Lengthy permitting processes are responsible for housing affordability problems in many cities, reports the Washington Post. Of course, I’ve been saying this for nearly two decades, but it doesn’t become true until it is reported in one of our newspapers of record.
While the Post is right about the problem with permitting, the article gets a lot of other things wrong. “Land is obviously part of the problem,” says the article. “San Francisco and Boston, hemmed in by water, have only so much of it left to build on.” Um, not really. The San Francisco Bay Area has built on less than 18 percent of the land available. Just 53 percent of the Massachusetts counties in the Boston metropolitan area have been urbanized, and that doesn’t count parts of the metro area in New Hampshire and Rhode Island. Why do people think that water on one side means they can’t expand in the other three directions?
The article never mentions urban-growth boundaries or other artificial constraints on urban expansion. Instead, it says “critics” have “blamed zoning laws.” In fact, zoning by itself isn’t the issue. Houston doesn’t have zoning, while Dallas does, yet both are growing rapidly and about equally affordable. Instead, the problem is urban containment.
Portland housing prices are growing faster than almost anywhere in the nation. So the Portland city council has decided to address this problem by building 1,300 units of “affordable” housing, adding less than one-half percent to the city’s housing inventory.
How are they going to pay for this? By taxing new homes 1 percent of their value. Because new and existing homes are easily substitutable for one another, when the price of new homes goes up by 1 percent, the price of existing homes will also go up by 1 percent.
The problem is that politicians don’t understand the difference (or hope voters don’t understand the difference) between “affordable housing” and “housing affordability.” The former is something governments build to help people who are too poor to afford decent housing. The latter is the general level of housing prices relative to the general level of incomes. Building “affordable homes” addresses the first problem, but not the second–except in cases such as Portland where affordable housing makes housing less affordable.
An article in the Wall Street Journal points out that self-driving cars will give more people access to housing that is affordable, particularly in urban areas where growth-management regulation has driving up housing costs. Unfortunately, that’s not the overt message in the article, which is instead headlined, “Driverless Cars to Fuel Suburban Sprawl,” as if that’s a bad thing.
You’d think that a writer for the Wall Street Journal would realize that sprawl is a good thing, but it gives people access to more affordable housing and less traffic congestion, and most importantly allows people to live in the way most people prefer: in a single-family home on a private lot. But this article by technology writer Christopher Mims seems to assume that everyone knows sprawl is bad, even though it doesn’t say why. In fact, the article reports, in a shocked tone, that “half of Americans live in, and are perfectly fine with, suburbs.”
Mims admits that no one really knows how self-driving cars will change the world. But he joins others in assuming that nearly everyone will give up owning a car and rely on car-sharing instead. After all, he and others point out, cars are actually used only 5 percent of the time–what a waste! Hey, Mr. Mims, the toilet in your house is probably used only about 5 percent of the time. Are you willing to share it with anyone who can download a smartphone app?
New York City politician Adriano Espaillat has proposed that the federal government create “anti-gentrification” zones “where vulnerable tenants could form cooperatives to purchase their apartment buildings away from predatory landlords [and a] ruthless market.” As a rule of thumb, any time a politician proposes a new government program to save people from the “ruthless market,” it is worth looking to see what other government programs are really causing the problem.
First of all, gentrification is a local problem, so why should the federal government get involved? Espaillat’s answer is “the federal level . . . is really where the money is.” The real answer is that Espaillat is running for Congress, so he has to propose a federal solution to get people to vote for him. Considering that the federal government is nearly $20 trillion in debt, the Antiplanner suggests that people should be skeptical of politicians who think the federal government is made of money.
Second, a lot of gentrification is driven by the “build up, not out” crowd, often using government subsidies to promote their visions. In New York City, for example, Mayor de Blasio wants to rezone low-income neighborhoods so that the city can tear down people’s mid-rise apartments and replace them with high-rise “affordable” housing. Too bad there isn’t some architectural critic to challenge this plan. Maybe they could write a book about it.
The young people who have moved to Portlandia like to eat out a lot, and as a result the Portland has more restaurants per capita than all but five other metropolitan areas in the country. However, the cost of eating out is rising because inexpensive restaurants are getting pushed out by more expensive ones that can afford to pay the rising rents required to stay in Portland.
This is just one more symptom of Portland’s growing affordability problem. In May, median home sale prices in the Portland area exceeded $350,000 for the first time. This is 4.8 times median family incomes, the worst Portland has yet seen. While sale prices might not perfectly reflect the entire housing market, they are probably pretty close, as Zillow estimates that the median value of Portland-area homes in April was $325,000.
Inexpensive restaurants aren’t the only thing that gets pushed out by rising land prices. Residents of a mobile home park in Northeast Portland are facing eviction as the owner wants to sell the land to a developer who will no doubt build dense, but much-more expensive, housing on the site. The residents are trying to raise $2 million to buy the park themselves, but this seems unlikely. At least four other mobile-home parks are also facing sale and redevelopment.
The city of Portland is considering new rules that will limit the size of new homes. This will supposedly make housing more affordable, but all it will do is limit the supply of homes that people want and make them less affordable.
The city of Denver is about to adopt new rules charging developers fees that will be used to build affordable housing. As if making new developments more expensive will make housing more affordable.
Voters in San Francisco just adopted a new ordinance allowing the city to require builders of 25 homes or more to dedicate a fourth of those homes to low-income renters or buyers. In the past, such “inclusionary zoning” rules only required that 15 to 20 percent of new homes be affordable. But if rules like this really worked, why not just require that all new homes be affordable?
The Antiplanner has spent the last week in Britain, and everywhere I went people were talking about Brexit: the vote in June on whether Britain should leave the European Union. Britain originally joined the union when it was a free-trade area, but since then it has grown increasingly intrusive on the economies of its member states.
While those intrusions are costly to Britain, the country’s biggest economic problem is self-inflicted: the housing crisis that makes Britain one of the least-affordable housing markets in the world. That crisis directly results from land-use laws passed to contain urban growth within specified boundaries. Since passing the first of these laws, the Town & Country Planning Act of 1947, British housing has not only grown more expensive, the nation has experienced four housing bubbles and collapses.
Until 1860 or so, all of the land in Britain was owned by an aristocracy that made up less than 4.5 percent of the population. Today, more than 60 percent of families nominally own the land they live on, though I use the word “nominally” because the official position of the government remains that “The Crown is the ultimate owner of all land in England and Wales.” This probably refers to alloidal title, while individuals may own a fee-simple title or freehold.
The Antiplanner recently listed more than half a dozen academic papers that concluded that growth management makes housing more expensive. To this number might be added a paper (really a lengthy blog post with some neat graphics) by economist Issi Romem, who works for the real-estate web site BuildZoom. Romem finds that urban areas with unaffordable housing haven’t expanded geographically to match their population growth, while areas that have expanded geographically remain affordable.
An article in the Wall Street Journal breathlessly reports this as news, when it is only news to those who have drunk the kool-aide of urban planning. The writer of the article, Laura Kusisto, has apparently listened to too many urban planners herself, for she reports that urban “sprawl” has a “tendency to lead to oversupply that can lead home prices to crash.”
This is completely wrong; the cities that Romem reports have grown geographically did not bubble and crash in the 2000s. Instead, the urban areas that saw housing prices crash are the ones that tried to contain sprawl. Too bad the WSJ can’t afford to hire reporters who understand a smattering of economics, such as the fact that restricting supply makes a good inelastic which in turn makes its price more volatile.
A new report from Hawaii’s Grassroot Institute argues that Hawaii’s land-use laws must be repealed because they discriminate against low-income minorities. Hawaii was the first state to pass a land-use law in 1961, and not coincidentally it has the least affordable housing in the nation.
The 2014 American Community Survey found that median home prices in Hawaii were 6.7 times median family incomes, compared with the national average of 2.7. These high prices had pushed low-income minorities to leave the state: while urban Honolulu had grown by 12 percent between 2000 and 2010, the urban area’s black population declined by 4 percent.
Hawaii’s 1961 land-use law divided lands in the state into urban, agriculture, and conservation (later a fourth category, rural, was added). While the supposed purpose was to protect Hawaii’s agricultural sector, in fact it destroyed it because high housing prices increased labor costs and plantations and canneries can’t compete with those in places like Fiji and Costa Rica.
In the minds of Australians, the term “Australian dream” is even more firmly associated with homeownership than the term “American dream” is in the minds of Americans. For more than a century, Australia has enjoyed higher homeownership rates than the United States.
Yet now the Australian dream is nearly dead thanks to state land-use restrictions that have made Australian housing some of the most expensive in the world. According to Wendell Cox’s housing survey of English-speaking countries, Sydney, Australia is the second-least affordable urban area, with only Hong Kong being less affordable. Hong Kong at least has an excuse of somewhat limited land area.
Some blame the housing crisis on the “concentration of wealth,” when in fact the opposite is true: by making housing expensive, the government has concentrated wealth in the hands of existing homeowners at the expense of renters and recent and aspiring homeowners. Others suggest that Australians should dream about something else, as if there is little anyone can do to ever make housing affordable again.