Pricing Upzoning: A Reply to Critics

Click to increase image sizeClick to decrease image size

Disclosure Statement

No potential conflict of interest was reported by the author(s).

Notes

1 If upzoning has major effects on the absorption rate, market participants would instantly adjust their pricing to reflect expected lower future rents and prices. But these immediate price reductions do not happen.

2 In fact, because priced upzoning can increase future costs when prices are rising it reduces the payoff to delay. This is consistent with Titman’s (1985) dynamic real options approach whereby adding costs to delay from strict density limits, or in this case pricing upzoning rights in the future, brings forward development decisions.

3 Etienne suggests the possibility that upzonings could be targeted at low-income, minority communities and used to thereby narrow the wealth gap. While this is possible, most proposals are not of this nature and mass upzoning is typically justified in relation to providing access for lower-income or minority groups to high-amenity neighborhoods. To the extent that this strategy was successful in fostering new housing (which has typically not occurred with upzoning in low-income neighborhoods), this would likely generate considerations around gentrification and displacement that have also concerned researchers (Freemark, 2023).

Additional information

Notes on contributors

Cameron K. Murray

Cameron K. Murray is a post-doctoral research fellow in the Henry Halloran Trust at The University of Sydney. His interests include property markets, environmental economics, and corruption. He writes the Fresh Economic Thinking newsletter and co-authored a book about the game of grey corruption entitled Rigged.

Joshua C. Gordon

Joshua C. Gordon is a visiting research fellow in the Digital Society Lab at McMaster University. His research interests include housing policy, labour market policy, union movements, and the politics of immigration.