How Approval Processes Drive Up Housing Costs in Major Cities
Housing in cities across North America has become increasingly unaffordable. Most people blame land scarcity, rising construction costs or speculative investors.
But in a study published in the journal Urban Governance, Austin Zwick, associate teaching professor and program director for the policy studies program in the College of Professional Studies and the Maxwell School of Citizenship and Public Affairs, points to a less visible culprit: planning processes municipalities are using.
Zwick’s research, published in March, examines how de facto discretionary approval systems—which require developers to meet all code requirements but also see approval depending on back-and-forth negotiations with regulatory bodies and case-by-case judgments from planners, elected officials and sometimes organized public organizations—drive up housing costs and suppress supply.
In contrast, a “by-right” system allows developers to get approval, with no additional steps to follow, as long as they meet or “check every box” on the municipality’s list of requirements or standards.
“In theory, discretion is meant to allow flexibility and responsiveness,” Zwick says.
Negotiation with developers is intended to promote better outcomes by requiring them to build public amenities and social housing units they wouldn’t otherwise build. In practice, though, builders with the time, money and political access can endure prolonged negotiations, and then they will pass those endured costs onto the buyers, whereas small-time builders can’t. The end result is that only large-scale luxury development gets built, not regular housing for regular people, he says.
Zwick offers a case study in his research of a stalled development in Vancouver, British Columbia, in which lengthy negotiations, public hearings and political approvals added hundreds of thousands of dollars to per unit to a condo building before construction ever began. He suggests that tackling the housing crisis isn’t just about federal funding or sweeping new policy, but for local governments to streamline their own processes.
Below, Zwick, tells Syracuse University Today what’s broken in planning processes, why it matters for the housing crisis and what cities can do about it.
The housing crisis is caused primarily, but not exclusively, by preventing supply from keeping up with demand. The planning rules that govern how housing gets built in the most expensive cities in North America aren’t strict rules at all—rather, they’re starting points for negotiation between the city and developers.
That gap between what the code says and how development actually works, which is common in the most expensive cities in the country, is not a technical footnote. It’s the ground-zero of the problem itself. And it’s something local governments can fix.
We don’t need the federal and state governments to throw money at the problem— though that would obviously help, but does not appear to be forthcoming—rather we need local governments to streamline their processes for approval, allowing the free market to tackle the problem.
Urban planning codes and processes determine what can be built, where and how quickly. When those codes require lengthy negotiations, multiple rounds of public hearings and eventually political approvals for even routine projects, they slow down housing production and drive up costs for developers.
Furthermore, over time, these procedural barriers translate into housing scarcity. Scarcity raises prices even more. The burden of this—all of the cost accumulation by delay and scarcity—falls onto renters and buyers. It makes it expensive and hard to find.
Those factors are real, but they’re not the whole story. Research shows that regulatory procedures themselves impose substantial costs on housing production, far more than land scarcity and marginal increases in construction costs.
In Vancouver, empirical studies estimate that planning-related delays and negotiations add hundreds of thousands of dollars to the cost per dwelling unit before a shovel even hits the ground.
Begin with an audit of the planning code to identify where discretionary ordinances have been layered onto what appears to be a rules-based framework, then systematically remove them.
Replacing negotiated, case-by-case ordinances with clear and predictable standards that allow compliant projects to build by right; in other words, projects receive automatic approval once every box is checked. No further delays, no more unpredictability. Developers will know exactly what they are getting into when they start a project.
Vancouver’s recent reforms demonstrate that this shift is politically achievable. Early evidence suggests it is already changing outcomes. It doesn’t guarantee that supply will catch up with demand—at least in the short run, as it’ll take time to build after all—but it does make it achievable in the long run.
