skyscrapers - Building the Skyline

June 17, 2019 by Jason Barr 3 Comments

Skyscrapers, Housing, and Cities: A Q&A Interview with Ingrid Gould Ellen (Part I)

Jason M. Barr June 17, 2019

Ingrid Gould Ellen is the Paulette Goddard Professor of Urban Policy and Planning at New York University, and a Faculty Director at the NYU Furman Center for Real Estate and Urban Policy. She is the author of Sharing America’s Neighborhoods: The Prospects for Stable Racial Integration and editor of The Dream Revisited: Contemporary Debates About Housing, Segregation and Opportunity.

On Skyscrapers and Housing

JB: One of the vigorous current debates regarding tall building construction is about luxury residential towers in places like New York, San Francisco, London, and Vancouver. Detractors argue they exacerbate gentrification and income inequality, while harming the quality of street life, and throwing shadows on the street and in parks. What’s your view on the effect of tall luxury residential buildings on cities? Should they be taxed or regulated? Or should they be encouraged?

IGE: The luxury construction boom is a very visible symbol of the inequality that characterizes our nation and our cities. But it is a consequence of inequality not a cause. Rising inequality is helping to drive demand for this type of housing, but that doesn’t mean that limiting construction will do anything to reduce inequality. In fact, local regulations that add cost and risk to permitting and building may exacerbate affordability challenges and only further incentivize developers to build luxury housing. So, it is really important to think rigorously about the potential effects of proposals to regulate the housing market and limit development.

With that said, building more market-rate housing under current conditions will not on its own fully solve the very real affordability challenges in the cities you mentioned, as there is a more fundamental problem that the cost of building and operating decent-quality housing outstrips the ability of many households to pay. If we care about economic diversity in our cities, inclusionary zoning programs that require market-rate developers to build some affordable units or contribute to a housing trust fund can be effective in strong markets in helping to maintain economic diversity and the vitality that it supports.

On Skyscrapers and Street Life

JB: Related to this, when it comes to tall buildings for housing more broadly, there’s a strong belief that they diminish happiness, are bad for vibrant street life, and generate too many negative externalities. In a recent CityLab.com article, Richard Florida, writes:

When buildings become so massive that street life disappears, they can damp down and limit just this sort of interaction, creating the same isolation that is more commonly associated with sprawl. As Jane Jacobs aptly put it: ‘in the absence of a pedestrian scale, density can be big trouble.’ Skyscraper canyons of the sort that are found in many Asian mega-cities, and that are increasingly proposed in great American cities, risk becoming vertical suburbs, whose residents and occupants are less likely to engage frequently and widely with the hurly-burly of city life.

Would you like to offer your thoughts on this? Are tall buildings for housing antithetical to quality of life and the notion of the “good city”?

IGE: Jane Jacobs got a lot of things right when it comes to cities, and I fully agree that “in the absence of a pedestrian scale, density can be big trouble.” But I don’t think that tall buildings are antithetical to a pedestrian scale. Tall buildings can be designed with attention and sensitivity to the pedestrians, with engaging street-level facades that house retail and other inviting uses.

Further, we have to consider the counterfactual. In high-demand areas, the choice is to build up or to build out. Building up helps to create high-density, walkable neighborhoods that are amenable to public transit. Building out creates low-density, automobile-dependent areas, which are clearly antithetical to street life. It’s possible that buildings might get so tall that costs outweigh benefits; but given the zoning restrictions that govern building in cities around the U.S. and many cities in the world, I think we are far away from that point.

Rise of the Superslim Luxury Towers along Central Park South. Photo by Jason Barr.

On Gentrification

JB: Gentrification in the 21^st century is a hot-button issue. The conventional wisdom is that it causes widespread displacement of low-income residents. And cities like Newark, New Jersey, are now actively seeking to prevent it. Based on your research, what are your thoughts on the impacts of gentrification in cities like New York and San Francisco? Do you see, on net, more harm than good coming from gentrification, or the other way around, and if so, why?

IGE: Gentrification is a complicated process, with many potential effects. Most of the discussion around gentrification focuses on direct displacement of existing residents and low-income renters in particular. Yet most of the research that has been conducted on gentrification (including work I’ve done recently in New York City) finds little evidence that low-income renters are more likely to be displaced in gentrifying neighborhoods. To be clear, this research doesn’t say that no tenants are displaced; rather it suggests that turnover rates for low-income renters are no higher in gentrifying neighborhoods than they are in other poor neighborhoods. Low-income renters are unfortunately at risk of displacement in all types of neighborhoods. It’s also true that gentrification tends to come with rising rents, which make it more difficult for new low-income households to move into a neighborhood over time.

While few acknowledge any good that comes from gentrification, we might see a glimmer of hope if we look at gentrification through the lens of integration. The moves that higher-income, white households make into predominantly minority, lower-income neighborhoods are moves that help to integrate those neighborhoods, at least in the near-term. The key is whether this integration will last, and what policies can help to sustain it.

On Gentrification Policies

JB: If you were advising a mayor who was worried about gentrification, what policies would you suggest? What might be the best way to help people who are negatively or unfairly impacted by neighborhood changes due to gentrification? Would you tell the Mayor of Newark that his fears about Newark turning into the next Brooklyn are warranted?

IGE: Most policy discussions surrounding gentrification center on efforts to protect individual residents at risk of displacement through legal representation or tenant-based vouchers. Policies to protect existing tenants from harassment and unjust evictions are critical. But if the mayor cares about diversity and integration, I would also encourage her to consider policies that keep neighborhoods open to a diversity of in-movers, since it is the people moving into a neighborhood who ultimately drive neighborhood composition. For example, creating and preserving place-based, subsidized housing in gentrifying neighborhoods can help to lock in diversity over the longer term and help to affirmatively further fair housing. While New York City may be an outlier, more than 10 percent of housing units in most gentrifying areas of the city are public housing units, and a significant share are subsidized through other programs. If preserved over time, these units can assure some level of economic mixing, and potentially racial mixing too.

It’s also worth noting that while gentrification is a real phenomenon in many cities, far more households around the country live in neighborhoods with persistent poverty. Mayors should not ignore the challenges faced by these neighborhoods and their residents.

The High line Park in Manhattan. While the park is a rare urban gem, it is blamed for gentrification in the surrounding neighborhood. Photo source: *NY Observer*.

On Homelessness

JB: Large cities in the U.S. are also seeing terrible increases in homelessness. Based on your research, what has been the driving factors behind this?

IGE: I’ve learned most of what I know about research on homelessness from Brendan O’Flaherty, of Columbia University. His excellent book, Making Room, argues that homelessness is caused in part by growing income polarization and the disappearance of the middle class. Specifically, the reduction in the number of middle-income households has meant less housing built for them that can filter down to the poor. This has also meant higher rents for the little low-quality housing that is available.

More recently, he has published a very useful review paper in the Journal of Housing Economics. While he highlights a lot of advances in our understanding, he also argues that we really don’t understand why New York and Los Angeles have seen such large increases in homelessness in the past decade, at a time when homelessness across the country appears to have declined. In general, weather, high housing costs and poor labor markets contribute to homelessness, but they do not explain all of the variation.

On Reducing Homelessness

JB: Relatedly, what kinds of policies should mayors and governors be implementing to reduce the homeless population?

That requires a very long answer! But let me focus on prevention policies, which have been found to be promising if they are well-targeted. Studies of New York City’s Homebase program have found that it successfully reduces entries to shelter. The challenge is identifying the households most at risk of homelessness. Many of the families who seek assistance from Homebase would not become homeless in the absence of assistance. There is considerable randomness in which poor families actually become homeless, but individuals likely have some private information about their risk. Prevention programs should figure out creative ways to elicit this information and thus target their services more effectively.

You asked about what mayors and governors can do, but there’s a lot that the federal government can do too. Currently, only one in four income-eligible households in the country receives federal rental subsidies, which significantly reduce the risk of homelessness.

Keep Reading: Part II of this Q&A Interview with Ingrid Gould Ellen can be read here.

June 4, 2019 by Jason Barr 7 Comments

The Economics of Skyscraper Height (Part IV): Construction Costs Around the World

Jason M. Barr (@JasonBarrRU) June 4, 2019

Note this is Part IV of a series on the economics of skyscrapers. The rest of the series can be read here.

Rise of the Skylines

As we look around planet Earth, we can’t help but notice that skyscrapers are getting taller. In 2000, for example, the average height of the tallest 100 completed buildings was around 285 meters (935 feet). In 2018, that number was about 385 meters (1263 feet), for an average annual growth rate of 1.8%. What is causing this rise in building height?

The Demand for Height

First and foremost, skyscraper construction is demand driven. Tall buildings are built to satisfy our need and desire to be together in dense urban areas. The more humans base their economies on services and intangible products, they more they are drawn to cities. The masters of finance, marketing, business services, and high-tech need to cluster together in order to make their products. Also, the great wealth generated by this productivity fuels the growth of the consumer-oriented city, and its concomitant suite of cultural and entertainment-based amenities. The quest for a better life draws people to the same place at the same time. The skyscraper is thus a solution to the problem—it is a machine that converts air to land.

The Supply of Height

But here I want to argue that to really understand skyscraper heights, we need to investigate not only the demand for tall buildings, but also the forces that create their supply. If we want to understand building patterns around the world in places like China or the United Arab Emirates, we need to study the costs of construction in these places. The rise of skylines in Asia is as much as due to the cost side as it is to urbanization and the increasing importance of global cities.

The Economic Theory of Skyscraper Height

But, before we dive more deeply into the costs of building a shiny new skyscraper, we first pause to discuss the economic theory of skyscraper height. The economic height of a structure is the one that makes the most sense in terms of best balancing the demand for height with the costs of providing it. If we did some economic modeling, what pops out is an equation for the optimal building height (based on some simplifying assumptions). Though one can find a more detailed treatment here, the bottom line is that this equation can be given in a simplified form:

Economic Height = (Market Price Per Floor)/(Construction Costs Index Value)

Or for simplicity:

H=P/C.

That is, the economic height is given by the market price per floor, P, relative to a measure of construction costs, C, which includes the prices of materials and labor, and the efficiency of the construction operation.[1] We can observe from the equation that, all else equal, the lower the value of C, the taller a building will be in a given city at a given time.

P

If you want to understand the near-universal pattern of why there are tall buildings in the city center and low-rise building further away, then just look at the nature of the market prices per floor (or per square foot or meter), and you will see they drop off rather steeply as one moves further away from the center. That is to say, within a city, at a given time, we can assume that C is about the same for all builders. It’s P then that measures what building occupants are willing to pay at various locations.

And P can be broken down into, roughly speaking, two parts. Part I is the quality of what’s inside the building (does it have fast elevators, great views, marble floors, etc.?). Part II is the quality of what’s outside the building—its location. This is the key reason why buildings are so tall at the center—the location (or land) value is so high. Wall Street firms need to cluster together to earn greater profits and they pay for the right to do it. Developers respond to the high willingness to pay by going taller. The desire to pay falls rapidly as one moves away from the center. This has been strongly documented around the world and over time.

3D Visualizations of Land Values in Chicago. Each of these graphs shows the relative value of land in the Chicago at different points in time. The peak is in the Loop and falls steeply from there. Source: Ahlfeldt and McMillen (2014).

A Moving Target

Skyscraper height is thus determined by the ratio of the benefits to the costs. If we want to understand height at a given time in a given city, then using the prices at various locations is a decent indicator of about how tall a building should be. But if we want to compare this economic height over time and/or across cities then things get more complicated—both P and C become moving targets.

Compare New York to Shanghai, for example. The average height of the two cities’ completed skyscrapers since 1988 have been similar. But the question we cannot decipher is what are the relative prices to costs? In New York, both prices and costs are higher than in Shanghai; and yet the ratio is about the same. Asking rents in the new 67-story One Vanderbilt tower adjacent to Grand Central Station are up to $160 per square foot ($1,722 per square meter). The 128-story Shanghai Tower, evidently, has asking rents of half that amount (and now you get a sense of the relative costs of building in these two cities that generates the same average heights).

Roaring Twenties

This equation can also help us understand the building boom in New York during the Roaring Twenties. P was rising because of the growing economy, and C was falling due to technological innovations and learning-by-doing. When you put the two things together you can a rapid rise in the heights of buildings.

The Average Heights of Completed Skyscrapers in New York and Shanghai, 1988-2017. Here a skyscraper is a building of at least 150 meters. Source: The Skyscraper Center, CTBUH.

Global Costs

One of the key drivers of costs around the world are wages. An unskilled construction worker in New York, for example, is paid $17.57 per hour. In India, laborers get paid $0.63 dollars per hour. While the same type of workers in China receive about $3.36 dollar per hour. Since labor costs represent a substantial fraction of total costs (in the U.S. they can be as high as half the costs), the less developers must pay for labor, the lower the costs, and thus the more likely they are to build taller.

Consider some examples (in non-inflation adjusted U.S. dollars). One World Trade Center cost nearly $4 billion, as compared to the Shanghai Tower, which cost $2.4 building to construct. On a per-floor basis, that’s nearly double the costs. The Burj Khalifa, is almost 300 meters taller than One World Trade Center, yet the total costs were 61% less! The idea of getting a 163-story building in New York for $1.5 billion is laughable.

Construction Costs for Some Supertall Skyscrapers Around the World. Source: Emporis.

A Skyscraper Cost Index

To investigate this issue in more detail, I created an index of skyscraper construction costs around the world. The website, Emporis.com, lists the costs of 200 large high-rise buildings. (Details about how I created the index can be found here). It is, admittedly, a first attempt to measure skyscraper construction costs. A more detailed analysis is made difficult by the fact that developers (or their general contractors) generally do not release the cost of construction and so I need to use the limited publicly available data.

But what the exercise shows is that, relative to the U.S., mainland China and the Arabian countries can get skyscrapers for a substantial discount relative to the United States (and even more so compared to New York City).

A Skyscraper Construction Cost Index. Underlying data is from Emporis. Index details are in Barr and Luo (2017).

Costnomics

But an index value doesn’t tell how total costs change with building heights, it only gives a measure of the average costs of construction. To better understand the economics of building height, we need to dive a little deeper. Let’s take the point of view of a developer. Say we own a large lot in an office district in downtown Barropolis. We know (approximately) the average rents we can expect to earn once the building is filled, since we can observe the rents being paid in similar towers. This means that in order to maximize the profit, we need to determine how our total costs change as we go higher, in order to find the sweet spot.

It’s generally believed that average costs per square foot or meter are u-shaped with respect to floor height. For smaller buildings, going taller means that the per floor costs are falling, and then, at some height, they begin to rise. At that point, the costs of providing an additional floor becomes greater. For example, the cost of adding the 51^st floor is more than the cost of adding the 41^st floor. Where that turning point is remains an open question, and, as I will show below, it seems to be different in different cities.

The economic theory of skyscrapers says that the profit maximizing developer keeps adding floors until the revenue of the last floor just equals the cost of providing it. One floor less means leaving money on the table since the revenue from another floor will be greater than the cost. Building one floor above the profit maximizing height means losing money since the cost of the last floor was greater than the revenue is generates.

More Concrete

So why do the costs of adding more and more floors rise after some point? The answer has to do with the nature of building tall. Going taller and taller requires thicker materials, such as concrete or steel, on the lower floors to support the superstructure (as do the internal elements such as plumbing and electricity). Similarly, the cost of the foundation rises as the building gets taller because the it needs to support more weight.

Swaying in the Wind

Next is the additional costs of wind bracing. Tall buildings are constantly being bombarded by the wind. The taller the building, the greater the wind pressure, and the greater the possible sway. Nobody wants to be inside a building that feels like being on a 19^th century whaling boat. Thus, the structure needs to have extra materials to make it more rigid, so any movement is imperceptible to human senses. (The current trick for supertalls is not to make the building perfectly rigid, but rather to use massive pendulums to slow down the swaying to a rate that can’t be detected.)

The Elevator Problem

Then there’s the elevator problem. Going taller means that, as some point, an additional elevator shaft needs to be created and filled with more elevators to move people to the higher floors. The developer must consider whether the lost rentable space and extra costs are less than the extra revenue from going taller. But, in general, taller building require more elevator equipment.

The Evidence

What does the evidence say about the structure of these costs? To look this, I have collected data for recently constructed buildings in New York, Chicago, and Shanghai (details here). The data set contains, for each building, the total cost of the structure and the number of floors; and from this we can look at how the average cost per floor changes as buildings go taller. In this way, we can infer something about the economics of skyscraper height. One caveat though; the sample sizes for each of these cities are very small, and they contain various types of structures, from public housing in Shanghai to supertall offices and luxury apartments. For this analysis, I only present the per floor costs without controlling for these other things. Please consider the findings as preliminary.

Costs in Three Cities

The first fact that pops out of this analysis is that it is much cheaper to build in Shanghai and Chicago than in New York City. The average price per floor for Chicago is about $6.2 million; for Shanghai it’s about $3.7 million per floor. For New York, on average, it costs about $15 million per floor. Or in other words, for a cost of $20 million per floor (on average), you can get a 65-story skyscraper in New York, while in Shanghai you can one that’s 120 stories. In Chicago, at that price, you can get a 100-story structure.

Second, the minimum point for each of these cities is different. The lowest per floor costs in New York about 32 floors. For Chicago, it’s at 55 floors. Shanghai doesn’t seem to have a turning point based on the data—with per floor costs rising at all levels. (Why this is requires further work.)

Skyscraper Costs versus Building Height for New York, Chicago, and Shanghai. Costs are given in millions of 2018USD. Each dot is data for a particular building. The curves are trend lines (polynomial of order 2). Sources: see here.

The Future of Height

It’s clear that the future of height is upward. Though we tend to focus on particular thresholds, like the first one-kilometer or one-mile high tower, these will eventually be achieved as long as two conditions hold. First is continued economic growth, which will bid up the value of central locations in cities around the world. And second is the on-going process of technological innovation which will lower the cost of providing height.

The fact that countries like the U.A.E, Saudi Arabia, and China could enter the skyscraper race in such short order is because they are able to tap into the global skyscraper complex of architects, engineers, banks, and other related institutions. These players rapidly spread information and know-how to newly developed countries that are aiming to grow their cities. The experiences with skyscraper building there then becomes part of the global knowledge base, further increasing the rate of technological change, and lowering the cost of construction. One of the reasons why New York City will never be able to compete anymore for the world’s tallest building (which it invented over a century ago) is because the rapid escalation in construction costs tend to erode any savings from technological improvements.

Ever Upwards

The rate and direction of technological change is difficult to measure, but I hope to measure and discuss it in a future post. Suffice it to say, however, that as long as the there’s the desire to go tall, humankind will find a way to get there. The economics of skyscraper height show this to be true.

Continue reading. The rest of the series can be read here.

—

[1] Normally, prices are quoted in dollars per square foot or meters. But for this analysis, I use per floor costs to illustrate the economics. So, for simplicity, assume that each floor in a skyscraper is fixed at 200’ x 100’=20,000 square feet (or about 1858 square meters), which is about the average floor size for a modern high rise in the U.S.

April 30, 2019 by Jason Barr 1 Comment

Revisiting 1916 (Part III): New York’s First Zoning Resolution and the Roots of NIMBYism

Jason M. Barr April 30, 2019

[Note that this is the third part of a three-part series on New York City’s first comprehensive land use regulations, enacted in 1916. Part I focuses on the history and thinking of the city’s reformers. Part II reviews this thinking through the lens of modern economic analysis. This post argues that the ideas and rules from 1916 set the stage for today’s NIMBYism and housing affordability problems.]

Zoning looks to the future and is not so much intended to cure past errors as to prevent future invasions by improper buildings and uses. Zoning seeks to protect and stabilize what is good and prevent what is bad. It seeks to make localities more attractive for their proper uses. It is based on the assumption that what is more attractive is more valuable. – Edward M. Bassett, 1931

Everybody Must Get Zoned

Today, America is totally zoned. That is, nearly every municipality in the country has regulations on land use that dictate what kinds of buildings can or cannot be built on every piece of property. These rules specify, often with bewildering minutia, whether a lot must be used only for residential or for commercial; if it must be for single-families or if apartments buildings are allowed. They specify the maximum building height and the minimum building height; how far the structure must be set back from the street; whether the property must contain off-street parking; the maximum square footage; the minimum square footage, and on and on and on. These zoning codes are like the Ten (thousand) Commandants: they tell what you can and cannot do; and implicit in them is that they are good and proper. Residents, government officials, city planners, and developers all have come to accept them as an inherent part of urban (and suburban) life.

The Impacts of Zoning

The impacts of zoning, however, have gone way beyond what was originally intended. The planners and officials, who first established them in big cities across America, sought to regulate the hitherto unregulated land markets to provide some order to real estate development. It was designed to keep factories away from homes; to limit congestion and overcrowding; and to promote open space, light, and air in the residential neighborhoods.

But as zoning took root in the first half of the 20^th century, it began to transmogrify. What was meant to place some limits on new development evolved to give inordinate power to owners of already developed properties. Once the maps and rules of each zone were set, the city government had very limited power over what did or did not happen within each zone. Their primary power was, and is, over enforcement, and the right to grant “variances”—permission to slightly bend the rules (if say someone’s new pool is going to be foot closer to the property line than it should be) if no one protests too loudly. From time to time, municipalities consider re-zoning particular neighborhoods, but they are usually ad hoc, and more likely than not, will reduce the allowable density, as a benefit to the existing property owners.

By shifting the power of regulation away from a more centralized mechanism to set rules within each zone, it has promoted the rise of NIMBYism and the power of individual property owners to use the law and regulations to stop development around their lots. Zoning began as a tool for creating order and has ended up as tool for freezing the city.

The Homevoter

The money invested in a home represents, for many Americans, their largest form of savings. Unlike stocks or bonds, most families can’t hold a diverse real estate portfolio. As a result, they start thinking not like a tenant or resident, but like a bank, which seeks to protect the value of its main asset. After 1916, when comprehensive zoning started in earnest, it began to dawn on homeowners that the codes, which proscribed limits on building construction, could be used as means to slow down, or even halt, changes in their neighborhood that might threaten the return on their investments. As an added “bonus,” the rules could help achieve other desiderata, such as keeping out the poor, the homeless, or specific types of businesses, without engaging in direct discrimination.

Resultantly, zoning has become the weapon of choice in the NIMBYist’s arsenal. As documented by economist William Fischel, by voting into office sympathetic officials, homeowners could make sure that the zoning maps became increasingly stringent. Any changes to the maps or individual lot designations must be preceded by hearings and allow the community to voice their anger or fears of harm that these changes will make. Politicians reluctant to displease their constituents, avoid this “third rail” of local politics, and keep the status quo. The bold mayor who seeks to change it has to contend with lawsuits and vocal protests of “Not in My Backyard!”

The Cost of Zoning

The harm of over-zoning America has been clearly documented. By ossifying the real estate market, it contributes to the higher cost of housing in America’s large cities; it reduces employment and economic mobility; it increases income and wealth inequality; and it reduces economic growth more broadly. Though zoning is not the only reason for America’s problems, its ubiquity and entrenched nature is doing more than help. Yet those who benefit by it are—rationally, I might add—addicted to it. As a result, we are stuck in a prisoner’s dilemma like situation—what’s good for the homeowners of the world, is bad for society at large.

A Passive Prophylactic Process

But, because zoning’s impact occurs through a passive prophylactic process, its harm is invisible. We can’t blame what we can’t see. Rather, developers and landlords are the ones who receive the invective because they are the agents of neighborhood change. Developers, by responding to price signals, tear down older buildings and provide taller ones and destroy the charm and character of the neighborhood that was supposed to be frozen by the zoning regulations. Landlords, by responding to price signals, displace low-income and long-term residents and beckon the gentrifying class who then jack up the price of housing and destroy the charm and character of the neighborhood that was supposed to be frozen by the zoning regulations. It’s easy to blame those who appear to be changing what was supposed to be fixed. As a result, residents seek more protections from the city. They ask the mayor to prevent new construction, or to freeze rents to stop gentrification. They react by requesting more ossification and the problem just gets worse and worse.

Revisiting 1916: The Zoning of New York

How did this happen? Where did all begin? Here I want to document the story of the birth of zoning in New York City, which was instrumental on setting us down the path we have today. New York is important for several reasons. First, in 1916, it was the first city to enact comprehensive zoning rules that dictated the use, bulk, and shape or height of every property within its municipal boundaries. This is not to say that New York invented zoning, or was even the first to dabble with it in America, but because of the city’s scale and importance, it clearly occupied an influential leadership position.[1] Additionally, New York’s trajectory from 1916 to the present is emblematic of many cities throughout the country, which have seen increasing stringency of the rules, and a greater transferring of (implicit) power to NIMBYists. Its history embodies the path from the dynamic city to the sclerotic city.

Zoning Maps from 1916 for Neighborhood “14A” in Queens. Upper left: height districts. Upper right: lot coverage zones. Bottom: use districts. See the graph below for the current zoning maps for the same neighborhood. The 1916 zoning maps established the idea of limiting development in different areas of the city. But they were relatively mild. Over time, they have become increasing detailed and constricting (see below).

1 BZ: The City Before Zoning

After the Civil War, America’s urbanization began in earnest. Between 1870 and 1920, the U.S. population went from being a quarter urbanized to half. As immigrants and rural folks poured into the cities, developers responded to the demand for building space. They put up low income housing in the ethnic enclaves; they built skyscrapers for the new breed of office workers; and they constructed factories for the products that were in high demand.

Developers, however, acted in an uncoordinated manner. They made decisions about the use, bulk, and height of their properties based on what they believed would generate the highest return. They could, in theory, build a 30-story apartment building in the suburbs if they thought it was good for them (though it would not likely have been profitable). If low income shelter was needed, developers would provide that which was affordable, and, as result, it came with few amenities, such indoor toilets or access to sunlight.

The Messy City

Because of the rapid growth, in the late 19^th century, cities began instituting a series of building reforms. They included fire and safety regulations; and laws that low income housing required running water, minimum room sizes, and sufficient light and air. Some cities, like Chicago and Boston, imposed outright height caps. But there was no systematic or comprehensive set of maps that detailed what could or could not built in all areas of the city.

To city officials and reformers, the uncoordinated, overcrowded city was a mess. Low income housing created dens of vice and disease. Factories in the heart of the city drew massive crowds of workers during the day, generating congestion and health and fire hazards. A real estate developer who put up a new skyscraper would instantly place unsuspecting neighbors in the shadows. When prices were high, developers would rush into the market pell-mell, generating speculative gluts that would then lower property values. Also, some forward-thinking developers might attempt to redevelop a block for a different use, rending the surrounding buildings obsolete, and causing a rapid loss of value to them. And so on. The perception was that the uncoordinated city was a bad city, and it needed to be ordered and organized for the greater good.

The Periphery

But concerns abounded not just about the center, but also the periphery. As streetcars and subways expanded outward, they allowed for Americans to embrace suburban living. The real estate footprint of American cities expanded accordingly; often beyond the municipal boundaries of central city itself. As a result, these central cities began annexing surrounding towns and villages to keep its tax base steady and ensure more orderly growth of the region. These towns and villages were contented to be annexed because they could then benefit from the central city’s suite of services and infrastructure investments at a discounted cost (assuming the corruption of the city government wasn’t too odious). These village could tap into the municipal water supply, get protection from police and fire departments, and have their roads and streets paved by the department of public works. In short, the annexation movement at the turn of the 20^th century was a deal that both sides were willing to embrace.

Annexation and Land Use

But what annexation meant for the central cities is that they were now in charge of vast estates of “virgin” urban land in the periphery that were, not that long ago, farms and rural villages. The planners and reformers held their collective breadth and urged action before these areas produced the ills they witnessed in the 19^th century—the congestion, the diseases, the overcrowding, the extreme poverty, and the rapid succession of neighborhoods with no warning. It might be that in the central core it was too late to do much except regulate future uses, but the vast hinterlands of America’s metropolises could be organized–zoned–into neat little boxes according the planners’ version of the American Dream—each household gets a lot and a house with greenery and clear air isolated from the chaos and hurly-burly of city life.

1916: The Birth of Zoning

As described in Post I of this series, in the 1910s in New York City, the political and economic forces that lead to zoning began to form. Local progressive leaders were increasingly able to have a say in government affairs. The sequence of events in New York began in 1911, when Fifth Avenue retailers petitioned the city for help against encroaching factories. This eventually led to the formation of the Heights of Buildings Commission (HBC), lead by lawyer Edward M. Bassett. The commissioners studied in great detail the nature of the problems, and the attempts to solve them in other places. In 1913, the Commission issued a report. It recommended the zoning of the city, and offered rules on usage, lot coverage, and building height. The HBC essentially had two overriding concerns: stopping overcrowding and its related problems, and preserving real estate values when new buildings went up or when the use of neighborhoods changed.

Zoning is the Future

They couldn’t influence was already built, and so they had to concentrate on the future. The bulk rules limited the ratio of the building footprint to the lot size. The height rules were based on the idea of setbacks—building had to set back after some height, based on the width of the street. The use rules created separate areas for commercial, residential, and industrial structures. In 1916, their recommendation became the zoning law of the land.

The regulations, in practice, were not overly restrictive because Bassett needed to get buy-in from the various stakeholders, and he feared that being too aggressive would lead to law suits that claimed the rules violated the sanctity of private property. In fact, it has been estimated that if built out to full, New York could have held 55 million people.

Variances and Re-zonings

But the zoning founders knew that there had to be some kind of mechanism for individual property holders to seek some dispensation if they could argue hardship. Two processes were established. First individual property owners could seek variances if they could claim good reason and their neighbors did not protest. Second, collectively, a neighborhood could petition the city to rezone particular blocks.

Applying for a variance then gave power to each member of the neighborhood to say no. If they felt the variance was not in their own personal benefit—they could issue a protest as a way to influence the zoning commissioners who were to vote on it. Secondly, the rezoning petitions promoted the possibility that neighbors could work together to reduce the density of their neighborhood further. In essence, they could change the rules in their favor to prevent the neighborhood from changing in away they did not see fit.

And petition they city, they did! Between 1916 and 1959, the zoning codes added some eight pages of single spaced zoning amendments. Some of them were needed because the times were changing and the rules had to reflect new uses and spaces, such as parking lots and gas stations. But the procedure was ad hoc and piecemeal.

Zoning Maps for Neighborhood “14A” in Queens from 1961 (top) and at present (bottom). Compared to the 1916 maps shown above, neighborhood zoning has become increasingly complex and proscribed. If you look carefully you can see how many more zones were added between 1961 and 2019. Source: NYC Department of City Planning.

From 16 to 61

As the 20^th century progressed, the original zoning founders were not happy. They looked around at how things were going, especially during the Roaring Twenties, and they felt the rules were not strict enough. The giant Art Deco Towers, like the Empire State Building and the Chrysler Buildings, were breaking world records despite the attempt to curtail heights. The outer boroughs were growing like weeds and uses remained too mixed for their tastes. Plus, the automobile was coming to dominate intra-city transportation, and the original rules had to little say about how cars were to be incorporated into the land usage regulations.

In 1950, a report commissioned by the city, suggested a different approach, and a follow up report in 1958, established new zoning maps, which went into effect on December 15^th, 1961. Instead of three simple use categories—commercial, residential, and unrestricted—each was now going to have several, finer-grained subcategories. For example, rather than one simple commercial category, there were now going to be eight, ranging from C1 to C8, where, for example, C1 and C2 where zones for local shopping areas, and C5 and C6 were zones for downtown office development. Neighborhood use and bulk rules were going to be mapped with surgical precision in order to minimize neighborhood change.

FAR Limits

There were no limits to height per se, but the new rules regulated bulk by establishing maximum floor area ratios (FARs), which essentially placed caps on building volume. In Manhattan the FAR in the densest areas were fixed between 10 and 15. For a FAR limit of 10, the developer had to the choice to provide 10 floors on the entire lot, 20 floors on half the lot, or 40 floors on a quarter of the lot. But perhaps, just as importantly, the FAR caps for much of the outer boroughs were set at one or less. This, by law, mandated that large swaths of the city must remain one- or two-family homes. While the 1916 codes incentivized free-standing homes in the suburban areas, the 1961 rules required it to be so. This was a legal, backdoor means of preventing the real estate market from functioning according to the law of supply and demand. The city was now placed under an invisible FAR geodesic dome, with a reduced maximum population of 12 million.

From Yes to No to Yes?

The history of zoning regulations through the twentieth century is like the closing of a vise. The first set of rules were just the foot in the door–they established the idea that property markets would be governed in a particular decentralized way. But planners and officials felt that the original codes did not go far enough. They did not contain the mess, and the grip of the vise had to be made tighter. The residents were happy to go along with this a as it prevented changes around them.[2]

Ironically, the tightening effects on cities were relatively muted until the 21st century. After World War II, urban growth took place either in the suburban fringes of central cities, or in the Sunbelt Cities, where there was still plenty of open land. But the changing nature of work and the rising skills premium has drawn people back to the older big cities. And when they arrive, they find that the place has been effectively squeezed. Whether people realize or not, NIMBYists have used the Zoning Power of No to make the city a game of real estate musical chairs, where the winner has the money to pay for a chair, at the expense of someone else. A century ago, the zoning founders dreamed of an ordered city, a beautiful city, but their legacy is a closed city.

There are ways to move residents from No to Yes, but it requires bold leadership. I have some policy suggestions here. But what can take the place of zoning? I leave that for a future post.

Continue reading Part I here, or Part II here.

—

[1] Los Angeles seems to have been the first city in the U.S. to begin zoning in 1908, but evidently it was not as comprehensive as New York.

[2] It’s hard to see it now, but there were other paths that could have been taken that would have reduced NIMBYism, but I will leave that discussion for a future post.

March 27, 2019 by Jason Barr 11 Comments

Revisiting 1916 (Part I): The History of New York City’s First Zoning Resolution

Jason M. Barr March 27, 2019

[Note this the first part of a three-part series on New York’s first comprehensive land use regulations, enacted in 1916. Part I focuses on the history and thinking of the city’s reformers. Part II reviews this thinking through the lens of modern economic analysis. Part III argues that the ideas and rules from 1916 helped to set the stage for today’s NIMBYism and housing affordability problems.]

A great many people suffer from gastric troubles. This is due in the first place to the fact that the people are compelled to eat a dry lunch, sandwiches, etc….It is also due to the congestion. It is hardly possible for a great many of the factory employees, especially on the higher floors to have the time to go down and eat their lunches in a neighboring restaurant and then have time to come back again to their work in the high buildings. They might have time if there were not such congestion. –Statement by Dr. George M. Price, Director of the Joint Board of Sanitary Control, to the NYC Commission on Building Districts and Restrictions, May 24, 1916

One of the most visible, and awe-inspiring, features of the New York City skyline is its Art Deco skyscrapers from the Roaring Twenties. Giants from another age, they are not just symbols of a time when business titans clashed in their battles to conquer the sky. But, also, they are reminders of the city’s first foray into the world of zoning—the specific set of rules that regulated the use, height, and bulk of every property in the metropolis. The “wedding cake” architecture was the result of developers being required to set their buildings back from the street line as they went higher. For architects, looking to move away from the old Beaux Arts designs, the rules nudged them into a modern style: sleek, dignified, and tall.

Manhattan’s Art Deco towers of the Roaring Twenties. The so-called Wedding Cake style of architecture was a result of the 1916 zoning codes, which required buildings be setback from the streetline as they rose higher.

New York, BZ (Before Zoning)

It’s hard to believe today but before 1916 there were few rules on what a landowner could do on his lot. Of course, any structure had to conform to fire and safety codes. And, from 1901, new tenement buildings were more regulated. But for the rest of the city, there were no restrictions on use or height. Factories could exist side-by-side single family homes, and skyscrapers could rise straight up to the moon. Lower Manhattan was a dense jumble of all kinds of buildings, from high-end offices to factories to warehouses to stores to forgotten 18^th century townhouses. The new building technology allowed for structures to rise twenty, thirty, or even fifty stories. The narrow streets were being turned into dark caverns, while throngs of workers poured in and out of the district like blood from a beating heart.

Brooklyn and Queens: The Wild West

It was not just the congestion and shadows that worried planners, social reformers, and government officials, it was also the future growth of the city itself. About half of the City of Greater New York—comprised of the five boroughs of the Bronx, Brooklyn, Manhattan, Queens, and Staten Island—contained land that was either under- or undeveloped. The subway was being built out to all corners, and the automobile and truck were beginning to have their impacts. The outer boroughs were a Wild West of opportunity and, if not checked, could turn the rest of the city into the same unregulated mess as Manhattan.

Then there were the merchants along Fifth Avenue, who wanted to keep their boulevard a clean, high-class mall. They saw the encroaching sweatshop factories–which made clothes for their shops–and they didn’t like it one bit. They caused too much crowding, which forced their customers to be jostled by the working-class, immigrant riffraff. The merchants petitioned the city to take action against their complaints.

The black areas show the unimproved properties in the Bronx (left) and Brooklyn (Brooklyn) as of 1913. Zoning planners wanted to prevent density, congestion, and shadows from emerging in these neighborhoods. Source: *Report of the Heights of Buildings Commission*, 1913

Planning a Plan

Attempts to cure New York’s urban ills had begun at least as early as after the Civil War. Social reformers were horrified by what they saw spilling forth from the dense ethnic enclaves like Five Points in Lower Manhattan. The slums were hives of disease, poverty, vice, and drunkenness. The culmination of the reform efforts was the 1901 Tenement House Act. The law required that new buildings have large courtyards for light and air. And the structures needed to be set back if they rose greater than 1.5 times the width of the street.

By the 1910s, progressives turned their eyes to broader urban problems, beyond tenement housing. Initial actions began in earnest in February 1913, with the creation of the Heights of Buildings Commission (HBC). The HBC was brought into existence by Manhattan Borough President, George McAneny, based on consultations with lawyer and reformer, Edward M. Bassett, who then chaired the HBC.

The Report

After studying the building regulations in other cities throughout the world, and what might be constitutional in the U.S., the commissioners felt that the best way forward would be to carve up the land into zones, which stipulated allowable use, height, and lot coverage. Factories would be separated from homes. Buildings would not have outright height caps but would have to setback from the street as they got higher. And courtyards and open space would be required, especially in residential areas. Their findings were summarized in the Report of the Heights Buildings Commission, published in December of 1913.

Based on the report, in 1914, New York State amended its constitution to allow for the city to create and enforce the zoning regulations. With its new powers, the city’s legislative body, the Board of Estimate and Apportionment, created the Commission on Buildings Districts and Restrictions (CBDR) to write the new law. The CBDR was also chaired by Edward Bassett, who continued to be the driving force behind enacting and implementing the zoning legislation.

Bassett’s Coalition

Bassett recruited the various commission participants from a relatively diverse (for the time) range of backgrounds, including from real estate, business, and civic and planning groups. Though Bassett had his particular opinions about regulating the city (see below), he drew from a wider population in order to get buy-in from all those who had a particular interest, vested or otherwise, in regulating the city’s real estate. In the end, he was able to garner wide support for his zoning ideas. Though not everyone got everything they wanted, they all saw the possible gains from the plan, and, in the end, went along.

As historian Keith Revell discusses, these supporters fell into two categories. First were the real estate and business communities, which included, skyscraper owners and developers, the Fifth Avenue merchants, and tax officials, who saw the rules as helping to protect private property. By regulating, but not liming, building heights, they saw a way to reduce some of the negative impacts of unregulated property markets without curtailing their ability to make a profit from the land. They were also onboard because of the relatively poor health of the real estate market in the years following the Panic of 1907. They saw restrictions as a way to limit oversupply.

On the other hand, the city planners, municipal engineers, architects, and public health experts saw the rules as way to control private property for public purposes—to empower the city government to begin to systematically attack some of the social issues generated by a crowded metropolis. These people felt that zoning was the first step to a more aggressive approach to city planning, which, they hoped, would follow in the subsequent years (and this was the side Bassett was on).

The Equitable Building is often cited as being the cause of the 1916 Zoning Resolution. This is not true. The codes would have gone into effect even if it was never built. Its bulk became a symbol of the ills of unregulated height, but it was only one example of many being discussed at the time.

On the Impact of the Equitable Building

Before we proceed, however, it’s important to rectify a misconception. A conventional wisdom about New York’s zoning laws was that it was a direct result of the construction the Equitable Building in Lower Manhattan. It is frequently stated or implied that amidst the horror of seeing the 38-story building rise straight up along the narrow streets, government officials fled to their desks and immediately drafted the zoning laws. To be sure, structures like the Equitable Building were on the minds of those crafting the legislation, but it’s important to remember that the formal process began at least as early as February 1913, and perhaps earlier due to agitation by the Fifth Avenue Association, who crafted a statement in 1911, hoping to receive special protections for their neighborhood.

Rebuilding after the Fire

The Equitable Building was announced on August 13, 1912, and renderings were circulated in the press. It was built to replace the previous Equitable Building, which burned to the ground in a fire (which was also a constant concern of city leaders). But it was not completed until 1915, at least two years into the legislative process. Certainly, during its construction from 1913 to 1915, people saw the Equitable Building as a terrible example of too much bulk, but the zoning framers were focused on the entire city, and skyscrapers occupied only one, albeit significant, part of their attention.

Lower Manhattan had achieved it cavernous status over the preceding two decades. As examples, the HBC’s report applies the proposed height rules to eight skyscrapers already completed or in the works. Though the Equitable was among the eight, they found all would have been reduced, to some degree, in bulk or height if completed with the rules in effect. In the 299-page, Final Report of the Commission on Building Districts and Restrictions, the Equitable Building doesn’t make its first mention until page 105, and, in total, is referenced on only four pages. Again, this is not to say the Equitable wasn’t on people’s minds, but only that it was one example of many tall buildings and the problems created by them as a class of structures. Suffice it to say, the evidence strongly suggests that the 1916 zoning codes would have passed even without the existence of the Equitable Building. No one building was that powerful.

The Zones

And thus on July 25, 1916, the New York City government adopted the nation’s first comprehensive zoning ordinance. It was “comprehensive” because every single of piece of property with the borders of New York was subject to its rules. Compared to today, it was relatively simple. Three set maps were created, regulating height, use, and lot coverage.

Height

The ordinance created five height districts. Each was designated by a “multiple,” which established how high a building could rise straight up before it had to be set back from the street line in relationship to the width of the street (1, 1.25, 1.5, 2, 2.5). In other words, the multiple created an “envelope” into which the building had to fit. The idea was that as a building got taller, the setback ensured that some sunlight would be available on the street.

The 1916 zoning codes established setback rule for buildings based on the width of the street. These drawing show examples of how the rules would apply. Source: *Final Report of the New York City Commission on Building Districts and Resolutions*, 1916.

For example, say a lot was on a street that was 60 feet (18.3 meters) wide. In a 2-times district, the building could rise 120 feet (36.6 meters or about 10 stories) before it had to be set back. After that it could rise four feet for every two feet set back. A tower could rise to unlimited height if its footprint was no more than 25% of the lot area. The most liberal zone was the 2.5-times district in Lower Manhattan. Much of Midtown was a 2-times district. Most of the outer-borough suburban areas were 1-times districts.

Use

The second set of maps established three use zones: residential, commercial (offices, retail, light industrial), and unrestricted (for any type of property but were intended for large polluting factories, utilities, and port and transportation facilities). About two-fifths of Manhattan, and about two-thirds of the entire city was zoned as residential.

Lot Coverage

Lastly, the ordinance regulated the lot coverage, or the area of a building’s footprint relative to the size of the lot. In the most restricted “E” districts, for example, it was necessary that the first floor of buildings cover no more than 50% of the cite, and second floors had to cover no more than 30%. The least restricted “A” districts could have nearly 100% coverage.

What Hath Thou Wrought?

While I will have to more to say in future posts about the long run consequences of the 1916 regulations, the questions remain: were they successful and did they unfold as intended? The answers, of course, depend on the eye of the beholder. The ordinance was a paradoxical document. On one hand it represented a radical assertion of the right of city government to control private property, and yet, on the other hand, it largely locked in the city’s existing spatial structure. Tall buildings were permitted in Lower Manhattan and Midtown. And the far flung reaches of the city were to be set aside for one- and two-family homes. Factories were allowed to remain along the shores; and apartment buildings were to hug the subway lines. As Revell writes,

Height and use districts were based on largely preexisting patterns of development, and their implementation required neither the relocation of industries nor the removal of tall buildings. The ordinance stabilized those patterns, giving official sanction and legal protection to the status quo. At once sweeping and conservative, the zoning ordinance grew out years of failed attempts to unite private and public efforts to guide the growth of the city’s landscape, especially in lower Manhattan.

Bassett’s Perspective

For Edward Bassett, the ordinance did not live up to his hopes and expectations. First, he was of the mindset that the zoning codes would be the first step towards a much more involved role for city government. The zoning rules were an indirect method of planning in that they basically established what could not be done, but not what must be done. As a result, they left the real estate market largely intact. But Bassett’s hope was that once the state and city established the power to control private property, planners would be free to actively arrange New York to produce what they envisioned as the “good” city. But this never materialized.

This map shows the distribution of the setback multiples throughout Manhattan, and parts of the Bronx and Brooklyn. The Art Deco giants of the Roaring Twenties were built in 2.5- and 2-times districts. Source.

The Skyscraper

Bassett was also a staunch opponent of skyscrapers. By focusing on their high costs (and ignoring their benefits), he was convinced they were inefficient and a misallocation of resources. His statements echoed many of the time, who saw them as inappropriate for a well-designed city:

Few skyscrapers pay large net returns. Most of them pay only moderate returns. The cost per cubic foot of tall buildings is greater than that for low buildings.…However, the very tall buildings demand many things out of proportion to their increased bulk….But even though a high building may pay a moderate net return as long as it is isolated and surrounded by low buildings so that all its floors and offices are light and attractive, the result may be very different after its is surrounded by similar buildings, shutting off light and reducing rentals on the lower floors.

He was convinced that the 1916 zoning rules would basically “tax” the skyscraper out of existence. The report of the HBC states,

For plots of normal size, it is estimated that buildings will reach their economic height when through the application of the court and set-back regulations the area of the building has been reduced to about 60 per cent of the area of the plot. This will mean that for buildings on an interior plot on a sixty foot street, the economic height limit will be about 14 to 17 stories. On a corner plot on a 100 foot street, the economic height limit will be probably 16 to 20 stories.

The Roar

Though there was nearly a decade-long lull in skyscraper building after 1916, because of World War I and a sharp depression in 1920-21, when developers returned to highrise office construction in the mid-1920s, they did so with a vengeance, constructing the great Art Deco giants we know and love. But Bassett complained that developers were gaming the system, and that height caps should have been imposed. By amassing very large plots, developers could construct their super-high towers and still follow the zoning rules. The completion of the Empire State Building in 1930, for example, only helped to fuel the belief that the law was almost as good as no law at all. In the end, urban economics would continue to assert itself. Density and congestion in the central city were going to be the norm. We would get the skyline we have today as a result.

The Evolution of Zoning

The ordinance did allow for appeals from property owners to change local zoning designations; and appeal they did! By 1959, the code contained eight pages of single-spaced line items listing modifications. Most were for downzoning—for making neighborhoods less dense. And by the late 1940s, there was a growing belief that the times had changed enough to warrant a revision or re-writing of the zoning codes. This led to the Zoning Resolution of 1961, which is largely what the city has today. (A discussion of these rules are left for future posts.)

But the 1916 codes, at the time, represented the most aggressive approach a government could take to obtain approval from the city’s diverse communities. The zoning founders had in mind a much more regulated and dispersed city. They were operating with very specific beliefs about the evils of congestion and hyper-density, and they were determined to impose their ideas on the city. Since then, however, economic science has developed tools to better analyze the costs and benefits of urban life. In the next blog post, we turn to what this economic analysis would say about the New York’s 1916 zoning resolution that changed America.

Continue reading Part II here or Part III here.