Defense Against The Demons Of Land Use Regulations

Why Care About San Francisco’s Draconian Housing Regulations?

“Robert Tillman’s idea of converting a coin-operated laundromat into a new apartment building initially had a lot of things going for it.

Except for his laundromat–one of three within a 100-yard radius in the heart of San Francisco’s Mission District–no businesses or tenants were located on his property, meaning no one would be displaced by its redevelopment. The site was already zoned for housing and was close to a major commuter rail stop, big pluses in a highly regulated, transit-obsessed city. Best of all, the new building would bring 75 additional apartment units to a city suffering from a severe housing shortage and some of the highest rents in the country.

But instead of sailing through the permitting process, Tillman has spent five years and over $1 million just trying to get approval to redevelop his own property. Anti-gentrification activists and city politicians have gone to extreme lengths to stop him.

“My site is the easiest site in the city to build,” he says, and yet “it’s taken me longer to get to this point than it took for the United States to win World War II.” ¹

Meanwhile, the median home in San Francisco sold for $1.7 million in 2025. ²

In this essay, I attempt to answer the questions:

• What harms do draconian regulations cause?
• Why do draconian land use regulations in SF persist if they are so harmful?
• How can land use regulations be reformed?

What harms do draconian regulations cause?

Draconian housing regulations lead to increased:

• homelessness
• poverty
• civil society decay and infrastructure costs
• environmental degradation
• infertility

Homelessness

Absolute rent levels and vacancy rates are the most powerful predictors of homelessness. While individual vulnerabilities determine which specific people are most at risk of losing stable shelter, the baseline rate of homelessness in a city is dictated by the structural supply of housing. When housing becomes highly scarce, the price floor for the cheapest available living spaces rises drastically. As median rents escalate, lower-income households are forced to spend disproportionate shares of their income on shelter. In high-cost rental markets, any sudden financial shock – an unexpected medical expense, a missed shift, or an auto repair – can instantly push a precarious household past the brink of eviction.³⁴

Because high barriers to construction also systematically block the development of low-cost, flexible housing models (such as single-room occupancy buildings or micro-apartments), individuals who lose their apartments have no lower-tier market housing options left to fall back on, converting a housing shortage directly into an unsheltered crisis.⁵

Poverty

When workers are priced out of San Francisco, they are forced to accept employment in less productive, lower-wage markets. Economists Chang-Tai Hsieh and Enrico Moretti quantified this misallocation, calculating that land-use restrictions enacted between 1964 and 2009 lowered aggregate US GDP growth by more than 36 percent – a permanent loss of hundreds of billions of dollars in national wealth.⁶

When households must dedicate 40 to 50 percent of their gross income to rent or mortgages, it drains capital that would otherwise fund technical education, angel investments, equity crowdfunding, or entrepreneurial startups.

Artificial housing scarcity creates an unearned windfall for incumbent property owners while locking younger workers and newcomers out. The result is a widening wealth gap driven not by productive merit but by passive real estate appreciation.

Civil Decay and Infrastructure costs

When workers cannot afford to live near major employment hubs, they push outward into remote, low-density exurbs. This spatial mismatch results in severe commute times, overloading regional road networks and transit systems. The daily friction of multi-hour commutes degrades workforce energy, reduces voluntary civic participation, and lowers overall workplace performance.

Municipalities with expensive real estate face chronic shortages of nurses, teachers, police officers, and maintenance technicians. When these essential workers cannot afford to live within reasonable proximity to their jobs, the baseline operational resilience and safety of the entire city are compromised.

Environmental Degradation

When workers are priced out of high-density employment centers due to artificial housing restrictions, residents relocate to distant exurbs where land-use restrictions are more permissive. This expansion of the urban footprint leads to fragmentation of ecosystems and the destruction of forests, wetlands, and agricultural land.⁷

By blocking housing development near job centers and mass transit lines, zoning regulations force extreme car dependency. A resident living in an exterior exurb of the San Francisco Bay Area emits nearly three times more carbon dioxide equivalent per year from driving than a resident living within the dense urban core.⁸

A one percentage point increase in the share of single-family detached homes within a metropolitan statistical area corresponds to a measurable 1.5 percent increase in per-capita on-road carbon dioxide emissions.⁹

Low-density, single-family detached homes are significantly less energy-efficient than multi-unit residential structures. Detached homes expose all four walls and the entire roofline to external elements, resulting in substantial thermal loss and demanding vastly higher natural gas or electrical loads for heating and cooling.

Multi-unit buildings reduce pollution by 45 to 62 percent per person relative to detached single-family layouts.¹⁰ Furthermore, dense, shared-wall designs require up to three times less carbon-intensive structural material per resident during the initial construction phase.

Infertility

High housing prices contribute to declining total fertility rates. High housing costs force young adults to remain in smaller apartments or shared living arrangements longer. Families cannot afford for one spouse to stay home and care for the children. This compromises long-term economic stability by shrinking the future labor force and worsening dependency ratios.

But it does not have to be this way.

A Tale of Two Cities: San Francisco vs. Tokyo

From 2000 to 2025, Tokyo’s population increased by roughly 16 percent, from approximately 12.1 million to approximately 14.0 million.¹¹ Yet Tokyo’s inflation-adjusted home prices remained flat – around 50 million yen for a typical condominium unit in central Tokyo, a price that held steady across two decades.¹² In price per square foot terms, Tokyo’s real estate effectively stayed flat at around $500 to $800 in constant 2025 dollars.¹³

Meanwhile, San Francisco’s population increased by roughly 6 percent, from approximately 777,000 to approximately 826,000, though it peaked at 874,000 in 2020 before a post-pandemic decline.¹⁴ Yet San Francisco’s median home prices rose 3.3 times over the same period, from roughly $200 to $300 per square foot to roughly $800 to $1,000+ per square foot.¹⁵

Why did Tokyo’s housing prices remain flat, despite a larger population increase than San Francisco?

The reason is that Tokyo’s government allowed much more new housing construction than San Francisco.

From 2000 through 2025, the City and County of San Francisco authorized an average of approximately 3,000 net new housing units per year, or roughly 3.6 building permits per 1,000 residents annually.¹⁶

Over the same period, the Tokyo Metropolis on average allowed 125,000 to 150,000 new housing starts per year, or approximately 9 to 12 housing starts per 1,000 residents annually.¹⁷

When normalized for population, Tokyo permits and constructs new residential units at a rate roughly three times higher than San Francisco.

Why the disparity?

Tokyo operates under a streamlined, national zoning law established under the Japanese Building Standards Act, which treats residential construction largely as a by-right administrative process, severely limiting the capacity of municipal authorities or local opposition to block dense development.¹⁸

By contrast, San Francisco relies heavily on local discretionary review, conditional use approvals, and neighborhood-level appeals.¹⁹

These land-use regulations (the “zoning tax”) add roughly 50 percent to the cost of housing in San Francisco.²⁰

The “zoning tax” is the extra cost added to a piece of land not because of its natural scarcity, location, or physical attributes, but because of government-imposed barriers.

In a completely unconstrained or free market, the price of a residential lot would be close to the cost of acquiring raw land and converting it into a buildable site (grading, bringing in utilities, basic infrastructure).

In San Francisco, roughly 88 percent of the total price of a residential lot is driven entirely by regulatory barriers to entry. Only 12 percent of the lot’s price reflects the actual cost of purchasing and preparing the land.²¹²²

The Pitchforks Of Public Choice: How Do Land Use Regulations Cause Harm?

Discretionary Permitting and Multi-Layered Review

Unlike by-right zoning – where a project is automatically approved if it meets predefined rules – developers must often face years of lawsuits and bureaucratic delay before they make it through the regulatory gauntlet of conditional use permits, architectural reviews, and environmental impact assessments. In California, for example, the California Environmental Quality Act (CEQA) is frequently leveraged by local opposition to delay or block dense projects based on traffic, noise, or aesthetic impacts, adding years of carrying costs before ground is ever broken.²³

Minimum Parking Requirements

Parking mandates add massive overhead, with above-ground structured parking costing approximately $52,000 per space and underground parking averaging around $73,000 per space.²⁴ Because the cost must be absorbed by the residential units, parking minimums often make smaller, lower-cost apartments economically unviable or physically impossible to fit on smaller urban lots.

Density Limits and Floor Area Ratios (FAR)

Zoning ordinances strictly regulate density through maximum units per acre or restrictive floor area ratios. Low FAR caps prevent developers from building up, forcing them to build wide, low-rise structures that fail to optimize high land costs. Combined with height limits, these restrictions artificially cap the number of units over which a developer can amortize fixed land and soft costs.²⁵

Single-Stair Exit Requirements

In most of the United States and Canada, building codes require multi-family buildings taller than three stories to have at least two internal exit stairways. This mandate restricts design efficiency, requiring long central corridors to connect the two staircases. It effectively prevents the construction of “point access blocks” (slender buildings with a single central stair and elevator serving a small number of apartments per floor). The dual-stair rule makes it difficult to develop high-density housing on small, narrow urban infill lots and forces a layout that minimizes natural light and cross-ventilation.²⁶

Disproportionate Impact Fees.

Municipalities often levy substantial development impact fees to fund broader civic infrastructure (parks, schools, water treatment). While these impact fees can reduce public opposition to development (by internalizing the cost of public goods and reducing the additional tax burden on the surrounding community), sometimes they are set at levels exorbitantly disproportionate to the cost of providing those goods. Such disproportionate impact fees raise the drawbridge and make new development financially unfeasible.²⁷

Inclusionary Zoning Mandates.

Inclusionary zoning policies require developers to set aside a specific percentage of units (often 10 to 20 percent) at below-market rates. Rather than being absorbed purely by developer profit margins, the costs of cross-subsidizing below-market units are passed directly to consumers through higher prices on market-rate homes, while simultaneously reducing the average size of newly constructed housing units. Moreover, if the market-rate units cannot generate enough premium to subsidize the cost of the below-market units and high impact fees, developers will simply redirect capital less restrictive jurisdictions.²⁸

Why Are Housing Laws So Perverse?

Why do so many cities have such perverse policies that drive up the cost of housing?

Homes are typically the largest component of a family’s portfolio of assets. As a result, single-family homeowners act as risk-averse voters – “homevoters” in William Fischel’s coinage²⁹ – who use local zoning to protect their primary asset.

Such voters suffer from a number of fears that drive their voting behavior, including fear of:

1. Home Value Loss
2. Blacks, Immigrants, and Poor People
3. Externalities (Traffic, Parking, Noise, Shade, Uglification, Views)
4. Increased Property Taxes³⁰

To drastically decrease the cost of housing in San Francisco, builders have to drastically increase the supply. But to drastically increase the supply, land-use regulations must be lifted. And voters will not support housing regulation reform unless their fears are addressed to their satisfaction.

Home Value Loss

Home-Equity Insurance

While upzoning increases aggregate land value, neighbors may fear localized volatility or downside risk. Originally proposed by William Fischel,³¹ home-equity insurance lets local governments or private insurers offer policies to protect homeowners against property devaluation following a zoning change. By mitigating the downside risk while leaving the upside intact, the financial incentive to block new construction is reduced.

Street-Level Upzoning (Street Votes)

Popularized by organizations like the YIMBY Alliance,³² this method decentralizes zoning authority to the individual block or street level. A qualified majority – typically two-thirds of residents on a single street – can vote to collectively permit higher-density development such as townhouses or upwards extensions. This ensures that the massive financial windfall of upzoning goes directly to the immediate property owners on that street, transforming potential opponents into active beneficiaries.

Blacks, Immigrants, and Poor People

Zoning restrictions have historically been utilized to enforce racial and economic segregation.³³ The exclusionary intent is not speculative: zoning laws were created explicitly to bar the people that existing residents fear.³⁴ Economists and legal scholars suggest two methods to address this.

By-Right Development and Administrative Approvals

Economists recommend shifting from discretionary zoning approvals (which require public hearings) to objective, by-right development standards managed at the staff level.³⁵ Public hearings disproportionately attract older, wealthier, and exclusionary voices. Removing the public veto for projects that meet pre-established design guidelines prevents exclusionary animus from blocking housing.

State-Level Preemption

When local jurisdictions use zoning to maintain exclusive enclaves, higher-level legislative interventions – such as state-wide legalization of accessory dwelling units or duplexes – dilute the localized political power of exclusionary voting blocs.

Externalities (Traffic, Parking, Noise, Sunlight)

Neighbors frequently object to the immediate physical disruptions of increased density. Economists suggest pricing and design regulations to internalize these costs.

Angled Light Planes and Building Envelopes

As used in Japan’s zoning system, mandates for specific setback angles and light planes ensure new multi-story buildings cannot cast permanent shadows over neighboring properties.³⁶

Priced Curbside Parking and Controlled Parking Districts

Donald Shoup’s approach eliminates mandatory minimum parking requirements and instead implements market-rate curbside parking or neighborhood parking permits. Free parking passes can be issued to existing residents while charging market rates for newcomers, ensuring street parking remains available.³⁷

Direct Developer Compensation

Some frameworks allow developers to pay direct cash compensation or neighborhood mitigation fees to adjoining residents who are directly impacted by construction noise or temporary disruptions.³⁸

Air Rights – Transferable Development Rights

The system commonly described as “air rights” is known in urban economics as Transferable Development Rights (TDRs), and New York City has been its primary laboratory since the mid-20th century.³⁹

In NYC, air rights are tied to a property’s Floor Area Ratio (FAR), which caps the maximum square footage a building can have relative to its lot size. If a building is constructed below its maximum FAR – such as a four-story historic brownstone in an area zoned for twelve stories – the difference is classified as unused development rights.⁴⁰

These rights can be transferred via two primary paths:

• Zoning Lot Mergers (As-of-Right)
• Special District and Landmark Transfers

Owners of contiguous tax lots legally merge their properties into a single zoning lot. The buyer aggregates the unused FAR from the underbuilt neighbor and stacks it onto their own building envelope, allowing construction significantly higher than standard zoning would normally permit on that specific footprint.⁴¹

For non-contiguous lots, specific overlay zones – West Chelsea, the Theater District, Grand Central – allow historic landmarks, transit infrastructure, and affordable housing providers to sell their air rights across a broader geographic area to designated receiving sites.⁴²⁴³

Traditional upzoning creates gridlock because windfalls concentrate on developers while neighbors bear the perceived costs. TDRs reverse this: a co-op board or historic church that owns an underbuilt lot can secure millions of dollars by selling its air rights to an adjacent developer,⁴⁴⁴⁵ transforming vocal NIMBYs into willing partners in density.

When a city protects a historic asset or enforces a view corridor, it imposes an economic loss (a wipeout) on the property owner. TDRs allow that owner to recoup the lost value through the private market by selling vertical rights to an area designated for growth.⁴⁶

Because the total aggregate FAR across the combined zoning lot remains unchanged, the overall density added to the city is capped by the existing master plan – it is simply redistributed vertically onto a smaller footprint.⁴⁷ Low-rise historic streets maintain their scale while vertical growth channels to specific corner lots or transit corridors.

Zoning Exemptions for Self-Contained Buildings

Many residents object to new housing because they fear the burden the new residents will place on existing city infrastructure, such as schools, power plants, and sewage treatment plants. As a result, municipal infrastructure deployment is frequently plagued by bureaucratic delays.

But what if developers of a new building internalize most of its own public service costs? By incorporating self-contained blackwater processing, closed-loop water purification, and on-site microgrids, the building would place zero net-new demand on municipal utility grids.⁴⁸ What if developers also integrate private charter schools, micro-schools, or dedicated daycare facilities directly into their lower floors?⁴⁹ Because the development absorbs most of its own marginal infrastructure costs, the fiscal externality on the neighborhood drops substantially.

Should developers not receive automatic as-of-right exemptions from local zoning caps, density limits, and municipal infrastructure hookup fees in exchange?⁵⁰⁵¹ Zoning exemptions for off-grid buildings would create strong market incentives for developers to invest in advanced decentralized infrastructure – membrane bioreactors for sewage, localized energy storage, building-integrated photovoltaics – trading the capital cost of internal systems for the upside of unrestricted vertical density.⁵²⁵³

Two major objections remain.

First, the double-taxation problem. If a self-contained building’s residents must pay municipal property taxes, they will be effectively subsidizing city services they do not use while paying for their own. The workaround is specialized infrastructure districts or Tax Increment Financing carve-outs,⁵⁴⁵⁵ where a portion of property taxes is rebated to the building’s micro-association to fund its private utilities.

Second, the spillover problem: even if a skyscraper purifies its own water and educates its own children, its residents still use municipal sidewalks and roads and rely on public police and fire departments.⁵⁶⁵⁷ The workaround is a scaled exemption system based on net-zero impact metrics – a building that offsets traffic impact via micro-mobility hubs or reduces grid reliance by 90 percent receives a proportionally scaled zoning exemption, with remaining public costs covered by a targeted municipal service fee rather than a discretionary zoning fight.

Increased Property Taxes

Homeowners worry that density will strain local infrastructure, forcing municipal tax hikes to fund expansions.

Developer Impact Fees and Connection Fees

Economists recommend models where developers pay upfront impact fees explicitly earmarked to scale up local infrastructure – roads, sewage, utility grids, and school capacity.⁵⁸ This ensures new developments pay for their own capital costs rather than externalizing them onto existing taxpayers.

Zoning Budgets and Fiscal Incentives

Implementing structural zoning budgets requires municipalities to balance any downzoning with corresponding upzoning.⁵⁹ When density is tied to measurable increases in the local commercial tax base, the fiscal benefits can be directly rebated to the neighborhood to reduce local property tax burdens.

Closing

The four fears that sustain zoning are not irrational.

Homeowners who watch their largest asset rise by a factor of three have good reason to worry about downside risk. Residents who see their neighborhood demographic profile change overnight have legitimate anxieties that reformers dismiss at their peril.

But the policy toolkit now exists to address each fear directly rather than through the blunt instrument of a building moratorium. Home equity insurance, street-level upzoning, by-right approvals, air rights markets, impact fees, and zoning carve-outs for self-contained buildings all offer mechanisms that internalize costs, distribute windfalls, and protect incumbents while still permitting growth.

The question is no longer whether reform is possible, but whether cities have the institutional imagination to deploy these tools before the mounting costs of stasis – homelessness, poverty, environmental degradation, and demographic decline – overwhelm the very communities zoning was meant to protect.

Appendix A: Examples of Self-Sufficient Buildings

US Examples

1. Brock Environmental Center (Virginia Beach, Virginia).

   

   Generates 1.83 times the energy it consumes via roof solar, two 70-foot wind turbines, and a deep-loop geothermal system. Waterless composting toilets handle human waste; greywater filters through a specialized infiltration garden. The first commercial building permitted to treat collected rainwater to federal potable standards.⁶⁰

2. Center for Sustainable Landscapes at Phipps Conservatory (Pittsburgh, Pennsylvania).

   

   Net-zero energy via photovoltaic arrays, a vertical-axis wind turbine, and 14 geothermal wells. All blackwater is treated in a subsurface constructed wetland to greywater standards, then sand-filtered and UV-disinfected for toilet flushing or solar-distilled to pharmaceutical grade for horticultural use.⁶¹⁶²

3. Earthship Biotecture Communities (Taos, New Mexico).

   

   The most complete operational examples of total off-grid autonomy. Entirely powered by solar and wind with deep-cycle battery banks. A closed-loop four-stage water system: roof-caught rain filtered for drinking, graywater routed through botanical cells for food production and filtration, then used for toilet flushing, with blackwater routed to solar-enhanced septic fields. The Greater World Community includes its own Earthship Academy operating entirely off-grid.⁶³

4. Omega Center for Sustainable Living (Rhinebeck, New York).

   

   Net-zero energy via rooftop solar. All campus greywater and blackwater flow through an “Eco Machine” – an engineered biological system of settlement tanks, underground anoxic tanks, outdoor constructed wetlands, aerated lagoons, and recirculating sand filters – before the purified effluent replenishes the local aquifer.⁶⁴

5. The Bullitt Center (Seattle, Washington).

   

   The greenest commercial building in the world. A 242-kW roof solar array produces more electricity than the building consumes annually. Rainwater collected in a 56,000-gallon cistern is treated to potable standards on site; all human waste is processed by self-contained composting toilets requiring zero water and producing dry, pathogen-free fertilizer.⁶⁵

Skyscraper-Scale Autonomy: NYC and San Francisco

In hyper-dense environments, true 100 percent autonomy is structurally impossible for a single skyscraper – vertical towers lack the land footprint to capture enough rainwater or solar radiation. However, developers use localized sub-grid infrastructure to bypass municipal capacity constraints.

1. One Maritime Plaza (San Francisco).

   

   Transformed its loading dock into a microgrid node with a 500 kW / 1,000 kWh indoor Tesla Powerpack battery system. The building charges batteries during low-demand periods and shifts completely off the municipal grid during peak times, shaving local grid demand by up to 20 percent and preventing local brownouts.⁶⁶

2. Salesforce Tower (San Francisco).

   

   The largest on-site blackwater recycling system in a US commercial skyscraper. A basement membrane bioreactor captures greywater and blackwater from all 61 floors, using ultrafiltration and UV disinfection to recycle 30,000 gallons per day, reducing public water and sewage demand by 76 percent.⁶⁷

3. The Helena (New York City).

   

   A 37-story residential skyscraper with an internal blackwater micro-treatment facility. The basement plant recycles roughly 76 percent of the building’s total wastewater, routing treated effluent directly back to cooling towers, toilet flushing systems, and rooftop irrigation – permanently removing hundreds of thousands of gallons of daily demand from NYC’s municipal infrastructure.⁶⁸

4. Bloomberg Tower (New York City)

   

   In dense cities where constructing a standalone school campus requires prohibitive horizontal real estate, developers integrate vertical multi-story educational models into the lower levels of mega-structures. The Bloomberg Tower / 731 Lexington (NYC) integrated a multi-story public school directly into the podium base, securing significant floor area bonuses by ensuring the local child population would not crowd existing classrooms. San Francisco high-rises similarly use commercial podium space for micro-schools with separate vertical transport systems.⁶⁹

International Case Studies

1. ACROS Fukuoka Prefectural International Hall (Japan).

   

   Designed by Emilio Ambasz, this governmental and commercial building features 13 terraced steps containing over 37,000 trees from 76 species. Rain cascades down the stepped terraces via natural gravitational stormwater runoff, eliminating artificial irrigation entirely. Accumulated stormwater is collected in basement retention tanks for HVAC cooling, toilet flushing, and architectural fountains. The 50 cm-deep “Aqua Soil” layers and heavy vegetation shield the southern facade from solar heat gain, lowering internal cooling energy so drastically that the building functions as a localized carbon sink. Nighttime moisture evaporation from the terraced mountain creates downward cold air currents, mitigating the urban heat island effect for the surrounding financial district.⁷⁰

2. CopenHill / Amager Bakke (Copenhagen, Denmark).

   

   Designed by Bjarke Ingels Group, this waste-to-energy plant doubles as a public recreational facility with an 85-meter artificial ski slope. It processes 400,000 tons of municipal waste annually, converting it at 28 percent electrical efficiency into 283 GWh of electricity and 1,300 GWh of district heating – powering 94,000 homes and heating 87,000 apartments. Through advanced flue-gas condensation, the plant produces more clean water through condensation recovery than it consumes. Sulfur emissions are cut by 99.5 percent, nitrogen oxides by 95 percent, and a pilot carbon capture system aims for net-zero operations.⁷¹⁷²

3. Namba Parks (Osaka, Japan).

   

   A 30-story office tower and 8-level terraced retail canyon built on the footprint of the former Osaka Baseball Stadium. Its 2.8-acre rooftop park is irrigated entirely by an on-site graywater recycling loop processing wastewater from the complex’s commercial and dining tenants. The stepped terraced design complies with Japan’s strict sun-shadow laws, ensuring no sunlight is stolen from the adjacent neighborhood.⁷³

4. PARKROYAL COLLECTION Pickering (Singapore).

   

   A high-density hotel and office tower designed by WOHA featuring 15,000 square meters of elevated sky gardens. Gravity-fed drip irrigation from an extensive rainwater harvesting network eliminates potable water use for landscape irrigation. A 60 kW-peak solar array powers landscape lighting; natural light harvesting provides for 100 percent of office common spaces. The building runs 30 percent more efficiently than conventional high-rises.⁷⁴

Notes