Houston doesn’t have zoning, which means that it doesn’t say how land can be used. As far as the city is concerned, you can buy land anywhere in the city and use it for commercial, retail, industrial, multi-family, or single-family residential. (About half of all residential areas in Houston have protective covenants limiting uses.)
This is a city that needs more affordable “workforce housing”? This three-bedroom, 2-1/2 bath, 2,140-square-foot house on a 7,500-square-foot lot is currently for sale in Houston for $60,000.
Though it doesn’t regulate how you use your land, Houston does have some basic development codes such as minimum lot sizes, set back requirements, and height limits that vary from neighborhood to neighborhood. Now, in an effort to compete for newcomers against its suburbs, Houston is considering the first changes to its development code in 14 years.
“The Obama administration is engaged in a broad push to make more home loans available to people with weaker credit,” says the Washington Post, and some people fear that will lead to another housing bubble. In fact, there are going to be more housing bubbles; the Obama administration is contributing to them; but not through policies promoting subprime lending.
Neither subprime lending nor other federal policies caused the housing crisis that led to the 2008 financial crisis. Too few people understand this because they still view U.S. housing as a single market. But unlike labor or food or cars, housing is not something that you can easily pick up and move to somewhere that may place a higher value on it. Oil can be easily and fairly cheaply transported, so there is a world oil market; but housing markets are strictly local.
Nearly eight years ago, Alan Greenspan famously said the United States was not suffering from a housing bubble. He has take a lot of heat for that, but he was right. His exact words were, “Although a ‘bubble’ in home prices for the nation as a whole does not appear likely, there do appear to be, at a minimum, signs of froth in some local markets where home prices seem to have risen to unsustainable levels.”
Recently the Antiplanner recounted some of the consequences of Portland’s race to become the nation’s best-planned city: failing schools; crumbling streets; lack of funding for building maintenance; and declining transit service. Now we have more information on the street situation plus one more example of mismanagement.
Portland’s city auditor has released two new reports showing that the city’s priorities are screwed up. A January report found that, even though the city’s transportation budget has been growing, spending on street maintenance, traffic signals, and structural maintenance” has been declining. A more recent report specifically criticized the city for neglecting its streets, saying nearly half need “significant rehabilitation or reconstruction” to put them in acceptable condition. “Despite knowing the inevitable and costly consequences of failing to maintain streets,” the city “limited street maintenance work in recent years, choosing instead to focus on other priorities.”
This is underscored by the city’s own report card showing that maintenance of pavement, traffic signals, bridges, and street signs fail to meet the city’s own standards.
Here is the second of my statements of principles for the New Year.
1. The Property-Rights Principle: Government should not regulate land uses except to prevent trespasses or nuisances.
People should be allowed to use their land in any way they see fit provided their use does not harm others (such as through air, water, or noise pollution) or violate contracts they have voluntarily agreed to. Any regulation beyond this “for the greater good” puts someone’s subjective notion of social values above individual rights.
Even if it could be proven that such regulations would benefit society more than they would harm individual property owners, government should not have this power because it invites abuse. If the social benefits are truly greater than the individual costs, then society should be willing to compensate the property owners.
The Bipartisan Policy Center released an “infographic” arguing that there is an imminent shortage of rental housing. “Five to six million new renter households will form over the next ten years,” says the “graphic” (quotations used because it really isn’t that graphic), but a “slowdown in new construction . . . means rental market conditions are tight.”
Click to download the entire infographic.
The group buys into the notion that an increasing number of people want to rent rather than buy. Yet it is more likely that the sagging economy combined with housing prices that are still too high in many states are preventing people from buying even though they would prefer to do so.
San Francisco has approved the construction of tiny apartments as small as 150 square feet. Previous zoning required a minimum of at least 290 square feet. New York City is considering a similar measure.
Tiny houses for sale in Petaluma, CA. Flickr photo by Nicolas Boulosa.
Meanwhile, construction of 200-square-foot single-family homes is growing popular in Washington, DC. Homes of 150 to 200 square feet sell for $20,000 to $50,000, or $133 to $250 a square foot.
Land-use planning has made British housing so expensive that more than half of all homeowners expect to have to downsize the next time they move while only 22 percent expect to upsize. Home prices in Britain and other European countries with lots of land-use regulation tend to bubble as much as prices in California and other states with strict land-use rules.
This Swedish apartment building slated for demolition due to planners’ overbuild of multi-family housing looks a lot like many so-called transit-oriented developments recently built in Portland. Photo is from the Swedish “abandoned places web site.
Meanwhile, Swedish planners so overbuilt multifamily housing that, since 1995, they’ve had to demolish 20,000 units, and many more wait to be torn down. The apartments were built as part of what planners called the “million programme,” in which a million dwellings were to be built in the 1950s and 1960s. About 110,000 of these units were built in three- to eight-story apartment buildings during the 1950s and 1960s. They were so uniform and boring that, in 1971, people took to the streets to revolt against government policy and demanded the right to build and live in single-family homes. As a result, where before 1970 three out of four dwellings built in Sweden were multifamily, after 1970 three out of four were single family. Here are some photos of apartments waiting for demolition.
Harvard economists have proven one of the major theses of American Nightmare, which is that land-use regulation is a major cause of growing income inequality in the United States. By restricting labor mobility, the economists say, such regulation has played a “central role” in income disparities.
When measured on a state-by-state basis, American income inequality declined at a steady rate of 1.8 percent per year from 1880 to 1980. The slowing and reversal of this long-term trend after 1980 is startling. Not by coincidence, the states with the strongest land-use regulations–those on the Pacific Coast and in New England–began such regulation in the 1970s and 1980s.
Forty to 75 percent of the decline in inequality before 1980, the Harvard economists say, was due to migration of workers from low-income states to high-income states. The freedom to easily move faded after 1980 as many of the highest-income states used land-use regulation to make housing unaffordable to low-income workers. Average incomes in those states grew, leading them to congratulate themselves for attracting high-paid workers when what they were really doing is driving out low- and (in California, at least) middle-income workers.
Cornell law professor Robert Hockett has proposed a way out of the “mortgage debt impasse” that he thinks is slowing our economy: have the federal government take all of the underwater homes by eminent domain, paying fair market value for the homes, and then sell the homes, hopefully to the previous buyers. Since the federal government will be able to sell the homes for what it paid for them, it won’t lose money, and fewer residents will lose their homes, so it sounds like a win-win solution.
Although the plan has been endorsed by Yale housing economist Robert Shiller, the Antiplanner is not so enthused. Hockett and Shiller barely hint that it is not exactly a win-win plan, and the big losers will be those who invested in mortgage-backed securities. The forced-sale of the homes backing these securities for less than value of the mortgages means many of these investors will lose their money.
No doubt many will say tough luck. But this attitude has become characteristic of the Obama administration, and it probably threatens our economy more than the “mortgage impasse.”
It is always a thrill for an author to receive the dust jacket for a new book, so I’ll indulge myself by presenting the complete jacket for the Antiplanner’s latest book, American Nightmare (click on the image for a full-sized, 1.5 megabyte, view). Here is a brief preview of the book, which is scheduled for publication on May 16.