Conversations on Zoning and Affordability: Short-Term Rentals and Investor Ownership
The article “Putting Housing in Little Boxes” discusses exclusionary land-use rules in the context of an environment of short-term rentals or investor ownership. This opinion piece in Governing magazine discusses how restrictive zoning in the United States systematically priced lower-cost housing out of reach, especially for renters and first-time homebuyers. Zoning is a structural barrier making housing less affordable and accessible for all. In Dallas, we face a housing shortage, especially for those burdened by unchanged wages and increased living costs. We examine zoning and the need for a more modern approach to space use.
Zoning is a Root of Affordability
U.S. zoning was originally intended to separate incompatible land uses. It separated areas of heavy industry from homes, and with population booms, it has become an increasingly restrictive system that dictates use, form, size, and who can live where. It started as a flexible approach to land planning and grew to be exclusive and effectively eliminated housing choices lower-income households once relied on. Zoning restrictions created a persistent “zoning tax”, or increases in home prices traced back to regulatory scarcity.
Read more here: https://pmc.ncbi.nlm.nih.gov/articles/PMC10691857/
Compounding Modern Zoning Exclusion: Short-Term Rentals and Institutional Buyers
Short-term rentals, as a concept, have been a solution to affordable housing through room shares and shorter-term rentals. With the arrival of disruptive housing share models like Airbnb, short-term rentals have had the opposite effect. The Governing article discussed how some cities have responded to affordability pressures by restricting short-term rentals (STRs), properties rented for short stays through platforms like Airbnb, and opposing investor-led purchases of single-family homes.
How damaging are short-term rental restrictions? Do STRs reduce the supply of homes available for long-term occupancy if a disproportionate share of units are converted to tourist-oriented stays? Institutional investors buying single-family homes for rent also change the ownership landscape in some neighborhoods. Should these be limited?
The scale of these effects in an area is what really matters. Research shows that while STRs can exert some upward pressure on prices, their impact on affordability is modest compared to the effect of restrictive zoning, which can add tens of thousands, or even hundreds of thousands, of dollars to the cost of new housing. In San Francisco, for example, zoning alone accounts for more than $180,000 of the price of a typical newly built home, whereas even a doubling of STR listings would only raise prices by a comparatively small amount.
Similarly, investor-owned single-family rentals are often a response to a constrained housing system, a supply shortage created by zoning that makes alternative formats, like traditional multifamily development, difficult to scale. Removing STRs or limiting institutional ownership without increasing overall housing capacity does not make housing more affordable; it restricts use.
Dallas’s Zoning Legacy and Impact
Dallas’s zoning history reflects a history of regulation prioritizing separation and aesthetics over equality or affordability. Dallas adopted its first comprehensive zoning ordinance in the 1930s, reflecting national trends toward formal land-use zoning, and over the decades, zoning in Dallas grew increasingly prescriptive, layering regulations about lot size, building form, setbacks, and permitted uses. Rules were promoted as promoting orderly development, but they reduced flexibility in how land could be developed, especially for denser or more affordable housing types.
In the late 20th century, large areas of Dallas were zoned exclusively for single-family homes, with limits on multifamily and mixed-use development. As the city expanded and jobs became concentrated in areas with limited housing options, contributing to rising housing costs and a separation between where people work and where they can afford to live.
Discussions around expanding where multifamily housing can be built, permitting accessory dwelling units (ADUs), and incentivizing missing-middle housing aim to broaden the range of housing choices. DCH regularly contributes to these conversations and advocates for zoning solutions to meet housing needs; however, until zoning rules meaningfully allow more diverse housing types across more neighborhoods, affordability pressures will remain.
Why Relegalize Housing, Instead of Banning Uses
We have to expand affordable and attainable housing in Dallas and in other major cities. Policymakers, advocates, and developers must focus on the supply side of the equation. Banning short-term rentals or institutional buyers might be an easy way to ease immediate pressure, but it won’t impact zoning rules that removed the housing types that helped keep housing accessible for earlier generations.
The Governing piece had an interesting quote to this point: “We cannot fix a housing affordability problem by banning its side effects.” Consider how cities can relegalize and encourage the kinds of housing that zoning regulations have systematically regulated away from smaller rental units and flexible housing formats to a broader mix of multifamily homes in more parts of town.
Please share your thoughts and read more here. https://www.governing.com/urban/putting-housing-in-little-boxes
