No Light Rail in Vancouver!

Planning Makes World Housing Unaffordable

Jan 23

2007

Urban planners have made housing unaffordable in places like San Jose and Portland. But planning has created affordability problems that are at least as serious in Australia, Britain, Canada, Ireland, and New Zealand.

That’s Wendell Cox’s conclusion in his third annual housing affordability survey, which looks at housing prices in 159 housing markets in the United States and British Commonwealth countries.

Like my analysis of affordability in more than 300 U.S. housing markets, Cox uses the multiple of median home price over median income as an indicator of affordability. (One difference: he uses median household income, I used median family income.) Cox rates markets “affordable” if the median price is less than three times median income.

As my paper shows, all but a couple of U.S. housing markets were affordable as late as 1969 (census housing and income data are for the year prior to each decennial census). But by 1979 the growing use of growth-management planning in the 1970s made many markets unaffordable.

Cox finds no affordable housing markets in Australia, Britain, Ireland, or New Zealand — probably because land-use planning in these countries is guided more at the national level. Cox finds seven affordable areas in Canada (Regina, Quebec, Winnipeg, Saskatoon, Ottawa, London, and Oshawa) and about thirty-five in the U.S., including Atlanta, Augusta, Dallas-Ft. Worth, Houston, Kansas City, Indianapolis, Louisville, and Nashville. Contrary to claims that affordability problems are created solely by demand, many of these regions have been growing fairly rapidly for the last couple of decades.

If you think that the link between planning and housing affordability is something that Wendell Cox and I just made up, here are some other opinions on the subject:

• “Government regulation is responsible for high housing costs where they exist” say Harvard economist Edward Glaeser and Wharton economist Joseph Gyourko.
• “In the Zoned Zone,” says MIT (now Princeton) economist Paul Krugman, “land-use restrictions — hence ‘zoned’ — makes it hard to build new houses.”
• Bank of England economist Kate Barker’s recent report on land-use planning notes that green belts, which now cover 13 percent of England, have not only driven up housing prices, but pushed office rents in Manchester and Birmingham to 40 percent above levels in midtown Manhattan.
• “There is no question that urban growth boundaries and that elaborate environmental studies and elaborate public processes increase the cost of housing by creating scarcity,” says New Urbanist Andres Duany on the CNU list serve. “And don’t tell me otherwise,” he adds, “because I am not stupid, nor am I inexperienced, nor do I have underdeveloped powers of observation.”

Increased housing prices seem to benefit those who already own their own homes, leading to the “home voter hypothesis,” the idea that homeowners support land-use restrictions that will drive up the value of their assets. I don’t think homeowners are this calculating, especially when planners tell them that the rules don’t effect housing prices. I think most homeowners see high housing prices as just something that happened with no known cause.

Moreover, I know many of those homeowners worry because they know that their children won’t be able to afford to live nearby. Plus, homeowners only benefit from high housing prices if they are willing to sell down to a smaller home. If they want to move up market, the increased value of their home is more than made up for by the higher price of the bigger home they want. High housing prices thus make people less mobile, a phenomenon that has been observed in Britain.

In another recent paper, Wendell Cox and Ron Utt observe declining homeownership rates, outmigration, and loss of jobs in California and other high-cost states. Land-use regulation is also associated with greater price volatility: prices not only go up, they go down more than in less-regulated areas. Harvard economist Edward Glaeser says that, for every $10,000 increase in value (relative to national prices) during one five-year period, homeowners can expect to lose $3,000 in the next five years. Since homeowners can’t always choose when they need to sell their homes, some are bound to lose.

I have always wondered: Are planners making housing unaffordable because they are willfully ignorant of economics? Or is it a deliberate effort to try to force cities to become more compact because people won’t be able to afford to live any other way?

In the case of congestion, it is easy to find planners and planning organizations who admit they want to create more congestion, either to promote transit ridership, to make streets safer for pedestrians, or simply to discourage driving. But planners have been more circumspect when it comes to housing affordability. Yet unaffordable housing neatly fits planners’ goals of promoting compact development and discouraging driving (because higher densities create more congestion).

But intentions are irrelevant. What is important is that housing was affordable before growth-management planning (of which smart growth is merely one variation). Now, in cities that have used such planning, it is not.

10

Trackback  •  Posted in Planning Disasters, Regional planning, Urban areas  

Reprinted from The Antiplanner