The California legislature is getting some push back on S.B. 827, which proposes to eliminate zoning in most of San Francisco, Oakland, and other “transit-rich” cities. So legislators have announced a new proposal, A.B. 2923, which would allow the Bay Area Rapid Transit District (BART) to build whatever it wants on land it owns, most of which is presumably near BART stations.
Home sweet $2 million home. Photo from Google streetview.
There’s no doubt that Bay Area housing is too expensive. An 848-square-foot home in Sunnyvale just sold for $2 million (a $550,000 premium over the asking price), or $2,358 per square foot. Increasing numbers of people are buying homes sight unseen. For some, commuting from Bend, Oregon is a viable option because the cost of flying is less than the cost of housing in the Bay Area.
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Yet there is plenty of doubt that building denser housing is the solution. The Bay Area’s biggest problem is the price of land, and land prices are high solely because of the region’s urban-growth boundaries. In most of the Bay Area, builders would have to cram in hundreds of units per acre to make the land cost per unit comparable to that in less-regulated regions.
The second problem is that dense housing costs 50 to 68 percent more, per square foot, than single-family housing. That’s because buildings more than three stories tall require a lot of steel, concrete, and other high-cost materials.
Compared to these two problems, the NIMBYism that S.B. 827 and A.B. 2923 would counter is relatively unimportant. If Bay Area cities had no zoning at all but the lands outside of their urban-growth boundaries were still unavailable for development, housing would still not be affordable. On the other hand, if the urban-growth boundaries were abolished but city zoning was left in place, housing throughout the region would soon be as affordable as in, say, Dallas and Atlanta.
“land prices are high solely because of the region’s urban-growth boundaries”
The fallacy of the single cause, also known as complex cause, causal oversimplification, causal reductionism, and reduction fallacy, is a fallacy of questionable cause that occurs when it is assumed that there is a single, simple cause of an outcome when in reality it may have been caused by a number of only jointly sufficient causes.
It can be logically reduced to: ” X caused Y; therefore, X was the only cause of Y” (although A,B,C…etc. also contributed to Y.)
Causal oversimplification is a specific kind of false dilemma where conjoint possibilities are ignored. In other words, the possible causes are assumed to be “A or B or C” when “A and B and C” or “A and B and not C” (etc.) are not taken into consideration.
@Frank, One question for you. Do you believe that, ceteris paribus, if you increase the supply of available land for development, that the price of the land might fall?
One question for you, first. Do you believe that SF Bay Area land prices are high solely do to UGBs?
No place in the United States that does not restrict rural development is expensive. Just about every place that does restrict rural development is expensive. Yes, there are a lot of factors involved, but restrictions on rural development are the most important ones and the ultimate source of other problems such as high labor costs and time-consuming permitting processes (because the cities wouldn’t adopt such processes of developers had anywhere else to go).
@Frank Yes, UGB’s are the primary causal factor. Prices, are a function of both supply and demand. The supply curve, for land, in the Bay Area, is held constant by UGB’s. If the supply of land was unconstrained, the price of land would be much, much less. According to SF Gate, Santa Clara county added 100k people between 2011 and 2016 growing from 1.8 million to 1.9 million. A county as physically large as Santa Clara(1304 Sq miles) should easily accommodate that 100k without a surge in prices. Harris County(1700 sq miles), in Texas added 600k, growing to 4.7 million, during the same period, and land prices have only kept pace with inflation.
“No place in the United States that does not restrict rural development is expensive.”
Correlation or causation?
Are the places with expensive housing markets those in highest demand? Like Seattle, SF, SF, Denver, etc.? Do they therefore institute a UGB in order to curb demand?
Also,how do you explain Austin, which doesn’t have a UGB but has gotten very expensive? Housing prices there are up 174% since 2011 and up nearly 10% in the last year alone. Median house prices in Austin are nearly 2x Waco and Dallas. Could it be demand fueled by ultra low interest rates and other factors?
If you’re a foreign investor, and you want to park your money in real estate, are you going to put your money in San Francisco or Wichita?
“Yes, there are a lot of factors involved, but…”
Yes, there are a lot of factors involved. Period. The “but” says “forget about everything that came before the but” in an attempt to deflect from a vert complex reality.
Let me preemptively say that I’m 100% opposed to UGBs and any regulations that violate private property rights, so any responses that straw man me will be ignored.
“UGB’s are the primary causal factor.”
Prove it.
Also, you’ve deflected by not answering the question. I asked:
SF Bay Area land prices are high solely due to UGBs?
You’ve changed soley to “primary causal factor” without even supporting your assertion with evidence.
@Frank, Asked and answered with a caveat. Now answer my question. Do you believe that, ceteris paribus, if you increase the supply of available land for development, that the price of the land might fall?
Austin metro prices, on average are only slightly more expensive than Dallas metro. Austin Metro house prices are higher because demand “currently” outstrips supply. Housing supply will meet demand, eventually, and prices will likely level or drop.
https://www.zillow.com/austin-tx/home-values/
https://www.zillow.com/dallas-tx/home-values/
“if you increase the supply of available land for development, that the price of the land might fall?”
Maybe. The hottest and most expensive neighborhoods in Portland, for example, are close in. I’d suspect “rural development” on the fringes of Gresham, Sherwood, Beaverton, etc. would do little to alleviate prices close in highly desirable neighborhoods like Irvington and Laurelhurst.
“Austin metro prices, on average are only slightly more expensive than Dallas metro”
If you want to call nearly twice as expensive “slightly,” go ahead. Just don’t expect me to take that statement seriously.
NIMBYism is not a real problem?
I guess your opinion would change real quick if they decided to build a Nuclear power plant in rural Oregon.
And demolished as well beyond it’s life expectancy.
https://www.youtube.com/watch?v=pFcfut7m9hQ
@Frank Look at the zillow comparisons for city and metro. There’s not that much of a difference.
Moving those goal posts results in a 30% difference, which is $300 more a month on a 30-year fixed in Austin.
My first comment referenced the huge jump in prices in Austin from 2011 to present. Look at that Zillow graph. That jump was not due to a UGB as UGBs are illegal in Texas.
Look at the corresponding Zillow Dallas graph. Prices have doubled since 2012. That cannot be the result of a UGB.
It’s more complicated. Yes, UGBs limit supply, but it’s unclear to what magnitude they affect prices in the areas in most demand, namely close to downtown in hip areas.
There’s a lot more at work than just UGBs, and I stick by my original comment about the fallacy of a single cause.
Fine, you got us. Everything but UGB will clearly increase prices somewhere between 30% and 100%. Meanwhile, UGBs increase prices somewhere between 600% and 1000%. As such, clearly, UGBs are not entirely to blame. But, they’re clearly a big factor.
But no, as to your insistance on correlation and causation, no, UGBs do not cause high prices. After-all, the boundary could be set so far out that it doesn’t impact anything. Or, demand for housing and therefore land could be shrinking. I’m sure a UGB around Detroit would have no measurable effect upon land prices. But, all houses are a substitute for each other. If the boundary is small enough to matter and demand is there then a UGB can cause land prices to shoot sky high.
Frank: reading your responses seems like it’s some type of exercise and rationalization more than a legitimate debate of the causal factors at work here. Typically in statistics strong correlations while other factors are held constant are sufficient to conclude a causal connection. In the instance of urban growth boundaries is very easy to compare similar areas and control for those other variables and find the impact of high prices is primarily due to the UGBs. This has been done consistently and is highly replicable. However your questioning and overall thought process suggest that you are not being rational about analyzing this in a dispassionate way. Something I have noticed about the types you tend to support this type of planning is they have an almost religious like fascination with the topic, and that regardless of evidence to the contrary or the desire for alternatives which are equally viable they continue to fixate on certain things such as urban growth boundaries. When confronted with evidence the contrary airy they merely deflect and ignore even consistent evidence that their views on the topic are inaccurate. The best analogy to this was a story I heard about a call that believe that the UFOs would land and take them to a faraway world on a certain date. When that date came and passed and no UF O showed up the cult leader came out and said that the date had been changed to some point in the future. Rather than abandon their obviously preposterous line of thinking they started worshiping the new date is the date when they would be picked up by the flying saucers. Your thought process is no different
”
I’d suspect “rural development” on the fringes of Gresham, Sherwood, Beaverton, etc. would do little to alleviate prices close in highly desirable neighborhoods like Irvington and Laurelhurst.
” ~Frank
You’re not crazy. Part of me is with you on that. But part of me is like “doesn’t change pricing for whom”. Yes, there are a group of people out there dead set and willing to pay more than just a premium for certain neighborhoods. Look at blue jeans, me being able to spend $30 on a pair of Wranglers doesn’t stop me from spending $200 on a pair from 34 Heritage.
But I at least have the option. For most people, they really don’t, not when it comes to all their other expenses. So the price of those wranglers being $25 or $50 is really important for them.
And then there’s just the UGB thing. I don’t disagree that cause isn’t _proven_. But at some point it becomes pedantic, Frank. Yes, there are variables, more than one, but what are the one(s) that are driving the pricing? How is it that Fort Bend County Texas has a higher median household income than Boulder County Colorado yet Boulder County – a largely empty, undeveloped, flat county – is 30% higher than Fort Bend’s? On the same token, how is Forsyth County GA, which has a higher median household income than Boulder County Colorado have a median house price that is 40% LOWER than Boulder?
All 3 have some of the highest median household incomes in the country. These are people who can afford to spend a lot if they so choose. IN fact, the other 2 have higher ones than Boulder. And all 3 while highly populated are largely empty, with more than plenty of land to build on without natural barriers. There are no issues with supply.
If you read Nassim Taleb, he has this concept of IYI, Intellectual Yet Idiot. Frank, I think you’re tiptoeing on being one of them with this. I’m half expecting to open my browser one day and see you proclaiming that short of having some this-or-that mathematical proof it just can’t be proof.
Come on, we know there are a lot of factors. We also know most all of them are not the difference maker. Maybe UGB make X amount of a difference, maybe it’s Y. BUt we can look at the world around us and see it’s driving up housing prices. Maybe it’ll b like weight and turn out to be a symptom of the cause but it’s a problem. So can we dig into how it’s a problem exactly how it is causing things or a symptom of a disease rather than these symantec pissing matches?