Some commenters on this blog still do not believe that growth management makes housing unaffordable. But the premiere of the Australian state of Victoria is convinced otherwise. Over the protests of planners, he has decided to add enough land to Melbourne’s urban-growth boundary to build 134,000 new homes.
This is in response to Melbourne’s extremely high median home prices, which Wendell Cox says are more than seven times median household incomes. (For references, median home prices in Houston — and almost anywhere else that doesn’t have growth management — are about two times median family incomes.)
Naturally, Victorian planners deny that urban-growth boundaries have anything to do with Melbourne’s high housing prices. Such high prices are solely due to low interest rates, says Victoria’s planning minister. Houston and other affordable American cities all enjoyed the same low interest rates, but managed to keep their housing affordable by having plenty of land available for new housing to meet the demand.
Among various fatal diseases diabetes is one such dysfunction that can cure all the underlying issues to viagra cialis cheap help out men. The medicine also promotes dilation of nerves that viagra generic no prescription runs alongside the spinal column. Some Probably Good reasons You Could Experience From Female Sexual Dysfunction It is possible to uncover physical viagra cost india problems galore that can lead to issues like these. To treat erectile dysfunction, the most commonly used and prescribed medicines include getting viagra deeprootsmag.org, levitra. Even if low interest rates were the cause of growing housing demand, this would illustrate one of the basic flaws of urban planning: its unwillingness to respond to changes in supply and demand. If you write a plan for 2030, you are bound to get some things wrong, such as the future demand for housing. If that demand changes, shouldn’t you change the plan?
At the same time, people fret that expanding the boundary “ will hand windfall gains to big land owners on the urban fringe.” But such gains are inevitable when you have an artificial boundary that pushes up land prices.
Not if you are an urban planner. Instead, you just fret about how any changes will “dilute the benefit of [the] 2030″ plan. Is this because planners believe housing should cost seven times household incomes? Or do they really believe that they can restrict housing supply without having an effect on price? Either belief should disqualify them from having anything to do with land-use regulation.
Homebuyers will still have to pay a pretty penny for housing in the Melbourne area. For one thing, the government plans to charge developers A$95,000 per hectare (which, at 6 homes per acre, amounts to about A$6,400 per home) for “infrastructure projects.” The Antiplanner believes infrastructure should be paid for by selling bonds and then having the property owners pay off the bonds over time. This will reduce new home prices, thus keeping the prices of existing homes more affordable as well.
Arent’ most (if not all) urban growth boundaries in the United States are required by law to contain enough land to meet demand for the next 20-years…?
Arent’ most (if not all) urban growth boundaries in the United States are required by law to contain enough land to meet demand for the next 20-years
—————-
In the Portland Metro area the Planners believe the best way to have a 20 year supply of land is to build homes in back yards(infill) and build up not out.
Even if home buyers want a house with a yard in a low density area.
I was just at my cousins, sons new home and the back yard was about the size of what use to be a set back, off the property line. They have small kids and would love to have a yard that is usable. But that choice is not affordable.
Sounds like your cousin should move to Houston. Everyone’s doing it these days, except for all the Antiplanners who act as if they hate Oregon but then choose to live there.
Back on topic, protecting farm and forest lands isn’t free.
In fact, nothing is free.
C’est la vie.
Sounds like your cousin should move to Houston.
======
Typical Planners solution. The politicians and Planners change the rules in Oregon, then tell the people that were there before the change, if you don’t like it you can move.
Who ever said Planners were unfeeling?
Many farmers in Oregon are going out of business because they make as much money by not farming as they do by farming.
The politicians and Planners change the rules in Oregon, then tell the people that were there before the change, if you don’t like it you can move.
I guess we should all keep owning slaves, since that was legal before the politicians changed the rules. And women shouldn’t be allowed to vote, etc. etc. etc.
If Oregonians don’t like the politicians, what keeps them from voting for someone else? I see that Jim Karlock ran for office in Oregon: I can only assume that he must have won…
I guess we should all keep owning slaves, since that was legal before the politicians changed the rules.
——-
Your off topic again
I’m done, you win master, tell me how I must live.
long live the planners!
Election results are in! Oregonians declare Libertarian Revolution! Down with planning!
Dembrow: 22,954
Karlock: 2,932
Other: 189
Some of Mr. Karlock’s campaign pledges:
I will fight to maintain our neighborhood’s character
Mr. Karlock wants to impose on his neighbors his own notion of how the neighborhood should be…?
I will oppose government policies that lead to neighborhood destroying gentrification.
“Neighborhood destroying gentrification”…? First of all, isn’t gentrification an example of the free market in action? And second, who is Jim to say whether a neighborhood has been “destroyed” or not? Why are his notions of what makes a good neighborhood better than anyone else’s? And would he impose his notions on others?
I support the reduction of taxes, fees, pollution and regulations to create a healthier economy and more family wage jobs.
Reducing pollution while also reducing taxes, fees, and regulations? Hmmm…
Endorsed by Neighborhood & Oregon leaders:
Randall O’Toole
First of all, in what way is Randall O’Toole a “neighborhood/Oregon leader”? I’m not saying he’s not, I’m just unaware of how he is.
Second, how does Mr. Karlock feel about being endorsed by someone who believes that CO2 is a greenhouse gas and is concerned about CO2 emissions?
Some commenters on this blog still do not believe that growth management makes housing unaffordable.
Again, for the ~40th time:
Randal.
Please supply empirical evidence that:
o UGBs are the sole reason prices go up.
o Empirical papers breaking out price increases from UGBs, equilibrium rents, hedonic increases.
o Growth Management strategies make prices go up more than conditions in same area without GM strategies.
o Empirical modeling studies that show GM strategies made the slope increase more than previous conditions.
Thank you in advance.
DS
The Antiplanner believes infrastructure should be paid for by selling bonds and then having the property owners pay off the bonds over time. This will reduce new home prices, thus keeping the prices of existing homes more affordable as well.
They do this now, via the mortgage. You just want the government to subsidize home building.
DS
Regarding Dan’s request (Comment #9):
Randal has previously provided Glaeser’s research as evidence. On that I would like to make a few points as it is the basis for much of Randal’s blogging.
In Superstar Cities, Glaeser proposes to prove that high home prices are a result of limited land. He continues:
He will show in Superstar Cities there is high demand and low supply.
How does he determine if a city has high demand?
They’re price growth is higher than the median.
How does he determine if a city has low supply?
They’re price growth is higher than the median.
Last I checked, this is a pretty clear tautology:
Prices are high because of limited supply. How do you know there’s limited supply? Because prices are high.
Glaeser hides this by adding a factor based on housing stock quantity as well, but one gets the same result if one just uses prices – whereas one gets significantly different results if one does not use price at all.
In addition, Glaeser has repeatedly warned (albeit quietly) that correlation does not imply causation. He states that the superstar cities, by virtue of their wealth, might be self-regulating out of cultural concerns. Thus high home prices could reflect self-selecting and not limited land supply.
Glaeser and a Krugman column are frequently cited by non-professionals, non-planning educateds, non-educateds in microecon, and various and sundry ideologues.
Trouble is, Glaeser is explicit in stating that the reason for the unaffordability is the folks asking electeds to zone up to 1-2 acre minimum lots, and this large-lot zoning is the reason for unaffordability (as I’ve pointed out here numerous times).
Yet the ideologues on this site insist that everyone being able to have a 1-ac lot would be Paradise on earth (but here we are with Randal complaining that new houses should pay for far-flung infrastructure in sprawling developments).
But one enjoys watching the paradoxes asserted over and over.
DS
AP: Your reliance on the Median Multiple (your Demographia link) reflects a continued dismissal of reality. As Cox states in the report: the Median Multiple is used because it is easily understood. He says nothing about its accuracy.
The simple median multiple does not account for trends in down payments, age distributions or any other significant cause of home valuation. The income component does not address capital gains (which are significant in new economy cities and decidedly negligble in declining old economy cities). It is a bogus descriptor offering no insight.
Not to mention, t g , it distorts unaffordability by making the numbers higher (thus wider apart and more variable) – compare to standard measures that most people including decision-makers use (viz. Median House Price/Median Household Income Ratio ).
But good catch. I couldn’t bear to read the report after viewing the blatant falsehood in the first sentence of the intro.
DS
Some commenters on this blog still do not believe that growth management makes housing unaffordable.
Right. Many zoning ordinances and centralized land use control in general makes housing unaffordable. Toss in arcane building codes that don’t have anything at all to do with safety to that mix as well.
But the premiere of the Australian state of Victoria is convinced otherwise. Over the protests of planners, he has decided to add enough land to Melbourne’s urban-growth boundary to build 134,000 new homes.
What kind of homes can be built? What density will be allowable (not mandated, but allowable)?
He can annex half of Canada if he wishes, but if the lot size is mandated huge and if density is regimented to one-size-fits-all LOW, it won’t solve the affordability, transit (and accessiblity to jobs) issues.
D4P Says:
Some of Mr. Karlock’s campaign pledges:
I will fight to maintain our neighborhood’s character
Mr. Karlock wants to impose on his neighbors his own notion of how the neighborhood should be…?
THWM: That sounds a lot like planning Mr.Karlock!
D4P:I will oppose government policies that lead to neighborhood destroying gentrification.
“Neighborhood destroying gentrificationâ€Â…? First of all, isn’t gentrification an example of the free market in action? And second, who is Jim to say whether a neighborhood has been “destroyed†or not? Why are his notions of what makes a good neighborhood better than anyone else’s? And would he impose his notions on others?
THWM: I just want to have an open market.
D4P: I support the reduction of taxes, fees, pollution and regulations to create a healthier economy and more family wage jobs.
Reducing pollution while also reducing taxes, fees, and regulations? Hmmm…
THWM: That’s some what of a Catch 22.
D4P:Endorsed by Neighborhood & Oregon leaders:
Randall O’Toole
THWM: ROT lives about 170 miles south of Portland, he’s hardly your neighbor. Mr.Karlock if you hate what’s going on in Portland there are plenty of other places in Oregon to relocate to, like Blitzen or Rye Valley.
http://www.youtube.com/watch?v=Vaw-9WElAjc
Many zoning ordinances and centralized land use control in general makes housing unaffordable. Toss in arcane building codes that don’t have anything at all to do with safety to that mix as well.
I agree Lorianne – all these large-lot developments are brutal for municipal finance and efficient provision of services.
Wrt building codes – some of these are efficiency-based: R-19 walls, whole-house fans, etc. But there are certainly outdated building codes – whether they are an important factor I’m not sure (but willing to think about examples).
DS
Seems redundant to point out some things but many planners seem to insist that unlike every other market, when it comes to housing, supply does not affect price …
So we hear some planners say over and over:
“ For the good of the planet, CO2 etc. (fill your own cause…) American neighborhoods must densify. “
“But don’t worry, affordability will not be affected, anyone who wants, will still be able to find the house they want at prices similar to today’s prices.â€Â
How would you get such an argument past even a 9 year old, who would naturally ask:
If houses do not become more expensive what on earth is going to prevent people from buying houses with yards?
Ettinger, so true: when my four year old approaches the cash register with a matchbox car, he always demands it at half price since there are twenty more on the shelf and no other children hustling for it.
To which I must reply, as the good parent I am: Buddy, haven’t I told you that neo-classical economics is like santa and the tooth fairy?
Ettinger,
I’m pretty connected across large scales, and I don’t know anyone – a-n-y-one that says supply does not affect price. No one. Zero. Zip. Nada. Niemand.
But almost all – a-l-l – know that demand is a major component of price. As I’ve relayed from the literature here numerous times. And why New Urbanist developments have a ~40% premium paid to live there (see, demand for nice, walkable places to live drives the prices in NU developments).
Is ettinger’s argumentation a hasty generalization fallacy or argument from ignorance? one wonders.
Speaking of affordability, one wonders (as Randal did yesterday) what the price will be if purchasers paid full price for their home? No subsidies for stormwater, roads, taxes (or other equity issues from the disparity between new and older homes), single-family large-lot res., emissions from greater VMT, etc.?
Randal of course forgot about the hidden subsidies for large-lot SFR and apparently didn’t know that his solution of bonding for infra isn’t really affordable.
DS
To continue on the supply/demand econ 101 thread:
House prices can’t go much higher than the buyer’s ability to pay (which is limited to capital gains and some fraction of income as determined by one’s mortgage originator). House prices can’t go much lower than the seller’s remaining principal on the existing mortgage. Supply could be a major cause of variations between these two bounds – but that has yet to be demonstrated. The models presented on this blog have not withstood falsification. Which in any other rational endeavor (with the apparent exception of quant funds) would be the minimum standard. Alas, that might suggest this blog then is not a rational endeavor, but an obviously political one.
I was looking for instances on where I’ve quoted the literature that found demand is more important than/equal to supply, and found this fine thread where some tried to argue the “artificial shortages” line – comedy ensues.
At any rate:
http://tinyurl.com/622jku
DS
D.S “But almost all – a-l-l – know that demand is a major component of price. As I’ve relayed from the literature here numerous times. And why New Urbanist developments have a ~40% premium paid to live there (see, demand for nice, walkable places to live drives the prices in NU developments).â€Â
Happy to hear that, and if that is the case, build NU developments in any one of the many areas where there are few objections (*) and let them sell at their market price.
As we’ve discussed in the past, problems arise because your strategy in promoting development of NU is coupled with suppression of new SFH development – because, as you indicated, many times, in multiple comments, you dislike SFHs and want to constrain America towards a more compact urban landscape.
At least be honest about what your guiding principle is:
“a) pick some suburbanite lower density neighborhoods and force them to upzone, coupled with
b) suppress new development everywhere else to minimize land use (and perhaps secondarily increase demand for the NU development)â€Â.
The issue we keep debating is not whether there is demand for NU. If there is, great! Agree with one of the many, I’m sure, volunteers of currently undeveloped land and build it. The issue is: Why does the American Dream need to be supressed / made expensive as part of your plan?
(*) Say, put an add: “Two undeveloped 100 acre parcels of land close to metro area sought (by group with power to rezone) for upzoning and conversion to high density New Urbanist development. You think there will be NO takers? That way you get around the problem of having to force the NU down the throat of existing suburbanites.
(**) essentially impose “a cap and trade system†on SFHs.
C.E.
As we’ve discussed in the past, problems arise because your strategy in promoting development of NU is coupled with suppression of new SFH development
Evidence for the suppression plz. Real evidence, not a passage from Rand.
DS
The empirical evidence for the impact of Metropolitan Growth Boundaries on land prices, go to:
http://motu-www.motu.org.nz/wpapers/07_09.pdf
Spatial Determinants of Land Prices in Auckland:
Does the Metropolitan Urban Limit Have an
Effect?
Arthur Grimes and Yun Liang
Motu Working Paper 07-09
Motu Economic and Public Policy Research
August 2007
Aurthur Grimes is an economist and Chairman of the Board of the Reserve Bank of New Zealand.
This is a paragraph from the concluding section:
All our other estimates of the boundary effect find a boundary land
value ratio of between 7.9 and 13.2, with the lower estimates coming earlier in the
sample period when the growth boundary is likely to have been less of a binding
constraint. These estimates variously control for distance effects (from the CBD,
local nodes and the coast), TA effects (reflecting different amenities and property
taxes by local authority), rural land-use, social and population factors (population
density, incomes and relative deprivation status), spatial lags and spatial errors.
The boundary effects near the end of the sample are almost always stronger than
the beginning of the sample, albeit with some slight drop-off between 2001 and 2003.
Skimming this paper, unless I missed it, the paper doesn’t answer any of the questions in the bullets in 9. It merely provides one data point: r of increase after initiation.
It doesn’t calculate the slope of change before or after, nor does it attempt to calculate factors such as income, demand elasticity, permits, etc. Nor do they check their model with other cities.
So. One data point, no other context. As I showed in 23, that’s not enough to get an idea.
DS
Owen McShane,
American readers can just look at specific examples closer to home.
Just look at the following two pieces of land (I used to live somewhat close by, for a few years):
Lot #1 (*)
http://www.realtor.com/search/listingdetail.aspx?pg=3&srcnt=26&sid=32f8cddf234244538dcd08be5add6baa&fhcnt=4&loc=fremont%2cCA&usrloc=fremont%2cCA&typ=20&ml=8&fhpg=3&lid=1100993762&lsn=21
Lot #2
http://www.realtor.com/search/listingdetail.aspx?pg=2&srcnt=26&sid=32f8cddf234244538dcd08be5add6baa&fhcnt=4&loc=fremont%2cCA&usrloc=fremont%2cCA&typ=20&ml=8&fhpg=2&lid=1103464050&lsn=13
(*) Sorry, could not get these two references to work as direct links with explorer.
The two properties are just 1 mile away (scroll down on the listings to see their locations on maps) – ironically, a walkable distance.
So why a price differential of 6800% (that’s right folks that is 68 times more expensive – only 1 mile apart). What else is different between these two properties except that one parcel is simply inside an artificial area called the city limits while the other one is just 1 mile further which puts it outside city limits.
Call it UGB, city limits zoning or whatever – it is regulation put in place to restrict development that accounts for this 68 times multiplier in land prices once you cross that artificial line that defines urban density from near zero density land.
I know we take such differences for granted but how can one claim with a straight face that regulation has little effect on land/housing prices?
But no wait! That can’t be the reason!! Property #1 must have some something extra. Amenities? What is it?
Access to light rail? Nope none have that.
Train? No, BART a few miles away for either property.
Freeway? Nope, freeway access close to either.
Better view? Nope, actually #2 has better view.
Oh wait! There’s a “Café La Scala†serving fresh latte down the corner on #1. That must be it!
The only substantial difference is the immediate availability of water and sewer at #1 (So let’s hear somebody make the case that developing that 20 acre property and bringing water/sewer services one mile away, or creating a local alternative, will cost an extra $737,959 per lot).
Prices talk. Talk that regulation is not a significant factor in the price of land walks.
C.E.
P.S. on #28…
Property #1: $749,000, for 0.17 acres inside UGB
Property #2: $11,049 per 0.17 acres ($1,299,000 for 20 acres) outside UGB
In Gullyvornia, it is hard to provide services such as water and sewer and ecosystem services such as clean air to that many people and not trash the environment (the environment, after all, enables the economy. Oh, and life).
That is: there is no reason to believe that CA should have, say, 45M people. So the people decided to limit growth. That is their decision. Of course, as related above, we know that UGBs and their application have effects, but there is different application in different areas. CA, as I’ve said before, decided to limit growth; there is nothing wrong with that – it is their decision.
But the anecdote above fails to equate CA’s policy prescription with others’. Why? It cannot. As I’ve said here before.
The bulleted items in 9 are the context for areas adopting UGBs. CA is only one aspect, and we cannot argue to others, as that is a logical fallacy of hasty generalization. Why? Other policies differ from CA’s.
To recap: there are many factors in housing prices, and it is simplistic to think otherwise. As stated above in 23:
Housing prices are actually determined by a hostof interacting factors, such as the price of land, the supply and types of housing, the demand for housing, and the amount of residential choice and mobility in the area. Further complicating this market reality is that growth management policies vary widely by state and by region and are unevenly enforced and implemented.
[…]
We cannot emphasize strongly enough that housing prices depend more on the relative elasticity of demand, especially within metropolitan regions, than on any other factor, including growth management.
DS
Is Houston really unplanned?
http://marketurbanism.com/2008/12/10/is-houston-really-unplanned/
Great article on ‘density’ (or lack thereof) being planned by zoning codes.
Houston is a extremely planned placed, just that it is mostly planned for intensive automobile use.
Houston planning is not done by government dictating crazy ideas. That is the key difference. Too bad planners seem incapable of understanding this difference.
Forced parking mandates are crooked, they artificially jack up construction costs and are back door way to subsidize auto use.
Let’s also not forget that the roads that you drive on are also a form of socialism too.
Damn Karlock, you’re such a sleazy pinko!
More screaming in the garage (read: comments weeks late).
One more reason why median multiples are nonsense as far as affordability:
Median price says nothing about population or quantity of stock.
To exaggerate: The median price of widgets is $5. The median amount available per person per widget is $4. Does this mean there are some people who can’t afford a widget? It depends on how many people and how many widgets there are. If there are 120 widgets and only 50 people, then, depending on the dispersion (another issue) there could be 50 widgets whose price distribution results in a $4 median, satisfying all buyers affordably.
Housing stock and population are no different. And it is significant in terms of the data.