FAR too restrictive: Time to repeal floor area ratio limits

By Steve Swedberg of CEI.

"In cities across the world, fights over housing affordability come down to a simple question: how much can be built on a single lot? In Chandigarh, India, officials are debating whether to double that limit, while Sydney, Australia has seen public clashes over proposals for increased housing density.

Back in the United States, lawsuits in Virginia suburbs, protests in San Francisco, and contentious hearings in cities such as Baltimore and Austin show that zoning has become a central flashpoint in local politics. One zoning law that has played a role in these disputes either directly or indirectly is the floor area ratio (FAR).

FAR limits how much total building space can be constructed on a lot, and it applies to both residential and commercial structures depending on the zoning district. It is calculated by dividing the total building floor area by the total lot area. For example, a 5,000-square-foot lot with a FAR of 2.0 allows 10,000 square feet of building space. That could take the form of a single large home, several smaller units, or some combination. In all cases, total floor area cannot exceed the FAR limit.

FAR may seem like a technical, math-heavy zoning rule disconnected from everyday life. In practice, it sets a limit on building size that strongly influences what housing gets built and who can afford to live in which neighborhood.

The faulty logic behind the limit

FARs in the US can be traced back to early 20^th-century New York City. The city initially used height limits to prevent skyscrapers from obstructing air and light to the streets. In the mid-20^th century, planners concluded that height restrictions were inadequate and began supplementing them with FAR regulations to control overall building bulk.

For housing, FAR rules effectively acted as a proxy for height limits by setting a maximum total building volume relative to lot size rather than a fixed vertical cap. Other cities followed suit by adopting similar approaches. Decades of development under FAR rules suggest that the logic behind the limit is flawed. FAR sets a maximum on total building volume relative to lot size, but it does not control how that space is used.

A building can fully comply with FAR yet still cast long shadows, crowd neighboring properties, or occupy most of the lot. Two buildings with the same FAR can look entirely different: one tall and slender, another short and bulky, covering most of the lot. Because FAR regulates size instead of form or placement, its impact on sunlight, airflow, and open space is inconsistent at best.

The other rationales do not fare better, especially that of “maintaining neighborhood character.” While often invoked to reflect residents’ preferences about scale and appearance, the concept of “neighborhood character” largely refers to a subjective sense of visual appearance or feel, not a clearly defined metric of public harm. The term is used to express general opposition, as opposed to something that is easily quantified or tied to a specific land-use concern.

Another justification is infrastructure capacity. By limiting building volume, planners aim to prevent overloading streets, utilities, and schools. However, infrastructure demand depends more on the number of units and occupancy patterns than on floor area alone. A large single-family home may place fewer demands on infrastructure than a smaller multi-unit building with the same square footage.

Many cities can address these challenges more directly through market-based alternatives such as user fees, impact fees, or private investment, which allow growth while ensuring that those who consume or benefit from infrastructure help cover its costs without resorting to distortive zoning regulations.

Fewer buildings, pricier homes

Beyond faulty rationales, FARs produce unintended consequences. To quote the Cato Institute, FARs “restrict the number of developable square feet of residential space for a given lot size, and thereby limit the density of co-living buildings.” By capping total buildable volume, FARs force developers to make trade-offs about how much to build and how to allocate space among units. This reduces the number of housing units, discourages mid-sized projects, and contributes to higher prices.

Direct studies of FARs are limited because they are usually bundled with other zoning rules, which makes their independent effects hard to isolate. Nevertheless, there are some FAR-specific case studies.

Zurich pursued a policy of upzoning, which is a change in zoning rules that allows more building space on a lot. By increasing the allowable FAR, Zurich boosted the number of housing units by 9 percent over a decade. A 17 percent increase of allowable FAR in Mumbai, India, resulted in a 58 percent increase in housing supply, as well as a 24 percent decrease in housing prices in affected areas.

Broader research on density limits reinforces these findings. Allowing more building space increases housing supply and takes pressure off of housing prices, while restrictive land-use regulations limit housing construction and drive up housing prices. An estimate from a Cato Institute policy paper attributes about 20 percent of housing growth variation to density regulations, including FARs.

Scrap the cap

FARs act as an invisible barrier to housing. They do not reliably protect sunlight, air, neighborhood character, or infrastructure capacity. Meanwhile, FARs constrain how many units can be built and raise costs for renters and buyers alike. Moreover, the decision about how much floor space to build and how to distribute it should be determined by those with the most at stake: the property owners, the lenders, and the residents.

While some cities might consider partially relaxing FAR limits as a short-term measure, the most effective solution is full repeal. Repeal would free developers to respond to demand, allow more housing units to be built where people want to live, and make housing more affordable without relying on burdensome regulations like FARs. It is time to stop letting this flawed formula dictate who can live where."