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It’s the Old Folks Fault

By | | Housing
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Usually, The Economist lives up to its name in analyzing important issues. But it misses the point in its latest article on housing affordability. The article notes that the British government has set a target of building enough homes so that real housing prices rise only 1 percent faster than inflation.

That’s an idiotic target. First, why should housing prices rise faster than inflation at all? In a market unhampered by government regulation, housing prices will rise and fall with incomes, and rising incomes lead to higher prices because people buy bigger or more luxurious homes, not because homes themselves rise in price faster than inflation.

Second, the idea that government planning can control housing prices is as bad as the idea that government should plan housing in the first place. The government’s plan is to relax some housing regulation, which is good, and to subsidize new homes, which just transfers the burden from one group of people to another. What the government should do is get out of the way entirely.

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Don’t Blame Inequality on the Rich

By | | Housing, News commentary
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Paul Krugman asks, “Is vast inequality necessary?” His answer is that some inequality is “inevitable,” but “the rich don’t have to be as rich as they are.”

But maybe the problem isn’t the rich are too rich. Maybe the problem is the poor aren’t rich enough. Like Bernie Sanders, who accuses Trump of being a demagogue and then spends most of his speeches lambasting the wealthy, Krugman wants to blame the wealthy for being rich. But the wealthy aren’t the ones who put policies in place that keep the poor oppressed.

The Antiplanner recently met Alan Graham, who helps homeless people in Austin. He says the homeless have too many health problems to make good employees, but they are very entrepreneurial. But the only entrepreneurial activity they are legally allowed to engage in is begging, because the courts have ruled that begging is a First Amendment right. Anything else they would like to do, even just open a lemonade stand, requires fees they can’t afford and permits from a bureaucracy they can’t understand. These rules were made by middle-class bureaucrats and progressive elected officials, not the wealthy.

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Supply, Not Demand, Is the Problem

By | | Housing
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Portland officials are quick to blame population growth for the rapid decline in housing affordability. But Portland is hardly the fastest-growing urban area in America, and many that are growing faster remain much more affordable.

Census estimates show that, between 2010 and 2014, the Portland urbanized area gained 103,000 new residents. That’s a lot, but the Houston and Dallas-Ft. Worth urban areas both grew by more than four times that number, and Atlanta grew by three times that number, and all three remain very affordable. Portland’s median home value (American Community Survey table B25007) was 3.8 times median family income (American Community Survey table B19113) in 2014, while Houston’s was 2.2; Dallas-Fort Worth’s was 2.3; and Atlanta’s was 2.6 times incomes.
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Those urban areas are all larger than Portland’s, but the Raleigh urban area is only half the size of Portland’s, and it also gained about 100,000 people between 2010 and 2014. Yet its median home value was just 2.8 times median family incomes. There’s no getting around it: Portland housing would be quite affordable if the city didn’t have an urban-growth boundary artificially limiting the amount of land available for development.

Confusing Cause and Effect

By | | Housing, Regional planning
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“National housing prices have risen much faster than construction costs since the 1990s,” says Paul Krugman (agreeing with Obama’s economist, Jason Furman), “and land-use restrictions are the most likely culprit.” While Krugman is right about this, he confuses cause and effect in several other parts of his article, “Inequality and the City.”

His first problem is when he credits (or blames) urban gentrification on, “above all, the national-level surge in inequality.” In fact, as MIT economist Matthew Rognlie has shown, it is the other way around: the increase in inequality has resulted from the surge in housing prices.

Krugman’s next problem is when he asks, “why do high-income Americans now want to live in inner cities, as opposed to in sprawling suburban estates?” The answer that he misses is: most don’t. The regions where housing prices have risen fastest–San Francisco, Los Angeles, Seattle, Portland, Boston, New York–are ones where suburban growth is stifled by growth boundaries or some other form of land-use regulation. Without that stifling regulation, more high-income families would live in the suburbs, just as they do in regions that don’t have that regulation.

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Affordability Baffles Planners and Politicians

By | | Housing
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The Washington, DC, public housing authority has figured out how to solve the region’s affordability problems: Evict people from public housing, convert the dwellings into luxury homes, sell them at a profit, then use the profits to build more affordable housing. This cycle can be repeated endlessly, especially since it won’t really solve the problem.

The housing authority claims it is only selling homes at “scattered sites,” especially ones in “more desirable neighborhoods,” while it concentrates the subsidized homes in what must be less-desirable neighborhoods. In other words, it is increasing income segregation, exactly the opposite of the Department of Housing and Urban Development’s goal of promoting more integration of both races and incomes. Apparently, DC’s housing authority didn’t get the memo.

In Portland, which has been known to have its own issues with raising rents on so-called affordable housing, the city just passed another rule that will make housing less affordable. After cheering developers for tearing down homes and building apartments or several smaller homes, the backlash against the practice has grown so strong that the city council has decided to charge developers $25,000 for every house they tear down. That’ll make housing more affordable (Not)!

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Will Obama Make Housing Affordable?

By | | Housing
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Property-rights and housing-affordability advocates were surprised and elated that the chair of President Obama’s Council of Economic Advisors, Jason Furman, gave a speech blaming housing affordability problems on zoning and land-use regulation. They shouldn’t be: while Furman is correct in general, he is wrong about the details and the prescriptions he offers could make the problems worse than ever.

There is no doubt, as Furman documents in his speech, that land-use regulation is the cause of growing housing affordability problems. Yet Furman fails to note the fact that these problems are only found in some parts of the country. This is a crucial observation, and those who fail to understand it are almost certain to misdiagnose the cause and propose the wrong remedies.

Citing Jane Jacobs (who was wrong at least as often as she was right), Forman blames affordability problems on zoning that “limits density and mixed-use development.” Such zoning is found in almost every city in the country except Houston, yet most cities don’t have housing affordability problems. Thus, such zoning alone cannot be the cause of rising rents and home prices.

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Portland Metro in a State of Denial

By | | Housing, Regional planning
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The State of Oregon should change its name to Denial, as state and local leaders seem to be living in that state most of the time. Although Portland Mayor Charlie Hales has declared the region’s housing crisis to be an emergency–one that contributed to his decision not to run for re-election–no one wants to get serious about fixing the problem.

The latest is that Metro, Portland’s regional planning agency, has decided that there is no need to expand the region’s urban-growth boundary as there is plenty of room to accommodate the 400,000 new residents that region is expected to gain in the next two decades. Metro’s plans calls for housing 80 percent of those new residents in multifamily housing primarily located in downtowns and along transit corridors.


Downtown Austin today houses about 10,000 people.

As Texas transportation official Mike Heiligenstein pointed out at the American Dream conference in Austin two weeks ago, the idea that huge numbers of people can live downtown is absurd. Downtown Austin today seems to be a forest of high-rise condos, yet only 10,000 people live there. He pictured what it would look like with 20,000 more residents and it seems impossibly dense–yet 20,000 is less than 5 percent of the region’s anticipated growth. Most Americans simply don’t want to live in Manhattan, and given the nation’s wide-open spaces, they shouldn’t have to–yet planners in both Portland and Austin think they should.
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Higher Cost = Less Affordable, Not More

By | | Housing
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Portland columnist Steve Duin laments that the city is not doing more to make housing affordable. He proposes to either tax new homes and use the money to build affordable housing or to mandate that developers to sell or rent a certain percentage of their new homes at below-market prices (inclusionary zoning).

The problem with either of these policies is that they create a few “affordable” homes by making housing more expensive for the vast majority of renters and homebuyers. Taxing new homes obviously makes them more expensive. But like the rising tide lifting all boats, it also raises the price of existing homes because sellers of those homes see that their competition–new homes–is more expensive so they can ask for more too.

Research has shown that inclusionary zoning leads developers to build fewer homes and then to sell the market-rate homes they do build for higher prices to make up for the losses on the below-market homes. Since inclusionary zoning pushes up market rates for new homes, that same rising tide makes all other homes less affordable as well.

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Why Is the Rent Too Damn High?
Because We Ignore the Real Problem

By | | Housing
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The Antiplanner’s recent coverage of housing affordability has focused on single-family homes. But a recent article by Andrew Jakabovics points out that rents are also rising, both in dollars and in the percent of people’s incomes that it consumes. “About half of all renters live in housing considered unaffordable,” meaning they spend more than 30 percent of their income on rent, Jakabovics says. Since 2000, the share of renters spending more than 30 percent of their incomes on rent has grown by more than 40 percent.

Unfortunately, Jacabovics never discusses the real cause of this problem or the great geographic disparities in rents. A close look at the data (American Community Survey table B25071) reveals that renters are hardest hit in Florida, Hawai’i, California, and Oregon, all states with strong growth-management laws. (Florida weakened its law in 2011, but few if any regions have weakened their growth-management plans since then.) Meanwhile, rental housing is still very affordable in states such as Texas, Utah, and Wisconsin.

Hawai’i and California aren’t surprising, but it is a bit surprising to see Oregon near the top of the list. Oregon’s “smart-growth” policies were supposed to avoid this problem by building a lot of multifamily housing in place of the single-family housing that has been made unaffordable by the urban-growth boundaries around every city in the state. But this clearly hasn’t worked.

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Build Out, Not Up

By | | Housing, Regional planning, Urban areas
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Someone has calculated that it would be less expensive for San Francisco workers to rent a two-bedroom apartment in Las Vegas and commute by air than to rent a one-bedroom apartment in San Francisco. They reasoned that a one-bedroom in San Francisco is about $3,100 a month while a two-bedroom in Las Vegas is about $1,000 a month, and four-day-a-week airfares would be about $1,100 a month. Even with local transport, Las Vegas is less expensive than San Francisco.

While most responses focus on the quality of life in Las Vegas vs. San Francisco, the point is that the latter is so terribly overpriced that some software engineers are actually living out of their cars.

The smart-growth mantra is “build up, not out,” but that’s clearly not working out. Between 2000 and 2010, the area of land in the San Francisco-Oakland urbanized area grew by zilch (in fact, according to the Census Bureau, it declined by 0.6%), and developers only managed to build 14 percent more units of housing. Meanwhile, Las Vegas-area developers built 52 percent more housing units as developed land expanded by 46 percent.

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