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Posted by: Peter Coy on October 01, 2007
Houston is a different kind of town. Brash, booming, it has sprawl and air pollution, but also vibrancy and a can-do spirit. One of the things that really makes Houston different is its absence of a zoning code. That absence strikes many people in the rest of the country as quirky in the extreme, if not downright dangerous. CB Richard Ellis, the big property company, fields a lot of questions about land use in Houston. The following is an article in the second-quarter edition of Investment Research Quarterly, a publication of CB Richard Ellis Investors LLC.
What No Zoning Really Means …
Houston is well known as the only major U.S. city with no formal zoning code. Such a seeming lack of order is difficult to grasp by those unfamiliar with the area. The absence of a comprehensive land use code conjures up images of a disjointed landscape where oil derricks sit next to mansions and auto salvage yards abut churches. To some degree these anomalies exist, yet for the most part Houston is like any other large North American city.
What is unique about Houston is that the separation of land uses is impelled by economic forces rather than mandatory zoning. While it is theoretically possible for a petrochemical refinery to locate next to a housing development, it is unlikely that profit-maximizing real-estate developers will allow this to happen. Developers employ widespread private covenants and deed restrictions, which serve a comparable role as zoning. These privately prescribed land use controls are effective because they have a legal precedence and local government has chosen to assist in enforcing them.
Some investors are understandably apprehensive about the lack of clearly defined rules. Houston developers have long recognized these concerns and have responded, particularly in suburban markets, by producing planned business and industrial parks that have rigorous covenants and deed restrictions. Not surprisingly, the sites receiving the attention of institutional investors, especially in suburban markets, tend to be in planned parks.
Is Houston a relic of the past of land use, or the wave of the future?
Right after I posted the above item I got an email from Nancy Sarnoff, a reporter for the Houston Chronicle, pointing out that land use remains a very live issue in Houston. Mayor Bill White, for one, is trying to stop construction of a 23-story high-rise in a neighborhood of single-family houses.
Here’s a link to her article in today’s paper. Thanks, Nancy.
BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.