Quote:
Originally Posted by TakeFive
Let me take a different tack. My problem (if you will) is that I'm more a Big Picture guy. But I do understand supply and demand. From the simplistic graphs of Econ 101 into the real world where there's a multitude of different dynamics and complexities, it's much easier to understand from 30,000 feet. There are both random and irrational factors to consider. Recently the Dikeou family holdings have been discussed. They've owned their properties for decades with no intention of doing anything. It's not rational; but it is a real world fact.
In the aftermath of the recession, with many investors escaping the mayhem and with cash to burn, RE investor/developers started taking advantage in the more obvious coastal cities like NYC to San Francisco.
Denver became one of the earlier flyover cites to attract investment bcuz they didn't get overbuilt like many places did. Texas which had been growing rapidly and continued right through the recession also attracted investment. BTW, Portland was moderately over supplied and it's bounce-back was a couple of years behind Denver.
Early on I recall Mill Creek buying a block east of Broadway and I thought it good that someone was willing to venture there - more risk I assumed. Looking back from today my thought now seems ludicrous. Mill Creek built a four story project. Early on even investors that were smart to come to Denver were uncertain on how strong the market would be; otherwise Mill Creek would have built a much denser project. That's how it was in the early years.
Certainly developers became aware of the migration to urban centers; but how strong or how long would it last? Well it just grew and grew now that we can look back. For a few years many have thought we were reaching saturation and headed to an oversupply. Even the Fed threw out a 'caution flag' to their member banks. If you've lived through the cycles you know that getting overbuilt has been a common problem. Also many 'experts' have predicted for 5 years that another bubble was being created and that interest rates would rise rapidly and kill the golden goose.
The point is that some of the savviest and smartest minds in the business have continued to lag what continued to happen. There's no algorithm for predicting future demand. Stonemans_rowJ recently pointed to the tsunami of a apartments coming so maybe, finally Denver will reach (at least temporarily) saturation.
With respect to Zoning
It would have been good to follow the Great Denver Rezoning Project a few years ago. While I'm not familiar with the more granular the object was to update the code and look to the future including more dense development. It was logical and generally incremental changes were intended. What may seem logical and straightforward becomes anything but that when you start holding neighborhood meetings. Homeowners etc are not always rational; they're often emotional and resist/fear change. How many NIMBY conversations have we had over the years. Too many to count for sure.
BTW, using San Marcos as an example shows partly how little Marohn knows about Texas. In the land of 2nd amendment and property rights zoning is a suspicious interloper. Houston is well know for having NO zoning downtown. Build whatever your heart desires. It's the Texas way of doing things. Worth noting is than San Marcos is on the Austin to San Antonio tech corridor so expecting higher future values is not far-fetched.
Whether Marohn's 'theory' has any merit we'll never know bcuz it's unrealistic once you get into the real world of real people and real complexities and random factors. In other words life happens while we're making other plans.
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Thanks for the response. There's lots to unpack here. I don't necessarily think Marohn's theory is watertight, but I can't help but see exactly what he described playing out here in Denver. The fact that he raises questions about something that "is counter-intuitive and directly clashes with the planning profession's fetish with density" is all the more reason I think it deserves some objective analysis. I share that fetish with density, and happen to know that many of us on this forum do too. But I think it is always worth re-examining our beliefs from a new perspective, especially when that perspective shares our interest in understanding and crafting good urban places.
While Denver's recent rezoning was meant more as a streamlining effort than strictly an upzoning, there were some areas designated "areas of change" in Blueprint Denver that I seem to recall
were upzoned. It is precisely in the areas where that change was moderate, like Lower Highland (going from single-family, to either TU, or MU-3 or MU-5), that we see the most scrape-offs occurring. In areas where single-family zones still exist in proximity to increasing land values, we see historic homes being scraped for tasteless McMansions without adding any density (which makes economic sense, because as Marohn describes, a $1,000,000 lot justifies more in structural improvements than provided by a modest bungalow).
Areas that have a larger gap between the existing land use and the potential buildout under zoning (like Uptown or Golden Triangle) are also seeing developers max out the FAR potential (see Evivia in GT), but the zoning is so high that it would take decades to fill every vacant lot with 18 story buildings. Back in May, Ken described something similar about downtown when
interviewed on Colorado Matters: It has taken way more than a single "real estate cycle" to replace all the land that was vacated downtown under DURA.
In fact, what Marohn describes explains is that what the Dikeou family has been doing is in fact
perfectly rational. Why settle for half the development potential, when you can wait for a developer to want to build that 70 story tower on your property? Especially since the value of the vacant land keeps going up - why build less than the zoning allows when you can just sit on your land and watch the investment increase? Or even better - pursue a zoning increase and watch your land value increase even more (this doesn't necessarily mean development would be imminent)! And even in these boomtimes, there isn't enough demand to fill every vacant lot in downtown with 70 story towers - not even close. Most lots will stay vacant for years to come.
In fact, those developers who are actually building "Texas Doughnuts" and "land ships" may actually be the ones finding the best mid-term use for vacant lots. But even those are fairly massive buildings - NOBODY is building small-scale apartment buildings like the ones leftover from the mid-century, or even smaller-scale rental units like ADUs build above an alley-garage.
As an aside, I'm not sure Houston is a great example to bring into play here. I'm no expert on Houston, but I think it's job market is fundamentally different from tech-boom style cities where speculation plays a bigger role. I don't seem to recall Houston as a place that is experiencing much in the way of gentrification growing pains. Austin on the other hand, definitely. I don't know much about San Marcos, other than what I've just read and that it is near Austin.
And of course it is extremely difficult when working in the real world of urban politics. This is actually part of Marohn's point - that planners jump at the opportunity to zone something like a Transit Oriented Development for 20 stories, or Lower Highland as MU-5 precisely because it is nearly impossible politically to get density elsewhere (like Single Family neighborhoods). And who on city staff wants to keep fighting for small upzonings on an ongoing basis, when entire neighborhoods can be up-zoned and not revisited again for over a generation? This behavior is also rational, but I can definitely see how it could distort pricing.
If everywhere were to actually grow incrementally, it would mean that EVERY single family neighborhood would be legally allowed to add ADUs. Only in neighborhoods where ADUs were already common would the zoning allow townhomes, and only in areas where townhomes already exist would 5-story mixed use buildings come into play, and so on and so forth. It is very much hypothetical, but something that I can't help but think about.
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There's really not a shortage of supply when you consider that most people dwell in a single unit, meaning for young people they will either occupy a rental apt or a condo, and when you take that supply as a whole, we are swimming in supply. Young people in Denver are not living in the backs of Ryder trucks like they are in the Bay Area. 
Linear Mode
