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.