Doorify Real Estate Podcast

Doorify MLS x UNC Kenan-Flagler: Fixing Housing Supply Through Smarter Policy with Jacob Sagi and Eric Maribojoc

• Doorify MLS • Episode 95

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Affordability isn't just a market issue, it's a policy outcome. Cities across the country are struggling to get housing supply right, and the rules they set often make things harder, not better.

In this episode, I sit down with Jacob Sagi and Eric Maribojoc from UNC Kenan-Flagler to talk through the real-world impact of zoning, regulation, and policy on housing supply. We unpack the often overlooked consequences of things like fire escape codes and discretionary approvals, and why some cities are stuck while others are seeing real progress. 

From the rise of accessory dwelling units (ADUs) to the “gentle density” movement, we look at what’s working and where it’s falling short. It’s a grounded, sharp conversation about the forces shaping where and how we live.

If you care about housing, zoning, or how smart policy decisions can change the landscape, this is a must-listen. Hit play and hear what the future of housing could actually look like.

Specifically, this episode highlights the following themes: 

  • How zoning and regulation directly limit housing supply
  • What makes ADU policy successful and what gets in the way
  • Why “by-right” development matters more than you think

Links from this episode:

1ae5b43598204883b524f061d4880e6d10fca88c (for podfollow.com)

Matt Fowler [00:00:00]:
So if you were czar of the universe, what regulations do you think we could safely reduce these barriers to building more affordable housing? I use the word safely because one of the examples is fire escapes. What's the width of a staircase that's going to evacuate or multifamily. It can be so large that it takes up too much of the cost, lowering the number of units you can build. But people also have to flee burning buildings. So how would you respond to that? Whoever wants to take it, 

Eric Maribojoc [00:00:43]:
Maybe I'll take a first crack at it. So I think from the perspective of we have a shortage of units in most metropolitan areas of the US A lot of the people in the space have been talking about how to fill that shortage. And there's maybe three things that people feel will make a bigger a big impact on producing more supply. One is allowing more types of houses, especially smaller houses, whether that's single family house on a smaller lot, whether that's Plex 4 Plex Duplex or whatever form that takes, just allowing regulation to allow smaller units than what we're currently building. The second feature is allowing that by right. So not making that discretionary and subject to approval because that is also another feature of our current system that makes both supply very short and also the process very expensive.

Matt Fowler [00:01:46]:
So you used the term by right, Eric, if I heard that correctly.

Eric Maribojoc [00:01:50]:
Yeah, by right.

Matt Fowler [00:01:51]:
So that's built into the zoning or the deed or something you don't have to get an exception for.

Eric Maribojoc [00:01:56]:
Right, Exactly. So developers can do it by right without asking for any discretionary approval. And the third one is keeping the whole process short and simple. If you allow more types of housing buy right you using short and simple procedures, I think you'll see a lot more people actually developing houses that we haven't seen for a long time in the US Infill built by smaller, more entrepreneurial developers in frankly land that our big developers don't have time to pay attention to today. And historically that's how the US got built. Hundreds of thousands of millions of houses built by small developers in infill locations. So I think that would be my wish list.

Matt Fowler [00:02:45]:
Interesting. So I guess Jacob, over to you, the next question, or you could feel free to expand on that. This is sort of extending that same question. What projects are you aware of locally or nationally, where policy shifted in a way that successfully empowered homeownership? And in one of our podcasts, you guys gave the example of Houston where they, they changed the regulations inside the belt line and really materially changed the rate of development. Tell us about a project that comes to mind.

Jacob Sagi [00:03:17]:
I think you put your finger on it. Houston is often viewed as an example of trying to take the hands off the regulatory levers in order to let the private market do what it does, at least in a lot of folks minds best. It's not without its critics, but I do think that in terms of affordability. So Houston, Houston is viewed as one of the most affordable large cities in the United States. I think it ranks, I don't know, something like second or third from the bottom in terms of, you know, when you start ranking how affordable different cities are. Certainly a median house in Houston is cheaper than a median house in Raleigh, even though Houston is a larger city and a larger economy. So all of these are, are, are right. I do think though it's worthwhile sort of asking questions about trade offs.

Jacob Sagi [00:04:04]:
So what is it that Houston gave up by going in this direction? Because I think we have seen, you know, probably since around the 90s. Is that right, Eric? That relaxation of regulations and therefore a lot more development and ostensibly more affordability. So what's the trade off here? Well, the trade off, I think in places like, at least in Houston specifically, is that there the municipality has a harder time controlling how infrastructure dollars are spent and how effectively they are spent. So right now I think They've got about $13 billion allocated to basically building highways in order to improve congestion, which has built over the years, but also help with effectively let people out of the city when they're hit by floods, like, you know, with Hurricane Harvey. And so, you know, there is this question of how infrastructure can keep up. Texas is in a fortunate position in the sense that they allocate a lot of money for infrastructure, much more so than many other states. And it's just that, you know, one could potentially level this criticism that when you allow that kind of decentralized development. Go on, you may lose a little bit in terms of the overall efficiency.

Jacob Sagi [00:05:14]:
That's, I would say, the balanced view on Houston.

Matt Fowler [00:05:17]:
Yeah, gosh, I hadn't thought about flood evacuation, but I guess, yeah, it's all those, all those trade offs. But Houston, if you guys go back and look at one of the past UNC Doorify podcast, there were some really good slides on, on the numbers that materially changed the rate of development down there. Next question. Another term that I ran across recently in a Urban Land Institute article was gentle densification. I think ADUs are often described in that way, a way of adding density to an existing neighborhood in a way that isn't, you know, tearing down or a massive development. It's these one offs, you know, that happen without a lot of destruction. The poster child for ADUS in the research that I've done includes Minneapolis, who a decade or so ago allowed these dwelling units. Auxiliary dwelling units is the way ADU stands for in the backyard.

Matt Fowler [00:06:14]:
And it wasn't very successful because they weren't ultimately affordable is what I read. Tell us a little bit about general densification, other ways of doing that. Adus, if you wanted to talk about those.

Eric Maribojoc [00:06:29]:
Yeah, so gentle densification is another format, like I mentioned, for trying to build smaller living units in the same land that's already being used. So ADUS is a format of that accessory dwelling units. I think for all the talk about getting rid or going away from exclusively single family zoning, I think most of our cities are still going to be predominantly low rise single family neighborhoods. The question is how do we add the capacity to house more people without fundamentally changing that characteristic. I think gentle density is one of them, is trying to build housing units that are smaller with the same mass as a single family house. Not larger, but still not taxing, as Jacob said, maybe the infrastructure of neighborhoods. So accessory dwelling units is one form of that. You know, like I said, the success of an ADU regulation really depends on the details.

Eric Maribojoc [00:07:38]:
Minneapolis wasn't very successful because they had other regulations that made it very difficult to build an ADU locally. Like Durham and Raleigh have now allowed ADUs recently. It's a little too early to tell yet how successful that is right now. The poster child for success is actually San Diego and Los Angeles. About six or seven years ago, the state of California passed legislation allowing these by right across the state. And right now San Diego or Los Angeles, about a third of their permits are now accessory dwelling units. And that's made a big dent in the supply. It hasn't affected the pricing as much because the shortage there is so large, but it's made, it's made now a pretty big portion of supply in those cities.

Matt Fowler [00:08:30]:
Wow, a third, that's enormous. Would you guys like to have a third more listings? Yeah.

Jacob Sagi [00:08:36]:
So I, if I may weigh into that. So I mean there are two kinds of victories to have here. One is that you manage to actually pass something across the finish line and allow some channel for additional supply. And certainly ADUs have done that in some of these congested cities like Los Angeles or high, high regulation cities. But the fact that they might have taken up about a third of the new supply to me and Again, I'm going to be provocative here is actually part of the problem because I don't think overall ADUs are known to have moved the needle in a substantial way in alleviating the housing problems that these cities have experience. So the fact that the way that we're doing it is with adus to me is kind of a signal that there's something fundamentally wrong with that city. And in fact we are seeing that those cities where, where ADUs are considered a something of a victory are those cities. We can't move anything.

Jacob Sagi [00:09:33]:
And getting back to your example of Minneapolis, Minneapolis I think is one example of a city that actually has been pretty successful in bringing in a whole array of solution for affordable housing. And ADUs might have been the least beneficial of them, but that's because they did so well on some of the other types of deregulations that they have accepted.

Matt Fowler [00:09:53]:
Well, that's so interesting, Jacob. It's so bad in San Diego and Los angeles that the ADUs make up a third of the market. Right, right.

Jacob Sagi [00:10:00]:
That's the point.

Matt Fowler [00:10:01]:
Yeah. Gosh. So we've only got about a minute or two left. My last question I wanted to ask you guys. I can't decide what this means for North Carolina, but when you look at the impact of AI on employment, we've just seen a lot of job announcements, job cuts, Amazon said 30,000 or something. A lot of these are knowledge workers. So what do you think the impact on North Carolina is going to be in terms of the impact on unemployment?

Jacob Sagi [00:10:31]:
Happy to take this first. Again, along the vein of being provocative, let me first say that I'm on the fence about whether this technology is actually going to disrupt the labor market on its own in a huge way in the next two to three years. But I do think we're going to see disruptions in the 7 to 10 year horizon again for this, you know, in the spirit of being provocative, I'm going to say that the large negative impact in North Carolina may be more felt in places like Charlotte. That type of a knowledge economy where we're talking about financial services, which potentially a lot of that could be replaced with AI. I think the Triangle area, being a tech and a knowledge hub in a more innovative and creative sense, may be better positions to adjust and who knows, maybe even benefit from it. So that's my speculative answer.

Eric Maribojoc [00:11:21]:
I mean, certainly this question is a big question for institutions like UNC where we're trying to prepare students for, for the jobs, you know, three, four, five years from now. We're taking steps now to actually incorporate AI in the curriculum so that the students know how to use it, how to work with it. Because we just don't know what the jobs will be looking like in a couple of years. I think I tend to agree with Jacob. The immediate impact, I think, is not going to be as large. I think by and large are the layoffs are reallocation of investments. People are reallocating large amounts of investments into AI research and development. And so they have to take it away from other parts of their company.

Eric Maribojoc [00:12:04]:
And I think that's what we're seeing. What the actual permanent jobs will be, we don't know yet, you know, but having a knowledge based economy like here at North Carolina, I think, as Jacob said, you know, I think we're potentially well prepared to accept those jobs, you know, when they come. But in the meantime, at unc, we're trying to stay ahead of it and make sure our students are trained and aware of how to work with AI.

Matt Fowler [00:12:33]:
Well, that's certainly important. And for a business degree from Kenan Flagler to keep you employed when AI happens. I want to thank you guys both for joining us and for working with us all year on the intern program and hope to see you again at PropTech.

Jacob Sagi [00:12:48]:
Thanks so much for putting on a great event there, man.

Matt Fowler [00:12:50]:
Thank you, Jacob.

Eric Maribojoc [00:12:51]:
Thanks.

Contributor

Matt Fagioli

Host