Notes From Babel

Don’t Be Fooled: The Urban Movement Is Not Your Friend

with 2 comments

Will at The League of Ordinary Gentlemen posted to this NY Times article, taking off on Chris Leinberger’s anti-suburb rant from 2008.  He quotes this passage summing up the general attitude of disgust towards unregulated suburban sprawl:

Second, look at the cities with stable and recovering home markets. On this coast, San Francisco, Portland, Seattle and San Diego come to mind. All of these cities have fairly strict development codes, trying to hem in their excess sprawl. Developers, many of them, hate these restrictions. They said the coastal cities would eventually price the middle class out, and start to empty.

It hasn’t happened. Just the opposite. The developers’ favorite role models, the laissez faire free-for-alls — Las Vegas, the Phoenix metro area, South Florida, this valley — are the most troubled, the suburban slums.

Come see: this is what happens when money and market, alone, guide the way we live.

Respectfully, this is a crock.  I’m not sure what is meant by the statement that San Francisco, Portland, Seattle and San Diego have “stable” home markets. According to the 6th Annual Demographia International Housing Affordability Survey, those markets have the 6th, 24th, 18th, and 13th most unaffordable housing markets in the world, respectively. This is undeniably the result of the artificially inflated values caused by over-exuberant regulators. If the foolhardy home borrowing/lending mess did not hit these markets as hard as the suburban markets, this is only because the foolhardy borrowers were more interested raising their families in a real home in a real community (see Joel Kotkin’s piece here, noting that “[o]ne recent University of California at Irvine study found that density does not, as is often assumed, increase social contact between neighbors or raise overall social involvement. For every 10 percent reduction in density, the chances of people talking to their neighbors increases by 10 percent, and their likelihood of belonging to a local club by 15 percent.”)

To suggest the regulators who price working families (particularly minorities, who have increased from 5% of the suburban population in 1970 to something like 27% today (see id.)) out of these markets have some sort of public service is pure rubbish.

[Wendell Cox just posted a more detailed analysis of Seatlle’s spike in housing unaffordability in the past decade due to smart growth regulations, and its particular impact on minorities.]

[The LandUseProf blog posted this same article.  A couple of the comments offer interesting insight—that onerous regulations galvanized sprawl into unregulated markets in the first place, and that some markets, like Miami-Dade, Detroit, and Cleveland, all dense and highly regulated, were not spared the harsh effects of the bust.]

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Written by Tim Kowal

February 19, 2010 at 12:18 am

2 Responses

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  1. Exactly where could urban sprawl occur in San Fran and Portland? Without regulation the point still remains that the many urbanized areas are out of space, which is exactly why housing is sold at a premium in the area – land is a limited commodity. Seriously, they’re on a coast. Not to mention that urban areas offer more employment opportunities. These stable markets have nothing to do with regulation and everything to do with geography.

    Contrast with the limitless vacant tracts of Phoenix, Las Vegas and non costal Florida. Fewer job opportunities and limitless cheap land.

    Last I read San Diego was one of the most unstable markets in the nation, replete with foreclosures fueled by the nation’s highest number of adjustable mortgages.


    February 19, 2010 at 9:19 am

    • There’s little disagreement that regions with heavy land use regulations experienced a heightened impact of the housing bubble. Even Paul Krugman noted this. Portland certainly has a strong “smart growth” policy—in fact, it is widely considered the model. Though see this article, explaining how when Portland scoured the nation for models on which to build their smart growth vision, it turned out that Los Angeles, of all places, had all the qualities that make a planner swoon.

      In 1994, Metro looked at other U.S. urban areas to see which one was closest to its plan for Portland: a high-density region with few roads and lots of rail transit. It turned out that the highest density urban area in America also has the fewest miles of freeway per capita and is building one of the most expensive rail transit networks. What city is that? Believe it or not, it was Los Angeles, which turns out to be the epitome of smart growth. Metro concluded that Los Angeles “displays an investment pattern we desire to replicate” in Portland.

      Portland, of course, has room. The planners there just genuinely like density. See this article at NewGeography.

      Stopping “sprawl” into undeveloped areas is not the only way to build up density and artificially inflate prices. There are a variety of regulations and planning hurdles that planners buzzing with activity: historic preservation districts, annual limits on development permits, subsidies for multifamily dwellings, environmental requirements, design requirements, etc. When these land policies spur the development of unwanted highly urbanized communities, they render traditional communities more and more scarce, thus driving up the costs of living in them. According to this article, “Bob Toll, president of one of the nation’s largest builders, has said that his company quit building “starter homes” for young families years ago because the margins on small homes grew too narrow due to excessive regulations.” So while it’s of course true that in places like San Francisco there is actual land scarcity to be contended with, the effect of land policy tinkering is the same.

      The predatory practices of the mortgage industry and the regulatory gusto of metro communities worked in symbiosis to make the housing bubble and bust as devastating as it was. According to that same article:

      Using the National Association of Homebuilders’ methodology for determining the impact of price increases on home affordability, we can say that regulatory restrictions priced at least 7 million – and as many as 18 million – families out of their local housing markets in 2007. As we have learned, families priced out of their markets still purchased homes – usually with unconventional, risky mortgages.

      The artificial spike in housing costs was particularly prominent in Seattle. According to this article:

      Between 1989 and 2006, the median inflation-adjusted price of a Seattle house rose from $221,000 to $447,800. Fully $200,000 of that increase was the result of land-use regulations, says Theo Eicher — twice the financial impact that regulation has had on other major U.S. cities.

      “In a nationwide study, it can be shown that Seattle is one of the most regulated cities and a city whose housing prices are profoundly influenced by regulations,” he says.

      A key regulation is the state’s Growth Management Act, enacted in 1990 in response to widespread public concern that sprawl could destroy the area’s unique character. To preserve it, the act promoted restrictions on where housing can be built. The result is artificial density that has driven up home prices by limiting supply, Eicher says.

      . . . .

      But Eicher argues that “demand does not need to drive up housing prices.”
      Cities such as Houston and Atlanta, which have few growth restrictions, have shown that. They’ve been able to add enough housing to meet demand, so their home prices have risen more moderately than heavily regulated San Francisco and Boston, which have a harder time increasing housing.

      Of course, land prices can be driven up the other way, too. Seal Beach imposed height limits on its downtown beach community, having the effect of driving up the values of those who already had spacious three-story homes, at the expense of their neighbors who had planned to build add-ons or who just generally oppose coercive land policies. And Joel Kotkin wrote about landowners in one California winebelt community that kept out new development that would “interfere[] with their viewshed.”

      But even assuming the prices are leveling in these metro markets, with median multiples of 6+, housing costs can’t be described as “stable” in any meaningful sense. It’s like saying the price of foie gras is stable—mashed up goose liver and San Francisco are both considered delicacies to elites. If people would rather eat Applebee’s, government should let ‘em.

      Tim Kowal

      February 20, 2010 at 9:55 am

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