The Antiplanner’s Law of Housing Affordability

Growth management not only makes housing more expensive, it makes housing prices more volatile. So, even though the American economy isn’t exactly booming, growth in some parts of the country is sending housing prices upwards, and housing affordability has become a battlecry in San Francisco, Los Angeles, Seattle, Portland, and many other cities.

Unfortunately, it is usually the battlecry of advocates of the wrong policies. San Francisco’s affordability crisis has led to a blame game, with some blaming high housing costs on anti-development progressives (which is partly true) while other say they are solely due to due to demand, not supply (which is completely wrong). Proposed solutions include increased rent controls and inclusionary zoning, both of which would make housing less affordable in the long run.

In Seattle, someone noticed that developers were tearing down $400,000 bungalows in order to build three $600,000 condos and came to the wrong-headed conclusion that housing could be made more affordable by saving the bungalows. Yes, $400,000 is less than $600,000, but if you don’t increase the supply of houses, overall affordability will decline.

Oregon economists have reached the stunning conclusion that housing supply and affordability are linked, as shown in this diagram that compares the growth in housing with housing prices. However, they don’t truly understand the link. The implication is that the government can make housing more affordable by building more homes. But the reality is that Portland and other regions aren’t less affordable because fewer homes are built; instead, fewer homes are built in those areas because they are less affordable and so fewer people can afford to buy new homes.

What is missing from all these reports is a fact that I’ve stated so many times before that I’m going to call it the Antiplanner’s Law of Housing Affordability: The key to housing affordability is an unlimited supply of vacant land available for development at the urban fringe. “Unlimited” doesn’t mean “infinite”; it simply means that land isn’t limited by physical or legal limits on land development. A city on an island may have a physical limit to land development, but urban areas like Seattle and San Francisco are physically limited only on their western sides, while it is legal limits on the east, north, and south that truly makes housing unaffordable.

“Unlimited” also means that an urban area that expands its urban-growth boundary by 2 or 3 percent won’t suddenly have affordable housing. So long as there is a boundary, if there is any economic growth, developers and speculators will buy all the land within the boundary in anticipation of future land shortages.

Of course, that’s not an issue in Portland, where Metro’s staff claims there is no need to expand the region’s growth boundary despite housing affordability problems. Instead, in a report that is based mainly on wishful thinking, the agency imagines that growing up, not out, will keep housing affordable.

The build-up-not-out mantra ignores several key facts. First, urban land is more expensive than land on the urban fringe, which means homes built on that land will cost more. Second, mid-rise and high-rise construction costs are higher than low-rise construction. Third, the cost of providing urban services is greater in a brownfield development where densities are increased than in a greenfield development of any density.

In American Nightmare, I argued that urban planning and zoning are forms of economic warfare by the middle class (meaning the 30 percent of Americans who have college educations and salaried jobs) on the working class (meaning the 70 percent who don’t have college degrees and have wage-earning jobs). When Metro staff and other urban planners talk about “livable communities,” they mean livable for the middle class, not the working class. With their higher incomes, middle-class families can generally afford more expensive homes, and affordability for them only because a “crisis” when (as in San Francisco), housing becomes so expensive that even the middle class can’t afford to stay.

This is the wrong way of looking at the issue. Housing is only affordable if it is affordable to everyone, not just the rich and the lucky few who get to live in state-subsidized housing. To keep housing affordable for everyone, regions need to keep land available for development. That means eliminating urban-growth boundaries and other land-use restrictions on the urban fringes.

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10 thoughts on “The Antiplanner’s Law of Housing Affordability

  1. Frank

    Dear Antiplanner:

    I was in Issaquah and Snoqualmie yesterday where many townhouses and massive new developments are underway. When I look on Craigslist for rentals in that area, there are very few, and certainly very few under 2000 a month.

    Can you please explain how the growth boundary is affecting this area that is seeing a tremendous amount of new housing developments?

    Can you please explain how the growth boundary is responsible for these high prices in these areas?

    What’s interesting is the proximity of these developments to I-90, which may attract commuters who drive to Bellevue and Downtown Seattle.

    How much of a role do you think amenities like proximity to a freeway, waterfall, quaint towns, hiking, boating, skiing, etc., etc. contribute to the high housing prices in these communities?

    How much of a role do you think high wages from Amazon, Boeing, Microsoft, etc., etc. contribute to the high housing prices in these communities?

    Thanks in advance and hope you had a good vacation.

  2. Ohai

    urban areas like Seattle and San Francisco are physically limited only on their western sides, while it is legal limits on the east, north, and south that truly makes housing unaffordable

    Right, all those steep hillsides and watersheds for drinking water reservoirs around the Bay Area are purely legal constructions with no physical reality.

    The key to housing affordability is an unlimited supply of vacant land available for development at the urban fringe. “Unlimited” doesn’t mean “infinite”; it simply means that land isn’t limited by physical or legal limits on land development.

    OK, but what about legal limits on development inside the urban fringe. Surely communities that outlaw any housing other than single family homes on large lots contribute to the unaffordability of housing. Why is it morally acceptable to prevent someone from building an apartment building in your town but it’s the height of injustice to prevent someone from building a bunch of houses on the forested hillside above it?

  3. CapitalistRoader

    …but urban areas like Seattle and San Francisco are physically limited only on their western sides, while it is legal limits on the east, north, and south that truly makes housing unaffordable.

    Ditto for Boulder. A Google Earth view of it shows the city surrounded by greenery, and driving around outside of the city you just see farms and open space but very few housing developments that are affordable to median income earners. It’s terrible for young people who realistically can never hope to afford to buy any kind of dwelling in or around the city. And it shows in the demographics: Boulder County is 14% / 79% Hispanic / non-Hispanic white, whereas the City alone is 9% / 83%.

    But that’s how the rich, white Boulderites want it. They don’t mind brown people driving in from Longmont every day to cut their grass and clean their houses. But they sure as heck want them out of town before night falls.

  4. msetty

    Ohai said:
    OK, but what about legal limits on development inside the urban fringe. Surely communities that outlaw any housing other than single family homes on large lots contribute to the unaffordability of housing. Why is it morally acceptable to prevent someone from building an apartment building in your town but it’s the height of injustice to prevent someone from building a bunch of houses on the forested hillside above it?

    Ohai, you don’t get it. Facts of geography contradict the ideological project here, so The Antiplanner ignores them and attempts to make the case that his version of “facts.”

    Never mind that in places like Silicon Valley, there are a lot more opportunities to develop mixed use, denser neighborhoods resulting in far more (potentially) affordable housing units–by converting underutilized auto-oriented commercial and industrial properties– than building subdivisions of detached single family housing at 2-5 units per acre in Gilroy or Hollister, never mind that commuting to Silicon Valley from those areas over 30-50 miles each way might cost as much or more than the mortgage and taxes for each single family house.

    Oh, don’t forget the additional 8-10 lane freeway paralleling U.S. 101 such widespread development would require from adding another 400,000-500,000 people in the Santa Clara Valley south of San Jose. Got another $8-$10 billion+ for THAT? There IS room for that, IF every last square mile of agriculture is paved over, assuming say, 5,000/square mile gross densities.

    And add another $10 billion or for a nuclear plant at Moss Landing providing enough electricity to run the desalinization plant needed to provide water to these folks–given that there is not enough water right now to go around in California for the folks that are already here.

  5. Builder

    There is plenty of land suitable for building in the Bay Are. People will deny this because it contradicts their beliefs but it is true. Of course, growth would require additional infrastructure but it would also bring additional money to pay for it.

    Water is an entirely different issue and is not the subject of this blog. However, due to bad pricing a tremendous amount of water is used badly in California so water for half a million new residents would pose little problem if water were priced and used properly.

  6. metrosucks

    Got another $8-$10 billion+ for THAT?

    Well, apparently, they DID have $2 billion for the worthless VTA light rail system (considered the worst performing of all light rail systems, which is impressive, considering that none of them are star performers by any means), and they want countless more billions to expand it so it can be even more worthless and expensive.

    never mind that commuting to Silicon Valley from those areas over 30-50 miles each way might cost as much or more than the mortgage and taxes for each single family house

    People already commute those distances, and longer, every day to work in the Bay Area. How long do you drive from your sister’s grape ranch to spew your anti-auto hate in Sacramento?

    given that there is not enough water right now to go around in California for the folks that are already here

    80-85% of water is used by agriculture, which is still stuck in the dark ages water-usage wise. Most of the water does not go to water evil suburban lawns or provide showers to evil suburbanites.

    Never mind that in places like Silicon Valley, there are a lot more opportunities to develop mixed use, denser neighborhoods resulting in far more (potentially) affordable housing units–by converting underutilized auto-oriented commercial and industrial properties

    Oddly enough, the local governments have been unable to get this jump-started without enormous subsidies to developers, despite the mendacious claims that high density is desirable, cheaper than suburbia, more efficient, and overall just lily pure and white, while suburbia is the root of all evil.

  7. Frank

    The agriculture water usage statistic is debatable. Google search results in several articles that challenge this stat. Farmers should pay market rates for water and energy instead of asserting their government-granted subsidised “rights”. This would provide farmers an incentive to conserve both.

  8. metrosucks

    That’s true Frank, but it’s undeniable that agriculture wastes a LOT of water (and much of this is also due to your fore-mentioned subsidized “rights” with perverse incentives built in, such as “use it or lose it”). While city water systems are not a shining example of the free market in action, even such a system would result in much less waste than the current one. In addition, from reading on the subject, apparently the cities have been paying for much of the capital infrastructure (dams, canals, etc) that farmers use for their crop irrigation.

    Even if we aren’t debating the relative worth of the delta smelt or some other endangered species, the fact that groundwater is being heavily depleted, with disastrous future consequences, should worry us. Also, instead of playing games with water delivery at the delta, they should have long ago build the bypass channel which would have cured the pump problems for fish & other wildlife.

  9. MJ

    Oh, don’t forget the additional 8-10 lane freeway paralleling U.S. 101 such widespread development would require from adding another 400,000-500,000 people in the Santa Clara Valley south of San Jose. Got another $8-$10 billion+ for THAT?

    If that region adds another 400-500K residents it will almost certainly have the money to pay for that. The Santa Clara Valley has already tried to built its way out of its traffic problems with light rail, to no avail. And it is has spent a couple of billion dollars in the process.

    There IS room for that, IF every last square mile of agriculture is paved over, assuming say, 5,000/square mile gross densities.

    Your straw man argument aside, if another 500K residents want to move to that area, agriculture will not be the preferred land use in that area. The prices of land for housing and non-residential urban uses will be multiples of the price for its use as agriculture.

    And add another $10 billion or for a nuclear plant at Moss Landing providing enough electricity to run the desalinization plant needed to provide water to these folks–given that there is not enough water right now to go around in California for the folks that are already here.

    The demand for water has little, if anything, to do with the pattern of land use in that area. Once again, if 400-500K residents want to move to an urban area in California, there will be water supply issues regardless of whether they live in a suburb or a central city, regardless of how ‘livable’ is purported to be. California’s ludicrous handling of water scarcity issues and failure to efficiently price it as a resource will ensure the existence of that problem either way.

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