The Seattle Post-Intelligencer says it has found the best Seattle homes for Millennials. Judging by the paper’s suggestions, Seattle Millennials should move to Houston. Houston may not have Mt. Rainier, but it has beautiful lakes, a sea coast that is just about as nice as Washington’s (though not as nice as Oregon’s), and most important, it doesn’t have urban-growth boundaries which means it has much more affordable housing.
Click any photo to go to the listing for that property.
The P-I‘s first suggestion is a 720-square foot, two-bedroom, one-bath home on a 5,000-square-foot lot. On the plus side, the living room has hardwood floors. On the minus side, the asking price is $259,950–and if Seattle’s housing market is anything like Portland’s, it will go for more than that. At the asking price, the cost is $361 per square foot.
Portland’s Bureau of Planning and Sustainability is following the White House’s advice by proposing to increase the densities of nearly two-thirds of the city’s single-family neighborhoods. Under the proposal, duplexes, triplexes, and accessory dwelling units would be allowed in single-family areas.
The plan also proposes to limit the size of a home to about half the square footage of the lot it is on, while at the same time allowing buildings to cover a larger area of the lot. That’s supposedly to prevent McMansions, but it also just happens to encourage people to build two separate homes on one lot (one of which would be called an “accessory” unit).
Portland’s current mayor, Charlie Hales, is a strong advocate of densification–so long as it isn’t in his backyard. When the city proposed to increase densities in Eastmoreland, one of the wealthiest neighborhoods on the city’s east side, residents strongly protested. Hales, who just happens to live there, backed them up. Judging from the map on page 14 of the proposal, neither Eastmoreland nor the wealthy Tualatin Hills neighborhoods are among those that would be rezoned. Continue reading →
Urban-growth boundaries and other forms of growth management make housing expensive, housing prices volatile, and particularly harm low-income people. They slow regional growth, are a primary if not the primary cause of wealth inequality, and cost the nation nearly $2 trillion a year in economic productivity. These and other problems are documented in a new paper that the Cato Institute will publish tomorrow. Antiplanner readers can get a preview of the paper today.
Titled The New Feudalism, the paper points out, as the Antiplanner has previously noted, that strict government control of land uses resembles feudalism in every way but whose names are on the land titles. You may own land in California, but your ability to use that land the way you see fit can be restricted just as heavily as faced by occupants of land in Africa or other places where the government or a few oligarchs hold title to most land.
The paper also argues that regions that practice strict growth management aren’t going to solve their housing affordability problems by building to higher densities. Higher land costs, higher construction costs (at least for mid-rise and high-rise housing), and higher permitting costs can all add hundreds of thousands of dollars to the cost of a single housing unit.
The Washington Post is publishing a series of opinion pieces on what housing policies the next president should adopt. The first, by Urban Institute fellow Erika Poethig, argues that federal rental assistance should target the most vulnerable populations instead of, as is done today, simply anyone who makes a certain percentage below median incomes. The second, by University of Virginia economist Edgar Olsen, goes further and argues that all low-income housing subsidies should be in the form of rental assistance, not construction of low-income housing, which he says is not cost effective.
The most recent article is by the Antiplanner, and readers of this blog will not be surprised to learn that it focuses on land-use regulation. One point that I didn’t make in the article for lack of room (I was given a 500-word limit) was that land-use restrictions that make housing more expensive impose higher costs on taxpayers who are expected to provide low-income housing.
On the same day, Oregon’s Cascade Policy Institute published a paper arguing that Oregon land-use regulation violates the Fair Housing Act just as much as if Oregon put up a sign saying, “No blacks allowed.” This is similar to a paper previously published by Hawaii’s Grassroot Institute, but of course with more of a focus on Oregon law.
Members of the city council argued that unoccupied short-term rental houses often get turned into noisy, “party houses” and that the use of those homes for short-term rentals made housing more expensive for everyone else. The first point might be legitimate, but no owner or renter wants to see their home trashed and so it is likely to be self-policed. The second point isn’t legitimate at all; it is Austin’s over regulated land-use rules that make housing there unaffordable.
The city of Portland, which likes to call itself “the city that works,” subsidized the renovation of a 50-unit downtown apartment building. The apartments will now be made available to people who earn less than $15,400 a year.
“In Portland, we strongly believe that downtown should be a place where people of all incomes can live,” said city commissioner Dan Saltzman. One problem with that philosophy, as Willamette Week‘s Nigel Jaquiss points out, is that the city spent $514 per square foot renovating those apartments. For a lot less money, it could have built twice as many brand new apartments elsewhere in the city.
In many ways, Portland is the model for nearly all of the policies advocated in the White House policy paper described here yesterday: minimum-density zoning, streamlined permitting for developers who want to build high densities; all single-family neighborhoods put in zones allowing accessory dwellings; lots of neighborhoods zoned for high-densities and multifamily housing; tax-increment financing and property tax abatements to subsidize density; and elimination of off-street parking requirements (which is the only policy discussed in detail by a Washington Postarticle about the White House paper). Yet, despite doing all of the things that the White House recommends to make housing affordable, Portland politicians claim that the city is suffering from a terrible housing crisis. Of course, most of the ideas proposed to solve the crisis, such as rent control and inclusionary zoning, will just make it worse.
A new Housing Policy Toolkit from the White House admits that “local barriers to housing development have intensified,” which “has reduced the ability of many housing markets to respond to growing demand.” The toolkit, however, advocates tearing down only some of the barriers, and not necessarily the ones that will work to make housing more affordable.
“Sunbelt cities with more permeable boundaries have enjoyed outsized growth by allowing sprawl to meet their need for adequate housing supply,” says the toolkit. “Space constrained cities can achieve similar gains, however, by building up with infill.” Yet this ignores the fact that there are no cities in America that are “space constrained” except as a result of government constraints. Even cities in Hawaii and tiny Rhode Island have plenty of space around them–except that government planners and regulators won’t let that space be developed.
Instead of relaxing artificial constraints on horizontal development, the toolkit advocates imposing even tighter constraints on existing development in order to force denser housing. The tools the paper supports include taxing vacant land at high rates in order to force development; “enacting high-density and multifamily zoning,” meaning minimum density zoning; using density bonuses; and allowing accessory dwelling units. All of these things serve to increase the density of existing neighborhoods, which increases congestion and–if new infrastructure must be built to serve the increased density–urban-service costs.
Palo Alto may be the most expensive housing market in America. The American Community Survey says the home of Stanford is the only city whose median home price was more than $2 million in 2014; the survey numbers don’t go higher than $2 million so we don’t know how much more.
Coldwell Banker’s 2015 report on average prices of a four-bedroom, two-bath home found that Palo Alto’s was $2.1 million; only Newport Beach, at $2.3 million, was higher–but the American Community Survey says a median home in Newport Beach was “only” $1.7 million. (Coldwell Banker’s 2016 numbers don’t include Palo Alto.)
Palo Alto residents earn more than the national average, but not enough to make up for the high housing prices. The median family income was $176,000 in 2014. That happens to also be the nation’s highest, but value-to-income ratios are still more than 11 when they should be under 3.
For the United States as a whole, the value of a median-priced owner-occupied home increased from 2.7 times median family incomes in 2013 to 2.8 times in 2014. The 2014 numbers are from the 2015 American Community Survey, which estimates both home values and family incomes for the year before the survey. In the survey, median family incomes are found in table B19101 while median home values are in table B25077.
In places where land for new housing is abundant, value-to-income ratios tend to hover around 2. Value-to-income ratios above 3 suggest real or artificial limits on the ability of homebuilders to meet the demand for new housing. While the national ratio of 2.8 is worrisome, many states are well under this ratio.
A few months ago, the Antiplanner listed more than a half-dozen papers by economists showing that growth constraints make housing less affordable. Yet many planners still deny that relaxing those constraints will make housing more affordable.
Now a paper by law professor Michael Lewyn makes exactly the same point, and responds directly to arguments made by advocates of growth constraints. Lewyn is far from a free marketeer, having written articles about controlling sprawl, encouraging walkability, and supporting infill development. But he apparently puts affordability above the fuzzy environmental goals of smart-growth planning.
Lewyn’s paper uses different terms than I would use, blaming land-use regulation on NIMBYs instead of urban containment. I think that NIMBYism is a result, not a cause, of the kind of comprehensive planning that leads to unaffordable housing. But that’s merely a quibble; the significance of Lewyn’s paper is that more people–and not just economists–realize that urban containment is a morally unacceptable policy.