An article in the Financial Times points out that about $10 trillion worth of wealth in the United States is phony, created by restrictive land-use laws that have pushed up the price of housing. Unfortunately, the article is behind a paywall, so most people won’t see it, but the author, Robin Harding, makes several good points.
First, these planning laws contribute to income inequality by making people who already own homes richer while making those who don’t poorer. Harding misses the nuance that, in cities like Portland that have subsidized multifamily housing, renters aren’t as ripped off as they are in the Bay Area, where NIMBY planning has limited all kinds of housing. But it remains true, even in Portland, that the land-use restrictions contribute to an income divide.
“Wealth of this kind is far more destructive than the alleged sins of the top 1 per cent,” says Harding. “It is wealth created not by improving our living standards but by making them worse.” Thanks to planning restrictions, the average size of home in Britain today is not only less than half the size of an American home, it is far smaller than the average before passage of the Town & Country Planning Act of 1947. This is the law that so many planners want to emulate in America.
Those who want to reduce income inequality by taxing the rich, concludes Harding, should take another tack. “If we want to make society fairer and more equal, just let people build.”
University of Minnesota planning professor Richard Bolan has responded to the Antiplanner’s critique of the Twin Cities’ Metropolitan Council’s plan to emphasize high-density housing and discourage large-lot single-family homes. My op ed pointed out that planner Arthur Nelson’s predictions that the demand for single-family homes was declining were based on oversimplified surveys that asked people questions like would they want to live in a “walkable community.”
A lot more factors are at work in people’s housing choices. “Given a choice between a 1,400-square-foot home on a tiny lot in a congested part of town for $375,000 and a 2,400-square-foot home on a large lot in a quiet suburb for $295,000,” my op ed said, “most people would prefer the larger home.” My point was the issues were too complicated for planners to be able to see what people would want 26 years in the future, and since homebuilders can adequately respond to changes in demand, there was no need for central planners to try to predict the unpredictable.
Bolan admits that he’s “not a supporter of Arthur C. Nelson’s report” on future housing demand. But Professor Bolan has his own reasons why central planners should try to determine people’s housing choices in the future: externalities.
Here are some thoughts for your consideration this weekend.
1. Orange County Register: It’s time for Congress to get out of the transportation business.
2. Huffington Post: Five reasons not to raise the gas tax.
3. Minneapolis Star Tribune: Twin Cities housing report not credible.
Have a safe and happy weekend.
The Twin Cities Metropolitan Council is currently writing the Thrive Plan, which–like so many other urban plans today–aims to cram most new development into high-density transit centers. To justify this policy, the council naturally hired Arthur Nelson, the University of Utah urban planning professor who has predicted that the U.S. will soon have 22 million surplus single-family homes on large lots.
Click image to download a copy of the report.
“Demand for attached and multifamily housing in the Twin Cities will continue to grow,” trumpets the Met Council’s press release about Nelson’s report on Twin Cities housing. That, of course, is what the Met Council wanted Nelson to “prove,” which is why they hired him. However, his report can’t really justify the Met Council’s plans.
Smart-growth planners justify their preoccupation with multifamily housing on the notion that, not only do Millennials prefer such housing, but as Baby Boomers become Empty Nesters, they too will prefer such housing. This is based on a logical fallacy:
- Most people in multifamily housing have no children
- When their children leave home, Baby Boomers will no longer have children
- Therefore, most Baby Boomers will prefer multifamily housing.
The reality, of course, is that even most Millennials live in suburbs, not dense inner cities–and even more aspire to eventually own their own home. So to presume that Baby Boomers will suddenly move to multifamily housing, out of possible nostalgia for their younger years, is absurd.
This is confirmed by a recent analysis of census data published by Fannie Mae. The share of Baby Boomers with children living at home declined from more than 24 percent in 2006 to 12 percent in 2012. Yet the share of Baby Boomers who live in single-family homes has fallen by just 0.3 percent from their peak, and remain today above the share before the financial crisis.
The Washington Post reports that millennials living in walkable DC neighborhoods are growing up, getting married, having children, and (as the Antiplanner would expect) moving to the suburbs.
What wimps! They should be like these Toronto millennials who have had kids but are “learning to survive in 700 square feet.” Of course, unlike the Post, which actually quantifies (sort of) the number of millennials moving out of DC, Toronto Life relies strictly on anecdotes.
Of course, somewhere there is a planner saying, “the problem is affordability. If we just subsidized inner-city housing, more people would move/stay there.” To the Antiplanner, the definition of a socialist is someone who doesn’t understand that subsidizing something is not the same thing as making it affordable.
The House of Representatives has approved an amendment offered by Arizona Representative Paul Gosar to the Transportation and Housing & Urban Development appropriations bill that would prevent HUD from spending any resources on its Affirmatively Furthering Fair Housing program. As previously noted, this program is basically an attempt to use fair housing laws to force suburbs to rezone land for higher-density housing.
As described by Stanley Kurtz, under regulations drafted by HUD, suburban communities of single-family homes that do not have a perfectly balanced racial composition would be de facto guilty of housing discrimination. To remedy this, such communities would be required to rezone for multifamily housing.
Ironically, the rules implicitly make a racist assumption that racial minorities prefer multifamily housing. On a per-square-foot basis, single-family homes are less expensive to build than multifamily, so the rules could have required construction of smaller homes. But, of course, the real goal isn’t racial integration; it’s increasing densities.
When the 2008 financial crisis hit, many writers piously suggested that homeownership was not for everyone. Most recently, New York Times blogger Josh Barro argues against homeownership, saying that “a 20 percent decline in home prices may wipe out the equity interest entirely, making it a riskier bet than buying stocks.” But housing prices rarely decline by more than 10 percent in regions with little land-use regulation; by restricting supply, it’s the regulation that makes prices volatile. (Meagan McArdle responds to some of Barro’s other points.)
Adding to this, now people are discovering that the same things that put homeownership out many people’s reach can make rents unaffordable as well. Unfortunately, many of the writers and analysts have failed to connect high rents with land-use restrictions.
A Houston writer named Aboubacar Ndiaye is one who gets it, blaming high rents on several factors but leading off with government regulation. In this, he includes “housing-choice vouchers, affordable housing mandates, rent control, height regulations, historic designations, and protective zoning laws.” Though some of these seem to be intended to make housing more affordable, he observes, they actually make it less so.
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.