Housing Regulations Put Walkability Out of Reach

Housing Regulations Put Walkability Out of Reach
AP Photo/Nick Ut

City dwellers face many tradeoffs when deciding where to live. Is it worthwhile, for example, to live in a neighborhood with easy access to public transit and within walking distance to urban amenities? Or is a neighborhood where parking is plentiful and it’s easy to drive between destinations preferable? Any real estate decision involves tradeoffs, but this particular choice is not made on a level playing field.

In a new study, Eli Dourado and I find evidence that consumers are willing to pay a premium to live in neighborhoods where they can walk to shops, restaurants, and other amenities. But this premium isn’t strictly based on how consumers value urban properties: It comes in part from land-use regulations, including density restrictions and use zoning, which prevent the real estate market from giving consumers a fair price for what they want.

Dourado and I used Walk Score data to undertake the first nationwide study of the relationship between walkability and home prices. We found that buyers are willing to pay 14 percent more for a home in a neighborhood with a “100” Walk Score rating than they are for one with a “0” rating.

For example, a home that might cost $500,000 in an “unwalkable” neighborhood could fetch $570,000 in a walkable location. Our finding takes into account other factors that may affect home prices, including size, age, and proximity to jobs, as well as market factors like income levels and unemployment rates.

Walkable neighborhoods may not be more expensive simply because it is costlier to build dense housing. Rather, municipal governments enforce regulations, such as height limits and historic preservation rules, that constrain the amount of walkable housing developers can build. The artificially limited supply simply goes to the highest bidder.

Lower Manhattan offers a good example of the effect of these supply restrictions. It’s home to some of the country’s most walkable and expensive neighborhoods, such as Union Square, the Bowery, and NoLita, but it’s nearly impossible to increase the housing supply in any of these locations.

Regulations also prevent unwalkable neighborhoods from becoming more walkable over time. Parking requirements and zoning often make it illegal to build commercial destinations in existing residential neighborhoods, while setback requirements and height limits prevent neighborhoods from accommodating denser housing.

The result? Higher prices and tough choices for people who prefer walkable neighborhoods: Pay the premium or live someplace that doesn’t suit their preferences.

In his book “Zoned Out,” Jonathan Levine found evidence that people were more likely to live in a neighborhood that matched their walkability preferences if they lived in a city with a wide range of housing options. Levine interviewed residents of Boston and Atlanta to learn how their preferences for walkability compared to the neighborhoods they actually lived it. He found that in a city like Boston, with neighborhood development styles ranging from traditional urbanism to exurbs, people who said that they prefer walkable neighborhood were likely to live in walkable places.

Meanwhile, because Atlanta was largely developed after the city established rules that tailor development toward cars rather than pedestrians, 60 percent of its homes are located in exurban neighborhoods. There, even people who said they had the strongest preferences for walkability had a 50 percent chance of living in an unwalkable suburb or exurb. Thanks to regulations requiring largely uniform suburban development, Atlanta residents have fewer walkable choices.

Our findings build on Levine’s insight: Because people who prefer walkability have to compete for a limited number of homes in walkable locations, they bid up prices in these neighborhoods.

As Levine’s study shows, walkability is a desirable feature for some consumers but not for others. Jane Jacobs categorizes us into “car people” and “foot people.” Each group has different preferences in neighborhoods and transportation options. In a world with fewer regulations restricting the supply of walkable neighborhoods, we would expect to see developers catering to both car people and foot people. But today, the legal environment skews development toward car people’s preferences. 

While ours is the first nationwide study of its kind, past studies have examined the relationship between Walk Score and house prices in a single city or a sampling of cities. Some have come to conclusions contradictory to ours — that houses in walkable neighborhoods don’t command higher prices.

But prices for walkability in a single city may not apply to the country as a whole. Our results are similar to Joe Cortright’s examination of 15 metropolitan areas and to Spencer Rascoff and Stan Humphries’s Zillow study of walkability, which also looked at 15 cities. Just as these studies do, we find that consumers nationwide must pay a premium for walkability.

Choosing to live in a walkable neighborhood can mean easy access to amenities such as restaurants and shops, a more environmentally friendly lifestyle, and more exercise. Current regulations prevent the real estate market from providing housing for all of the people who would like to live that way. The premium that foot people have to pay for an otherwise efficient lifestyle is not a result of the market at work; it’s driven by counterproductive policies.

Emily Hamilton is a research fellow for the Mercatus Center at George Mason University’s State and Local Policy Project and coauthor of the new study The Premium for Walkable Development Under Land Use Regulation.

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