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Growth Management Violates Fair Housing Act

By | | Housing, Regional planning
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A new report from Hawaii’s Grassroot Institute argues that Hawaii’s land-use laws must be repealed because they discriminate against low-income minorities. Hawaii was the first state to pass a land-use law in 1961, and not coincidentally it has the least affordable housing in the nation.

The 2014 American Community Survey found that median home prices in Hawaii were 6.7 times median family incomes, compared with the national average of 2.7. These high prices had pushed low-income minorities to leave the state: while urban Honolulu had grown by 12 percent between 2000 and 2010, the urban area’s black population declined by 4 percent.

Hawaii’s 1961 land-use law divided lands in the state into urban, agriculture, and conservation (later a fourth category, rural, was added). While the supposed purpose was to protect Hawaii’s agricultural sector, in fact it destroyed it because high housing prices increased labor costs and plantations and canneries can’t compete with those in places like Fiji and Costa Rica.

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Reviving the Great Australian Dream

By | | Housing, Regional planning
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In the minds of Australians, the term “Australian dream” is even more firmly associated with homeownership than the term “American dream” is in the minds of Americans. For more than a century, Australia has enjoyed higher homeownership rates than the United States.

Yet now the Australian dream is nearly dead thanks to state land-use restrictions that have made Australian housing some of the most expensive in the world. According to Wendell Cox’s housing survey of English-speaking countries, Sydney, Australia is the second-least affordable urban area, with only Hong Kong being less affordable. Hong Kong at least has an excuse of somewhat limited land area.

Some blame the housing crisis on the “concentration of wealth,” when in fact the opposite is true: by making housing expensive, the government has concentrated wealth in the hands of existing homeowners at the expense of renters and recent and aspiring homeowners. Others suggest that Australians should dream about something else, as if there is little anyone can do to ever make housing affordable again.

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Oregon Legislature Repeals Laws of Supply & Demand

By | | Housing, News commentary
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Like the apocryphal story of the state legislature that passed a law dictating that pi equals 3, the Oregon state legislature has passed two laws that pretend the laws of supply & demand don’t exist. The difference is that, in reality, no state legislature ever did pass a law saying that pi equals 3, but Oregon’s legislature is totally ignoring basic economic principles.

First, earlier this week, the legislature passed a new minimum wage law increasing the minimum to as high as 14.75 per hour in the Portland area by 2022 (with lower minima for other parts of the state). This will supposedly be the highest in the nation, but only in the unlikely event that no other state raises its minimum wage in the next six years. However, after adjusting for the cost of living, Oregon’s new minimum wage probably is the highest in the nation even before 2022.

Proponents claim the minimum-wage law will improve Oregon’s economy by putting more money in the hands of its residents that they will spend in Oregon businesses. The new minimum wage “is going to be good for Oregon families and is going to add to consumer purchasing power that will benefit our small businesses,” Oregon’s labor commissioner told a reporter. That’s like warming the bed by cutting off one end of a blanket and sewing it on to the other end. If increasing the minimum wage does so much good, why not increase it to $15 right away? Or $50? Or $500?

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And Another Question

By | | Housing
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“The only real solution for Oregon’s housing crisis is to eliminate the growth boundaries. Until then, everything else is just window dressing.”

San Francisco Home Prices Are Far Out, Man

By | | Housing
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Last week, the Federal Housing Finance Agency released its quarterly home price indices for the fourth quarter of 2015, so we now have a 41-year time series for every state and many metropolitan areas. The numbers show that, even after adjusting for inflation, housing prices in the San Francisco Bay Area have exceeded prices during the peak of the housing bubble.

The data show that prices are also rising for some metro areas, such as Houston and Dallas, that didn’t bubble in the 2000s (see chart below). However, this increase is due to higher incomes in those areas; the home value-to-income ratios have remained about the same, while those for the metro areas in the above chart have increased from the post-bubble crash. Austin’s increase is partly caused by strict regulation in the city, though many of its suburbs remain affordable.

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The Next Recession

By | | Housing, News commentary
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Many signs indicate that the economy is headed into another recession. The stock market is dropping. China’s growth is slowing. The Baltic Dry Index is at its lowest level in history, which means there is less international trade. Many predict that housing prices are about to collapse again.

While progressives such as Naomi Klein blame capitalism for these problems, the reality is that our current economic doldrums are the fault of too much government. As investment analyst Lacy Hunt points out, all of the economic tinkering since the 2008 crash has failed to spur the economy.

Some of it has done more harm than good. Remember when Chrysler and General Motors were taken over by the government to prevent them from going bankrupt–and then the government immediately forced them into bankruptcy? In a normal corporate reorganization, bond holders have first claim on the assets of the company. But the Obama Administration zeroed out Chrysler’s bonds in favor of its labor unions. That meant automakers would have to pay a premium for any future bond sales. Inconsistent government policies make investments risky and drive investors to less productive areas of the economy.

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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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