A new paper with the above title by urban economists Edward Glaeser and Joseph Gyourko provides more evidence to back up the Antiplanner’s recent paper on the New Feudalism. One of the major points of that paper was that the Obama administration’s plan to force suburbs to relax zoning codes to allow higher density housing is not the solution to housing affordability problems.
Glaeser and Gyourko point out that housing is affordable in most of the country despite zoning. In some parts of the country, however, “property rights have essentially been reassigned from existing land owners to wider communities, which have chosen to substantially reduce the amount of new building.” The result is that the supply curve for housing, which is nearly horizontal (meaning changes in demand have little effect on prices) in communities with traditional zoning, becomes very steep in the overly regulated communities (meaning small changes in demand can result in large changes in prices, i.e., prices will be more volatile).
Glaser & Gyourko make one interesting point that I had not raised. One of the impediments to housing production in California is a state environmental quality act that requires developers to assess the local environmental impacts of new housing. The result is that little new housing has been built in California, forcing people to move to places like Arizona and Texas. But California’s temperate climate means that greenhouse gas emissions there are far lower than in interior states. “If California’s restrictions induce more building in Texas and Arizona, which require far more artificial cooling,” says the paper, “then their net environmental [effects] could be negative in aggregate.”
The New York Times reported on the paper, but I think the writer misstates one of the main points. Instead of viewing homes as an investment, suggested the reporter, Americans should view them as consumer goods and accept that prices will fall. Americans need to “open our eyes to the negatives of the national obsession of owning a home, expecting its value to rise, and using the levers of local government to keep neighborhoods as they are,” says the Times.
Yet homeownership isn’t an “obsession”; it is a natural, worldwide desire to have a predictable, stable home life. Nor does “using the levers of local government to keep neighborhoods as they are” make housing unaffordable: instead, it is using the levers of state or regional government to keep rural areas as they are. While the Antiplanner prefers the Houston model of deed restrictions over zoning, city zoning really isn’t a major problem for affordability so long as there is plenty of unzoned land outside the cities.
In such areas, people don’t buy homes expecting to get rich from rising prices. But they do see the equity they build in their homes as a store of wealth that they can borrow against to start small businesses, put their children through college, or retire on.
The one thing missing from the Glaeser/Gyourko paper and the Times article is a way out of the housing affordability mess. Glaeser/Gyourko suggest a federal program of building large numbers of homes in unaffordable areas, but considering the kind of homes federal bureaucrats are likely to build, this is likely to do more harm than good. The Times falls back on the Obama solution of building higher densities, but that’s not how most Americans want to live, and it seems silly to demand higher densities in states like California and Oregon that are at least 95 percent rural. The best solution to the conundrum, the Antiplanner has suggested, is through the courts, not legislation.
Randal O’Toole is a senior fellow with the Cato Institute specializing in land use and transportation policy. He has written several books demonstrating the futility of government planning. Prior to working for Cato, he taught environmental economics at Yale, UC Berkeley, and Utah State University.
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Then there is the matter of "leapfrog" growth and development
But California’s temperate climate means that greenhouse gas emissions there are far lower than in interior states. “If California’s restrictions induce more building in Texas and Arizona, which require far more artificial cooling,” says the paper, “then their net environmental [effects] could be negative in aggregate.”
The above California perspective makes sense, in my opinion. In much of the state (at least when it is not being slammed by rainstorms), heating and cooling costs are quite reasonable. Certainly that's the case in much of metropolitan Los Angeles and San Diego.
Growth controls (usually by local governments) in closer-in suburbs is sometimes rationalized by claiming that it will somehow force development to take place in center city areas.
What happens instead is that development (and the people wanting that development) move out to the next jurisdiction beyond the one that is imposing growth limitations. In other words, they just leapfrog over the reach of local elected officials who claim to be in favor of various forms of growth restrictions.
Politician cannot legislate morality, and they really cannot legislate growth policy very much either and most attempts to do so are just wishful thinking.
The Planners are also getting rich
For those who already own a house these restrictions help make you a fortune. That includes most local officials and planners, who while they envision that newcomers and the young (expecially the minorities) will live their lives in apartments, it's not want they expect for themselves. Most probably understand that the restrictions they impose have generated hundreds of thousands of dollars in equity for themselves and their supporters.
The Constitution
I liked the New Feudalism paper after I was able to get past its, um, deficient description of feudalism. Ultimately this situation must be traced back to the unwillingness of the Supreme Court to apply the takings clause in the spirit in which it was written into the Constitution. Had the Court early and always severely limited the scope for "regulatory takings" by the government, then we would not be confronted with the present crisis.