Although it is difficult to do for all relevant properties across a whole local government area/jurisdiction over the medium-long term, it is important to try to measure that part of the zoned capacity that is feasible or realistically available for development over the planning horizon. In part that is because you can't feasibly provide an 'infinite' capacity of no zoning limits with necessary upgraded supporting infrastructure across all catchments over the same period. The feasible or realistic planned/zoned supply (capacity), in response to expected growth over the medium-long term, needs to be aligned with planning for that supporting infrastructure.
I see this is an old post. Missed it at the time. Nice write-up.
Couple of points.
First, even if a change of use is feasible, it might not happen. Landowners delay feasible development until the most profitable time.
There's no mechanical or automatic connection between providing more feasible capacity and seeing faster housing production; the latter is governed by economic forces - it's not just a downstream consequence of policy choices.
So you don't need to worry about "a political maelstrom of universal construction noise and tenant displacement on every lot in every block of the city"
Second, what's your concept of feasibility?
This is important.
If you think of feasible capacity as being profitable arbitrage opportunities for developers to buy land with a tear-down structure at the market price and develop it immediately, then you're missing the point that while this might be a sensible decision threshold for a potential developer, it's not a meaningful measure of capacity provided by policy settings, since land prices capitalise the development profit achievable on the site at the most profitable time to develop.
If you use this measure, you can even find zero feasible capacity on a downtown vacant lot, if the lot is priced for development later at a more profitable time. Yet clearly the lot could be profitably developed today. We need to count the potential dwellings on this lot as feasible capacity for the measure to have any meaning.
The right measure of feasible capacity - not “how much does zoning theoretically allow” but “how much is actually plausible to get built, where, and by when” - is about how many feasible CHANGES OF USE there are. This requires comparing the income stream in current use of each site to the development residual if that site was redeveloped.
Unfortunately, this is analytically difficult. You can't just use the market price of the property.
Thinking of the rate of home building as being like extracting an exhaustible resource is good.
And yes, planning shapes where those resources are and the composition of available resources.
But it is also true that, across all exhaustible resources, the rate of production trades off the benefit of extracting now with the benefit of extracting later.
Like in oil, coal, etc, there aren’t excess returns to housing over the long run.
This article explains how Harold Hotelling, back in 1931, articulated this intertemporal trade-off for exhaustible resources.
So the question, if Hotelling is right, is whether changing the shape of the zoned capacity changes the time preference of the market to want more homes now.
Although it is difficult to do for all relevant properties across a whole local government area/jurisdiction over the medium-long term, it is important to try to measure that part of the zoned capacity that is feasible or realistically available for development over the planning horizon. In part that is because you can't feasibly provide an 'infinite' capacity of no zoning limits with necessary upgraded supporting infrastructure across all catchments over the same period. The feasible or realistic planned/zoned supply (capacity), in response to expected growth over the medium-long term, needs to be aligned with planning for that supporting infrastructure.
I see this is an old post. Missed it at the time. Nice write-up.
Couple of points.
First, even if a change of use is feasible, it might not happen. Landowners delay feasible development until the most profitable time.
There's no mechanical or automatic connection between providing more feasible capacity and seeing faster housing production; the latter is governed by economic forces - it's not just a downstream consequence of policy choices.
So you don't need to worry about "a political maelstrom of universal construction noise and tenant displacement on every lot in every block of the city"
Second, what's your concept of feasibility?
This is important.
If you think of feasible capacity as being profitable arbitrage opportunities for developers to buy land with a tear-down structure at the market price and develop it immediately, then you're missing the point that while this might be a sensible decision threshold for a potential developer, it's not a meaningful measure of capacity provided by policy settings, since land prices capitalise the development profit achievable on the site at the most profitable time to develop.
If you use this measure, you can even find zero feasible capacity on a downtown vacant lot, if the lot is priced for development later at a more profitable time. Yet clearly the lot could be profitably developed today. We need to count the potential dwellings on this lot as feasible capacity for the measure to have any meaning.
The right measure of feasible capacity - not “how much does zoning theoretically allow” but “how much is actually plausible to get built, where, and by when” - is about how many feasible CHANGES OF USE there are. This requires comparing the income stream in current use of each site to the development residual if that site was redeveloped.
Unfortunately, this is analytically difficult. You can't just use the market price of the property.
Thinking of the rate of home building as being like extracting an exhaustible resource is good.
And yes, planning shapes where those resources are and the composition of available resources.
But it is also true that, across all exhaustible resources, the rate of production trades off the benefit of extracting now with the benefit of extracting later.
Like in oil, coal, etc, there aren’t excess returns to housing over the long run.
This article explains how Harold Hotelling, back in 1931, articulated this intertemporal trade-off for exhaustible resources.
So the question, if Hotelling is right, is whether changing the shape of the zoned capacity changes the time preference of the market to want more homes now.
https://fresheconomicthinking.substack.com/p/crampton-debates-crampton-on-the?r=531z1&utm_medium=ios