Common Deceptions About Growth Boundaries

Portland State University planning professor Ethan Seltzer thinks it’s a “misconception” that urban-growth boundaries make housing more expensive. “This claim has been addressed and dismissed since Gov. Vic Atiyeh’s administration,” he claims, though without offering any actual evidence.

“By law,” he continues, “there must be enough land in the UGB to meet needs for residential development for the next 20 years.” The law says it, so it must be true. Never mind that Metro decided not to add any land to the growth boundary last year even though Portland was in the midst of a housing crisis.

Planners such as Seltzer may have convinced themselves that they are immune to the laws of supply and demand, but economists disagree. The end of this post lists more than half a dozen economic papers that conclude that growth management and land-use regulation explain most if not all the differences in housing affordability among cities.

In Portland’s case, median home prices were 1.8 times median family incomes before planners drew the growth boundary. Since then, the population inside the growth boundary has grown by 60 percent but the boundary has been expanded to add only 14 percent more land. As a result, median home prices today are 4.1 times median family incomes. Because all Oregon cities must have growth boundaries, Oregon in 2014 was the fifth-least-affordable state after Hawaii, California, New York, and Massachusetts. Of course, higher prices also have to do with increased land-use regulation, stiffer development fees, and other costs, but cities like Portland wouldn’t dare to impose those restrictions and fees if there weren’t an urban-growth boundary to prevent people from escaping to low-cost housing elsewhere.

Like too many other urban planners, Seltzer also thinks density is the solution to every problem, including reducing “energy use, farmland preservation and economic vitality.” In fact, density is often the problem, not the solution, and even when density helps there are other solutions that work better and cost less.

For example, multi-family housing uses more energy per square foot than single-family housing. Mid-rise and high-rise construction uses more energy per square foot than low-rise. The only way that density saves energy in housing is because people in dense, multi-family housing live in smaller homes. Why? Because such housing is so expensive!

If you want to save energy, encourage people to build zero-energy homes that cost about $125 per square foot. That’s $250,000 for a 2,000-square-foot house (plus the cost of the land, which isn’t very much if you don’t have an urban-growth boundary). By comparison, in Portland you can spend $369,000 on a 705-square-foot high-rise condo, or $465,000 on an 1,157-square-foot mid-rise condo. Saving energy in a single-family home is vastly more affordable.

Farmland preservation? Why? According to the 2012 data from the US Department of Agriculture, Oregon has 14.8 million acres of non-federal agricultural lands and only grows crops on 3.5 million of those acres. About 24 percent of the state is agricultural, while developed areas (including urban areas and rural roads, railroads, and any other developments more than a quarter acre in size) only cover 2.3 percent of the state. All of Oregon’s urban-growth boundaries cover just 1.5 percent of the state, and if there were no urban-growth boundaries, urbanization might have extended to about 2 percent. In other words, planners like Seltzer raise threats to farmlands only as a sort of bogeyman to scare the public.

Density is hardly needed for economic vitality. In terms of sheer numbers, the fastest-growing urban areas in America are Houston, Dallas-Ft. Worth, and Atlanta, and none of them are very dense. The Houston urban area alone grows by more people every six years than live in the entire city of Portland. Most people think Houston’s heat and humidity make it undesirable, but the lack of planners has made it one of the most economically vital regions in the nation and the headquarters for 27 Fortune 500 companies.

Portland is the headquarters for just two Fortune 500 companies (Nike and Precision Castparts), both of which have had conflicts with land-use regulators. Unlike Houston, Portland is near mountains and canyons and has a mild climate, yet too much planning and regulation has made it an economic basket case, with people working shorter hours for lower pay than elsewhere (and the new minimum-wage law sure isn’t going to help).

The dirty little secret that planners have known about since at least 1999 is that the impacts of high housing prices fall hardest on the poor, which is why some people call Portland’s system “economic apartheid.” Census data indicate that, from 2010 to 2014, the black population of the city of Portland shrank by 6.3 percent while the black population of the urban area as a whole shrank by 1.4 percent.

Many low-income blacks who have stayed in Portland have been forced into lower-quality housing. Between 2000 and 2010, the share of households headed by whites living in single-family detached homes declined by 3.3 percent, but the share of households headed by blacks living in such homes declined 16.1 percent. While white homeownership rates fell by 2.2 percent, black homeownership rates fell by 12.6 percent.

It is time to stop defending the indefensible. Oregon’s land-use planning system and similar growth-management laws in California, Hawaii, Washington, and other states make housing unaffordable yet provide few to no compensating benefits. These laws should be repealed.

Economic Papers Finding That Land-Use Regulation Increases Housing Costs

• “Government regulation is responsible for high housing costs where they exist” — Edward Glaeser and Joseph Gyourko, The Impact of Zoning on Housing Affordability
• Rapid growth of housing prices is “correlated with restrictive growth management policies and limitations on land availability” — G. Donald Jud and Daniel T. Winkler, The Dynamics of Metropolitan Housing Prices
• “Metropolitan areas with more extensive regulation can have up to 45 percent fewer [housing] starts and price elasticities that are more than 20 percent lower than those in less-regulated markets” — C. Tsuriel Somerville and Christopher J. Mayer, Government Regulation and Changes in the Affordable Housing Stock
• “Places with more regulation experience a 17 percent smaller expansion of the housing stock and almost double the increase in housing prices” — Raven Saks, Job Creation and Housing Construction: Constraints on Employment Growth in Metropolitan Areas
• “Land-use regulations raise housing and developed land prices” — Henry O. Pollakowski and Susan M. Wachter, The Effects of Land-Use Constraints on Housing Prices
• “Regulatory stringency is consistently associated with higher costs for construction, longer delays in completing projects, and greater uncertainty about the elapsed time to completion of residential developments” — John M. Quigley, Steven Raphael, and Larry A. Rosenthal, Measuring Land-Use Regulations and Their Effects in the Housing Market
• High housing prices are “associated with cost-increasing land-use regulations (approval delays) and statewide growth management” — Theo S. Eicher, Growth Management, Land Use Regulations, and Housing Prices: Implications for Major Cities in Washington State

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