Urban planners have made housing unaffordable in places like San Jose and Portland. But planning has created affordability problems that are at least as serious in Australia, Britain, Canada, Ireland, and New Zealand.
That’s Wendell Cox’s conclusion in his third annual housing affordability survey, which looks at housing prices in 159 housing markets in the United States and British Commonwealth countries.
Like my analysis of affordability in more than 300 U.S. housing markets, Cox uses the multiple of median home price over median income as an indicator of affordability. (One difference: he uses median household income, I used median family income.) Cox rates markets “affordable” if the median price is less than three times median income.
As my paper shows, all but a couple of U.S. housing markets were affordable as late as 1969 (census housing and income data are for the year prior to each decennial census). But by 1979 the growing use of growth-management planning in the 1970s made many markets unaffordable.
Cox finds no affordable housing markets in Australia, Britain, Ireland, or New Zealand — probably because land-use planning in these countries is guided more at the national level. Cox finds seven affordable areas in Canada (Regina, Quebec, Winnipeg, Saskatoon, Ottawa, London, and Oshawa) and about thirty-five in the U.S., including Atlanta, Augusta, Dallas-Ft. Worth, Houston, Kansas City, Indianapolis, Louisville, and Nashville. Contrary to claims that affordability problems are created solely by demand, many of these regions have been growing fairly rapidly for the last couple of decades.
If you think that the link between planning and housing affordability is something that Wendell Cox and I just made up, here are some other opinions on the subject:
- “Government regulation is responsible for high housing costs where they exist” say Harvard economist Edward Glaeser and Wharton economist Joseph Gyourko.
- “In the Zoned Zone,” says MIT (now Princeton) economist Paul Krugman, “land-use restrictions — hence ‘zoned’ — makes it hard to build new houses.”
- Bank of England economist Kate Barker’s recent report on land-use planning notes that green belts, which now cover 13 percent of England, have not only driven up housing prices, but pushed office rents in Manchester and Birmingham to 40 percent above levels in midtown Manhattan.
- “There is no question that urban growth boundaries and that elaborate environmental studies and elaborate public processes increase the cost of housing by creating scarcity,” says New Urbanist Andres Duany on the CNU list serve. “And don’t tell me otherwise,” he adds, “because I am not stupid, nor am I inexperienced, nor do I have underdeveloped powers of observation.”
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Increased housing prices seem to benefit those who already own their own homes, leading to the “home voter hypothesis,” the idea that homeowners support land-use restrictions that will drive up the value of their assets. I don’t think homeowners are this calculating, especially when planners tell them that the rules don’t effect housing prices. I think most homeowners see high housing prices as just something that happened with no known cause.
Moreover, I know many of those homeowners worry because they know that their children won’t be able to afford to live nearby. Plus, homeowners only benefit from high housing prices if they are willing to sell down to a smaller home. If they want to move up market, the increased value of their home is more than made up for by the higher price of the bigger home they want. High housing prices thus make people less mobile, a phenomenon that has been observed in Britain.
In another recent paper, Wendell Cox and Ron Utt observe declining homeownership rates, outmigration, and loss of jobs in California and other high-cost states. Land-use regulation is also associated with greater price volatility: prices not only go up, they go down more than in less-regulated areas. Harvard economist Edward Glaeser says that, for every $10,000 increase in value (relative to national prices) during one five-year period, homeowners can expect to lose $3,000 in the next five years. Since homeowners can’t always choose when they need to sell their homes, some are bound to lose.
I have always wondered: Are planners making housing unaffordable because they are willfully ignorant of economics? Or is it a deliberate effort to try to force cities to become more compact because people won’t be able to afford to live any other way?
In the case of congestion, it is easy to find planners and planning organizations who admit they want to create more congestion, either to promote transit ridership, to make streets safer for pedestrians, or simply to discourage driving. But planners have been more circumspect when it comes to housing affordability. Yet unaffordable housing neatly fits planners’ goals of promoting compact development and discouraging driving (because higher densities create more congestion).
But intentions are irrelevant. What is important is that housing was affordable before growth-management planning (of which smart growth is merely one variation). Now, in cities that have used such planning, it is not.
Oooh. Good list.
Here are some more lists.
Look at the ranking for Austin’s traffic. Bad. It’s a sprawling city, and it’s held up here for “good” planning, yet the traffic is cr*ppy. Huh. Sprawl doesn’t relieve congestion either.
“Government regulation is responsible for high housing costs where they exist†say Harvard economist Edward Glaeser and Wharton economist Joseph Gyourko.
Yup.
Absolutely true.
Now, you may ask yourself: what is Dan the planner doing saying so? Sudden attack of hating his job?
No.
The regulation, simply, is regulation to enable the libertarian dream, held up high here in comments: big house, large lots.
It’s causing high home prices:
Thank you for helping to clarify that sprawl drives up prices too, Randal.
And about that Green Belt thing, the people are asking for that too, and they are increasing, and they work to achieve goals. Yes, they are trying to achieve numerous goals, not just one narrow goal:
Lastly, Randal, can you please follow the rules and cite the Duany quote? It’s likely, esp. from what we see above, that we’ll want to place the quote in context.
Thank you in advance.
DS
** protecting nonmarket goods and creating open space amenities.
“In the case of congestion, it is easy to find planners and planning organizations who admit they want to create more congestion, either to promote transit ridership, to make streets safer for pedestrians, or simply to discourage driving. But planners have been more circumspect when it comes to housing affordability. Yet unaffordable housing neatly fits planners’ goals of promoting compact development and discouraging driving (because higher densities create more congestion).”
Until housing becomes super expensive, high density, high rise construction is far to expensive to sell. In order to sell half-million dollar condos we first need lots of half-million dollar homes.
DS,
Your quote from the Boston study does not show that sprawl causes unaffordable housing. The quote makes it clear that it is the regulations that make housing unaffordable. Houston is sprawling and remains very affordable because planners there have not made residents feel entitled to control what happens on other people’s property (outside their immediate neighborhood).
The English green belt study used all kinds of language to soften the blow because green belts are popular. But it made it clear that green belts were causing huge problems and needed to be fixed. The Labour government is seriously considering relaxing the green belt rules.
I don’t remember making any rules requiring people to cite every quote. But I did cite the Duany quote — it came from a CNU list serve (CNU@LSV.UKY.EDU). I am not a member of that list serve (the quote was forwarded to me) so I don’t know if it is still on line, but I am sure you could join and find out. The email was from July 15, 2004.
For the record, here is the entire email as it was forwarded to me:
Quandaries of affordable housing relative to New Urbanist principles:
1. The most affordable housing is mobile homes. Yes we can (and have) designed them better, Yes we can (and have) created better community plans. BUT they are relatively low density and they are technically incompatible (lots and services) with the more upscale “stick built” houses that would eliminate the associated income monoculture. What to do?
2. There is NO question that urban growth boundaries and that elaborate environmental studies and elaborate public processes increase the cost of housing by creating scarcity. (And don’t tell me otherwise, because I am not stupid, nor am I inexperienced, nor do I have underdeveloped powers of observation). What to do?
3. When asked, the public process opposes affordable housing, if for no other reason than it drains the tax base (even when the construction is government subsidized) this is the truth. Do we lie to the people? Do we ignore them? Do we believe in the public participation process or not?
4. We know (from our projects) that when buildings are badly designed they do not go up in value while the well designed ones do. This is a proven and an easy to use tool. There is nothing easier to deliver than an ugly little apartment building or an uncomfortable little house. Do we employ this permanent anti–-gentrification measure? I am not being facetious
5. We were once asked to write an-anti gentrification ordinance (for Winter Park Florida). We succeeded in doing so. When confronted with the implications to the potential value of their own properties, the very people who retained us to do it would not vote for it. Now the area is gentrified and those who sold made tons more money than they would have under our code, Real people are not stupid. When it comes to their own self interest. Is it not unfair to deny the poor appreciation on their houses?
I am not cynical. I am realistic. I want us to challenge ourselves to develop real and effective techniques, and not blow smoke like the three generations of failed planner before us did.
Andrés
end quote
Randal:
The quote makes it clear that it is the regulations that make housing unaffordable.
Pardon me, but you may want to read more of Glaeser’s work. So you don’t misinform your readers.
He specifically uses this area for a few reasons. These wealthy landowners influenced local government to make the large-lot regulations to protect their property values.
Landowners restricted supply by acting to keep out the rabble. Happens all over. All the time. Not that Reason and the Sam Staley types tell anyone.
Houston is sprawling and remains very affordable
As I’ve said in these comments many times, Houston has a cr*ppy climate and few knowledge jobs, so rents don’t get bid up from amenity seekers. Austin is sprawling too, but less affordable, because the knowledge jobs attract educated workers, who demand amenities.
The wealthy choose to live elsewhere, which is a biiig reason why Houston is so affordable.
That is, again: Houston is affordable because it’s cr*ppy and those who can afford to migrate, do. And they bid up rents somewhere where its nice.
But [the report] made it clear that green belts were causing huge problems and needed to be fixed.
Sure. They are called trade-offs.
I don’t remember making any rules requiring people to cite every quote.
I’m quite sure you didn’t make that rule, as rules requiring folks to back their claim tend to hinder ideological arguments. Anyway, as I’m sure you remember from the time you spent in grad school, it is standard to cite something when making an assertion. But thank you for the quote.
The quote, in context with the profession, is expanded upon here. What does he talk about in this link?
People raise housing prices. They could have kept them down, but rejected the option, IMHO out of vanity. What about growth boundaries? Well, folks asked for environmental protection.
This is what happens. If human population continues to grow, then you either protect the environment by limiting where people live (and drive up prices), or you let them spread all over the place and sh*t the bed. The same is true with wealth: wealthy nations’ footprints are larger. You cannot separate the effect from the cause. Once the bed is shat upon, no one wants to clean it up, so you prevent the sh*tting action.
So, UGBs are a symptom of the problem. They are not the problem. Until human population decreases via decreased birth rates or wealth decreases, this is what you get. You can rail about the symptom, Randal, or you can rail against the problem.
DS
Dan said: The regulation, simply, is regulation to enable the libertarian dream, held up high here in comments: big house, large lots.
JK: Please quit mis-representing libertarian principles. Libertarian believe that people should be allowed to live as they want, unless they are hurting another person. Some may prefer to live on a small low cost lot, others on a large, higher priced lot. Planners want to dictate how people live.
Dan said: It’s causing high home prices:
Moreover, greater Boston’s least dense communities are less likely to allow new housing and such communities are more likely not only to require larger minimum lot sizes but also to adopt other regulations that restrict the construction of new housing, such wetlands regulations** that go beyond statewide standards. These findings are consistent with new research by Andrew Jakabovics of MIT’s Center for Real Estate’s Housing Affordability Initiative, who found that the median lot size for new construction for new single-family houses built in Greater Boston between 1998 and 2002 was 0.91 acres, up from .76 acres.
JK: The operative part of this quote is “regulations that restrict the construction of new housing†Did you miss that when you wrote the below? Or are you intentionally misrepresenting the quote?
Again it is the restrictions on supply that are causing prices to rise.
Recall basic economice: price reflects the balance between supply and demand. Restrict demand and, all else being equal, price goes up. PERIOD end of discussion. (unless you want to argue against the most basic law of economics)
Dan said: Thank you for helping to clarify that sprawl drives up prices too, Randal.
JK: You know that is not true. It is a misrepresentation of the quote.
I have noticed that planners have to do things like the above, since they, generally speaking, have no facts supporting their arguments.
Thanks
JK
Thanks for whole Duany email. I think my favorite part of it is:
“and not blow smoke like the three generations of failed planner before us did ”
I think we are now working on the fourth generation of failed planner.
Thanks
JK
Antiplanner, have you collected details on the previous three failed generations of planners in a short, easy form suitable for exposing the “profession�
Thanks
JK
The operative part of this quote is “regulations that restrict the construction of new housing†Did you miss that when you wrote the below? Or are you intentionally misrepresenting the quote?
Again it is the restrictions on supply that are causing prices to rise.
You’re having trouble reading today, Jim. Go back to the part where I quoted who caused the restriction. Read that and get back to us.
You know that is not true. It is a misrepresentation of the quote.
Share with us Jim, as per your basic law of econ abouit restricted supply, where the quote says supply is not restricted by homeowners:
[emphasis added]
That’s right. They develop on large lots with open space and close the door behind them to anyone else. I bet they don’t have ADUs in their code either, and can you imagine an apartment complex in a gated community? No? Me neither.
DS
Dan said:
“As I’ve said in these comments many times, Houston has a cr*ppy climate and few knowledge jobs, so rents don’t get bid up from amenity seekers. Austin is sprawling too, but less affordable, because the knowledge jobs attract educated workers, who demand amenities.”
Actually Dan, Houston and Austin are both pretty affordable.
http://www.housingtracker.net/affordability/texas/houston
http://www.housingtracker.net/affordability/texas/austin
Agreed johng.
Austin has higher median home prices and higher household income as well. The affordability indices are similiar because of the proportion of income:mortgage.
DS