A couple of decades ago, the planning mantra in Oregon was “don’t turn Portland into Los Angeles,” meaning don’t make it more congested. So planners were a bit chagrinned to discover that their plans actually aimed to turn Portland into Los Angeles (see p. 7), meaning a dense urban area (L.A. is the densest in the nation) with a low number of freeway miles per capita (L.A. has the lowest of the nation’s fifty largest urban areas). Since then, Portland-area congestion (measured in hours of delay per commuter) has reached the Los Angeles’ 1985 level.
Today, the mantra is “don’t turn Portland into San Francisco,” meaning an extremely unaffordable housing market. So it should be no surprise that Portland planners are following exactly the policies that will turn Portland into San Francisco.
“We have a crisis of housing affordability in this city,” says Portland Mayor Hales. But expanding the urban-growth boundary is not the answer, he claims. “It’s not true that new housing at the edge is affordable,” he argues. “Maybe it once was when there was cheap land, cheap money and cheap transportation. That’s not true anymore.” Yes, but the reason it isn’t true is the urban-growth boundary. Get rid of the boundary and associated planning restrictions, and vacant land becomes cheap, and new homes built on the urban fringe will cost a lot less. In turn, that will force prices down throughout the city and region.
A Los Angeles judge has ruled that a densification plan for Hollywood is “fatally flawed because the city failed to adequately assess the environmental impacts and alternatives. The plan called for lifting height restrictions so developers could construct higher-density housing.
In an all-too familiar refrain, planners argued that the plan would transform the community into a “vibrant center of jobs, residential towers and public transportation.” But neighborhood groups opposed the plan, saying it would “push out longtime stakeholders, harm neighborhoods, overtax our infrastructure, and overburden our already gridlocked streets and freeways.” The judge’s 41-page decision concluded that the environmental impact report contained “errors of fact and of law.”
California environmentalists persuaded the legislature to pass so many environmental laws that it is practically impossible to comply with them all, and then used those laws to beat down proposals for new roads and suburban development. Now those laws are coming back to bite them as they try to impose their high-density visions on various communities.
Realtors and home builders strongly defend the mortgage interest deduction as a way of increasing homeownership, which is supposed to be a good thing. But does it really work that well?
Edward Glaeser doesn’t think so. While he agrees that there are social benefits to increasing homeownership, he notes that the mortgage-interest deduction mainly benefits the wealthy, who are almost always homeowners anyway. He also finds that, while the subsidy has changed significantly over the years, those changes have not been reflected by changes in homeownership.
Charging taxes on interest is double taxation because the people who earn the interest also have to pay taxes on it. So, as Wikipedia notes, when Congress created the income tax in 1913, it allowed people to deduct the interest from all personal loans, not just mortgages. But in 1986, Congress (no longer worried about double taxation) repealed that deduction for all loans other than home loans. The stated reason for leaving that deduction was to promote homeownership.
On March 29, Colin Barr, a Fortune magazine financial writer, argues in a blog post that “housing prices will keep falling.” Just two weeks later, the cover story of the April 11 Fortune proclaims the “return of real estate” and says “it’s time to buy again.”
They can’t both be right: either Fortune magazine is wrong or Fortune magazine is wrong. As a matter of fact, they are both wrong.
Barr bases his argument on a graph comparing housing prices with the consumer price index. Before 1997, the two lines parallel one another. Then housing shoots upward until 2006. Though housing prices have fallen since then, they haven’t reached the line that would have been parallel to the CPI. Prices will continue falling, Barr argues, until they return to that line.
“Under Obama’s proposal, fewer to own homes,” reported the Antiplanner’s local paper. The paper was reprinting an article from the New York Times, whose original headline was the slightly less inflammatory, “Administration calls for cutting aid to homebuyers.”
Is this another smart-growth plot to restrict homeownership only to the wealthy? Or is it a rational response to the recent financial crisis? The article is based on a report from the Department of Housing and Urban Development on reforming the home finance market.
In addition to mentioning high-speed rail a couple of times, President Obama’s state of the union speech mentioned the need to regulate the finance industry to prevent the kind of global crisis that took place in 2008. This received one of the loudest applauses of the evening as it has become conventional wisdom that the crisis was due to banker greed and the lack of regulation. “The main cause of the crisis was the behavior of the banks–largely a result of misguided incentives unrestrained by good regulation,” says Nobel-prize winning economist Joseph Stiglitz.
An alternate view is provided by Jeffrey Friedman: the crisis was actually caused by too much regulation, most of which had been written precisely to prevent such crises. But instead of preventing financial panics, successive waves of regulation each laid the groundwork for the next crash. Friedman presents his view in a new book, What Caused the Financial Crisis, which also includes the paper by Stiglitz that contains the above quote.
Nations with well-functioning housing markets that are responsive to changes in demand will be more likely to grow faster than nations with strict land-use regulation, says a new report from the Organization for Economic Co-operation and Development (OECD). The report is a part of a series of studies known as Going for Growth that are promoting economic development.
The report (which is also summarized in this presentation) compared housing markets in more than 20 leading nations and showed that those with less regulation tended to have more affordable housing whose prices were less volatile. Some of the data in the report, however, were overly simplistic: the United States and Canada, for example, were each considered as single housing markets, when in fact housing policies and market conditions vary tremendously from state to state, province to province, and metro area to metro area.
According to economists at Moody’s, the housing market will bottom out in 2011–which means now may be the time to hunt for cheap homes and be ready to flip them when prices start going up. Unfortunately, the Antiplanner can’t afford the $250 required to listen to Moody’s webconference, so let’s look at some other data to see how likely it is that prices will start to recover.
First, we can go to the Federal Housing Finance Agency (FHFA), which publishes home price indices beginning in 1975 for states, metropolitan areas, and the nation as a whole. Many news reports rely on the Case-Schiller index, but that index only covers a selection of metro areas and misses many states. The FHFA uses the Case-Schiller methodology but has a much larger database.
The Antiplanner has made a user-friendly Excel chart from FHFA’s state data. Simply enter the two-letter acronyms of up to six states in cells BK150 to BP150, and the chart should update with those states. Nationally, housing prices peaked in the first quarter of 2007, declined through the second quarter of 2010, and recovered slightly in the third quarter of 2010. But, as averages of the country as a whole, national data do not provide very useful indicators of what is really happening in housing markets.
A new report from Oregon’s Department of Environmental Quality urges the state to give people incentives to live in smaller homes or disincentives to live in larger ones. A Life Cycle Approach to Prioritizing Methods of Preventing Waste from the Residential Construction Sector reviews the energy costs of various styles of homes and comes to the startling conclusion that larger homes require more energy than smaller ones. (How much did it cost to figure that one out?)
The report therefore recommends that the state “place incentives on smaller homes or disincentives on larger homes.” Why? If someone needs a bigger home, and they are willing to pay for it, why should the state care? Despite the coy use of the term “incentives,” what they really mean is coercive measures to arbitrarily make larger homes more expensive to force more people to live in smaller houses.
Time used to be a news magazine with (for part of its history) a strong anti-communist slant. Apparently, news doesn’t sell anymore in the Internet age, as Time is now more of an opinion magazine.
So when last week’s cover story was titled, “Rethinking Homeownership,” the Antiplanner assumed this would be another smart-growth diatribe against urban sprawl with the usual talk about how “some people just shouldn’t own a home.” There’s a little bit of that: “Homeownership contributed to the hollowing out of cities and . . . fed America’s overuse of energy and oil.” But mostly it is just a lament that there have recently been lots of foreclosures.