The ABC of Making Housing Unaffordable

On 12 December, ABC Radio National’s Breakfast Program aired another group discussion on “Australia’s housing market”. Presenter Hamish Macdonald was joined by an “expert panel” made up of Ken Morrison, CEO of the Property Council, John Daley, CEO of progressive think tank the Grattan Institute, and Tom Whitty, managing editor of The Project, a television show pitched to the youth demographic. The conversation ran along predictable lines.

All three panelists agreed that housing affordability was a real problem, especially in Sydney. But they took up positions on various sides of the issue. Generally speaking, Morrison argued for a supply-solution and dismissed demand-management or tax reform. Daley supported a supply-solution, but insisted that some demand-management and tax reform was essential. Whitty rejected a supply-solution altogether, and thought it was all about demand-management in the form of abolishing the tax concessions for negative gearing and capital gains. "We're manipuating demand", he said.

Neither Morrison nor Daley acknowledged that greenfield development offered any advantages relative to inner-ring infill. Daley repeated his blinkered point that jobs growth is all in the centre. There was no mention of the land value impacts of limiting peripheral supply, a near universal policy across the country. Daley seemed to think all new housing should be concentrated within a few kilometres of the CBD. Bizarrely, he held up Vancouver and Portland (Oregon) as cities that got their housing location right, failing to mention that they are amongst the least affordable places on earth. Morrison made no objection to any of this.

In terms of the system of interests set out in our last article, “Sydney lurches to housing affordability disaster”, Morrison expressed the position commonly held by the Big Projects coalition, while Daley and Whitty repeated views popular with the knowledge-welfare elite. Typically for the ABC, nobody argued for suburbanisation and greenfield expansion, policies of particular benefit to the worker-trader class of industrial and routine service workers and small traders.

A striking feature of the discussion was how the demand-management crowd are utterly impervious to evidence. Morrison cited estimates by Grattan and the McKell Institute that abolishing the tax concessions would lower prices a puny 0.49 or 2 percent. Despite failing to offer any counter-evidence, Daley and Whitty were unmoved. Daley shifted onto the different point of whether the cost to the federal budget is equitable, and then started talking about the rental market. Whitty just fell back on anecdotes about the type of bidders succeeding at auction sales. Macdonald’s sympathies were clear all along, at one point becoming testy with Morrison for refusing to concede that the concessions are central.

This feeds into the false narrative being built up by the ABC and other media outlets, particularly catering to a younger audience. It’s all the fault of greedy oldies or wealthy investors with their snouts in the trough. The impulse is to slap taxes on the scapegoats. In the meantime, the real causes go undiscussed and the problem keeps getting worse.

This piece originally appeared at The New City Journal.

Caltrain and Blended High Speed Rail Promise Peninsula Traffic Paralysis

The following notice was issued by the Community Coalition on High Speed Rail in the San Francisco Bay Area.


Paul Jones, a mechanical and industrial engineer who was an Associate Professor of Industrial and Systems Engineering at the Georgia Institute of Technology, and who was the principal engineer in charge of the high-speed rail design study for the high-speed train from Madrid to Barcelona, Spain, has analyzed the traffic impacts that can be expected if the High-Speed Rail Authority (partnering with Caltrain) actually constructs its proposed "Blended System" project on the Peninsula.

What is Mr. Jones' bottom line conclusion? The following quotation is from the "Abstract" of his November 7, 2016 report, "Potential Traffic Paralysis Throughout the Peninsula: Blended Caltrain/High Speed Rail Impact on Street Traffic."

(End of notice)

The report is available at:

Note: The California High Speed Rail project, of which this work is a part, has been evaluated in reports by Joseph Vranich and Wendell Cox, who predicted substantial cost escalation ( This prediction turned out to be low. This was shown in a subsequent report, with an analysis indicating that the system is likely to require substantial subsidies to operate ( A later report by Wendell Cox and Adrian Moore found that the high speed rail line that the reductions in greenhouse gas emissions (CO2) from passengers transferring from planes and cars would cost up to nearly $19,000 per metric tonne ( This is more than 1,000 times the market price.

Toronto Area Housing Market Rigged Against Millennials

In a Globe and Mail column, Margaret Wente accurately describes Toronto’s housing affordability crisis and its principal cause. The Toronto area’s house prices have escalated strongly relative to incomes since the province enacted its “Places to Grow” urban planning regime. The resulting destruction of the competitive market for new residential has driven prices up, just as oil prices rise when OPEC implements strong supply restrictions.

Wente concluded her article:

“The solution to the affordability crisis isn’t high-density housing and mass transit in the burbs. It’s to give people what they want – by getting the ideologues out of the way and restoring a sensible balance between supply and demand. Can we do that and be environmentally responsible too? Central planners who think we can’t should be required to raise their families in an apartment block in Oshawa and take the bus to work. They’d find a better way soon enough.”

It’s no wonder that international researchers are increasingly pointing to house price escalation as a leading driver of rising inequality. Nor should it be surprising that a new Canada Mortgage and Housing Corporation report will issue its first “red warning” on Canada’s housing market, principally due to out of control house price escalation in the Vancouver and Toronto metropolitan areas.

Zoning and Urban Containment: The Need for Clarity

It is a terrible mistake to be confusing ALL zoning rules with the single true determinant of inequity in housing and economic mobility.

That is, can rural land at rural land prices, be converted to urban use?

This suppresses the price of all urban land to the extent that it is such a small input into “housing costs” relative to the cost of structures, it is very hard to push “house prices” up into unaffordable territory.

There is absolutely no city in the UK that does not have “house prices” at least double the price of the affordable, median-multiple-3 cities of the USA, in spite of the UK cities being 4 to 10 times denser than the US examples.

As long as you have urban planning or proxies for it, that rations the overall land supply, site values are highly elastic to allowed density, so much so that density correlates the wrong way with “affordability”.

This is a very important lesson that needs to be understood, fast, or there will be years or even decades of wrong policy made.


California’s Attack on Rule of Law

Morris Brown, founder of Derail (a citizen group opposed to California’s high speed rail project) writes over at Fox and Hounds Daily that newly enacted California Assembly Bill 1889 is unconstitutional.

Brown could not be more on the mark. In 2008, the California legislature had placed a number of protections in a Proposition authorizing bonds for California’s high speed rail line. These were intended as enticements to voters to approve the proposition. The legislature and Governor promised. The people approved. And, now the legislature and Governor have gone back on their promise.

In short, the legislature and Governor have revised the conditions of the proposition, something that requires a vote of the people. With respect to high speed rail (and perhaps other propositions) California has replaced rule of law with rule of men (and women). That this should have occurred with respect to a voter approved proposition is particularly egregious, since such measures (such as initiative and referendum) were Progressive Era reforms, under Governor Hiram Johnson in 1911, intended to permit the people to take legislative authority from the legislature and governor when they felt it appropriate.

Meanwhile, the California high speed rail project has become a legendary “white elephant,” with costs going through the roof and little hope for achieving the promised travel time between San Francisco and Los Angeles.

Brown’s analysis can be accessed here….

Why Intensification Will Not Solve the Housing Affordability Crisis

Analyst Phil Hayward of Wellington, New Zealand provides a provocative perspective on why urban intensification (densification in the urban cores) is incapable of compensating for the huge house price increases attributable to urban containment boundaries. Writing on Making New Zealand for Urban Planning that Works, he notes that “planners and advocates and politicians and even economists, are making an assumption that urban intensification is a potential route to housing affordability.”

The assumption involves changing zoning so that “X number of housing units” can be constructed in existing urban locations “instead of X number of housing units” on pristine ex-urban land. The latter is assumed to be an evil to be avoided, and that the former is a perfect substitute in terms of “sufficient housing supply to enable affordability.

Hayward continues:

Common sense tells us that there are quite a few potential problems with this assumption. For example, NIMBYs will obstruct the intensification and reduce the rate of housing supply so the policy will fail. Therefore, what we need is the removal of NIMBY rights of protest and appeal, and the policy will then work.

Hayward’s analysis suggests that:

And generally, the data runs in that direction - not only does intensification within a regulatory boundary "not restore affordability", it seems that the more density you “allow”, the higher your average housing unit price gets. The correlation runs the opposite way to the assumption.

Indeed, “Paul Cheshire and his colleagues at the London School of Economics believe this is due to the ‘bidding war’ at the margins of each income-level cohort of society, for ‘slightly more space,’" according to Hayward. “But when a market is allowing people to consume "as much space as they want", which has only really occurred in the automobile era, the “bidding war” effect is absent.”

Boston and Atlanta provide powerful examples.

…(The) difference is that Boston has de facto growth boundaries / green belts while Atlanta does not. The ironic implication is that fringe growth containment pushes median multiples up less, when there are severe restrictions against density – otherwise Boston should be the most expensive city in the data, not Hong Kong. The evidence suggests that this is because there is a total absence of “bidding war for slightly more space” - everyone has "more than they want" already. The median multiple of 6 rather than 3, represents the effect of demand for "living in Boston", period, and they simply don't provide enough houses to keep the median multiple down like Atlanta does (in the face of staggering population growth in Atlanta, by the way).

Perhaps the most important conclusion is that “there is no evidence that any city anywhere in the world has ‘freed up intensification processes’ enough to result in floor space being built faster than site values inflate.

The bottom line is a mistaken impression that high density housing “will remain available as a substitutable option to suburban family housing even if the latter is forced up in price deliberately by central planner's policies. The lesson that needs to be learned urgently, is that this is impossible; the two things are inter-related.”    

But when a market is allowing people to consume "as much space as they want", which has only really occurred in the automobile era, the “bidding war” effect is absent. The evidence supports this, with most median-multiple-3 cities being from 600 to 2500 people per square km. Another interesting case study would be Liverpool; it lost approximately 50% of its population from the 1950's to the 2000's (similar to Detroit) - yet its median multiple is over 7. And its density is still 4,400 per square km (presumably it would have been double this, or more, in 1950). This is prima facie evidence that 4,400 people per square km within a growth boundary, are still going to be dissatisfied with their living space, to the extent that they will be engaging in an unwitting bidding war against each other for a little more of it. Of course under these conditions, the lowest socio-economic cohort is denied all options other than crowding tighter and tighter in rented accommodation or even illegal “living space”. In UK cities, rental advertisements include options like a ¼ share in 2 rooms, with communal access to kitchen and bathroom shared by even more tenants in further rooms. In median-multiple-3 housing cities, the same real rent would apply to a whole house of reasonable size and standard. 

There might be other policy mixes by which housing supply within a growth boundary could be made the means of keeping housing affordable, but publicly and politically, the debate is nowhere near tackling the complexities involved.

Center for Opportunity Urbanism: America’s Housing Crisis

This video from Center for Opportunity Urbanism (COU) explores America’s housing crisis --- focusing on the new generation. COU is a non-profit dedicated to preserving the American dream and promoting upward mobility for all Americans. Check out the video and let us know what you think.

Resurrecting the New York Subway

The subway is crucial to mobility in the city of New York. Over the last 10 years, ridership increases on the subway have been more than that of all other transit services in the United States combined. It was not always this way.

In  New York Post article entitled "How Bratton's NYPD Saved the Subway System,"the Manhattan Institute's Nicole Gelinas describes the depths of the problem in 1990, when there were 26 homicides on the subway. Of course, there is nothing more important to civil society than order, and the threat to life and limb on the subway led to a significant ridership loss after 1980.

Gelinas notes that the murder of a Utah youth that year "would help propel Rudy Giuliani into the mayor’s office three years later, as Democratic voters turned to a Republican prosecutor to get a seemingly ungovernable city under control." Gelinas tells the story of how new transit police chief William Bratton brought the subway under control and helped to make possible the highest ridership levels since World War II. Gelninas notes that " Policing played a huge role in making Gotham’s subways safe, as it did in reducing crime throughout the city. In fact, the New York crime turnaround began in the subways, and what the police discovered about violence underground would prove essential to the broader battle for the city’s streets."

Bratton played an important role in this city-wide progress, after he was appointed as New York City's police commissioner by Mayor Rudy Giuliani. His success and is widely considered to have been influencial in the more effective policing strategies that have been, at least in part, credited with much lower urban crime rates in the last century. Indeed, the urban core (downtown) residential renaissance evident in many cities would not have been possible otherwise.

Portland Columnist Calls for Abandonment of the WES Commuter Rail Line

Portland Tribune columnist (see "My View: WES is a Mess: Time to Pull the Plug") Bill MacKenzie took the occasion of a Tri-Met (transit agency for the Oregon side of the Portland, OR-WA metropolitan area) approval to purchase two used Budd Rail Diesel Cars (RDC) for the Wilsonville to Beaverton commuter rail line to call for its abandonment.Fconcl In addition to the $1.5 million purchase cost, $550,000 will be required for refurbishment. When then are ready for service, they will surely older than most Tri-Met employees, since the last Budd RDC's were built in the early 1960s.

He mocks the agency's general manager, Neil MacFarlane, who justified the purchase as necessary to accomodate future passenger growth: "Oh sure, plan for massive ridership growth,"MacKenzie scoffs. He continues, In early 2009, TriMet predicted WES would have 2,400 daily riders its first year of operations and 3,000 by 2020." In 2015, the line carried fewer than 1,900 riders each weekday, and its cost per boarding was more than four times that of buses (not counting capital costs).

He concluded that: "Even if WES reaches 3,000 average daily boardings, operating costs per boarding ride will remain much higher than for buses and MAX. The fact is, WES is a train wreck. It’s time to shut it down."

Expo Line Expansion Fails to Stem L.A. Transit Loss

The long awaited and highly touted Santa Monica extension brought an approximately 50 percent increase in ridership of the Los Angeles Expo light rail line between June 2016 and June 2015. The extension opened in mid May 2016. In its first full month of operation, June 2016, the line carried approximately 45,900 weekday boardings (Note), up from 30,600 in June 2015, according to Los Angeles Metropolitan Transportation Authority (MTA) ridership statistics.

However MTA ridership continued to decline, with a 51,900 loss overall. Bus and rail services other than the Expo line experienced a reduction of 67,300 boardings (Figure).

Between June 2015 and June 2016, rail boardings rose 30,500, while bus boardings declined 82,400. In other words there was a loss of 2.7 bus riders for every new rail rider over the past year. Los Angeles transit riders have considerably lower median earnings than in the cities with higher ridership, and lower than the major metropolitan average (see the analysis by former Southern California Rapid Transit District Chief Financial Officer Tom Rubin and "Just How Much has Los Angeles Transit Ridership Fallen?" and ) here and here).

Note: A passenger is counted as a boarding each time a transit vehicle is entered. Thus, if more than one transit vehicle is required to make a trip, there can be multiple boardings between the trip origin and destination. Because the addition of rail services, as in Los Angeles, can result in forcing bus riders to transfer because their services can be truncated at rail stations, the use of boardings as an indicator of ridership can result in exaggeration, as the number of boardings per passenger trip is increased. This may have produced a decline of as much as 30 percent in actual passenger trips since 1985, as a number of rail lines have been opened in Los Angeles.