How Urban Planning Processes Drive Up Housing Costs

Municipal planning processes that rely on discretionary approval systems are a driver of the current North American housing affordability crisis, according to research published in the journal Urban Governance. By necessitating case-by-case negotiations between developers and local officials, these systems create financial barriers that favor large-scale, luxury-oriented projects while effectively stalling the development of housing stock.

Key Takeaways:

• Discretionary planning systems require developers to engage in prolonged negotiations, which increases the cost of development.
• A transition to “by-right” development—where projects are approved with no additional steps to follow as long as they meet or “check every box” on the municipality’s list of requirements—can reduce time and associated financial overhead.
• The high cost of navigating municipal bureaucracy is often passed directly to the consumer, contributing to high housing costs.

The Impact of Discretionary Approval on Housing Supply

The current housing landscape is often attributed to land scarcity, rising construction costs, or speculative investors, yet Austin Zwick, associate teaching professor and program director for the policy studies program in the College of Professional Studies and the Maxwell School of Citizenship and Public Affairs at Syracuse University, points to planning processes municipalities are using. In his research, Zwick identifies “de facto discretionary approval systems” as a culprit.

In these systems, meeting all code requirements is insufficient for project approval. Instead, developers must navigate a series of negotiations with municipal planners, elected officials, and sometimes organized public organizations. While intended to foster flexibility and ensure the inclusion of public amenities and social housing units, this process introduces uncertainty. According to Zwick, builders with the time, money, and political access can endure prolonged negotiations, and then they will pass those endured costs onto the buyers, whereas small-time builders can’t, leading to a market dominated by large-scale luxury development.

Regulatory Bottlenecks

The relationship between regulatory friction and market outcomes involves the challenges of navigating municipal systems. Just as complex, discretionary administrative hurdles in urban planning can prevent the delivery of “regular housing for regular people,” bureaucratic inefficiencies can delay development.

Historical Precedent and the Vancouver Case Study

Zwick utilizes a case study of a stalled development in Vancouver, British Columbia, to quantify the impact of discretionary delays. In this instance, the requirement for lengthy negotiations, public hearings, and political approvals added hundreds of thousands of dollars per unit to a condo building before construction ever began. These costs are eventually internalized by the buyer, rendering the final product inaccessible to the average earner.

Moving Toward “By-Right” Systems

The solution proposed by Zwick involves a fundamental shift toward “by-right” zoning and approval processes. Under this framework, if a developer meets the requirements—such as checking every box on the municipality’s list of requirements or standards—approval is granted with no additional steps to follow. By removing the discretionary element, municipalities can reduce the risk and cost of development, effectively lowering the barrier to entry for smaller builders.

The transition to such a system requires local governments to streamline their own processes. Zwick suggests that tackling the housing crisis isn’t just about federal funding or sweeping new policy, but for local governments to streamline their own processes.

The trajectory of this research suggests that urban housing policy can prioritize efficiency and supply-side accessibility. As researchers continue to analyze the housing crisis, the integration of data-driven planning will remain a focus. Future studies are expected to further quantify the correlation between specific zoning policies and housing affordability.