Cheap transport and cheap housing: is there a tradeoff?

Michael Lewyn's picture
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A few months ago, I updated a city rating system (available at http://lewyn.tripod.com/livable09) that evaluated cities' "livability" by rating crime rates, transit-friendliness, and cost of housing.  

Plenty of cities did very well on the first two criteria.  For example, New York is now safer than most big cities, and of course is by far the best city in the U.S. for public transit.  But its housing costs are dreadfully high.  The same was true of Boston and San Francisco (which, if only crime and transit were considered, would rank second and third for livability).  

By contrast, the most car-oriented cities tended to have very cheap housing.  If only crime and transit were considered, my three least livable cities were Jackson, Baton Rouge and Detroit- but low housing costs partially canceled out these disadvantages. 

This apparent trade-off creates ammunition for those who argue that subsidizing auto-oriented sprawl reduces housing costs by opening up land for housing, and thus cancels out negative externalities caused by sprawl.  On the other hand, it could also be argued that this benefit is itself canceled out by higher transportation costs.

When I decided to place cost of living into my "livability mix" I wondered if there was a happy medium - cities which were less car-oriented than sprawling Sun Belt cities, but still were less expensive than New York or Boston.  In fact, I did have some winners: when all three factors were considered, Rust Belt cities such as Pittsburgh and Syracuse clobbered both Sun Belt cities and expensive coastal cities, because they combined low housing costs with mediocre-to-good walking and transit. 

But these livability winners (with the exception of Madison, a university town) had something not-so-positive in common: they are declining cities in stagnant regions, a fact which I suspect brings housing prices downward.

In other words, its possible for a city to have decent transit and reasonably priced housing, but in American cities today, only in declining regions with declining urban cores.  For example, Pittsburgh has lost more than half of its 1950 population, and its metropolitan area is also declining (though less rapidly).

To the extent that the smart growth movement can succeed in revitalizing cities, its biggest challenge might be: how can Americans do so without suffering from Boston- or New York-size housing costs? It seems to me that this is not an impossible problem to solve- in theory. All we need do is just build a lot more housing to keep up with demand.  But given the political constraints on infill development, this may be easier said than done. 

 

Michael Lewyn is an assistant professor at Touro Law Center in Long Island.

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Todd Litman's picture
Blogger

Affordable-Accessible Housing is Key to True Livability

Mike, you raise important points.

Yes, from individual households' perspective there are often trade-offs between cheap housing and other objectives such as affordable and healthy transportation, improved mobility for non-drivers, and environmental protection. But cheap housing is not truly affordable if, because it is in an automobile-dependent location, it has high transportation costs (money, time and risk). That is why experts now recommend that affordability be measured based on combined housing and transport costs ("H+T Affordability Index" at http://htaindex.cnt.org ).

There is no inherent reason that smart growth must increase housing costs. Yes, more compact development does tend to increase land costs per acre and adds some design costs (such as sidewalks and nicer landscaping), but this is offset by reduced land consumption per housing unit and infrastructure cost savings, so housing production costs are generally equal or lower in smart growth conditions, as discussed in "Understanding Smart Growth Savings" (http://www.vtpi.org/sg_save.pdf ), "Production-Built Homes: The Cost Advantages of Smart Growth" (www.epa.gov/smartgrowth/sg_business.htm ) and "Smart Growth & Conventional Suburban Development: Which Costs More?" (www.morrisbeacon.com/images/documents/MBD%20EPA%20infrastructure.pdf ).

Many existing smart growth communities have higher housing costs due to high demand and limited supply. The rational response, which maximizes consumer and social benefits, is to greatly increase the supply of such housing by encouraging more affordable infill development, and applying compact, multi-modal design when building new suburban communities (see "Affordable-Accessible Housing In A Dynamic City," http://www.vtpi.org/aff_acc_hou.pdf ). This will require changing current policies and development practices which favor automobile-dependency and sprawl, including excessive restrictions on development density and mix, generous minimum parking requirements, and transport funding dedicated to roads and parking facilities that cannot be easily transferred to walking, cycling and public transit improvements.

Todd Alexander Litman
Victoria Transport Policy Institute
www.vtpi.org
facebook.com/todd.litman
"Efficiency - Equity - Clarity"

"Trading down" - does it work?

Michael is indeed raising important points, and it is good to get the reality stated so clearly by Todd, that it is necessary to trade down in "space" per person in "Smart Growth" development, to offset the higher land prices at those locations. But Britain has been "trading down" the "space per person" for decades, and their "affordability" has steadily got WORSE. They have smaller homes at much higher prices, not smaller homes at the same or lower prices, than is possible under conditions of allowed sprawl.

See the many papers of British academics like Alan W. Evans and colleagues, and Paul Cheshire and colleagues.

I have tackled this subject repeatedly, to the vexation of smart growth advocates who seem incapable of understanding these realities of urban economics and real estate markets; and to my own continual vexation as these people refuse to "get it". Let me re-frame the argument afresh and see if light dawns.

"Sprawl" is associated with low urban land prices. This is because the direction of population movement is away from the most expensive land at the urban core, and towards the low-price agricultural land beyond the periphery. The urban land market is constantly being supplied with low-cost fringe land.

Incidentally, it will ALMOST ALWAYS be cheaper to commute further and buy homes further away from expensive urban cores. This is because the cost of travel will always "capitalize" into the cost of efficiently located land anyway. The ONLY EXCEPTION to this rule, is cities where LAND IS SO CHEAP THROUGHOUT THE CITY, that this "cost input" to location decisions, is LOWER than the cost of travel. Houston and Atlanta might be examples. Certainly Detroit right now. It is interesting that Michael identifies "rust belt" cities as meeting a certain "ideal" criteria.

The once-dense urban cores (predating the automobile) have been emptying out for decades in most cities, which keeps the cost of location there, more competitive for those who remain or those who defy the trend and move back. BUT WHAT HAPPENS to urban land markets IF "planners" are correct and people overwhelmingly move back the other way, from the fringe to the core? WHAT HAPPENS to land prices at the core and at the fringe?

This is a self-adjusting, impossible-to-get-around situation. It is impossible to get MANY people "moving back the other way" before the MOST people are "priced out" of the "core" location. I do not believe that ANY PUBLICLY ACCEPTABLE AMOUNT of "trading down" in space per person will be sufficient to overcome this.

The high density living of the pre-auto era is still associated, and rightly, with unacceptable living conditions. But even attempting to reinstate THESE conditions under conditions of MODERN INCOME LEVELS, is doomed to failure. People accepted those conditions only when they were unable to "buy their way out".

This is the opposite of the "move to the fringe" - where there was an infinite supply of low cost land. If "planners" want to replicate the "move to the fringe", only in the opposite direction, they will need to somehow create an INFINITE SUPPLY OF LOW COST LAND AT THE CORE instead of the fringe. This is impossible. Unless planners are given powers of confiscation of land from the current owners in urban cores, and powers to redevelop it so as to sell apartments, condos, etc to buyers with "ZERO" land cost component and ZERO profit.

Todd Litman's picture
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Smart Growth Includes Affordability Strategies

Wodehouse makes a number of inaccurate statements.

Wodehouse is wrong to claim that combined housing and transport costs are always cheaper in sprawled areas. On the contrary, if you look at actual data in the Housing + Transportation Index maps (http://htaindex.cnt.org ) you'll see that the most affordable locations in most urban regions are inner neighborhoods where housing costs are modestly higher than average but transport costs are much lower than average.

These differences are much greater if we use a broader concept of "cost" to include travel time, accident risk, public health problems, environmental damages and inadequate mobility for non-drivers. Residents of sprawled locations not only spend more money on transportation, they also spend more total time in travel (see Joe Cortright's analysis in "Driven Apart: How Sprawl is Lengthening Our Commutes and Why Misleading Mobility Measures are Making Things Worse," www.ceosforcities.org/work/driven-apart ), have much higher traffic fatality rates and are less likely to achieve physical activity targets (see my recent Blog on the subject at http://www.planetizen.com/node/50571 ), consume more land per capita, produce more pollution and are much worse off if they are ever unable to drive.

Finely, Wodehouse misrepresents the concept of smart growth. It includes much more than urban growth boundaries. Most smart growth strategies (allowing higher development densities, more housing types, reduced parking requirements, etc.) reduce housing costs. High housing costs result from natural and regulatory limits on urban expansion combined with restrictions on higher density urban infill development. People concerned with housing affordability should therefore work hard to implement these smart growth strategies.

Todd Alexander Litman
Victoria Transport Policy Institute
www.vtpi.org
facebook.com/todd.litman
"Efficiency - Equity - Clarity"

I am NOT wrong....!

I have said before more than once that I SUPPORT

"....allowing higher development densities, more housing types, reduced parking requirements....."

And that the only thing I oppose about "Smart Growth" is urban growth boundaries or proxies for them. In a way, I don't care what you call them. Restricting fringe growth by any means, is counter productive to all the urban planners other objectives.

I like Todd's clarity here:

".....High housing costs result from natural and regulatory limits on urban expansion combined with restrictions on higher density urban infill development......"

I agree 100% with abolishing restrictions on higher density urban infill development. BUT, UGB's ALWAYS inflate urban land prices throughout the urban area, and inflated urban land prices ALWAYS create INCENTIVE for households and businesses to locate FURTHER AWAY. Get this point, and you will be a new man.

Furthermore, the effect of the UGB is very much worse if planners have NOT succeeded in abolishing restrictions on higher density urban infill development. It is insanity to implement the one, when you know that obstacles to the other are going to prevent "densification" from happening IN THE EFFICIENT LOCATIONS anyway.

But then Todd says:

"......People concerned with housing affordability should therefore work hard to implement these smart growth strategies......"

NOT the UGB. UGB's are incompatible with affordable housing, period. I still stand by what I said above. The only way you are ever going to achieve your objectives is by confiscating value off the owners of sites at your favoured locations - otherwise all you are doing is delivering windfall planning gains to the owners of land at these locations. The Netherlands has used "compulsory acquisition" for decades, to avoid blowing out the price of urban land and wrecking their economy and their society. Dutch academics seem to be some of the most advanced in the world at actually understanding these issues. There is a government department in the Netherlands charged with monitoring housing prices and acting via "positive" development measures to restore it should it be lost.

The refusal of certain advocates to engage with these realities leaves them wide open to suspicion that their real motivation is delivering "planning gains" to fortunately situated "friends" of theirs. In fact, I wonder if it would be enlightening to learn who funds certain advocates of "Smart growth". It is no mystery to me if property magnate George Soros lavishes funding on "conservation" activist groups. He knows what side his bread is buttered on, and these people are merely "useful idiots" to him.

Lastly, I have pointed out before, the glaring flaw in the "Housing plus Transport Costs" analysis Todd refers to. This analysis is very lovely, because it involves an actual population sample's actual outgoings on housing costs and transport costs, IRRESPECTIVE OF WHEN THEY PURCHASED THEIR HOME AND HOW MUCH THEY HAVE ALREADY PAID OFF. Very lovely, but absolutely nil help whatsoever to the young first home buyer facing Hobson's choice for his "location".

Of COURSE Grandpop and Grandmom Smith in the old inner suburb pay next to nothing for "housing", because they bought this house when the city was half its size, and paid $15,000. Now Joe and Jane first home buyer have a choice between Grandpop Smith's house now "worth" a cool $1,500,000 thanks to "Smart Growth"; or a "sand suburb" home 60 miles away for $350,000. OF COURSE commuting costs from further away are going to be much less than the costs of the mortgage "closer in"

It is not as if someone did not come up with the correct finding years ago. The famous TCRP/Brookings "The Costs of Sprawl 2000" contained a section headed "The Effect of Lower-Cost, Outlying Land on Housing Costs":

page 448 onwards of the following PDF:

http://onlinepubs.trb.org/onlinepubs/tcrp/tcrp_rpt_74-c.pdf

The overwhelming conclusion is in fact that in lower land price cities, it is NOT worth "driving to qualify" (median house price below $170,000)and in high land price cities (median house price above $170,000) it IS worth "driving to qualify". The higher the median price is above $170,000, the more impossible it will be for a first home buyer to afford the "more efficient" locations. Once a generation has passed, the "trend" that has been forced onto urban location decisions will be glaringly obvious; and obviously wrong. Alain Bertaud already noted this about Portland - unnaturally high densification nearer the fringes, instead of nearer the CBD as the "planners" wanted.

Always analysis that obscures - why?

I stand by what I am saying. The "Housing plus transport costs" papers Todd refers to, focus on the wrong thing; status quo rather than "trend".
1) The H+T index data includes "incumbent" property owners, who are necessarily the greatest proportion of sample sets. There is nothing wrong or dishonest about this, but it does not provide valid comparisons of choices facing NEW households following a decade or more of volatile shifts in house prices. Of course somebody lucky enough to have bought their home in an inner suburb of Los Angeles 20 years ago, will have mortgage payments today that are a fraction of what it would cost a first time buyer today. My concern is solely on the choices facing NEW households, and the TREND that will result from THEIR decisions. The "average" mortgage costs of a census region is not at all a valid indicator of the cost faced to "buy in" to a location after prices have been rising for a decade or more. The greater the inflation of house prices, the less valid "average" mortgage costs become.
Note: Even the incumbents who are already on the property ownership ladder, would benefit from "cashing up" and moving further away. They would gain more on an "investment" of their housing capital gains, than the extra commuting costs.
2) The H+T data fails, egregiously, to differentiate between house sizes and different households requirements for space. Average "housing costs" for some areas include a higher proportion of "homes" in which only 1 person can live; or 2; or 3; rather than a traditional family.
3) The cost of vehicle running is, as I have criticised other studies before, comprised of averages and estimates based on the entire vehicle fleet. This includes discretionary purchases of gas guzzlers, luxury vehicles and new cars that depreciate rapidly. Nowhere are "best option" vehicle running costs considered.
4) The H+T data are also skewed by the fact that recent first home buyers in "high land cost" cities DO have MUCH higher "housing plus transport" costs not due to a bad choice on their part, but to the ABSENCE of choice. They simply cannot afford the "H+T" cost of absurdly expensive "efficiently located" homes at all. The "lowest" H+T cost for these people, in fact the ONLY H+T cost they can afford at all, is a remote location and a long commute. This necessarily distorts the "study" outcomes against these locations. The fact that THIS outcome is "worse" than the status quo for incumbents who got on the property ownership ladder long ago, is a completely unfair and invalid "comparison".
5) The higher proportion of young people delaying child-bearing, and living alone in tight, "budget", accomodation as they save money for a high-cost housing target, will distort the H+T indexes in favour of the high-land-cost cities.
6) I have no problem with results obtained in cities with low, stable land prices. The H+T index data completely fails to identify the massive differences in land price levels and volatility between different cities. Low land price cities necessarily must have lower H+T DOLLAR costs and H+T costs relative to incomes; this is masked in the H+T data, by the incumbent owner factor, and by the use of intra-city percentages rather than inter-city comparisons. It hardly matters if Houston residents spend more on transport than housing; the cost of housing is so low, that discretionary spending on types of vehicle, etc is likely to be higher.

The very thing that first got me concerned years ago about all this, was my simple observation of numerous real life young first home buyers opting to "drive to qualify". THEIR real life options and real life decisions made perfect sense. The H+T data completely fails to "tease out" the right data, and has the effrontery to condemn "drive to qualify" on wholly spurious grounds. I say effrontery, because I am well aware of the real life pain inflicted on the younger cohort in the high land price cities. This is my motivation in pursuing these arguments. I speak for the "harmed" cohort of society.

I find it odd that the advocates of restrictive planning care so little about these realities, that they never seem to bother to collate data of any kind other than data that obscures the problem. It is as if they do not know, among their friends, a single young couple wanting to start a family - goodness knows what kind of social circles they all move in.

london toll

Dear M.Lewyn,

There's a toll existing for London coupling Mobility time and House Price :
http://www.mysociety.org/2007/more-travel-maps/morehousing

Regards,
Gabriel PLASSAT
http://transportsdufutur.typepad.fr

Amazing

That is amazing, that is exactly the sort of thing we need.

Planners need to realise, using maps of this nature, that it is always cheaper to commute than to buy a house "closer to work".

Housing costs

Of course, if public policies, particularly taxes and user charges reflected the lower net infrastructure and social costs of higher density living, that would also reduce the "advantage" that sprawled or lower density housing has. We could even get into a discussion of how a policy focused on taxing land values would advantage higher density development, but, then, you know how long-winded and annoying us Henry George freaks can get.

Like what Mason Gaffney said in 1964, for Pete's sake?

THIS is BRILLIANT:

http://www.masongaffney.org/publications/E3Containment_policies.CV.pdf

I am baffled at why these obvious truths and solutions have never got on the agenda of "Smart Growth" advocates. Perhaps it is because, as I am forever criticizing them for, they have nil understanding whatsoever of economics.

James S. Russell's picture

auto-alternative cities can be affordable

Lewyn sees the relationship of transportation and land supply in affordability that too many others miss. Fast-growing auto-oriented cities could not open great swaths of land to development without extending highways and building beltways. Beltways, especially, are land-development armatures much more than they are transportation solutions, as I write in my book, The Agile City: Building Well Being and Wealth in an Era of Climate Change (Island Press).

National transportation policy (abetted by states) does not similarly see the opportunity of transitways (whether for bus or rails) as a means of opening land to development or serving underserved neighbhorhoods. One reason cities like New York and Boston are so expensive is that the supply of transit has barely grown in decades, while highways on the outer urban edge have grown a great deal. So the most transit-focused areas tend to draw wealth, and lower-income people tend to live in the most transportation-starved neighborhoods. Or else they move to the urban edge in search of affordable housing.

We could reverse that with a transit-first strategy within urban areas devoted to increasing transit supply in areas patterned to use it efficiently.

HEAR, HEAR

".....Lewyn sees the relationship of transportation and land supply in affordability that too many others miss....."

HEAR, HEAR.

I have often had cause to comment on Lewyn's promise. He often seems to pick up on vital points like this.

Yes, urbanism can be affordable...

You only need to look north, where the new housing supply has been planned around transit and thus quite reasonably affordable (even given the rapid ascent of the Canadian dollar)...in Montreal, where I am living for the summer, we had surfeit of huge one or two bedroom apartments at our choice for between $900 and $1400 a month. Many of them came with conveniences not seen in urban America (at least not in my income range) such as laundry machines and dishwashers (IN THE APARTMENT!)...We had our choice of neighborhoods - trendy Mont-Royal (3 stories on average)...downtown (20 story high-rise with a pool)...or a mid-rise elevator building in the University area...all in impeccable condition. An excellent transit system that reaches into the far regions of the city; Bixi bike sharing for $27 a month; and everywhere is walkable. Yes, it is an arctic paradise.

Back below the 49th, however, is the unobserved correlation the prevailing politics in still-urban areas in the US? Think about it - the dense real "cities" in the US all fall into the "high regulation" category (and are also extremely liberal) such as Boston, NYC, and San Francisco; alas, they are also the most expensive.

There is a set of hybrid metro areas which are more politically moderate (and whose land use regulations tend to be more flexible) such as Washington, DC and Chicago (and maybe L.A.?) And they are moderately expensive.

The cheapest cities are those with the fewest regulations and most politically conservative, i.e. Vegas, Phoenix, Houston, Atlanta...

So yes, regulatory barriers and price seem strongly connected - but it doesn't take much to imagine a scenario where urbanism is also provided at market-demanded levels. That combination just hasn't been available (outside of the declining cities) in the U.S...but southern cities like L.A., Atlanta and Miami are most primed to be able to offer it, if they get the density right.

JUDDMS

JUDDMS, I hope we see a lot more of you on Planetizen.

You sure summed up the facts.

Cheap Housing? I think not

It's the problem of ensuring cheap housing that's the issue. Like you mentioned, declining cities in stagnat regions are a possible factor in the housing prices of that area going down (in fact, I would say that's a very BIG factor). Cheap housing will not occur in a city full of opportunity and jobs. It will not occur in an area that is viewed or is safe and liveable. Short of changing government regulations and taking a direct hand in the way the housiong market works, the fact is prices will always be high where areas of demand are. Even by building more housing, you have to look at who is building it (developers who just want to flog them off at the highest price?), what it's being built with (sustainable materials?) and how to ensure urban sprawal doesn't explode out of control. I would think that perhaps the most effective measures are those that may impact and stray into the personal freedoms of the individual, something we all have problems accepting.

~~
To draw a house, we look to architects.
To build a city, we look to engineers.
To create a nation, we look to planners.

Cheap Housing: "How To"

".......Cheap housing will not occur in a city full of opportunity and jobs......"

I disagree. Cheap housing will occur in any city, regardless of opportunity, jobs, desirability, whatever; where agricultural-rent land beyond the urban fringe is open to development under conditions of true free market competition, where "planning gain" is absent.

The only thing that changed in cities with opportunity and jobs and desirability of location, to move their housing costs from "affordable" to "unaffordable", was actual "run-out of land", or regulatory impositions that turned development into a game of "planning gain". You will not find a counter example to this.

California's cities were as affordable as Houston once apon a time. No lack of opportunities and jobs during the great California growth phase.

Inflated urban land costs are actually an economy-killer. There is no counter example to this, either. Only "works in progress" like Vancouver and Sydney that SEEM to be still doing OK "in spite of" their inflated urban land costs.

WHY high land costs are an economic disadvantage

Take a look at the graph on page 5 of this:

http://www.houston.org/economic-development/joel-kotkin/pdf/KotkinAppend...

"Discretionary Incomes".

The lower the land costs, the higher the discretionary incomes, both per capita and total.

This is why low land cost economies will grow a lot faster in future, all else being equal, than high land cost economies.

mutually exclusive?

not necessarily, but it's an interesting topic. Since we are speaking in generalities, I would offer the following. One might surmise that better transit and pedestrian friendly areas are more dense and that more dense areas have higher land costs. (This is an FAR reality, all other things constant). One might also surmise that as population and employment densities increase, driving decreases. The issue is that the relationship between higher density and less driving is not linear. Few densities make someone ambivalent between commute options - usually there is clear winner. To make an area transit and pedestrian friendly enough to rid someone of their vehicle, density has to be pretty high and when that is done, you get really high land costs and subsequently high housing costs. The lower transportation costs do not offset the higher housing costs in part because users don't pay according to use. Therein lies the problem: public policy tends to treat land as a regulated private good and transportation as a public good. One responds to market signals, the other does not. The result was: drive till you qualify.

It will be interesting to see how this changes because of the nation's economic situaiton.

Land Costs and Density

"better transit and pedestrian friendly areas are more dense and that more dense areas have higher land costs."

But does that push up housing costs, given that people in denser areas use less land for housing?

Eg, in Houston, people might use 1/6 acre of land per capita for housing, and in Amsterdam, people might use 1/60 of an acre of land per capita. If so, the cost of an acre of land would have to be 10 times as high in Amsterdam as in Houston to make housing more expensive there. We know land costs are higher in Amsterdam, but we don't know if they are that much higher. (I am making up these density numbers to illustrate an obvious point.)

We would need empirical research to determine whether the higher cost of land in denser areas actually causes a higher cost of land per unit of housing - all else being equal. Of course, larger metropolitan areas and areas with faster population growth tend to have higher land costs and also tend to have higher densities. We would have to compare cities with similar populations and similar growth rates but with different densities.

Intuitively, I would think that higher densities would lower land costs per capita. Imagine that Houston had passed a law 100 years ago saying that no housing may be built at densities lower than 20 units per acre. This would have decreased demand for land dramatically and so would have held down land costs in the metropolitan area.

Charles Siegel

It's all priced per buildable foot or unit

So, the per buildable may be similar, but as in your example, what gets offered for the "same price" is less quantity (not necessarily bad). Chicago might be a good example. A newer 750 sf downtown condo may fetch $400,000 while a newer 3/2, 2,000 sf house with a small yard in Naperville or nearby may fetch the same. So, the nominal price is the same, but the goods sold are not. For a one person household, the same or greater utlility may be gained from the downtown condo, but a household of 4, for example, may gain significant utility from the additonal space and yard. The Naperville household will likely spend more on transportation, but a trade-off still exists. In this case, the trade-off is quantity of home and land. To complete the example, you would need to identify a similar product the 4 person household would have to pay in a similar to downtown location - maybe Lincoln Park or Old Town. If that 2,000 sf house is now $800,000 in one of those places, you would have to make the case that annual transportation savings would be approximately $20,000 annually (additional annual cost of mortgage). Even at private full cost of ownership, that might be $8,000 annually. This is where the transportation pricing model breaks down because the market does not price it. The numbers should be roughly equal minus the time factor so this household has an ambivalent decision. Note: obviously these estimates are very rough, just a guideline for the example.

Compare Metropolitan Areas

I know that, within each metropolitan area, housing costs more near the city center.

The question I am asking is what happens if we compare two different metropolitan areas, one high density and one low density, which is why I used the examples of Houston and Amsterdam.

To decide between planning policies that increase or decrease housing densities in entire metropolitan areas, we need to compare their effects on prices in entire metropolitan areas.

Charles Siegel

Excellent questions, definitely on the right track

I have always agreed that minimum lot sizes were wrong from every point of view.

But the crucial thing that determines how "affordable" housing will be in any city, is what is the "cheapest land in the urban economy".

If you have locked agricultural-price land out of the urban economy with UGB's and proxies for them, then you will not have affordable housing, period, no matter how small that housing gets in size.

Britain is a "worst case" example, much worse than the Netherlands, because at least in the Netherlands they have used powers of compulsory acquisition of land to keep land prices low. Britain, and any city wanting to "contain growth", absolutely SHOULD include "compulsory acquisition" in their kit of regulatory tools. Otherwise a massive class of rent-seekers is created surrounding development permission, and you get "planning gain" sums of money, higher and higher over the decades, being fought over for years by incumbent property owners, developers, local bodies, consultants, speculators, land bankers, etc.

"Smart Growth" advocates badly should be engaging with the damning papers coming out of the London School of Economics on this subject. Check out authors like Paul Cheshire and Christian Hilber. Peter Hall and Alan W Evans did good work for decades, preceding the LSE people, at the University of Reading.

The bottom line is that in Britain, housing space per person has got steadily lower for decades, AND the price per square foot has risen far faster than the space has been traded off; leaving people with smaller and smaller homes at higher and higher prices.

BUT if you were to forget the UGB and allow land prices to remain low, and used incentives to increase density rather than blunt instruments of containment, everything would be different.

BUT note too that Los Angeles probably "IS" THE outstanding EXAMPLE of a US city that has much smaller average lot sizes than all the others. It is a tremendous pity that we do not seem to have any example of a city that never had minimum lot sizes and never had fringe growth constraints, to see what the result might have looked like.

This might help too.

Charles, you also said earlier:

"......Imagine that Houston had passed a law 100 years ago saying that no housing may be built at densities lower than 20 units per acre. This would have decreased demand for land dramatically and so would have held down land costs in the metropolitan area......"

Alan W. Evans, in "Economics, Real Estate, and the Supply of Land", points out that in most US cities, the price of land per square foot is higher for smaller lots than for larger; but in Britain and the Netherlands, the price per square foot is MUCH HIGHER for the RARE LARGE LOT. This reflects different distortions in each market; in the US, people are forced to consume "too much land", in Britain, they are forced to consume too little.

But the price of land per square foot is MANY TIMES LOWER in the "forced to consume too much land" cities, than in Britain - to the extent that a 1 acre lot in most US cities is CHEAPER than a one-EIGHTH of an acre lot in Britain.

Hope this helps.

Alan W Evan's 2 books published in 2004 should be standard texts for everybody studying urban planning. The other book is called "Economics and Land Use Planning".

Ten Comments in One Hour

Wodehouse, haven't you figured out yet that this sort of blizzard of posts is self-defeating? If you post ten comments in one hour, most people won't read beyond the first.

I am not surprised that land is cheaper in American cities than in British cities, since Britain has higher overall population density than the US.

Charles Siegel

Britain's problem is regulations

Charles,

Numerous academic analyses have pointed out that Britain's urban land prices are far higher than other European nations with similar or higher densities. This represents probably the single biggest disadvantage to Britain's economic competitiveness, bigger even than their famous Trade Union problems. In fact, the cost of living pressures of unaffordable housing, add to workforce militancy.

The McKinsey Institute's 1998 Report on Productivity in the British economy was damning. So have the recent OECD Reports been.

"Bigger Better Faster More: Why Some Countries Plan Better than Others" by Alan W Evans and Oliver M Hartwich, explains why urban land is about twice the price in Britain as it is in Germany; besides some other cross-national comparisons.

Many of the academics studying this phenomenon have pointed out things like, Britain is 8% covered in urban areas AND 8% covered in "green belts". (This is because green belts are of necessity a much larger diameter than the city they surround - even quite a narrow green belt can contain as much land as the city within it).

Allowing development on HALF of Britain's green belt space, would keep British urban land competitive in price for a century.

I am sorry if you dislike my many short posts on this thread - it is a very good thread, the best I have seen on Planetizen, and I am very enthusiastic about it. Michael Lewyn is a promising analyst, he is objective and inquisitive.

I would like to point out to Michael here (so as not to multiply posts) that Britain has a "rust belt" too, but it does not rebound with positive features as cities in the USA do - because even though they have had high unemployment for decades in some parts of Britain, urban land refuses to come down to "affordable" levels let alone "bargain" levels. This is 100% due to Britain's heavy handed and misguided "planning" system.

"Rust belt" cities in the USA would be insane to think they can help themselves one iota by introducing "Smart Growth" type regulations. Fortunately none of them have, at least to my knowledge.

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