Earlier today, I tweeted in an annoyed fashion about this story:

On April 5th, 2010 Matt LaGrant, DC’s Zoning Administrator, issued a ruling that DCRA will no longer grant Building Permits or Certificate of Occupancies for restaurants, bars, diners, coffees shops and carry-outs along 14th and U streets (plus adjacent commercial side streets) because of zoning regulations restricting the availability of space to eating and drinking establishments to 25% of the linear frontage of the greater 14th and U Street area.

Now, Greater Greater Washington explains that I shouldn’t be too upset with DCRA, that in fact their discretion is limited in this case. Fair enough. It remains the case that the 25% rule is exceedingly stupid. There is a high level of demand for quality bars and restaurants in this city. When the government acts to artificially limit the amount of space that can be used for such places, it has the effect of granting existing bars and restaurants undeserved market power. They can charge higher prices and offer a lower level of service and still pack their establishment. Hot areas with limits like this end up with crowded, overpriced, mediocre bars and restaurants, accompanied by vacant storefronts.

BeyondDC tries to mount a defense of the limit:

One of the most basic tenets of urbanism is that a healthy mix of uses should be encouraged, and while people normally think of “mixed use” as meaning the residential/commercial mix, it also applies to the type of commercial. Healthy city neighborhoods need a mix of commercial types just as much as they need a mix of land use types. If a neighborhood becomes overrun with too many of one type of storefront, that means there is less room for every other type. If a commercial district leans too heavily on restaurants and bars, that means it probably doesn’t have enough hardware stores, clothing stores, book stores, barber shops, or home goods stores to meet the day-to-day needs of neighborhood residents. And neighborhood commercial districts that force neighborhood residents to travel elsewhere for their basic needs aren’t doing their job as neighborhood commercial districts.

The problem is, you can’t just regulate local demand for other uses. If you block the opening of things people want but the demand doesn’t yet exist to support the service businesses mentioned above, then you just wind up with vacant properties, which do no one any good.

The issue is one of residential density. Let’s set up a basic equation. A given store needs x customers to survive. It has access to y residents within easy walking distance, z percent of which demand the service a store is offering. So if y * z is greater than or equal to x, then the store survives.

Let’s say that all stores need 1000 customers to survive, and let’s say we’re in a neighborhood in which 2000 people live within easy walking distance. Drugstores sell basic necessities, and therefore attract 100% of the local population. In this example, then, drugstores survive. Around 70% of residents use a dry cleaner, so a dry cleaner can stay open, as well. But only 30% of residents will use a hardware store with any regularity. At this density, the hardware store fails, but if residential density doubled it would survive. Perhaps 10% would regularly use a local book store. Only 5% might use a specialty grocer or clothing boutique. The more esoteric the business, the higher residential density needs to be to support it. Everyone in a neighborhood might say they want a super quaint cheese shop on their block, but in practice a relatively small share will actually patronize it, and so you need a high level of density to support a highly diverse commercial cluster.

Some sectors can get around this by developing themselves as attractions to residents of other neighborhoods. So if the bars and restaurants in MidCity had to rely on the local residential population, far fewer would be able to stay afloat. But because it is an attractive nightlife destination, it can tap a far larger population pool.

That, some may say, is precisely the problem — all these people coming in from elsewhere, crowding up the sidewalks and pouring into the street late at night. Well, maybe so, but preventing that influx doesn’t do anything to address the underlying issue of residential density.

In fact, the bar and restaurant cluster is probably the absolutely best thing that could happen to the neighborhood. As it becomes more attractive as a place to visit and go out, more people become interested in living nearby. That leads to increased investment in residential development, which leads in turn to a larger market, sufficient to support community-serving businesses. The bar cluster is the egg that hatches the chicken which goes on to lay the egg.

Interestingly, BDC says:

This is something that private shopping malls have known a long time, and it’s one of the advantages they have over urban neighborhoods that led to the mall’s dominance in the latter part of the 20th Century. Ownership controls the exact mix of tenants in order to serve every need under one roof and reduce shopper’s desire to ever leave or go anywhere else. Every good mall has one or two sports apparel stores, one or two formalwear stores, one or two jewelry stores, etc. And of course a food court. But unless it’s an older mall struggling to survive (and therefore not picky about who signs leases), there is never more than a couple of stores for any one niche.

This is instructive. The shopping mall most likely has a single owner who is interested in seeing the venture as a whole thrive. As such, the owner can vary rents in order to generate diversity. So to return to the equation, the shopping mall owner can subsidize the rent for niche businesses, leading to a decrease in x — the number of customers needed to stay afloat. That will work as well as increasing y or z. But the question is, should the city or the local neighborhoods subsidize certain businesses? Maybe so; in the past, I’ve considered whether subsidization of grocery stores isn’t a good idea. And one might argue that if niche businesses are subsidized effectively, then the value of the whole neighborhood will rise, essentially covering the cost of the subsidy through rising property values and tax receipts.

But this is tricky business. Who pays and who receives? Should local residents in the MidCity are, many of whom may not be all that wealthy, pay to subsidize the entry of an independent bookstore? Or a trendy clothing boutique?

I think the right answer isn’t to try and craft the perfect subsidies or block the opening of new restaurants. Instead, the solution is to design places well, and to create more space — more space for businesses and more space for residents. Another basic tenet of urbanism is that neighborhoods are anything but static; they grow and mature. The set of businesses that exists when a neighborhood is fringe and trendy will be significantly different from the set you’ll see when the neighborhood “grows up”. The going out crowd is famous for whining about this fact, actually: when the area that used to be full of nothing but hip bars suddenly has niche grocers and yoga studios and tailors and book shops — stuff that appeals to boring old regular households. Interventions to try and skip development steps may well end up slowing or stalling an area’s maturation.