Upzoning Chicago: Impacts of a Zoning Reform on Property Values and Housing Construction

By Yonah Freemark (Massachusetts Institute of Technology)

Upzoning—a policy that increases the allowed scale of new construction—has recently attracted considerable attention from policymakers. States from California to Utah are considering legal changes that would require municipalities to increase the amount of new housing allowed to be built in certain neighborhoods. In Minneapolis, local officials have done what was previously thought politically impossible: Allow the construction of multi-family apartments in neighborhoods formerly zoned only for single-family homes.

The theory is that allowing additional new construction will bring more housing, increase housing affordability, and reduce the class and ethnic segregation that plagues most U.S. cities. But it’s also a policy being contested by some, often neighborhood groups, who worry that upzoning will encourage real-estate speculation and thus spur displacement.

Considerable research has evaluated how different levels of zoning controls at the metropolitan scale compare (most find regulation that allows higher densities associated with lower housing costs). But there has been very little research to understand what happens in specific neighborhoods affected by zoning changes. That’s because, first, large zoning changes affecting entire communities are relatively rare, and second, it’s often difficult to identify a comparison group for a zoning study, because so many zoning changes are targeted for areas that are already of particular interest to developers. Think of New York Mayor Michael Bloomberg’s upzonings of the waterfront in Brooklyn and Queens.

In my new research, recently published in Urban Affairs Review, I delve into this question of what happens in neighborhoods once they are upzoned through a case study of a series of upzonings in Chicago. Implemented in 2013 and 2015, these changes were undertaken broadly, without specific association with new developments or other changes. The upzonings were designed to increase density and reduce parking requirements around rail stations. By examining parcels that were upzoned and comparing them to equivalent, nearby parcels that weren’t, I set out to determine what, exactly, happens in the short term after an upzoning.

I identified two primary conclusions about the effects of the zoning changes. First of all, I found no perceptible uptick in new housing-unit permitting in the upzoned areas compared to the unaffected areas over five years. This might seem like a surprise in light of the news stories regarding apartment projects going up in areas around transit in Chicago in recent years. But my study shows that the zoning reform itself did not induce a specific increase in construction compared to other neighborhoods.

Second, I found an increase in property values in upzoned areas roughly equivalent to the increase in allowed density. This finding extended to existing residential units in some of the models I used, indicating that the cost of living in certain neighborhoods actually increased in the period I examined.

Together, these two findings paint an interesting picture: In the first few years following an upzoning, construction may not immediately increase but the cost of property will.

The two conclusions of this study reflect in part the fact that development is a lengthy process; it takes time to move from a policy like zoning to actually getting housing units in the ground. They also reflect the fact that property buyers did rather quickly take the zoning change into account—they were willing to pay more for buildings and land in the upzoned areas.

The study’s overarching account raises concerns in that it tempers the expectation that upzoning can be by itself a remedy for housing affordability through increased construction. In the short term, my study suggests that property prices will increase in upzoned areas and new construction won’t accelerate. Whether these trends continue into the longer term is unclear.

To what degree can the conclusions of this study inform policymaking? The study absolutely does not find that increasing an area’s housing-unit count reduces affordability. The logics of supply and demand are still at play in American cities, and increasing the number of housing units is key to meeting demand. Policies that exclude certain types of people from certain neighborhoods, like zoning codes that prevent apartments from being built in communities filled with single-family homes, simply reinforce segregation and inequality. Upzoning, from that perspective, is undoubtedly a key tool in the arsenal of planners.

But the manner in which upzoning is implemented is important. In any area that city officials are considering for increased density, they should take seriously the concerns of local residents who are worried that their housing costs will increase. They should identify strategies designed to address that possibility, such as rent stabilization and immediate investments in new affordable housing. Moreover, since the study points to a rise in property costs but not new construction, cities that upzone should make sure to work carefully to promote immediate new construction, not just speculation related to the possibility of future construction.

Issues remain that I did not study in relationship to Chicago’s zoning change but that we need to better understand. I did not have access to quality rent data, so I could only measure the cost of property. I did not have details about the types of housing units being built, so these might have changed over time, and so might have the provision of parking. I did not study the construction of non-residential buildings (like offices or retail space), which may have been affected by the reform. We need more information about how impacts differ between neighborhoods. And, importantly, we need to know more about upzoning’s effects on individuals (whose movements and housing costs I did not study directly), over the longer term.

It’s also essential to note that this research—like all scholarship—must be thoroughly contextualized. It is possible that Chicago’s form of upzoning produced different results than would other upzonings because of characteristics specific to this city: whether because it targeted just areas around transit (rather than the city as a whole), because it targeted mixed-use zones (rather than residential-only districts), or because it was implemented in a city with relatively affordable housing (rather than very high rents, such as in San Francisco). More research is needed to investigate whether Chicago’s experience would be duplicated elsewhere, or whether it is an exception.

Read the UAR article here.

Photo by Brad Knight on Unsplash

Author Biography

Yonah Freemark is a doctoral candidate in the Department of Urban Studies and Planning at the Massachusetts Institute of Technology. He has written extensively on housing, land use, and transportation. His dissertation project explores the politics of planning related to transportation infrastructure and associated development in the U.S. and France.

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