Losing Amazon HQ2 Gave Dallas Time To Figure Out Zoning Policy

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One of life’s joys is the “I told you so,” because it is so often precluded by a period of scorn and disbelief. Last week I had a bumper crop, but let’s talk about Amazon’s HQ2.

You remember that? The corporate welfare pageant where municipalities fell over themselves, checkbooks flailing in the breeze, trying to lure Amazon to places its corporate relocation team had already picked? Yeah, that.

The Metroplex was one of those entries, and we even made it past the first culling before being sent home roseless, our taxpayer checkbook tucked firmly between our legs. New York may have kicked them out, but Amazon continues to hire there, albeit fewer than the 25,000 expected from their half of HQ2. Amazon wanted a presence in New York regardless of the freebies.

On the other hand, Virginia, happy to accept the Amazon bouquet, has seen home prices surge by 17 percent while property owners hoping for more, have caused new listings to crater – one zip code near HQ2 saw an 85.3 percent decrease in new listings. This has essentially frozen the market and caused property tax bills to swell.  Everyone’s expecting that once hiring picks up with HQ2, the lid will be blown off valuations. The same thing is playing out in the rental market especially in areas with the lowest rents as REITs and investors move in.

Now, suburban Washington, D.C., isn’t cheap to begin with, and like Dallas, what’s been built is more luxe than workforce housing. Show me any location where housing is nuts-expensive, and I’ll show you a place where there is a housing shortage. Amazon just made it worse. That’s because the HQ2 pageant promised tens of thousands of jobs paying over $100,000 a year – housing to serve this demographic isn’t what’s meant by workforce housing.

But ever-generous Amazon has pitched in with a $3 million donation to a local community foundation – a parsimonious drop in the ocean that won’t deliver much help.

Because that’s how corporate welfare goes. The Trump tax cuts for corporations promised new prosperity. Instead, corporate tax revenues are down by a third, the gap between taxes collected and government spending rose 17 percent (driving up the deficit), and while corporate spending jumped in the first two quarters of 2018, they flattened in the third quarter. All this against the backdrop of tax-dodging corporations repatriating foreign money they’d refused to pay taxes on. Half of the repatriated money — approximately $124 billion – was spent buying back their own stock (roll in shareholder dividends and it was $1.3 trillion in 2018 (up 17 percent).

What about the touted job creation? The 1,000 largest publicly-traded companies shed 140,000 jobs while creating just 73,000. Even the promised wage increases never happened. Wages grew in 2017 by 0.6 percent but slowed to 0.5 in 2018 after the cuts. So much for tax cuts paying for themselves.

But corporate welfare is widespread.

Solomon’s Recalcitrant Kansas Cities

In the past 10 years, Kansas has given $184 million in tax incentives to corporations moving jobs from Kansas City, Missouri. During the same period, Missouri has given $151 million in incentives to snatch jobs away from Kansas City, Kansas. That’s $335 million to poach jobs. Net-net?  Kansas City, Kansas wound up with an additional 1,200 jobs and Missouri with 1,200 less. That’s $279,166 spent per job (read more).

Incentives were even awarded after some companies had decided on the move.

Texas ain’t no Better. A 2017 report (readable by HQ2 fans) by UT Austin professor Nathan Jensen found that of the 80 incentivized deals studied, just 15 percent wouldn’t have invested in Texas without the free cash. Jensen also found that the majority of projects and dollars had already been committed to Texas before the incentives were offered.

Massively inefficient land use

It’s The Housing

But, this isn’t a news website dishing about dumb government (could you imagine?), it’s a website about real estate. So Amazon is making housing worse in an area that’s already pricey. While Dallas is relatively cheap by comparison, we’re still ratcheting up in home values. Why?

As I said, all high-priced locations have one thing in common – they’re not building enough housing to serve the majority of their citizens. Sometimes there are natural barriers to this – mountains, oceans, etc. But it’s more often to do with municipal regulations on construction – zoning. Less available land drives up prices.

Several cities are realizing that single-family homes are a luxury they can’t afford. I’ve mentioned before that Minneapolis largely eliminated the single-family zoning category in 2019 in an effort to encourage new and denser building in the city (exceptions being historic districts). Of course, you can still build a single-family home, but it’s effectively down-zoning a lot that could now contain up to three units (a triplex for example).

Over the past year, Metroplex builders have been moving to build smaller homes on smaller lots as the market steps back from the red-hot years and affordability squeeze. However, builders report that many of the Metroplex’s “212 municipalities oppose any sort of density for fear that it will devalue existing homes and burden their infrastructure. What the cities do not recognize is that well-designed, affordable housing strengthens communities by diversifying its demographic composition” according to Metrostudy. Of course, sometimes it’s the neighbors with unrealistic opposition.

Single-family zoning is getting into the crosshairs in many municipalities because it represents huge swathes of buildable land locked into its lowest use. Most zoning people talk about land attaining its highest use.  In Minneapolis, single-family zoning comprised 70 percent of residential land.

Looking at old maps, they also realized that multi-family zoning followed old streetcar routes (lots of people, and lots of public transportation, equated to urban vibrancy).

Are the wheels turning? Where is there a ton of multi-family in Dallas? Follow the trolley lines. Before car-driven sprawl, we knew how to build cities.

Dallas’ Single-Family Zoning in Yellow (Source: UrbanFootprint)

Numbers, numbers, numbers

According to UrbanFootprint, Dallas has 517,636 dwelling units. Of those, 236,670 are single-family, 21,418 are townhomes, and 259,538 are multi-family. That equates to 46 percent of dwelling units dedicated to single-family homes. So not quite 50-50, but close.

But this is CandysDirt.com, so let’s talk dirt. Single-family zoning accounts for 14,483 acres while multi-family accounts for 7,941 acres – equating to 64.6 percent of residentially-zoned land trapped with a single-dwelling unit. So 46 percent of dwelling units take up 64.6 percent of residential land – a nearly 20-point spread.

Accessory dwelling units (granny flats) will help some, but never enough. If Dallas wants to avoid the trap of a housing shortage brought on by high housing prices due to a scarcity of affordable land, Single-family zoning has to be examined – especially inside the LBJ Loop. If Dallas wants to stop losing to the burbs, it has to be more affordable.

Aside from saving the corporate welfare that was probably unneeded to secure Amazon HQ2, Dallas should be kissing the ground that they have the time to figure out a better land management policy. Make no mistake, Dallas will continue to grow. If it doesn’t want to price out significant and valuable parts of its residents, it has to get in front of its housing shortage and do what it can to enable workforce housing that’s affordable to average citizens both new and existing. Without Amazon, we have a little more time.

See?  I told you Amazon would be more a curse than a boon.

Remember:  High-rises, HOAs and renovation are my beat. But I also appreciate modern and historical architecture balanced against the YIMBY movement. In 2016, 2017 and 2018, the National Association of Real Estate Editors recognized my writing with three Bronze (2016, 2017, 2018) and two Silver (2016, 2017) awards.  Have a story to tell or a marriage proposal to make?  Shoot me an email sharewithjon@candysdirt.com. Be sure to look for me on Facebook and Twitter. You won’t find me, but you’re welcome to look.

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Jon Anderson

Jon Anderson is CandysDirt.com's condo/HOA and developer columnist, but also covers second home trends on SecondShelters.com. An award-winning columnist, Jon has earned silver and bronze awards for his columns from the National Association of Real Estate Editors in both 2016, 2017 and 2018. When he isn't in Hawaii, Jon enjoys life in the sky in Dallas.

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  1. M says

    I don’t think it will change, unless you’re a company like David Weekley with the cash to fight for your zoning change for a year… The loud NIMBYs will continue to win out, the false notion of “the affordable housing will ruin our neighborhood” boogeyman is still enough to defeat a zoning case. I’m excluding Oak Lawn and PD 193 here, as it seems to be the only place you can even get a thoughtful back and forth between developers and current residents.

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