A Bay Area writer, Kim-Mai Cutler, writes what she supposes is the definitive analysis of why housing in San Francisco is so expensive. Unfortunately, she left a few things out.
She blames expensive San Francisco housing on Google’s refusal to build housing on its own campus in Mountain View–which Google says it can’t do because of the need to protect a rare owl. But Cutler defends the right of “anyone–rich or poor–the chance to transform or be transformed by” living in San Francisco. How can the City of 800,000 people achieve that when there are another 2.5 million people at its doorstep most of whom wish they could live in the Paris of the West?
Cutler’s solution is to build “affordable housing.” That means subsidized housing. If everyone in the nation has a right to live in San Francisco regardless of income, who is going to pay the subsidies? It also means high-density housing. Just how attractive and hospitable will San Francisco be after all of its single-family neighborhoods have been replaced by mid- or high-rises?
Washington state property rights advocates have taken inspiration from Florida’s repeal of its 1985 growth-management mandate (counties in Florida are now allowed but not required to practice growth management). Since Washington’s 1991 law was modeled on the Florida law, it is possible that the Northwest state could follow Florida’s example.
The Senate Governmental Operations Committee is holding a work session on this question, and my written testimony emphasizes that the costs of the greatly exceed its benefits, especially since most of the benefits are imaginary. On Monday, Dan said it might be more useful if I were to talk about the tunnel under Seattle, but that’s not the subject of the hearing.
That tunnel is expected to cost $4.25 billion, and it may be a boondoggle, but this is actually peanuts compared with the cost growth management has imposed on housing. In 2012, about 8,000 new homes were built in the Seattle-Tacoma area. Those homes probably cost at least $200,000 more apiece than they would have without growth management, a total cost of about $1.6 billion. Of course, even more homes were being built each year before 2008, so the total cost over several years could quickly reach $10 billion.
When urban planners talk about infill, they make it sound so benign. “We’ve identified some vacant lands, and we’ll direct growth there instead of sprawling at the urban fringe.”
Portland builders often demolish one home and replace it with four “skinny houses” like this one.
In reality, infill can mean a complete transformation of neighborhoods, one house at a time. Hundreds of homes are being demolished each year to be replaced with either larger houses (such as this one that is four times the size of the house it replaced) or multifamily housing. Either way can be way out of character for the neighborhood.
This is happening in wealthy neighborhoods as well as working-class neighborhoods. The Antiplanner doubts that this is what people thought they were signing up for when they agreed to give a regional planning agency authority over their zoning codes. Residents of other regions need to beware of local officials offering the bring them the wondrous benefits of Portland-style planning.
The Obama Administration hates wealth and success. That’s the only explanation for recent actions it has taking to bring down those who are wealthy and successful.
First, the administration is plundering J.P. Morgan of $13 billion, partly for actions taken by Washington Mutual and Bear Stearns, financial institutions that went broke and which J.P. Morgan took over as a favor to the federal government. These fines are for things WAMU and Bear Stearns did that no one thought were illegal at the time. The Obama administration has effectively made them retroactively illegal and fined a company that hadn’t engaged in similar activities itself. Normally, when a bank goes broke, the government asked another bank to take over so that people don’t lose access to their savings. Good luck convincing a bank to do that now. As J.P. Morgan CEO Jamie Dimon says, “A Bear Stearns deal would not happen again that way, we simply wouldn’t undertake it.”
Second, the administration has charged Apple for acting as a monopoly price fixer for selling ebooks at certain prices. Never mind that Apple was entering an already competitive textbook market and offering to sell ebooks for far less than its competitors sell hard-copy books. The judge in the case has appointed as an inquisitor someone who has no experience in antitrust law, but is charging Apple more than $1,000 an hour to go through its books and question its employees.
Mayor Bloomberg says New York City’s lack of affordable housing is a sign of a vibrant economy, because it proves people want to live there. Despite his reputation in the business world, he obviously doesn’t understand the laws of supply and demand.
“Somebody said that there’s not enough housing,” Bloomberg said on a radio show. “That’s a good sign.” Housing is only scarce, he said, because “as fast as we build, more people want to live here.”
In fact, as the Antiplanner has previously shown, high housing prices do not prove that lots of people really find an area desirable. Instead, they are more a sign of government barriers to housing.
At least once a week, the Antiplanner encounters an urban plan that assumes that millennials and other young people will be much less inclined to drive cars and own their own homes than Americans have been in the past. But a new study from researchers at UCLA reaches the same conclusions as other researchers reported by the Antiplanner: young people drive less because of the weak economy, not because they prefer to walk and take transit.
Is this the American Dream?
Similarly, a 2013 survey from PulteGroup, a home builder, finds that the vast majority of people between 18 and 34 aspire to own their own homes. Among those whose incomes are above $50,000, 65 percent say they hope to buy a home in the next year. Similar results were found from a 2012 poll by Better Homes & Gardens Realty and a 2011 survey by the National Association of Home Builders. Far from appreciating multifamily housing, the greatest fear of young people in New Zealand is that they will be stuck in apartments.
“Houston Housing Hits Hurdle,” reports the Wall Street Journal. The rapid growth of fastest-growing metropolitan area in America–gaining more than 120,000 people per year in the last decade–is fueled by cheap housing, but prices rose 12 percent last year.
Housing in the Woodlands, the Houston area’s oldest and largest master-planned community. Developers usually dedicate at least 20 percent of the land in such communities to parks and open space.
What’s made rapid growth possible is the growth of master-planned communities in which developers assemble thousands of acres, install streets, water, and sewer lines, and then sell individual lots to homebuilders and homebuyers. One the infrastructure is installed, a homebuyer can purchase a lot, get construction permits, have the house built, and move in within 120 days of closing on the land.
Developers eventually pay for the infrastructure by creating “municipal utility districts” or MUDs that then charge an annual fee to the homebuyers for 30 years–something like a property tax. This is a better way of financing infrastructure than through impact fees or other up-front costs, because such fees then get added to the general cost of all housing in a region. MUDs can be found throughout Texas, but about 40 percent of them are in the Houston area. In the short run, though, MUDs can only work if developers can find the funds needed to initially install the infrastructure.
Denver’s urban-growth boundary has made housing expensive. More than a decade ago, the city blamed “failure by the private market to produce enough affordable housing” (see p. 5). To fix this “failure,” the city required developers to build “affordable housing.” Now, the city admits that this ordinance is a failure.
Data from the 2011 American Community Survey indicates that the median value of owner-occupied homes in Denver is nearly four times median family incomes. It should be just two times, which is typical for cities that don’t have urban-growth boundaries or other restrictive land-use laws. So housing prices are nearly twice as high as they ought to be.
As this city document explains, Denver’s “inclusionary zoning” ordinance requires developers who build 30 or more homes or condos at one time to sell at least 10 percent of those homes at “affordable” prices. Typically, this means an average of about $40,000 less than market prices, which is likely below the actual cost of constructing the homes. To make up for the losses, developers have to sell the remaining 90 percent for more than they would otherwise.
Growth-management planners who have made housing unaffordable in California, Oregon, and other states respond that this high cost is offset by lower transportation costs in their cities. They call it the H+T Affordability Index, and the supposed reduced cost of transportation excuses all of the housing affordability problems their plans create.
In fact, most of their cost numbers are hypothetical, and their estimates seem likely manipulated to achieve the result they wanted. Fortunately, we now have a relatively independent source of information that directly contradicts the H+T claim.
The Economic Policy Institute (EPI) is a left-wing organization that seems to believe in income redistribution. However, it has no axe to grind about urban sprawl, so when it calculates the cost of living in various cities, it has no incentive to skew the data in favor of heavily planned regions.
The Wall Street Journal reports that the “latest urban trend” is “less elbow room” as measured by an increase in accessory units and additional homes built on the lots once occupied by only one home. To illustrate this “trend,” the Journal had to travel to Vancouver, BC, which Wendell Cox ranks as second only to Hong Kong as the least affordable urban area in the English-speaking world.
That lack of affordability, in turn, can be traced to the region’s mindless pursuit of densification via urban-growth boundaries. In other words, this “trend” may actually be just a response to planning-induced housing shortages, not to any real desire of people to double up on individual home sites.
Consider, for example, some other evidence: the Census Bureau says that the average size of homes built in 2012 reached a record 2,340 square feet. More than 40 percent of homes are now built with four bedrooms. Even new condos have reached a record average size of more than 1,400 square feet. The average size of rental apartments, however, is a paltry 1,110 square feet.