Free-Market Land Use Policy, by way of Houston, TX

I'm attending the American Dream Conference in Houston, Texas this weekend and I've learned some interesting things.

Houston is the fourth largest city in the United States. Though, its median sales price of existing homes in 2007 was only $152 thousand. Compare this to the top six largest cities:

City                     Population                  2007 median sales price, existing homes

       New York, New York (pop 8,213,839)  $380-$540 thousand

2)    Los Angeles, California (pop 3,847,059)   $589 thousand

3)    Chicago, Illinois (pop 2,842,753)   $276 thousand

4)    Houston, Texas (pop 2,117,937)  $152 thousand

5)    Phoenix, Arizona (pop 1,469,794)  $257 thousand

6)    Philadelphia, Pennsylvania (pop 1,456,350)  $234 thousand

 

One reason is that Houston is the largest city in the country that does not regulate land-use through zoning. This means the free-market dictates where commercial and residential activities occur.

There are areas of the city where a large high rise shares a city block with a single family home. While this may sound unthinkable, consider that it does not happen in all places and where it does, prices adjust to the situation. So a home near a commercial property would cost less than a similar home in a traditional neighborhood.

Houston is not without regulation, however. Typically, the use of a property is defined through deed restrictions. So each property contains individual restrictions that limit what the owner can do with the property. These restrictions are similar to HOA agreements and they can range from landscaping to building height requirements. The deed restrictions can expire (usually within about 50 years) and can be renewed (or left to expire).

Some property owners will allow their deed restrictions to expire in order to sell the property for commercial purposes with no land use limitations. This is how large multi-use activities become intermixed. They are usually highly controversial and opposed by the local residents.

Deed restrictions can also influence the value of a property. Most residents enjoy predictability with land use so tight restrictions that last a long time are more desirable. Likewise, unrestricted properties are an invitation for commercial enterprises.

While mixing residential and commercial development might be undesirable to some people, the majority of Houston residents seem to prefer it. There have been several attempts to move Houston toward zoning but the public has consistently rejected the idea. Thus, preserving the free-market system.

Comments

[Todd W.]

Sounds good to afford the "American Dream", but it can drag down a current homeowners investment value.