Thrive’s Failure on Housing, Part I: If We Zone It, They Will Come

The Thrive Montgomery 2050 plan casts the lack of robust housing growth as a major challenge facing the county, suggesting that it will leave people unhoused. It further suggests that job growth won’t happen unless we have more housing. The proposed solution is to increase allowed residential density in both commercial centers and single-family residential neighborhoods.

This approach wholly misunderstands both the reality of the situation and market economics. Much land is already zoned both for housing and density. According to Montgomery’s Planning Department, there are roughly 36,500 unbuilt residential units. This doesn’t even include Rockville and Gaithersburg.

In 2019, the Council of Governments (COG) released a housing target of 41,000 new units for Montgomery by 2030. We built 4,739 new units in 2019 and 2020, leaving 36,261 to be built by 2030. Even excluding all of the units built in 2021, we have already approved enough new units to meet COG’s housing target.

The ideas that there is no place to build and that insufficient housing is planned to meet expected needs are simply false. The lack of opportunities to build is not the problem, as anyone who has driven past the remains of White Flint Mall knows. Of course, sections of nearby Pike & Rose are also still being built.

But can we get even more housing built through adding density? Proponents envision developers responding to Thrive-enabled upzoning by building massive numbers of new units and thereby depressing the price, whether for rental or sale. New jobs, they say, will come to Montgomery as a result. But that’s not how the market works. Developers build in response to demand. New jobs result in new housing—not the reverse.

Developers also naturally consider many complex factors in deciding when and how much to build, especially land prices, building costs, sales prices, and likely profits. No matter how much we upzone, developers won’t dump more housing on the market. Developers look to make a profit, so they build at a rate that allows them to make money based on demand—not at a rate that results in profit-killing price declines.

This isn’t a nefarious plot to limit housing. It’s just how the economy works and assures that new housing gets built. But zoning for more housing won’t result in more housing unless there is a demand for it in that area and the economics of building it make sense. No one is going to build more if prices are going down and they can’t make money out of it.

Just because you zone it doesn’t mean that they’ll build it. Rampant increases in density may slow building because tall buildings are much more expensive to construct. But builders don’t want to lose the profits off the increased density, so they wait to build until it’s profitable. Indeed, this is the rationale behind the expensive payments to build at Grosvenor Metro even as property taxes rise.

The evidence that “smart” growth results in lower prices is thin on the ground. Neither Portland nor New York is known for affordability. But Houston, the embodiment of sprawl, is. Why? Texas is big so the city can expand outward much more easily than here. They also have no zoning, so development can be densely packed or spread out. It’s an argument for a set of policies very different from smart growth.

In short, Thrive promises a chimera. If only we increase density and allow more housing to be built, housing prices will come down and jobs will increase. Montgomery County has allowed more density repeatedly in recent years and it hasn’t happened. Thrive’s doubling down on the strategy won’t work either.