There is a growing movement aiming to address the perception of racial bias when it comes to housing.
The US has a history of racial division dating back to the days of segregation. Those practices were outlawed in 1917 when the US Supreme Court deemed those practices as contravening the law. The law was further strengthened in 1964 with the Civil Rights bill was signed into law by Lyndon Johnson. The practice of designating certain neighborhoods as white only, or black only clearly violates every moral and ethical and legal principle in a free and modern society. To be clear, our society has made huge strides since those days. At the same time, it’s also clear that racial inequality still exists on multiple levels.
The question remains whether certain newer regulations have the unintended consequence of discriminating against racial groups.
The City of Minneapolis has tackled this question with respect to the zoning code. The argument is that a high proportion of dark skinned people are tenants in Minneapolis, and a high proportion of light skinned people are home owners. Therefore, it could be argued that the zoning code that limits certain zones to single family homes that are predominantly owner occupied has the same effect as racial segregation, even if that was not the intent of the regulation.
In response, the city has decided to eliminate the single family home designation in the zoning code. In fact, a number of states and the department of housing and urban development (HUD) have started to tackle the question as to whether zoning is exclusionary. They added provisions for higher density in transit oriented areas.
This approach seems both balanced and positive. As a developer, the creation of more opportunity for higher density development within the core of the city is a positive step. This could be one of those rare moments when there is consensus on what might be a politically charged, or perhaps racially charged topic. Developers welcome a more relaxed regulatory environment. Home owners and tenants grappling with affordability would welcome the move as well.
Curiously, some cities like Philadelphia have gone in the opposite direction. The city has moved to reduce the areas in the city which are zoned for multi-family development. I’ve personally owned property in the city that has had the zoning arbitrarily changed from residential multifamily to residential single family. Those properties that are zoned multi-family are arguably more valuable because you can build higher density.
If you look at cities like Houston, which has no zoning code whatsoever, the city functions without a problem. Market forces and practical considerations like traffic and utilities provide the only broad constraints. Unless a property has a deed restriction specific to the property, you can build a warehouse next to a single family home, next to a school, next to an office building. The city has assumed that common sense will prevail and the free market will determine whether a project will succeed in a specific location or not.
When you look at the work of almost any municipal government, if you take the time to read the minutes of the city council meeting, or watch the video replay of the meetings, you’ll find that more than 90% of the work of local government is tied up in land use. The amount of resource that is frankly wasted in bureaucratic red tape is astounding. Some residents will argue that maintaining the historic nature of some areas can only be done with the protection of strict regulation.
No doubt, cities all over will be looking at what Minneapolis has done to help guide their own future land use policy.
A change in zoning regulations has the potential to change the supply demand balance dynamics within a city. This one factor can do more to determine the long term viability of a new multi-family project than most people recognize.
