Houston: 2013 Minimum Lot Size Reform & Land Prices
According to a 2024 working paper (The Effects of Minimum-Lot-Size Reform on Houston Land Values by Emily Hamilton), a 2013 change that substantially reduced minimum lot sizes across Houston had no significant effect on land values. The reform aimed to allow denser housing development.
Why it matters: Some critics worry that zoning changes that allow greater density, known as "upzoning," will increase land prices and hurt affordability, at least in the short term. However, the Houston example suggests broad zoning reforms may avoid this pitfall by facilitating more housing supply.
The details: In 1998, Houston cut minimum lot sizes from 5,000 to 1,400 square feet within the I-610 Loop. In 2013, officials extended this reform to the entire city where sewers are available.
Economist Emily Hamilton of George Mason University analyzed the 2013 change using a "difference-in-difference" model and property tax assessment data from 2005 to 2021.
In most statistical models, Hamilton found the reform had no significant effect on land values outside the I-610 Loop relative to inside it.
In a few specifications looking only at areas closest to the city center and most likely to see townhouse development, the reform decreased assessed land values by 10-14%.
Unlike recent reforms in Chicago and Minneapolis that had muted impacts on construction, Houston's changes have enabled extensive townhouse development, transforming many neighborhoods.
Hamilton argues that Houston's citywide reform created a large "zoning buffer," distributing new housing potential across a 541-square-mile area outside the urban core.
This contrasts with geographically narrow upzoning around Chicago transit stations, which was found to raise land prices by 15-23%.
Hamilton says the downward pressure of an additional housing supply in Houston may have offset any increase in land values from greater development potential.
Yes, but: Tax assessment data doesn't always match market values, although contested assessments are common in Texas. Houston's relatively liberal land use rules could limit applicability to more regulated markets.
Methodology: The study used a difference-in-difference model controlling for neighborhood and time trends. Models incorporated spatial effects and Census demographic data in some specifications.
Bottomline: Upzoning doesn't necessarily mean higher land costs at a broad enough scale. Pairing density reforms with policies to incentivize housing supply could help maximize affordability benefits.