This urban economist would really like to know the answers.
Among land use regulations, Washington, D.C.'s 1910 Height of Buildings Act holds a special place in the minds of urban economists. The Act, imposed by Congress, limits all building heights in the District of Columbia based on the width of the street they are on, with caps set at 90 feet, 130 feet, and in a very few places, 160 feet, depending in which part of the city you find yourself.
As D.C’s economy has boomed in recent years, the Height Act has helped make it one of the most expensive cities in this country. Office space in downtown D.C. is more expensive than in New York's financial district, and 850 square-foot apartments in Anacostia, one of the cheapest areas in the city, now rent for $1300 a month.
The logic behind the Act -- its broad brush, its heavy restriction -- is so befuddling to most economists that reference to it is enough to cause paroxysms of outrage. In my scholarship, I use the arguments of Height Act supporters as an example of the types of misguided thinking that pervades much debate about zoning in big cities.
But the Height Act remains quite popular, and garners support from many corners. Recently, Kaid Benfield offered this clearly argued defense of the Height Act. As the Act stirs emotions, polemics on either side don’t usually promote much in the way of dialogue. Which is a shame. So I thought I might ask its supporters a couple of questions.
Before we go on, though, I want to be clear about what the Height Act does and doesn’t do. The Height Act is a limit on local zoning authority. If the Height Act was repealed or reformed, the D.C. government would retain its power over zoning, including the power to limit the height of buildings. The only change would be that the local government could allow buildings to get higher if it so chose.
Okay, on to some questions:
1. Do you believe supply is important in determining prices in housing and office markets?
I don’t mean this rhetorically. The classic argument against sharp limits on supply like the Height Act is that they reduce supply and drive up prices. Benfield writes in response: “if affordability were closely related to building height and density, New York City and San Francisco would be the two most affordable big cities in America.”
It’s hard to know exactly what this means, as it seems to confuse supply and demand. Although New York and San Francisco have tall buildings, they also have lots of people who want to live there – they are two of the nation’s economic dynamos. And New York City and San Francisco also have some of the strictest land use controls in the country, limiting building severely, as measured by the difference between housing costs and the cost of building housing, as Ed Glaeser, Joe Gyourko and Raven Saks have shown. In cities with fewer restrictions, from Chicago to Houston, housing and office prices are genuinely much lower.
But if Height Act proponents think limits on supply do not increase prices, why not? Is it some distinction between housing and offices and other markets? If so, what is your model of how office and housing markets work?
2. Why do you think development should be spread out?
One of the central arguments for the Height Act is that limiting heights spreads development out – offices that can’t locate on K Street instead move elsewhere, spreading lobbyists across the city (and, of course, to nearby cities like Rosslyn, which has no height limit).
My question is why anyone would want this. Surely the lobbyists don’t want to be spread out. K Street provides them with all sorts of amenities necessary for their trade – quiet and overpriced restaurants, easy access to the Caribou Coffee near the White House. But most importantly, it provides them with access to one another, and the chance to learn from one another. (As Dan Rodriguez and I have noted: "A lobbyist talking to another lobbyist about congressional procedure is producing information spillovers that will improve the listener’s productivity at work. A lobbyist talking about congressional procedure to just about anyone else is a bore.”). Having office space on K street is valuable to firms, something we can tell from the fact that they are willing to pay an extremely high price for it.
What public policy interest is served by spreading them out? And from spreading out apartment dwellers and anyone else who might work or live in a newly tall building?
One might consider this a method of redistribution. But it’s a really weird form of redistribution. Using height limits to redistribute resources transfers wealth to property holders in non-core neighborhoods from both property holders in core areas and from users of office space and apartment renters. While non-core district property holders are likely not as rich as core-district property holders, they are likely more rich on average than apartment renters (or people looking for jobs in office towers).
Notably, some proposed minor forms of Height Act reform rely on some of the same reasoning. Some have argued that the Height Act should be repealed outside of the city center. But this is hard to understand. Areas like K Street, Capitol Hill, Dupont Circle and the like are where people would want to build tall buildings. Removing the restrictions elsewhere would do much less good.
So the question remains: why do we want spread development?
3. What effect do you think limiting heights has on agglomeration, including the depth of local markets and information spillovers?
In economist-speak, cities exist because of agglomeration economies, or the gains from co-location. Having lots of people in one place reduces shipping costs (although, as transportation costs have reduced, this has lost force as a cause of urbanization in the U.S.) It also allows for the creation of deep markets – for actors in L.A., for diamonds on 47th Street, or just for singles in most cities – that allow city residents to specialize and match more easily, and gives them insurance against the failure of a single employer, shop or date. Cities also allow for the capture of information spillovers, or for learning among neighbors. As a result, wage growth is faster in cities than elsewhere, and people in cities invent more stuff. Cities don’t expand indefinitely because of agglomeration’s opposite, congestion costs, or the increased rents and hassles created by density.
Among people who call themselves urbanists, there are roughly speaking two tribes. All of them share a common critique of modern zoning regimes, arguing in various forms that big-lot suburban style zoning has reduced the benefits of urbanity, reducing wealth, sterilizing the culture, and creating environmental problems. But one tribe, call them prescriptivists, believes that the agglomeration benefits discussed above are best captured by a particular urban form – mid-rise, walkable, dense but not too dense – that should be spread to all cities. People in this tribe, most notably New Urbanists like Andres Duany and Jeff Speck, generally argue that although many zoning regimes mandate inefficient urban outcomes, it is a good idea to use coercive regulation to determine city form. It just should be done right. As a result, they tend to like policies such as the Height of Buildings Act. Speck writes in his new book: "We have known for three decades how to create livable cities" and then devotes 300 pages to explaining exactly how cities should look.
Economically minded urbanist thinkers (demand-side urbanists, perhaps?) find this to be entirely wrong. Who’s to say what the proper density is? Or why would one think that very different cities in different climates with different types of employers should look the same? Forcing one city form will lead to distortions – cities with empty downtowns that didn’t ask for them and cities that are extremely overpriced because of density restrictions. While regulations may be necessary to reduce nuisances, they ought not be used proscriptively. The market can figure out how dense a city should be, and provide a sufficient amount of housing and office space (and if there are those left out, they should be given cash to buy in.) Agglomeration economies necessarily include positive externalities, but repeated play among urban residents should be sufficient to catch them pretty well. And where they don't, there is little reason to believe that local governments will make things better and not worse.
So for Height Act supporters, this leads to a few extra questions –do you believe in a single optimal city form? And why do you think D.C. captures it? Or are height limitations somehow a particularly good fit for a national capital?
4. Why do you think D.C. will grow without going up?
Benfield notes that many European cities without skyscrapers are denser than American cities with them. And it’s true – Paris and Barcelona are quite dense, despite not being very tall (although they are also very expensive, suggesting that land use controls are reducing the supply of housing.) But Benfield does not offer any American examples. The reason for this is pretty simple. Our land use system gives neighborhoods way more power to limit density, such that most cities don’t end up with lots of row houses and short apartment buildings. (Here are some ideas I've offered on how land use procedure could be reformed to reduce the influence of small groups of neighbors on land use policy.) Outside of perhaps Brooklyn, that style of development is extremely rare in the U.S.
We do not know what would happen if the Height Act was repealed, but it doesn’t strike me that absent such reform there is much reason to believe that the city will increase new building permits in any way sufficient to drive down prices from their current artificial high. Do supporters of the Height Act agree or disagree with this? Do they think Paris-style density is coming to D.C.? And if not, why is this an argument in favor of the Height Act?
5. Do you think D.C. would instantly become as tall as New York upon repeal?
This follows from the last point. Many pro-Height Act arguments work from the premise that if the Act was repealed, D.C. would end up looking like Shanghai or New York. (As a native New Yorker, it’s hard for me to understand why this is a bad thing -- would Woody Allen have been able to romanticize "Foggy Bottom" the way he does Manhattan?) Except the D.C. government would still have the power to restrict heights. Repeal would merely allow the city government to permit higher buildings. There’s no reason to believe the next step would be a concrete jungle. Does this worry drive your opposition? If so, what is your assumption about local politics and how does it differ from mine?
6. How much is the D.C. aesthetic worth?
This is the heart of the argument. D.C. does a great deal to protect a particular aesthetic. Benfield points to the availability of light and the vistas as a central argument for keeping the height limit. And D.C. has a long history of sacrificing economic growth for aesthetics. L’Enfant’s plan for the city created many attractive circles, allowing for statues of old generals and views of white buildings with columns. But unlike Manhattan’s regular grid, D.C.’s diagonals ensure non-regular plots of land, which Gary Libecap and Dean Lueck have shown reduce property values.
Now as I noted, I don’t think the basic look of D.C. would be at risk if the Height Act was repealed. And I think these aesthetic values are odd, at best. But if you do love D.C.’s aesthetic and have a different view of local politics than I do, at what point would the value of keeping the aesthetic become too costly? Ryan Avent estimates that as of 1998, the “shadow tax" of the Height Act and other restrictions in downtown D.C. alone equaled roughly $1.4B in forgone real estate value. (And that was using 1998 numbers, so it’s a very conservative figure.)
At what point does imposing a particular aesthetic become too costly? Is there a dollar figure one associates with this kind of thing? If not, why not?
MORE FROM THE ATLANTIC CITIES