as land. And it can keep property taxes lower since each lot with 2, 3, or 4 homes yields more municipal revenue and the infrastructure costs are lower than for greenfield construction.

AEI estimates that eliminating restrictive zoning laws would add eight million homes to the country’s existing housing stock, over a 20-year period. Such a change could save $400 billion in infrastructure costs because most of this new development would occur in relatively densely populated areas that require far less new infrastructure to accommodate new homes.

In many ways, prioritizing light touch density is not a new concept; for decades, it was the norm in communities across the U.S. For example, in 1950, duplexes, triplexes, and quadplexes made up 19% of overall housing stock. By 2008, this number had shrunk to just over 8%. Today, 75% of residential land is zoned to exclude anything other than single-detached homes. Such a limited supply of missing middle housing is a significant contributing factor to a drop in Millennial homeownership. There simply is not enough of the type of housing they can afford – or even want – to buy.

There are other, even more important reasons to reform the way we build housing. Restrictive zoning has its origins in racial and ethnic segregation, when federal, state, and local policymakers excluded minority communities from the “most desirable” areas of a given city or town. These laws led to racial inequities that persist to this day, while leaving many cities ill-equipped to meet the growing need for homes. Revising zoning laws to allow for light touch density will have a significant impact on righting the historic wrongs in housing policy.

Local zoning reform and other land use provisions meant to increase light touch density housing production would be encouraged by the common sense policy provisions contained in the Yes In My Backyard (YIMBY) Act. It has already passed the House without opposition; its fate now lies with the Senate.

Light touch density can have significant impacts on improving housing access by tamping down unsustainable home price appreciation and keeping property taxes in check. Communities with housing needs would be well served in adopting these modest, but high impact reforms to accommodate current and future growth.

Mike Kingsella is the executive director of Up for Growth, a national 501(c)(3) pro-housing policy and research member network.

Edward J. Pinto is an American Enterprise Institute (AEI) resident fellow and director of AEI’s Housing Center. Mr. Pinto also serves on Up for Growth’s Advisory Board.