Scholars show that reducing minimum lot sizes unleashed a small housing boom in Texas’s largest city.
For Houston residents, 1998 was a year of both trial and opportunity. A historic tropical storm made landfall in September of that year, dumping 17 inches of rain and causing extensive damage to over 1,400 homes and businesses.
Yet even as this Texas city struggled to recover from the wreckage, the Houston City Council prepared to pass a sweeping set of land-use reforms whose benefits in the long-term would far outweigh the damage from the storm. These reforms targeted the city’s subdivision ordinances that stipulated the minimum square footage for every residential parcel in the city.
By reducing its subdivision requirements, Houston’s land-use reforms enabled housing development to flourish in areas that would have otherwise been constrained by the pre-1998 subdivision rules, two land-use scholars show in a new paper. Nolan Gray and Adam Millsap, both affiliates of the Mercatus Center, argue that Houston’s subdivision regulations offer a model for other cities struggling with housing affordability. Not only did Houston’s housing revisions ultimately result in an increase in housing, but they also successfully overcame homeowner opposition, one of the single greatest obstacles to the development of new housing today.
Taking its name from the 1926 U.S. Supreme Court decision in Village of Euclid v. Ambler Realty Company, which officially recognized zoning as constitutional, Euclidean zoning regulates urban land use by separating a city into discrete areas where specific categories of development—residential or commercial, for example—are permitted. After the Supreme Court handed down the decision, Euclidean zoning quickly became ubiquitous in cities across America.
Despite Houston’s repudiation of traditional zoning, Gray and Millsap explain that it nonetheless employs a system of land-use controls that operate like zoning regulation. Private deed restrictions, for example, are agreements that stipulate how a property may or may not be used and that allow individual property owners to dictate everything from land use to architectural design.
Houston’s subdivision regulations are another such form of informal zoning, as they effectively bar development on any parcel that does not meet the minimum lot size standard.
Before 1998, Houston mandated minimum lot sizes for detached single-family homes of a whopping 5,000 square feet. This requirement meant that only one house was permitted to be built for every 5,000 square-foot parcel, resulting in a uniform standard of suburban-style homes and preventing the development of smaller, denser housing more within reach of the city’s lower-income homebuyers.
When Houston’s reforms took effect in 1999, the default minimum lot size for all single-family homes dropped from 5,000 to 3,500 square feet. Moreover, homeowners and developers could even receive permission to build on lots as small as 1,400 square feet provided that they met certain additional lot coverage requirements.
Although these changes may appear technical, Gray and Millsap quantify just how pervasive their effects have been on Houston’s residential housing market.
Using data from the Harris County Appraisal District, Gray and Millsap reveal that the reforms unleashed a housing boom among residential parcels between 1,400 and 5,000 square feet. Comparing new development in 1997 to the peak building year in 2005, Gray and Millsap show that building activity rose more than 300 percent.
This dramatic increase was the logical consequence of the city’s subdivision reforms, Gray and Millsap argue. The same parcel that before 1998 could only accommodate a single house could now see the development of as many as three individual townhomes.
Moreover, Gray and Millsap point out that the post-1998 housing development was remarkable not only for the sheer quantity of new homes built, but also for the neighborhoods in which they were concentrated.
Analyzing the areas that saw the greatest development after 1998, Gray and Millsap found that new housing clustered in tracts with a high concentration of middle-income residents and underdeveloped or vacant land. The significance of this trend, they explain, is that it stands in contrast to development patterns in other housing-strapped cities, where real estate development is frequently linked to the gentrification of low-income neighborhoods and resident displacement.
Gray and Millsap contend that the success of Houston’s land-use reform was a product not only of the reform’s substantive merits, but also of its appeal to one of the greatest opponents of new housing development: homeowners.
The revised ordinance permitted groups of property owners to stipulate that their area be subject to a higher minimum lot size than the citywide default. Gray and Millsap refer to this special designation as the ordinance’s “opt out” provision because it provided an exemption for homeowners who opposed the default minimum.
Gray and Millsap argue that the opt out provision, coupled with the city’s system of private deed restrictions, placated property owners who, without such a provision, likely would have prevented the reforms from passing at all.
Gray and Millsap urge other cities to take cues from Houston in how it successfully overcame homeowner opposition to new housing. They suggest that rather than choose between vilifying or pandering to homeowners, cities should negotiate with them head on, offering meaningful concessions to obtain homeowner support for new housing policies.