March 21, 2014

Housing: NIMBYnomics and the Missing Middle

An intriguing argument in Keep Austin Wonky:


Often, developers are described as ‘greedy’ (which is a way of saying they are making too high a profit relative to the externalities they produce).  Interestingly, many anti-development advocates believe that the same ‘greedy’ developers that produce certain types of development (‘stealth dorms’, large high rises) will recalibrate and build the ‘right kind’ of multi-family if we just place enough constraints on what they can do.

… the development types in the missing middle is what many of the anti-development advocates allude to as being the outcome they would like.  In their view, the preferred solution is to regulate the market enough to narrow the options available to the developers so that they get to work on creating housing the Austin NIMBY coalition would like.



The assumption is that the actual humans that are proficient at redeveloping a single-family house or duplex to accommodate a lot of roommates is going to be good at navigating the process for missing middle-style, low-unit multi-family.  This is a flawed assumption. …

The different development firms and sources of capital that produce large complexes certainly have the skills and money to tackle the missing middle.  But why don’t they? Well, because there’s not an attractive ROI in it, obviously.  If you are going to take on development risk, why do it for some relatively minor project? If you are a leader at such a firm, you still have to make time in your schedule for selecting designs, meeting with capital, dealing with the politics whether the project has 1x units or 5x units.  So, it makes sense to go for 5x. …


More explanation here.

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  1. “If you are going to take on development risk, why do it for some relatively minor project?”

    I’m interpreting “development risk” here to mean “city bureaucracy”. There’s certainly an awful lot of that to contend with. We’re trying to build a wheelchair ramp to our house that has to extend a short way onto city property in order to minimize the slope. It’s been six months now trying to get this thing through the labyrinth that is City Hall, and each new person I talk to unveils yet another expensive obstacle that I have to overcome.

    I can only imagine how bad it must be for a developer.

    1. “I’m interpreting “development risk” here to mean “city bureaucracy”.”

      Why? There are many aspects of development risk.

      1. Because that’s what I’m dealing with right now. Of course you hear stories about how bad it is, but the reality is worse than I imagined.

      2. I don’t understand… why does your current trouble lead you to believe that’s what the author intended to imply?

      3. Well, of all the risks to a development project, uncertainty about the final shape of it must rank fairly high. A lot of money must get spent by developers negotiating with City Hall to get approval for a project, and it seems to be subject to the whims of all the people who come in contact with it. That’s gotta weigh pretty heavily on the minds of developers in addition to the more traditional risks such as materials/labour costs and market prices.

  2. Zoning plays a major role. If an area or lot is zoned for 10 storeys that is usually what will be built. If it is zoned 4 storeys that is built if it is economical. The issue is often excessive land prices by the land owner. At a certain land price any project becomes uneconomical. The develop, the city assessing (often very heavy) community amenity charges and the current land owner all have a role to play, and if one of the three is off, no development will happen.