Rents Too High?

When the 2008 financial crisis hit, many writers piously suggested that homeownership was not for everyone. Most recently, New York Times blogger Josh Barro argues against homeownership, saying that “a 20 percent decline in home prices may wipe out the equity interest entirely, making it a riskier bet than buying stocks.” But housing prices rarely decline by more than 10 percent in regions with little land-use regulation; by restricting supply, it’s the regulation that makes prices volatile. (Meagan McArdle responds to some of Barro’s other points.)

Adding to this, now people are discovering that the same things that put homeownership out many people’s reach can make rents unaffordable as well. Unfortunately, many of the writers and analysts have failed to connect high rents with land-use restrictions.

A Houston writer named Aboubacar Ndiaye is one who gets it, blaming high rents on several factors but leading off with government regulation. In this, he includes “housing-choice vouchers, affordable housing mandates, rent control, height regulations, historic designations, and protective zoning laws.” Though some of these seem to be intended to make housing more affordable, he observes, they actually make it less so.

By comparison, the authors of a recent study from Harvard’s Joint Center for Housing Studies seem nearly clueless. They barely mention land-use regulation as a cause and when they do, they suggest that regulations be lifted to allow construction of denser rental housing. But denser, mid-rise or high-rise housing is actually less affordable than low-rise housing.

This thing viagra in the usa brings a big change in their love-life that they no longer perform well during the intimate moments. But before you do cheapest price for viagra anything, make sure you are getting genuine drug. Take Shilajit capsules for at cialis canada generic least 4 months to take your prescription and drive off to the nearest neighborhood drugstore or mall. When must avoid caverta without prescription? You must buy cheapest cialis not take this medicine. Even more clueless is a Florida “housing advocate” (meaning housing-subsidy advocate) quoted in this New York Times article. “Increasing the supply is not going to increase the number of affordable units; that is a complete and utter fallacy,” says Jaimie Ross with the Florida Housing Coalition. “People say if there really was a great need, the market would provide it; the market would correct itself. Well, the market has never corrected itself and it’s only getting worse.”

Actually, markets are very responsive once government gets out of the way. But it’s pretty difficult for the market to correct itself in Florida, where most cities still have growth-management plans on the books even though the state legislature repealed the law mandating such planning in 2011.

Overall, the highest rental prices are associated with the most restrictive land-use rules. Renters in Oakland or San Jose must earn more than $30 an hour to afford a two-bedroom home, says the latest report from the National Low Income Housing Coalition. In Boston and New York City, they need to earn $28 an hour to be able to rent that home, but someone in the Houston metro area only needs to earn $18 an hour. Miami and Ft. Lauderdale are in-between at about $22 to $24 per hour.

This same report shows that the least affordable rental markets tend to be places with lots of land-use restrictions, with Hawaii, California, Maryland, New Jersey, and New York topping the list of unaffordable states. Restrictive regions can mitigate rental costs by subsidizing and otherwise promoting multi-family housing: where many parts of the San Francisco Bay Area have restricted denser housing, Portland has promoted it, and as a result rental prices in Portland are about the same as those in Houston. However, this article shows that even in Portland rental housing is expensive unless people are willing to rent in the suburbs.

This is what planners mean by “smart growth”: make land unaffordable and impose onerous approval processes on single-family home developments, but compensate with subsidies and streamlined approvals to multi-family developments. The result is great for people who want to live in multi-family housing, but too many people who would rather live in a single-family home end up being forced to settle for an apartment half the size. That’s only smart in the original sense of the word: a sharp, stinging pain.

Tagged , . Bookmark the permalink.

About The Antiplanner

The Antiplanner is a forester and economist with more than fifty years of experience critiquing government land-use and transportation plans.

14 Responses to Rents Too High?

  1. Sandy Teal says:

    The problem with analyzing “wealth” is that a large segment of the population doesn’t want to accumulate “wealth”. They want to spend as much or more as they earn every year.

  2. Dan says:

    … they suggest that regulations be lifted to allow construction of denser rental housing,[presumably to increase supply -D]. But denser, mid-rise or high-rise housing is actually less affordable than low-rise housing.

    …“Increasing the supply is not going to increase the number of affordable units; that is a complete and utter fallacy,” …”

    Sounds like folks are confused.

    This piece in Vox isn’t confused and agrees with Randal:

    And then there are the expensive cities. The places where house-sellers are asking for over $200 per square foot. All of them are cities where the housing stock is growing slowly, even though these are the places where it would be most profitable to build. That’s because these cities tend to have geographical constraints that prevent further sprawl, and have adopted zoning codes that make it difficult to add more housing by building more densely.

    I suspect the scatterplot from Trulia therein can be used by folks on both sides of the issue, as it is quite informative.

    DS

  3. msetty says:

    Dan, I’m not sure Randal would agree with the “…and have adopted zoning codes that make it difficult to add more housing by building more densely…” part. And in the Bay Area, I’m not sure where the flat areas are where you could build single family houses much more cheaply, unless you’re talking about protected areas such as West Marin or the vineyards of Napa and Sonoma, but that have insufficient additional water, very poor access and would require massive investments in infrastructure, particularly roads, that would offset much of the alleged potential savings in housing prices that “freeing up” such areas would allegedly cause.

  4. Builder says:

    How about the huge swaths of vacant land south of San Jose? How about Solano County? How about eastern Contra Costa County? There is lots of developable land in the Bay Area. These are just a few examples. Of course, as always, lots of infrastructure would be needed but that is true of any sizable development and the infrastructure could be built at a reasonable cost, if it was allowed.

    Of course, I’m sure the usual suspects will tell us why this cannot be done and I don’t intend to get involved in an online argument with them. It is always easy to say something is impossible. Especially if you don’t allow people to attempt it.

  5. Dan says:

    Michael, I have to disagree: Randal has linked to work here before that argues about places that have adopted zoning codes that make it difficult to add more housing by building more densely as evidence for this type of regulation being a contributor to high housing prices.

    Nevertheless, I agree with you that the Bay Area has very few open parcels within a humane driving distance to develop at a decent price. But I am following Bay Area and Seattle’s struggle to build more housing supply to try and do something about rising prices. I’m waiting to see about demand-driven prices in Omaha, Wichita, Tulsa, Sioux Falls. Lubbock…

    DS

  6. msetty says:

    Sure, it is “not impossible” to build hundreds of thousands of more units of suburban single family houses in the outlying parts of the Bay Area, but that doesn’t mean it is acceptable or desirable.

    There are already thousands of vacant acres currently zoned in East Contra Costa County for housing but not yet built on. All of this property is quite remote from the job sites, 40-60 miles away, which are concentrated in the West Bay, e.g., San Francisco, San Mateo and Santa Clara Counties.

    In Solano County you’d have to build a new 6-8 lane freeway extension south from Davis (Highway 113) to connect to Highway 4, and probably all the way to I-580. A bridge across the Sacramento/San Joaquin Rivers alone would cost north of $2-$3 billion, if the second Benicia Bridge opened in 2007 is any guide, plus several billion more for a freeway. Similarly, you’d probably have to expand I-80 between Davis and Sacramento from six to at least 10 lanes, another expensive project across the Yolo Bypass floodway.

    Add to this several billion more for the usual utilities.

    Overall the housing+transportation costs here could come close to the Bay Area average outside San Francisco and San Mateo Counties.

    As for Santa Clara County, about half of the “rural” area south of San Jose, e.g., around Gilroy, San Martin and Morgan Hill has been developed into either urban or land-intensive “ranchettes” and similar low intensity not entirely urban, not entirely rural uses.

    You could probably in theory add the flat areas in San Benito County, but there isn’t anywhere enough water in the area, except perhaps through the expense of seawater desalinization from Monterey Bay and pumping it inland. In Solano County, you could in theory divert water now used by farmers from Lake Berryessa, but politically that would be a huge minefield.

  7. Dan says:

    One thing that isn’t discussed often enough in this debate in CA is likely too meta for most to try and deal with.

    One of the things that always comes up when the Peripheral Canal/other scheme is re-floated again is just how precarious a balance there is in CA (I worked on a public art project in Solano Co way back in the day that highlighted this balance). The current drought – unprecedented in the formal record – highlights the tensions that arise every few years when water supply is tight. Some of us discuss whether Australia or CA will succumb first. Every year the race seems to get more interesting. The water managers and planners in CA don’t get paid enough if you ask me for the damage done their stomachs and immune system from worry.

    DS

  8. MJ says:

    And then there are the expensive cities. The places where house-sellers are asking for over $200 per square foot. All of them are cities where the housing stock is growing slowly, even though these are the places where it would be most profitable to build. That’s because these cities tend to have geographical constraints that prevent further sprawl, and have adopted zoning codes that make it difficult to add more housing by building more densely.

    Sounds pretty confused to me. Are we really going to argue that Boston, Chicago, New York, Orange County, etc. are being geographically constrained in terms of their growth? All have grown, and have done so by growing outward.

  9. Dan says:

    Chicago: Lake Michigan. New York: salt water. Boston: well.

    So now you are talking about humane driving distances out from land developed for decades if not over a century.

    DS

  10. Sandy Teal says:

    New York, Boston, DC and most other east coast cities found a lot of new land to develop even though they were on the coastline. They just filled in the wetlands.

  11. Tombdragon says:

    Funny that the pro-planning, smart growth advocates, aren’t affected by the ever increasing fees, and cost of living increases along with the limited opportunity the policies they support. To us it means less for savings, food, and no frills. Fewer children, more welfare, and a lower standard of living for an ever increasing percentage of the population are what those policies have wrought here in Portland. Government salaries continue to grow, $1,000 per square foot buildings are being built by the City of Portland, to house their bureaucracy. They are incapable of serving the transportation needs for the public, believing they are better equipped to transport the individual to their destination, rater than trusting them to take responsibility for themselves. People aren’t flocking to public transportation, and those who pay the majority of the property taxes are being left behind as those of greater, more affluent means are being coddled by the politicians in power.

    http://www.oregonlive.com/portland/index.ssf/2014/05/why_portland_is_footing_bill_t.html

    http://www.oregonlive.com/portland/index.ssf/2014/05/water_district_backers_call_fo.html

    http://www.oregonlive.com/opinion/index.ssf/2014/01/brendan_monaghan_why_cities_se.html

  12. MJ says:

    Chicago: Lake Michigan. New York: salt water. Boston: well.

    So now you are talking about humane driving distances out from land developed for decades if not over a century.

    Okay, looks like I’ll have to spell it out. These cities are only bounded on one side by physiological features that limit their expansion. All of them have grown considerably over the last half-century, and most of that growth has taken the form of outward expansion and lower-density settlements. None of these places are Singapore.

    And by the way, what is a ‘humane’ driving distance?

  13. MJ says:

    One other comment: Presumably, the scatterplot that Sadbeard approvingly linked to was referring to entire metropolitan regions — after all, housing markets are regional in character. It is important to make that distinction — when most self-described ‘urbanists’ talk about zoning or other regulations limiting densities, they are often referring to individual central cities (New York, Washington, D.C., San Francisco, etc.), even though they represent a small part of the overall housing market in a given region.

    But then again, good scatterplots are usually adequately labeled.

  14. Dan says:

    when most self-described ‘urbanists’ talk about zoning or other regulations limiting densities, they are often referring to individual central cities

    That’s not what the Zoned Zone folks say.

    All of them have grown considerably over the last half-century, and most of that growth has taken the form of outward expansion and lower-density settlements.

    More like a century-plus. So now you must go far out for greenfield development.

    DS

Leave a Reply