Land-use regulation caused the housing bubble. Now, in at least one city, other regulations have forced a bank to demolish brand-new homes.
It would be easy to say that this shows that builder constructed a surplus of homes. But the truth is that these houses, like their builder and our entire economy, are simply victims of overzealous regulation.
Among the many rules in the city of Victorville is one that imposes daily fines on the owners of homes not brought up to code within so many months after construction begins. The builder of these homes nearly completed them, then went bankrupt. Given a choice between paying the fines, bringing the homes up to code, or tearing them down, the bank decided to bulldoze them.
According to one of the comments on this site, the “code violation” was some windows broken by local vandals. Another story says it was due to the builder’s failure “to finish roads, walls, and other improvements that bring the community into code.” Whatever the details, this waste — from beginning to end — can be blamed solely on stupid land-use rules.
It would be nice to think that Denver Regional Transit District (RTD) General Manager Cal Marsella is feeling pangs of guilt for lying to the public so often about the virtues of rail transit. That would explain why, even though he is one of the highest-paid public officials in Colorado, he just announced that he is quitting that job to take the “opportunity of a lifetime” by going to work for a private company that operates buses (update:and would like to operate trains) for public agencies including (by an amazing coincidence) RTD.
One reason why transit officials like trains is that the top officials of rail transit agencies get paid more than the leaders of agencies that only run buses.
In 1995, RTD paid Marsella $112,000 to run RTD, which was then mostly a bus system. He was picked for the job partly because he and the then-chair of RTD’s board of directors, Jon Caldara, agreed that rail transit was a waste of money.
Within a few years, he had changed his tune, overseeing construction of two new light-rail lines and pumping interest groups for their support for a 2004 measure to raise taxes to build six more.
Dorothy English wanted to live to be 100 because there were “some bastards I want to get even with.” Specifically, Multnomah County, Oregon, which zoned her 20 acres of land years after she and her husband bought it, thus preventing her from subdividing it into eight parcels for her grandchildren.
She didn’t make it, dying a year ago at the age of 95. But she just may get even anyway.
New Republic editor John Judis has a couple of insights about the Obama administration’s economic and social goals. He points out that, for more than a century, Progressive and free-market forces have gone through cycles of “reform and reaction.”
The Progressives — who the Antiplanner’s faithful ally John Baden calls the “American counterrevolutionaries” — have repeatedly sought to increase the size and scope of government: railroad regulation, public land agencies, and the income tax in the 1900s; social security, low-interest home loans, and government ownership of power plants in the 1930s; medicare, the war on poverty, and environmental laws in the 1960s.
In between, friends of free markets tried to roll back these reforms, but were never completely successful. Thus, each successive reform era has further increased government power and reduced free markets.
Smart growth was one of two necessary but, by themselves, insufficient conditions for the housing bubble that led to our current economic crisis, says the Antiplanner’s faithful ally Wendell Cox. Cox’s fully narrated PowerPoint presentation (23.8 MB) at last weekend’s Preserving the American Dream conference shows that housing bubbles in states with smart growth were worse than the Japanese bubble of the 1980s, while bubbles in markets with what Cox calls “responsive zoning” were barely noticeable.
A French economist named Vincent Benard concurs. His presentation (1.9 MB) shows that France also had a housing bubble and that its bubble was also due to land-use regulation. In particular, Benard observed that it can take six years for builders to get approval to build homes. When demand for housing grew in 2000, builders began applying for permits but only received them when the market began to tank in 2006.
Ron Utt, the Antiplanner’s faithful ally, has uncovered the first steps of President Obama’s plan to force smart growth on those parts of the country that managed to escape the housing bubble. The departments of Transportation and Housing & Urban Development have signed a joint agreement to impose smart growth on the entire nation.
Under the agreement, the departments will “have every major metropolitan area in the country conduct integrated housing, transportation, and land use planning and investment in the next four years.” Of course, nearly all of the metropolitan areas that already did such integrated planning suffered housing bubbles, while most of those that did not did not have bubbles. The effect of Obama’s plan will be to make the next housing bubble much worse than the one that caused the current financial crisis.
The Obama administration believes in recycling, as shown by the so-called high-speed rail plan it announced last week. Below is a map of the plan, and below that is a map of the Federal Railroad Administration’s 2005 high-speed rail plan. As you can see, the proposed routes are identical. (The grey lines on the first map represent conventional Amtrak trains.)
In January, Australian smart-growth guru Peter Newman published a book on how smart growth will reduce greenhouse gas emissions. A few months before, the Urban Land Institute published a book on the same topic. Last September, California passed a law requiring its cities to practice smart growth to reduce greenhouse emissions.
The Antiplanner will review these books in detail in the future. In the meantime, what kind of assumptions do we have to make to justify using smart growth in order to reduce greenhouse emissions?
Someone sent me this photo album of skinny houses around the world. Many of them are are more creative and interesting to look at than the typical Portland skinny house.
The hypothesis behind skinny houses is that increased densities will allow people to be closer to transit, shops, and jobs, and therefore they will walk, cycle, and ride transit more and drive less. I say “hypothesis” because there is little evidence this is true, or at least that it has more than a tiny effect on travel habits.