Paul Krugman argues that housing costs, not taxes, are what is drawing people to Georgia and Texas and away from California and New York. He’s partly right, but he’s mostly wrong.
What he fails to see is that the same impulse that attempts to control land uses in California, making housing expensive, also makes unduly regulates California businesses and boosts taxes to make California undesirable. The same impulse the attempts to control rents in New York City also leads to nanny-state rules and excessive bureaucracy that makes that city undesirable to many businesses.
Contrary to what Krugman says, housing prices in California and New York are high not because they’ve run out of land. California especially has plenty of land available while a good share of the New York and Connecticut counties bordering New York City are rural open space. Nor are prices high because cities won’t allow higher densities: if California cities didn’t have urban-growth boundaries, few people would want to live in higher densities.
The sad events in Ferguson, Missouri are being used by urban planning advocates to popularize their latest cause: suburban poverty. Ferguson is “emblematic of growing suburban poverty,” says the Brookings Institution. “Hit by poverty,” says CBS News, “Ferguson reflects the new suburbs.” According to a Brookings info graphic, between 2000 and 2011 the numbers of central city poor grew by 29 percent while the numbers of suburban poor grew by 64 percent.
There was a time that the suburbs were demonized because only middle-class and wealthy people lived there, leaving poor people in the inner cities. Now that lower-income people are living in the suburbs, the suburbs are being demonized for having “concentrated poverty,” with a distinct implication that wealthy whites have moved back to the cities leaving the undesirable suburbs to the poor and minorities.
The reality is that all demographic classes–all ages, races, and income levels–are growing faster in the suburbs than the cities. The suburbs offer less congestion, lower-cost housing, and often better schools and other benefits over the cities. Instead of turning the movement of low-income people to the suburbs into some kind of crisis, this movement should be celebrated as a success.
Ever since the British parliament passed the Town & Country Planning Act in 1947, housing in that nation has gotten less and less affordable. As a result, the average size of new homes today is only 925 square feet, down 44 percent from the average size in 1920. Meanwhile, the average size of new home in the United States in 2013 was 2,598 square feet, up 56 percent from 1,660 square feet forty years before.
Eric Pickles, Britain’s community secretary, blames the problem on “Labour policy, which decreed that at least 30 homes had to be built on every hectare of land” (about 12 per acre). But we know the problems go back well before the previous government, and the Tories had plenty of chances to reverse the policies in the Town & Country Planning Act.
Although the Daily Mail published this article just a few days ago, it is based on reports from the Royal Institute of British Architects (RIBA) that go back to at least 2011. RIBA has started a campaign aimed at having the government set minimum requirements for space and light in new homes.
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.