Throwing Money at Housing Won’t Work

Recognizing that “rents are going up much faster than the incomes” in places like New York and Los Angeles, Secretary of Housing and Urban Development Ben Carson recently told NPR that cities need to move “away from the concept that only the government can solve this problem by throwing more money at it.” In response, Portland’s Mayor Ted Wheeler tweeted, “Secretary Carson, if you don’t think gov’t can provide solutions, then you should step aside and allow someone up to the task to lead.” Apparently, in Oregon it is an apostasy to think that any problem can’t be solved by throwing tax dollars at it.

This is particularly ironic when Portland is now suffering cost overruns on its so-called affordable housing projects comparable to those for its light-rail projects. One project that was supposed to cost $200,000 per unit is coming in at $285,000 per unit–a 42.5 percent overrun. Wheeler proudly tweeted that the city just approved another project with 203 units of so-called affordable housing. Because home prices in a market of nearly 820,000 homes are going to be significantly influenced by the subsidized construction of 203 more–Not!

As the Antiplanner previously noted, “affordable housing is not the same as housing affordability.” Affordable housing is government subsidized housing for people too poor to afford housing. It is not intended or expected to influence the overall housing market because it does nothing about the underlying conditions that have made housing expensive in the first place. The problem in Portland, and the entire West Coast, is that housing is unaffordable to almost everyone, not just the very poor, and the only real solution for most people is to move away.

“The rent steals so much of your paycheck, you might have to move back in with your parents,” reflects the Los Angeles Times, “and half your life is spent staring at the rear end of the car in front of you.” This, in a nutshell, describes the Antiplanner’s two biggest complaints about West Coast-style urban planning: that it deliberately makes housing expensive and roads congested. Of course, the Times never mentions the cause, only the results: Californians are fleeing the state for more affordable and less congested places such as Las Vegas.

California is nearly 95 percent rural, but the remaining 5.3 percent consists of the densest urban lands of any state in the country. This is no accident, but a result of decades of careful planning by urban planners who believe that low-density development is bad and high densities–the higher the better–are good. On average, California urban areas have more than 4,300 people per square mile, compared with less than 2,200 for urban areas in the other 49 states.

California also has the least affordable housing in the country. The solution, argues the New York Times, is denser development. Come again? If being twice as dense as everyone else has given California the nation’s least affordable housing, how can more density make it more affordable?

Oregon has been subject to this density mania for years. Portland’s Willamette Week just did a story about six cities that are supposedly “smarter than Portland about housing.” Were they smarter by not having urban-growth boundaries? No, in most cases they were smarter, according to the newspaper, because they allowed more density. Willamette Week doesn’t cite any evidence that this made them more affordable, and in fact the densest ones are pretty unaffordable.

Montreal, supposedly, is smarter because it encourages row houses–a form of housing that Portland (according to an August 11, 1999 article in the Oregonian that is no longer on line) rejected years ago because it wasn’t dense enough. According to the latest affordability data, Montreal is much less affordable than Portland, so it is hardly a shining example.

Similarly, Tokyo is supposed to be smarter because it allows taller high rises than Portland, which limits buildings to 460 feet. But if Portland’s housing shortage was due to high-rise regulations, you would at least see lots of residential high rises that are close to but not over Portland’s height limit. You don’t. “Seattle, San Francisco and Los Angeles all have buildings in the works that will rise higher than 1,000 feet,” says the weekly. And those cities are how much more affordable than Portland? No, they are less affordable.

Chicago cut red tape on new construction. While that’s a good idea, the latest density data indicate that Chicago’s urban densities are declining, probably because people are moving out due to high housing costs.

Singapore is supposed to be smarter because it is spending gobs of money building high-density public housing. But when you are in a multi-trillion-dollar housing market, it is going to take hundreds of billions of dollars in public housing to have an effect on prices. Carson is absolutely right: throwing other people’s money at the problem may be politically popular, but it doesn’t solve anything.

While homelessness isn’t exclusively related to affordability, it’s no coincidence that homelessness is rising fastest in unaffordable areas. If cities and states would make themselves more affordable by relaxing rural land-use restrictions, the need for public housing would dramatically decline.

“The affordable-housing crunch is a nationwide problem,” claims the above-mentioned New York Times article. Wrong again: it’s only a problem in states that have rural land-use restrictions, which are basically the Pacific Coast states, New England to northern Virginia, and Florida. This means the solutions are very different than they would be if it were truly a national problem.

Density is not the solution because land in dense areas and construction of mid-rise and high-rise housing costs more than low-rise construction in low-density areas. Those who argue for density have fallen into the trap set by urban planners of failing to look beyond urban boundaries.

Oregon is 98.5 percent rural. California is 94.7 percent rural. The solution to the housing affordability issue in these states is to allow development on those rural lands. That means government’s real job is to out of the way, not create more costly programs that don’t work. If Wheeler doesn’t understand this, then maybe he should be the one to step aside.

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6 thoughts on “Throwing Money at Housing Won’t Work

  1. Frank

    “The problem in Portland, and the entire West Coast, is that housing is unaffordable to almost everyone”

    Almost everyone?

    Portland. Nobody lives there anymore. It’s too crowded.

  2. John Daly

    Think there’s an Antiplanner mistake about Montreal. According to Wendell’s numbers, Montreal (median-price-to-income ratio of 4.8) is indeed more affordable than Portland (5.5). I suspect that doesn’t have much to do with row houses, however. Demand in Montreal isn’t very strong, and it’s not really bumping up against its greenbelt yet.

  3. The Antiplanner Post author

    John Daly,

    Thanks for catching that. I was comparing my numbers for Portland with Wendell’s numbers for Montreal. I base my numbers on family income while Wendell uses household income. Usually, the difference is small, but I guess Portland has a lot of low-income households that don’t qualify as families.

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