Ep 83: Local Effects of Upzoning with Simon Büchler and Elena Lutz
Dec 11, 2024
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Simon Büchler, an Assistant Professor of Finance, and Elena Lutz, a Ph.D. candidate in Urban Planning, delve into the long-term effects of upzoning in Zurich. They discuss how relaxing land-use regulations increased housing supply by 9% without a significant rise in rents. Their research highlights the complexities of zoning reform and its impact on affordability while addressing concerns like gentrification. The guests also explore the challenges posed by large upzonings and the concept of 'bindingness' in regulations, providing valuable insights for other urban areas grappling with similar issues.
Upzoning in Zurich significantly increased housing supply, with upzoned areas producing up to 12% more units compared to non-upzoned regions.
Despite the increase in housing units from upzoning, rents remained stable, suggesting that new supply may mitigate price hikes in high-demand areas.
The long-term effects of upzoning on housing supply and affordability can take 5 to 10 years to fully manifest, complicating policy assessment.
Deep dives
Impact of Upzoning on Housing Supply
Upzoning in Zurich significantly increased housing supply, with upzoned areas producing 9% more living space and housing units compared to non-upzoned areas. Areas that experienced larger upzonings saw even greater increases, with housing supply rising by up to 12% in those jurisdictions. The study revealed that approximately 50% of upzoned parcels were redeveloped within a 15-year span, indicating that while upzoning effectively encourages development, the full effects may take longer to materialize. This suggests that high-density developments are likely to emerge more prominently as time progresses, particularly in prime locations where demand exists.
Correlation Between Upzoning and Rent Stability
Interestingly, despite the increase in housing units resulting from upzoning, rents in those areas did not experience a corresponding increase. The study's findings indicated that rents remained stable in upzoned zones, which counters the common expectation that new housing tends to raise rents due to enhanced amenities. This stability could be attributed to the supply of new housing outpacing demand, coupled with the existing housing market's segmentation. As such, constructing more housing in high-demand areas might mitigate price escalations rather than exacerbate them, supporting the case for policy reforms favoring upzoning.
Role of Timing in Development Outcomes
The study emphasized that the effects of upzoning are not immediate but can take five to ten years to fully manifest. This delay is significant, as it often complicates policymakers' perceptions of the effectiveness of upzoning initiatives. Furthermore, while only 50% of upzoned areas saw action within 15 years, the majority of developments in these areas maximized permitted building capacities, suggesting that when construction occurs, it is often robust. Policymakers need to consider this lag when assessing the impact of zoning changes on housing supply and affordability.
Local vs. General Housing Market Impacts
While the study concentrated on localized rent effects, it is noteworthy that the observed outcomes may vary when considering broader market dynamics. Larger context issues, such as neighboring municipalities' zoning practices and population growth across the region, could influence the overall housing market trend. The findings imply that upzoning alone might not resolve systemic affordability issues throughout Zurich, particularly in a highly competitive housing market with increasing demand. Future research may be necessary to evaluate how these moving chains affect rent levels on a citywide scale and how demand influences rental stability.
Policy Recommendations for Effective Upzoning
From the findings of the study, several policy recommendations emerged that could enhance the effectiveness of upzoning initiatives. Policymakers should prioritize substantial upzoning in areas exhibiting high rents and significant demand to stimulate effective housing production. It is also imperative that changes to local zoning laws are applied strategically, rather than being minor adjustments that may not generate measurable impacts. Finally, addressing the socio-economic implications of new developments, and ensuring that existing residents are supported and included in the transformations, is vital for a holistic approach to urban planning.
Urban upzonings have been rare across the world, and many of the most significant occurred only in the past 5–10 years or less. One exception is the canton of Zurich, Switzerland, where cities and towns have been relaxing land use restrictions for over 25 years. Simon Büchler and Elena Lutz share their research on the long-term effects of these reforms on housing supply and rents, and the kinds of zoning changes that produce real-world results.
