A Scary Story for Planners

Todd Litman's picture
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Let me tell you a scary story that you can use to frighten fellow planners at next week's Halloween party. It's not just fun and games – this story is true and may cause nightmares.

Sometime in the near future, during a public meeting concerning land use policy reforms, a critic will say in an athoritative voice, "Recent academic research shows that smart growth policies are ineffective at reducing vehicle travel and climate change emissions," and wave a copy of, Compact Development And Greenhouse Gas Emissions: A Review Of Recent Research, published last year in the Portland State University Center for Real Estate Quarterly Journal.

Some decision-makers will find this persuasive because the article seemed to be published in a legitimate journal, and so will choose to implement policies that increase sprawl and automobile dependency, creating less affordable, more dangerous, less healthy, and more environmentally harmful communities than people would rationally choose. And thus will have succeeded an elaborate effort by the National Association of Home Builders to justify sprawl.

This story began on a dark and stormy night, or whenever the NAHB does its strategic planning. As discussed in a previous column, An Inaccurate Attack On Smart Growth, the NAHB sponsored a major research program intended to discredit recent research such as the report to Congress, Transportation's Role in Reducing U.S. Greenhouse Gas Emissions, and the Urban Land Institute's Land Use and Driving: The Role Compact Development Can Play in Reducing Greenhouse Gas Emissions. They cherry-picked and misrepresented their own research results to claim that, "The existing body of research demonstrates no clear link between residential land use and GHG emissions and leaves tremendous uncertainty as to the interplay of these factors," and "The assumption of a causal connection between density and GHG emissions is based on prevailing beliefs within the planning community and not on verifiable scientific research or analysis."

In fact, four of their five researchers concluded that smart growth policies can significantly affect vehicle travel and emissions. The exception was PLU Adjunct Professor Eric Fruits, whose report was particularly critical of smart growth. Fruits subsequently published a summary article of his research in the PSU's Center for Real Estate Quarterly Journal, which he edits.

That article contains what I believe are false statements and conclusions. In particular, it claimed that "some studies have found that more compact development is associated with greater vehicle-miles traveled," a statement based on a total misrepresentation of a fifteen-year-old article which simply presented theoretical analysis indicating that under some conditions a grid street systems could increase vehicle travel compared with hierarchical street systems. In fact, subsequent research indicates that grid street systems that increase roadway connectivity can significantly reduce vehicle travel.

This type of misrepresnetation is possible because the Center for Real Estate Quarterly Journal does not reflect the essential principles of a real academic journal. It does not require peer review. It does not prevent conflicts of interest (the article was written by the journal's editor based on his paid research). The article's subject is outside the Journal's scope (an understanding of real estate markets does not indicate an understanding of urban geography dynamics).

I raised these concerns to PLU's Academic Dean, which, to the University's credit, lead to the following policy changes:

(1) A disclaimer will be added that articles are not peer reviewed.

(2) A bio and picture of the author will be added at the front of each article.

(3) The Quarterly will be referred to as a "trade journal."

 

This type of conflict raises the epistemological question, that is, it forces us to examine the basis by which we evaluate information. This is always important and has become more so in the Internet age, where the quantity of information available can be overwhelming, which requires careful discernment of sources. In general, academic journals tend to provide higher quality information, but now, even they can be unreliable if special interests are cleaver about manipulating them to achieve nefarious ends.

So, be afraid, be very afraid, of efforts to misrepresent information. Arm yourself with a skeptical eye, good research skills, and a willingness to challenge inaccurate claims.

*     *     *     *

Of course, biased and incomplete information is just one of many horrors that planners face. Angry mobs, excessive workloads, contradictory policies, and our own errors ("Opps, I forgot" is never a pleasant response to a query by your boss or elected official). Please use the Post New Comment option below to share your own "horror story for planners".

 

For More Information 

Here are some sources of guidance for evaluating information and research quality.

Susan Beck (2004), The Good, The Bad & The Ugly: or, Why It's a Good Idea to Evaluate Web Sources, New Mexico State University Library (http://lib.nmsu.edu/instruction/evalcrit.html).

CUDLRC (2009); A Guide To Doing Research Online, Cornell University Digital Literary Resource Center (www.digitalliteracy.cornell.edu).

Economist (2011), "An Array Of Errors: Investigations Into A Case Of Alleged Scientific Misconduct Have Revealed Numerous Holes In The Oversight Of Science And Scientific Publishing," The Economist, 10 September 2011; at www.economist.com/node/21528593.

Ann Forsyth (2009) A Guide For Students Preparing Written Theses, Research Papers, Or Planning Projects, www.annforsyth.net/forstudents.html.

Todd Litman (2008), Evaluating Research Quality: Guidelines for Scholarship, VTPI (www.vtpi.org); at www.vtpi.org/resqual.pdf.

Todd Litman (2011), Critique of the National Association of Home Builders' Research On Land Use Emission Reduction Impacts, Victoria Transport Policy Institute (www.vtpi.org ; at www.vtpi.org/NAHBcritique.pdf. Also see, An Inaccurate Attack On Smart Growth (www.planetizen.com/node/49772).

Quack Watch (www.quackwatch.com), is a guide to quackery, health fraud and intelligent decisionmaking.

Skeptic Society (www.skeptic.com) applies critical thinking to scientific and popular issues ranging from UFOs and paranormal to the evidence of evolution and unusual medical claims.

Wikipedia, Logical Fallacies (http://en.wikipedia.org/wiki/Category:Logical_fallacies). This website lists and categorizes various analytic errors.

Todd Litman is the executive director of the Victoria Transport Policy Institute.

Comments

Comments

interesting....

Very interesting article. Although at times proponents of smart growth make claims that are hard to believe (obesity will be solved by smart growth), an attack by an "academic journal" should be rightfully put in its place. Unfortunately, there are so many think tanks and such that issue reports, that for every report that has science backing it, there is another report based on false science that is published by a think tank that gets a lot of press.

Todd Litman's picture
Blogger

Evaluating Research Quality

Thank you for your feedback, EricCotton.

Yes, that is the point. A report published by the National Association of Home Builders or a "think tank" that it sponsors would be treated with skepticism. Academic journals are supposed to maintain high standards of review and objectivity. In a real journal, a reviewer would probably have challenged Fruits' statement that, “some studies have found that more compact development is associated with greater vehicle-miles traveled.” The reviewer would have checked the referenced article and seen that the claim is unsubstantiated. The editor would then have required Fruits to provide better evidence or clarify that statement. Responsible journals will publish retractions if a published article contains information that is subsequently found to be inaccurate. Since Fruits both wrote the article and edited the "journal," none of this accountability occurred.

By the way, I don't think anybody claims that smart growth "solves" obesity problems. However, there is good evidence that creating more walkable, multi-modal communities increases residents' likelihood of achieving physical fitness targets (at least 150 minutes a week of moderate physical activity) compared with automobile-dependent sprawl. In this way, smart growth policies, such as improving walking and cycling conditions and increasing land use mix can play a role in improving public health - not a cure but an important contribution. These conclusions have been published in peer review journals, so you can have some confidence of their reliability and evaluate their evidence yourself. See for example:

Reid Ewing, et al. (2003), “Relationship Between Urban Sprawl and Physical Activity, Obesity, and Morbidity,” American Journal of Health Promotion, Vol. 18, No. 1 (www.healthpromotionjournal.com), Sept/Oct., pp. 47-57; at www.smartgrowth.umd.edu/pdf/JournalArticle.pdf.

Lawrence Frank, Andrew Devlin, Shana Johnstone and Josh van Loon (2010), "Neighbourhood Design, Travel, and Health in Metro Vancouver: Using a Walkability Index," Active Transportation Collaboratory, UBC (www.act-trans.ubc.ca); at www.act-trans.ubc.ca/documents/WalkReport_ExecSum_Oct2010_HighRes.pdf.

Center For Disease Control, Healthy Places, Related Articles (http://www.cdc.gov/healthyplaces/articles.htm ).

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

Vested Interests' Tactics

Thanks for doing the legwork, Todd, on how they spread misinformation.

Best,

D

Sorry ...

Suck it up, lovers of so-called "smart growth." The Portland State University article tells the truth!

Speaking of vested interests' tactics...

Suck it up, lovers of so-called "smart growth." The Portland State University article tells the truth!

...and the grass is a lovely shade of blue today!

Best,

D

Smart Growth Justification

Using GHG as the sole justification for so-called "smart growth" (are we still calling "growth" smart?) is way too narrowly focused and hopefully the pursuit of community sustainability is linked to issues beyond the politically contentious (but no less valid and serious) climate change predicament. These include dwindling and increasingly expensive petroleum, loss of biodiversity, loss of sense of community and social capital, infrastructure costs, transportation choice and efficiency, protection of farmland, and so on. I'd hope that planners both in academia and professional practice will increasingly seek a leadership role in the pursuit of sustainability including setting the agenda, defining terms, and serving as a bridge between disparate parties. While many of these criteria may not be as "measurable" as those of us who hang on metrics would like, they are no less valid aspects to our quality of life.

Thanks for a good article...

I thought we were in a rational, "enlightenment" era

HOW MUCH land in the world/ each region/ each country, is “urban”? The following data is from the Lincoln Institute’s “Atlas of Global Urban Land Consumption”.

Worldwide: 0.47%. Sub-Saharan Africa: 0.12%.

Between 1% and 2%: USA, India, Bangladesh

Between 0.5% and 1%: China, Indonesia, Pakistan

As a percentage of ARABLE land:
Worldwide: 4%. Sub-Saharan Africa: 1.5%

Between 4% and 8%: USA, Egypt, France

Between 2% and 4%: China, Russia, Spain, Mexico

Between 1% and 2%: India, Bangadesh, Canada, Vietnam, Ethiopia

Less than 1%: Afghanistan, Sudan

For the UK, their figure is 5.73% of total land, and 23.39% of arable land. For the Netherlands, the figures are 10.68% and 38.34%.

The issue of “food security” is a vexed one. Some nations eg Japan, could use this as an excuse to invade other countries. As a rule, it is cheaper for land-pressured countries to buy their food from land-rich food exporting countries anyway. As long as international peace prevails.

There is no correlation at all, between a nation’s ability to feed itself, and its wealth. Wealth is always correlated with the extent of “value added” industry in a nation. Even a nation that has to mostly import commodities, but successfully exports value added goods, will be far wealthier than a nation that produces mostly commodities whether for domestic consumption or export. Even nations like the UK and the Netherlands, could “grow” their urban areas and keep urban land prices affordable, (and their industries competitive) for centuries before they finally did “run out of land” – if they ever did. Demographic busts and reduced immigration are highly likely long before that point.

Urban growth is far more equal in its social and socio-economic effects, and far less unsightly, if densities are LOW and there is abundant “green space” conserved, around and beyond which urban development is permitted. “Green belts” and Urban Growth Boundaries result in “a green and pleasant land” for the enjoyment of a wealthier minority, and “overcrowded squalor” for the majority of lower income people.

Britain’s system actually lacks the “pretty” peri-urban “sprawl” of Paris and Rome and other continental cities, and even the extremely “green” LOW density sprawl of Atlanta and other US cities, where the amount of “green” visible on Google Earth is visibly several times greater than the amount of rooftops. On the ground, the result is a highly “democratised” enjoyment of local greenery. Furthermore, the most "biodiverse" areas in the world, are mature suburban lots and gardens in wealthy countries.

Overcrowding, everywhere it occurs, is due to excessive density (a factor of low relative mobility), not overpopulation per se. China; India, Bangladesh, Pakistan, Indonesia; all are about as NON-sprawled as Victorian era European countries, and have similar urban-to-total land ratios i.e. 1% to 4%. All these countries could raise public health, living standards, productivity, and social mobility immensely by “sprawling” to at least Europe’s level.

Europe is the world’s most densely-populated CONTINENT, even though its citizens are not as crammed together as Asians; and Europe is also the wealthiest. This would seem to prove the thesis of economists like Colin Clark and Julian Simon – humans are “The Ultimate Resource”:

http://www.google.co.nz/search?q=julian+simon+ultimate+resource&ie=utf-8...

It is about the most extreme absurdity in the world, that any AMERICANS would be stressing about “paving over paradise”, given the still very low rate of "urbanisation" of their total land, and the fact that MOST of their "sprawl" has already occurred. It would be almost impossible to double Atlanta's size again now.

Lather, rinse...

For years and years, this 'total land' twaddle is trotted out. And for years, the same point is made about the problems with the assertion. Yet here it is again, the zombie "argument" that will not die. And it is framed like it is devastating. Shocking, surely.

Best,

D

Huh?

Can you read? I quoted figures for the percentage of ARABLE land, too; as the Atlas I was quoting provides these as well as percentages of total land.

What is your point? We need urban planning regulations that ensure that farmland is "only" reduced from, say, 19% of the total land mass to 18.99% over the next century, instead of to 18.98% if we "allowed sprawl"? (Mountains and national parks and so on being assumed to be most of the rest).

The figures for lightly populated, net food exporters like the USA and Australia would look even more absurd. There is literally dozens of times as much farmland as there is urban land, in these countries and indeed the whole world. And the amount of land newly developed per year is a miniscule fraction of what is already developed. Ironically, as my quote above pointed out, the countries that are the most urbanised and have to import their food because of this (NOT because of failed cultures and politics) are among the wealthiest in the world?

Whose argument is the "zombie" that will not die? We're paving over the planet, waah! waah! waah!

Can you follow the point that if at any time we did reach a balance where the remaining farmland was essential to be able to feed the human population, the price of food would be much higher and the economic rents of land used to produce food would be higher than what they would be if converted to urban? It is easy to tell from economic land rents that we are nowhere NEAR that point today.

Whose arguments are scary, irrational, and rabble-rousing? Not mine.

A Reasonable Limit To Sprawl??

"if at any time we did reach a balance where the remaining farmland was essential to be able to feed the human population, the price of food would be much higher and the economic rents of land used to produce food would be higher than what they would be if converted to urban."

If food prices were so high that farmland was more expensive than urban land, the high cost of food would cause hundreds of millions of people (if not billions of people) to suffer from malnutrition and starvation.

Isn't it reasonable to limit sprawl, rather than waiting for things to get that bad.

Charles Siegel

"Sprawl" is (as good as) nothing to do with rural land rents

But limiting sprawl is nothing to do with whether it gets that bad or not.

As I have been saying, limiting sprawl only affects rural land quantities by fractions of fractions of a percent. The situation I am talking about, can only possibly be the result of the earth's population increasing to the point that there really is not enough land to grow food for everyone. Limiting urban sprawl is a factor only a fraction of a fraction of a percent as significant as "population", period. The earth's population increase is already tapering off, and I believe it is tapering off at a level at which rural land rents will remain just as low as they are now.

The fact that rural land rents are so low that they almost do not count at all in the price of urban development, is a sign that the world is actually nowhere near this point yet. The cost of "development" is far higher than the cost of the raw land, and the cost of buildings is far higher again. UNLESS you are running a racket in land for urban development, which is the case in many cities today. In China and India it is called "corruption" and in the West it is called "urban growth constraint".

Projecting Sprawl

You might be interested in a paper I wrote years ago that projected rates of sprawl into the future. I found that, if the area of developed land continued to grow at the rate of 1982 to 1997, over 19% of total US land area would be developed by 2047.

go to http://www.preservenet.com/studies/LimitSprawl.html and see Figure 3.

Your figures are all about the current amount of land lost to sprawl, and they do not project growth of sprawl into the future. It is a bit like someone in 1950 saying that the world would never run out of oil at current rates of consumption - ignoring the fact that consumption is growing.

You also overlook quality of farmland. In California, where I live, what may be the world's best farmland for producing wine would already have been lost to sprawl if it had not been protected. The quantity of agricultural land in Kansas has nothing to do with the need to preserve land in the Napa Valley. And I don't want to wait for the cost of wine to rise so much that an acre of land used for producing wine is worth more than an acre of land used for urban development.

Charles Siegel

Excellent concrete points to address

I think the best rural land, that is used to produce very special, high-end produce, could well remain in that use even while sprawl continues around it. One problem you have in the Napa Valley, is that the price of urban land in the wider region has been driven up so high, that the "gain" on conversion from rural, would indeed swamp even the best rural land - while if your urban land remained as affordable as it is in Texas, this would be far less likely to happen.

For "less than best" rural land, my earlier arguments still apply. The fact that owners of this land can be induced to sell it for urban development, merely means that what they are producing, can also be produced at least as cost-effectively somewhere else. It would actually help the third world if the first world did not subsidise its rural sector so much, AND it would help the poorest in the first world if "protect farmland" policies did not drive up the price of housing and "living".

I understand from a variety of authoritative sources, such as Robin Best, Peter Hall, Alan Evans, Colin Clark and Shlomo Angel, that the RATE of "sprawl" is never "linear". Most cities have achieved their greatest "sprawl" in the century following emergence into the "developing" world; typically a city footprint increases 16-fold in around a century. This is driven by migration from rural areas, decreased mortality rates at all age groups, and increased mobility. Rail based sprawl is actually worse on multiple levels that auto based sprawl. It is "ribbon" type, with distances increasing as new land is brought into the urban economy; in contrast to contiguous infill between the rail "spokes" with roads; and it never brings affordable housing and the democratisation of property ownership, because the development processes are predictable and easily captured by the land owning classes that Karl Marx and Henry George accurately condemned; in contrast to highly competitive Leavittown type development.

Where I will agree the USA has an unnecessary problem, is the ridiculously large mandated minimum lot sizes that apply in many municipalities, and the regulatory barriers to perfectly logical infill development, such as putting 3 more homes on 1 acre lots that are close to nodes of jobs and amenities. Anthony Downs' "New Visions for Metropolitan America" (1994) is full of helpful information on this sort of thing. Downs provides several potential regulatory scenarios that limit sprawl while maintaining choice and IMPROVING affordability. America could easily cope with the kind of growth you envisage WITHOUT the linear rates of sprawl that you conclude, without "preserving farmland" and blunt growth boundaries that force urban land prices up.

Both Downs (in later works) and Bertaud also point out that inflated urban land prices force more households and businesses towards the fringe. This effect, which Bertaud graphs for a few cities, is easily observable with the naked eye in many more cities that Bertaud does not graph (population dispersion studies are costly). This result, these authors point out, is a factor for INCREASED VMT, especially so if planners have strictly zoned for maintaining CBD strength.

I am interested that your paper notes EXTREMELY HIGH sprawl (and population growth) rates in certain small-medium cities in Texas. This is mostly driven by population growth displaced from growth-restrictive regions, especially California. If median multiple house prices are up around 7 to 12 in the cities in one State, and stable at a historical norm of 2.5 to 3.2 in another State with resources and economic growth and an ABSENCE of regulations that will drive these median multiples up, it is a foregone conclusion what will happen.

Michael Lewyn's picture
Blogger

Texas to California?

Are you seriously saying that if a small city in Texas is growing, it must have something to do with people moving from California? That seems really hard to believe, especially since there is a much more plausible cause (people moving from Mexico to Texas)!

I do realize that housing prices in parts of the country are at absurd levels, and I am willing to concede that land use regulation probably has part of the chain. But I would like to suggest that there are events happening on this planet (and yes, even in the United States!) that are not in fact caused by overly restrictive land use regulation.

Land use policies have HUGE implications

Michael, I always appreciate your intelligent observations and inquiring mind. Of course Mexican immigrants have something to do with it too.

I was just saying on another thread, that certain Nations and States take "spillover" of humanity from other parts in which the people migrating would definitely not have the same opportunity (or else they would not migrate). Far too much of the criticism of the nations and States that TAKE the spillover, is unfair because the statistics relate to the spillover effects, not the structural conditions that actually incentivise the spillover. For example the "inequality" said to affect the USA - when in fact "remittances" from the POOREST quartile in the USA - back to their countries of origin - far outweighs that from any other country in the world. Certain countries with "HIGH EQUALITY" have a dirty little advantage - a near MONOCULTURE with a strong ethic of work and personal responsibility. (Some nations have monocultures that tend to poverty in the masses, and a corrupt elite, but we never seem to hear about those).

Texas gets criticised currently for RELATIVELY high unemployment, yet look at the quantities of people its economy is absorbing WITHOUT this unemployment rising OR house prices rising.

http://texanomics.blogspot.com/

I have been debating people who argue the "causes other than land use regulation" for years now, and have become more and more certain that land use regulation has the pivotal role. There is simply no example of a land market that has enacted urban growth constraints and has NOT had a house price bubble - there is simply NO example of any WORKABLE policy that WOULD constrain house prices when urban land is rationed. Capital Gains Taxes? Didn't work anywhere. Restrictions on credit? Didn't work anywhere. IF credit is restricted sufficiently to constrain house prices in a rationed market, the pressure from constituencies locked out of the housing market ALWAYS lead to the political easing of credit restraints. Regardless of whether young people are saving most of the money for their first home or borrowing it, in a rationed market prices will rise faster than MOST of them can save money (either to buy or as a deposit). Alan W. Evans' books which discuss the Korean experience, are hugely helpful to getting an understanding of this.

On the other hand, NO market had a bubble, without planning and permission processes that enabled rent-seekers to maximise "planning gain", whether small or large amounts of housing development occurred subsequent to the inflation of "planning gain". Again, Alan W. Evans' books are far and away the best source of analysis of this. Governments frequently are central actors in the creation and sharing of "planning gain", especially in Britain, where Evans is based. But their role in Arizona and Nevada also explains a lot.

The ONLY markets that seem to be immune to unaffordability and bubbles, are the ones where "planning gain" remains minimal. Anyone who wants to, can repeat Bill Leavitt's provision of affordable new housing for an honest and modest profit. Ironically, it is the advocates of limits who claim they are resisting "evil big business" interests, when THEIR LIMITS result in a racket in planning gains and speculation that creates "rent" literally orders of magnitude greater than the profits made by an honest Leavittown developer.

Besides the racket in fringe development, the biggest (quasi monopoly) rent gains are racked up by the owners of centrally located urban property. It has suited the families who have owned the heart of London for centuries very much, to have London "planned" as it has been, rather than allowed to grow like a typical US city, with much shallower land rent curves. Regardless of the reasons you might advance for the planning, the fact remains that the BIGGEST of the "big business interests" are very much on the "planners" side, not that of the free market advocates.

If young people were properly informed on all this, the "Occupy" movements might turn their attention to this - it is the biggest wealth transfer of all.

http://www.aim.org/newswire/us-wealth-gap-between-young-and-old-is-wides...

http://www.newgeography.com/content/00452-the-housing-bubble-and-boomer-...

Viva La Revolution

See Also:

http://www.dailymail.co.uk/news/article-2055497/JEREMY-PAXMAN-Baby-Boome...

"......The Baby-Boomers could expect to find — and afford — somewhere to live, for it was the building boom which made Harold Macmillan’s reputation......

".......In 1968, when the first of the Baby-Boomers were beginning to think about settling down, 425,000 homes were built in Britain. Last year, the total was just over 100,000 — fewer than in any year since 1923. With figures like that, of course, the cost of putting a roof over your head rises.

Lucky Generation investors who followed the advice of property-porn television and got into buy-to-let schemes developed another way of taking money from the young and securing it for the old.

Young people look at the out-of-reach property ladder from a swamp of debt......"

AND:

http://www.macrobusiness.com.au/2011/11/expect-the-revolution-to-grow/

".......The pain of the post financial crisis adjustment is not being borne fairly because the young and the under- skilled are being sacrificed everywhere to incumbents who want their jobs, tax rates, and asset values protected – and who carry the required political clout to get their way. And lest those of us in the commodity belt start feeling smug, have a think about the exclusion of many of our children from home ownership. Family (two bedroom) home ownership in convenient suburbs now starts at the $750,000 level and the required deposit is close to $150,000. This is a level most cannot afford without parental support. We are thus building an ugly two tier society comprising those who have parents wealthy enough to support them into decent home ownership and those who do not. Again, the incumbents are victorious. Property values are supported by supply-side constraints which benefit existing owners, local bodies via rates and development levies, and a host of parasites who feed on the current system. Do not bet on this lasting the next decade......"

1968 vs Last Year

".......In 1968, when the first of the Baby-Boomers were beginning to think about settling down, 425,000 homes were built in Britain. Last year, the total was just over 100,000 — fewer than in any year since 1923.

Have you considered that 1968 was near the high point of a very powerful economic, while last year (2010) was the aftermath of a recession caused by a bursting housing bubble?

You are very good at posting quotes with numbers whose causes you do not understand.

Charles Siegel

I assure you I know this stuff

That article writer quoted figures that were entirely appropriate, and I assure you that I know my stuff very well on this subject, thank you. Britain, thanks to its urban growth constraint policies, has experienced a FALLING "supply" response over the long term, in the face of RISING prices and INCREASING outright shortages of homes. I have read literally dozens of books and papers on this subject - I recommend everything authored or co-authored by Alan W. Evans of the University of Reading, and everything authored or co-authored by Paul Cheshire of the London School of Economics. THIS web page is a handy place to access them:

http://www.performanceurbanplanning.org/academics.html

You can see the concrete evidence of housing completions in the UK HERE:

http://www.communities.gov.uk/housing/housingresearch/housingstatistics/...

Right through decades of steady population increase, economic cycles, rising incomes, and increasing actual shortage of homes, the number of housing completions per year "cycled" around a lower and lower trend point. It is clear that for decades over which Britain needed around 400,000 new homes per annum, there has been almost NO YEAR in which this many WERE built, and the "MAXIMUM" built during the peak of a "boom" has slipped steadily down through the 300,000's into the 200,000's and even LOWER.

Furthermore, Britain's whole economy is literally being strangled by the numerous effects of inflated urban land prices and cumbersome planning and permission processes.
Productivity drops, workforce cost pressures rise, discretionary spending falls, social exclusion increases, etc etc. Britain's economic productivity is some 20% below that of its major European trading partners and 40% below that of the USA.

".....You are very good at posting quotes with numbers whose causes you do not understand."

OK, now YOU tell ME what is causing the symptoms I describe above, so that I can pass YOUR advice on to the British what their problems are. I have tended thus far, to think that people like Evans and Cheshire have it right, but I am open to suggestions.

Michael Lewyn's picture
Blogger

circular argument?

"There is simply no example of a land market that has enacted urban growth constraints and has NOT had a house price bubble - there is simply NO example of any WORKABLE policy that WOULD constrain house prices when urban land is rationed. "

Given that every place has SOME land use regulation, isn't there something circular about this argument?

That is to say, if you assume that the places with the highest housing prices/bubbles/whatever else you want to condemn are the most heavily regulated, and then compare them to other places, you of course will find that overregulation causes high prices.

The problem is that regulation is not a switch that is either 100 percent "on' or 'off". So to even prove correlation, let alone causation, you have to find some independent measure of regulation other than high or unstable prices, or the existence of some often-toothless statute purporting to manage growth.

Analysis needed - a simple rule works, though

Quite so. Surely you are aware that academics are working on these problems. There is a "Wharton Regulatory Index" that has, however, been criticised by Steven Malpezzi, Wendell Cox, and Paul Cheshire (and his LSE colleagues) among others. This index is, however, a start in the right direction. The OECD's papers on housing bubbles are focusing more and more on "elasticity of supply" and the reasons for differences in them. But in any case, I have not yet seen any examples of urban land markets that counter my above assertion after years of looking for them and being provided with examples that did not stand up to analysis.

Nelson, Pendal, Knaap and Dawkins stated years ago that an "urban growth containment policy" of necessity had to drive up the price of urban land - a policy that did not drive up the price of land would be so loose in its restrictions that it would not in fact, be reducing urban expansion compared to an absence of regulation.

One of the criticisms of the Wharton index, is that it fails to capture the effect of a monopoly ownership of developable land, eg by State or Federal government. A city might have no regulations at all against urban development, yet if a Government Department owns all the surrounding land and has worked out that it can help its own budget very nicely by rationing the sales of it, a bubble is the consequence.

Here is a quick rule of thumb for you to consider. If William Leavitt, reincarnated, approaches a city administration and whoever else is involved in planning procedures, and says "I can buy this farm and turn it into lots for $30,000 each and put $120,000 houses on the lots"; what happens from that point, is sufficient to tell whether that city has a regulatory framework that is going to cause unaffordable housing and a bubble, or not. IF farmland that is turned into housing is inflating in "RAW" value by literally dozens or hundreds of times in the process, then the "William Leavitt" affordable housing entrepreneurs are being excluded by anti-competitive regulations.

The cost of developing is typically around $25,000 per lot. The raw land price as farmland is typically between $3000 and $6000 per acre. Therefore, the size of a lot hardly matters for housing affordability as long as markets are not distorted by anti-competitive regulation. But in every market where land is regulated, the inflation in the price of the RAW LAND far exceeds any "trade off of size" that households can make to retain affordability. Lots of one tenth of an acre typically cost well over $100,000 in every REGULATED market; in Britain they are typically well over double that (converted to US currency).

Some of this price inflation may well be thought to be due to up-front cost levies by government; but Alan W. Evans (who I believe to be the world's most advanced land economist) points out in his books that the EFFECT of up-front cost levies is DIFFERENT when land is inflated in price by "rationing" as well, than what it is when there are no RESTRICTIONS as such. A levy of $20,000 in an "unrestricted" market would simply add $20,000 to Bill Leavitt's selling price. But when prices are inflated by $100,000 due to rationing, the fact that there is a levy of $20,000 in there, does not mean that only $80,000 of the increase is due to the rationing. It means that the "planning gain" raked in by the original seller of the land, has been "garnished" by government, so that he gets $80,000 and the government gets $20,000. In the absence of the levy, the inflation would still have been $100,000, and the land owner would have got the lot.

If I have not recommended to you before, Alan W. Evans 2 books published in 2004, I certainly do so now. I get the impression you are pro-knowledge. The 2 books are called "Economics, Real Estate and the Supply of Land"; and "Economics and Land Use Planning".

Selection bias.

Michael is surely aware of the literature wrt land-use regs and what the literature finds when it answers the question 'what does reality say about growth boundaries?'.

What is more interesting is:

o how the literature answers the question of 'when were land-use regs enacted' and 'why?'.

o why hasn't our intrepid commenter compared severity of bubbles among markets? is it because the conservatarian blogs won't do it because the findings are inconvenient to the narrative?

o why is there no mention of equilibrium rents amongst bubbled markets?

Nevertheless: it is the community's business only if they wish to slow growth or place a growth boundary (not the same as slowing growth). It is nobody else's business what they do, especially those who don't live there.

Best,

D

Michael Lewyn's picture
Blogger

Why we are still arguing....

Dano's question, as I understand it, is "why hasn't the literature settled this question?" My answer: there really is no generally accepted way of quantifying the stringency of land use regulations, even WITHIN national boundaries (let alone between nations).

Granted, some regions have growth boundaries, but they differ widely in their stringency. And the stringency or lack thereof of a growth boundary might be canceled out by other regulations. For example, Portland probably has the strictest growth boundary in the U.S. but that doesn't mean it has the most supply-limiting restrictions overall; it could be the case that other regions's suburb-by-suburb NIMBY regulations on balance restrict housing supply more than Portland's growth boundary.

As far as what a community's "business" is- that's more of a legal issue. In the U.S., jurisdictions generally have lots of power to zone - but whether this is advisable for the community or the region as a whole is a very different issue from whether the jurisdiction has the legal right to do so.

There IS a lot of good analysis no-one is reading

There IS a lot of good analysis no-one is reading. Even from before 2007. And no-one is now listening to the "few" who are rightly saying "told you so".

Malpezzi and Wachter found in a paper years before the current round of especially severe bubbles, that there was no formula that would fit "all housing markets", BECAUSE the ones with maximum elasticity of supply (where Bill Leavitt WOULD be able to buy a farm and turn it into homes with no "planning gain") defied all the other "inputs" that were said to relate to house price rises. The solution adopted by Malpezzi and Wachter, was to make especially severe "demand shocks" ENDOGENOUS to reduced elasticity of housing supply. This worked. In other words, once expectations of price rises become embedded in the market, following whatever initial moderate but sustained rises were caused by restraints on supply, there is no stopping the price rises from that point, until the fiscal Ponzi literally collapses.

Environmentalists love to talk about "tipping points". There is another one for them. Urban property markets have "tipping points" too.

Michael, I think you would love the books by Alan W. Evans that I recommended in the earlier post below. He explains the practical real life mechanisms by which a market like Portland experiences rises in prices of land within their UGB, a mere 4 years after they enacted it - when there was "20 years supply" within it....!

I understand what you are getting at with the potential to grow "housing" supply via increased density in established areas, which potential is mostly obstructed by NIMBYism and minimum lot sizes and so on. What I have been arguing ever since I came onto Planetizen, is that THIS is what planners and regulators need to concentrate on - it is POINTLESS doing an UGB at all. Increased density WILL occur in the right places if you REMOVE the obstacles to it. Placing barriers to fringe development will NOT cause increases in density in the "right places"; in fact the inflated land prices that result are themselves an obstacle to increased density in the "right places" EVEN IF you DO remove the minimum lot sizes and strip away the NIMBY rights.

One of the most valuable insights anyone has provided on all this, has come from Anthony Downs in his ripe old age. He points out that regardless of the reasons why people might relocate in greater numbers, to a city centre or TOD; the effect is to drive up the price of property at those locations so that only the first few buyers actually get in - free real estate markets work this way. When population is freely relocating OUTWARDS, of course this does not happen; but when they are relocating INWARDS to towards focal points, of course it does. (As I already said somewhere else, Curitiba "worked" because it compulsorily acquired the land for the TOD, so that the mass of low-income potential inhabitants of the TOD were able to afford it).

Downs bluntly states that the density increases that planners desire, will ONLY occur if land is "compulsorily acquired", and the resulting developments sold at prices that are a bargain in comparison to the alternatives. Otherwise, what you are up against is that the "inner city" or "TOD" options will always be uncompetively priced, both in real income-related terms, and relative to alternatives such as fringe homes.

Alain Bertaud and Patrick Troy are another couple of authors who provide rare insights - what they say is that the result of urban growth boundaries, is a "doughnut" urban form, with higher density at the fringe and a whole lot of lower density between that and the CBD. This is the OPPOSITE of what the planners wanted, i.e. increased numbers of people with "improved" access to the CBD.

In those dreadful lassez-faire free markets like Houston, a fringe home is $120,000 and a quite decent CBD apartment is $150,000. When you drive up the price of LAND, you end up with the fringe homes at $450,000 and the CBD apartments at $1,500,000. What you NEED to do, is somehow make the fringe homes $450,000 while keeping the CBD apartments at $150,000. But then the biggest vested-interest backers of "Smart Growth" will suddenly become insurmountable blockers of it. All this is actually nothing whatsoever to DO with "saving the planet".

Spinning the debate as some advocates do, to say that "big business interests" want to "exploit the environment" and make fat profits out of "sprawl", is to completely miss the point that the "big business interests" far prefer making ten times as much money by sitting on property they already own, than they could by going to the TROUBLE of actually honestly building stuff people want at a fair price.

Not arguing.

Dano's question, as I understand it, is "why hasn't the literature settled this question?" My answer: there really is no generally accepted way of quantifying the stringency of land use regulations, even WITHIN national boundaries (let alone between nations).

Apologies, I'm saying the literature makes it clear that "it depends", yet the ideological op-eds pretend "it depends" doesn't exist, then harrumphs and pretends that equilibrium rents don't exist and demand doesn't matter. Confirmation bias and selection bias drive ideological stances on this issue.

Best,

D

The intrepid commenter

It is definitely NOT the "conservatarian blogs" which find the differences in severity of house price bubbles "inconvenient". I don't know how you can pretend to be so knowledgeable in the face of the evidence. Obviously it is you that has not examined the evidence.
Australia: highest central bank base interest rates in the OECD 2002 to the present: now has the OECD's biggest house price bubble.
South Korea: extremely limited availability of credit; young people traditionally saved between 80% and 100% of the price of their first home; price bubble peaked at a median multiple of around 15 in Seoul in 1989, with national SAVINGS - NOT DEBT - having risen, because of young people desperately saving towards a rising target.

I have read everything listed on this data base of academic analysis:

http://www.performanceurbanplanning.org/academics.html

I assure you that my position is not a "conservatarian blog" one. It is the advocates of urban growth containment who have an overwhelming academic case to answer to, and are failing to do so.

Seeing you raise the subject of "equilibrium rents": "ECONOMIC rents" include monopoly and quasi monopoly components as well as amenity value. Numerous advocates of stringent planning allege that rises in property values are the result of "amenity value" that has resulted from the planning, when in fact they are quasi monopoly rents. A straight out wealth transfer is NOT a "creation of value" - a "creation of value" causes a rise in net incomes or GDP.

Elevated urban land values with a significant quasi monopoly rent component, as in most British cities, are in fact associated with economic stagnation, not "creation of value" and rising incomes and GDP. The fact that the US economy is around 40% more productive than the British one, has a lot to do with this. The economy of the Netherlands falls midway between, in spite of the fact that it is even more "short of land" than Britain. This is because the Dutch understand monopoly rent, and use powers of compulsory acquisition to minimise it.

I encounter numerous debaters who confuse economic rents and real estate market rents. In a house price bubble of the kind we are discussing, the "capitalised value" of real estate market rents remain well below the levels that house prices are inflating to; this is because the "economic rent" (with a strong quasi monopoly component) being extracted by the owners of property, includes hefty capital gains.

As Michael Lewyn also intelligently observes, maybe "it is the community's business" whether they want growth boundaries or not, but it might not in fact be in the wider public interest. Why is it considered to be in the wider public interest, to tax higher incomes and spread the wealth a bit; yet it is OK for a reverse wealth transfer to be engineered by the owners of property? "The Environmental Hustle" was a very appropriately titled book by a Professor at MIT back in the 1970's. This is classic "Baptists and Bootleggers" stuff, with the environmental protection advocates in the role of the Baptists.

Far too few writers on this subject have noted that the biggest gainers of all from current planning fads, are the owners of CBD property. While the racket in "planning gains" delivers something like $300,000 per acre to the lucky owners of luckily sited green fields, the "differential rents" raked in by the owners of already developed property rise commensurately with the efficiency of their location, and CBD property owners are the biggest gainers of the lot. All these rises represent a "quasi monopoly" economic rent - NO NEW INCOME has been created; all that has happened is that the earners of the status quo level of incomes have had an increased amount of that income transferred away from them. There is NO CONTRIBUTION TO GDP, from monopoly rent.

The median multiple house price is a useful quick indicator of serious trouble in an urban economy, but if the ratio of GDP to land rents could be calculated, this would be extremely useful. Urban economies that extract maximum GDP from minimum land rents, have a HUGE competitive advantage over economies that are the opposite way around. Plus, social mobility and equality will be helped in the right direction instead of the wrong one. Almost ALL of the "Occupy" movement protesters have no idea that the "injustice" they are protesting about is in a large part a result of policies they support. Like urban growth containment and "preservation of the environment".

On one hand, our young and restless protesters almost all want to bring a halt to humanity's "exploitation" of resources and the environment, but on the other hand they do not want increases in inequality, or a reduction in the income that is accessible to THEM and/or redirected to unfortunate members of society. But they do not see that the wealth creation that is necessary before the "sharing" of it is possible, has always required exploitation of resources and the environment; and they do not see that "rationing" always causes a relative concentration of wealth in the hands of those who are best placed to benefit from the rises in price that the rationing creates - and the rationing of land is no exception to this rule.

Sprawl point.

What is your point?

My point is - obviously and quite clearly despite the pretending otherwise - that the argumentation is tired and trite and has been refuted a brazillion times. Yet here it is again, resurrected, like the zombie that would not die. The ideological arguments never change.

Best,

D

Scary, scary, scary

Whose arguments are scary, irrational, and rabble-rousing? Not mine.

Someone here is looking scarier and scarier with their defense of an intransigent irrational position, one that is tragically "popular" and increasing in popularity thanks to lying propagandists who get far too much airtime and deference from the mainstream media. This position could bear a similar relationship one day to that between popular eugenics in the 1930's and the eventual Holocaust; only with something worse than the Holocaust.

Godwin's Law.

This thread is hereby effectively ended with the predictable and comical descent into parody.

Best,

D

Corallary to Godwin's Law

There are many corollaries to Godwin's law, some considered more canonical (by being adopted by Godwin himself) than others. For example, there is a tradition in many newsgroups and other Internet discussion forums that once such a comparison is made, the thread is finished and whoever mentioned the Nazis has automatically lost whatever debate was in progress.

http://en.wikipedia.org/wiki/Godwin%27s_law

Charles Siegel

The fatal flaw

I will stick to the point I make repeatedly on here.
There is a fatal flaw with ALL the "studies" that show that "Smart Growth is more effective.......etc etc".
They all compare "household A at location X" with "household B at location Y" and conclude that yes, household A at location X, a Smart Growth household, lives more "sustainably" than household B.
There is NO study that shows that ANY prescriptive regulations aimed at "encouraging" (forcing?) more households to live like the "most sustainable" households, EVER do anything other than impose increased "housing" costs (AND "housing plus transport" costs) without actually resulting in any significant level of the desired changes in household location.

There is actually so much academic literature condemning the substantial net costs and illusory benefits of "Smart Growth", that one wonders if there is a conspiracy to keep Smart Growth alive.

http://www.performanceurbanplanning.org/academics.html

The best studies to engage with if you are short of time, are those authored and co-authored by Prof. Paul Cheshire of the London School of Economics. Britain of course has had "Smart Growth" since 1947. Their economy is said to now be 20 to 40% less productive than their main trading partners because of it. Households pay approximately 2.5 times as much for median housing as in a typical free market (eg in Texas) AND the housing they pay 2.5 times too much for, is on average one THIRD the size and on ONE SIXTEENTH the lot size. So much for "trading off space against extra cost".

"Smart Growth" in the "prescriptive" aspects of it, is a disaster. The parts that ARE "good", are the parts that involve the removal of restrictions on things like lot size and height. If there is a conspiracy and a racket, its beneficiaries are the owners of large property holdings at the highest value locations. Of course the families that have owned the core of London for centuries are very happy that London has not developed like Houston, because if it had, their "rents" would have been only one tenth or less of what they have been. "Smart Growth" advocates need to work out whose useful idiots they are, and repent of the damage they are doing to the young, first home buyers, low income earners, potential new business starters, and so on - all of whom are the victims of a wealth transfer away from them "to" property magnates.

Leith Van Onselen, housing bubble guru

I also strongly recommend the world-leading commentary on housing bubbles, of Leith Van Onselen, "The Unconventional Economist" on the "MacroBusiness" Blog.

http://www.macrobusiness.com.au/author/leith/

http://www.macrobusiness.com.au/category/canadian-housing-bubble/

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