What Research from Boston Zoning Can Teach Chicago

To economists, America’s housing crisis — in the form of high prices — is no surprise.

For years, lawmakers have distorted the market through zoning laws that restrict new building and limit housing density. More recently, however, cities around the United States have been working to loosen restrictive zoning codes to increase housing supply. Chicago, meanwhile, has so far kicked the can down the road on zoning reform.

In the spring legislative session, the Illinois legislature failed to pass zoning reform included in Gov. JB Pritzker’s BUILD plan. At the same time, it authorized a $200 million grant for new housing development. While expanding housing supply can moderate prices, the measure serves as a measly Band-Aid fix that fails to address the root of the housing supply problem.

The legislature would do better to repeal excessive and restrictive zoning laws that impede additional construction, especially regulations that restrict density.

Boston is having much the same problem, as it happens.

Recent research from the Cato Institute finds that Boston’s restrictive zoning has increased house size and raised rents. Indeed, the city’s density and single-family zoning restrictions contributed significantly to higher rent, higher house prices and increased average size of housing units. If Boston relaxed these restrictions, the research finds, “single-family home sale prices would fall by 4.4% ($28,488), and by 2.2% ($13,394) when paired with multifamily zoning.”

Chicago’s density zoning restrictions, though less onerous than Boston’s, certainly inflate the cost of housing. Vacant, developable lots do not abound in most U.S. cities, and Chicago is no exception. Thus, the answer to the housing problem lies in increasing housing density — more people occupying the same lot sizes as are available now — and in allowing more space to build in areas where previous zoning laws had limited development.

Boston’s housing problems, like Chicago’s, are hardly unique. Decades of research confirm that housing, as legislators are finally starting to notice, is a supply and demand problem, but restrictive zoning limits supply, preventing the market from solving the problem. Take single-family zoning, which accounts for 41% of Chicago’s residential space. These policies bar anything that is not a detached home or two-flat meant for one or two families — so no 30-unit apartment buildings. Where the laws of supply and demand would usually incentivize developers to build single-family homes into apartment buildings, zoning laws have made this impossible.

Zoning near train stations and major bus lanes, for example, is often restrictive on the theory that more people will want to live near public transportation, so allowing dense development there would drive up land values and price out lower-income residents. In response, many cities force developers to sell a certain quota of units for below market value or pay a fee to the city when building near transit. Other transit-related zoning laws require developers to build out parking spaces for their residents, regardless of whether they own cars.

On this front, at least, Chicago is making some progress. Last year, the city passed an ordinance to eliminate parking requirements near major transit stations and bus lines, as residents have less need for cars in those areas. It also allowed developers to build smaller apartments than the typical minimum lot requirements within a certain distance from a transit station.

These measures are a step in the right direction. And Boston has attempted some, most notably in its 2021 legislation, the Economic Development Bond Bill, which made changes to Massachusetts’ Zoning Act. It allowed, for example, multifamily housing and 15 housing units per acre within half a mile of train stations. Researchers estimated that in the next 60 years, “median sale prices of single-family homes could fall by 8.5% ($131,617) near train stations in areas with highly restrictive zoning, such as suburban municipalities.”

Opponents of Pritzker’s BUILD plan cited concerns of losing local control. These concerns don’t fall on deaf ears. Indeed, Chicago aldermen shouldn’t wait for statewide legislation to repeal restrictive zoning laws. The data will be on their side if and when they decide to act.

From those of us in Boston to our friends in Chicago: It’s time to put housing back in the market’s hands.