Yes, We Can Have a Healthy Environment and Economic Development: Reconciling Conflicting Planning Objectives

Todd Litman's picture

I am sorry to report that, Canada, my chosen country (I immigrated here in 1993), recently withdrew from the Kyoto Accord, which sets international climate change emission reduction targets. It's worth noting that this decision was made by the ruling Conservative Party which received less than 40% of total votes, but the other four parties split the more progressive votes and are unable to form a coalition, resulting in federal policies that are far more politically conservative than the average Canadian would prefer.

Climate change is a wicked problem because it involves a complex mix of differing values and perspectives, plus a high degree of uncertainty, so there is no single "correct" solution. However, this does not reduce the justification for action. Many planning decisions involve diverse perspectives and uncertainty, and there are normal ways to address these factors. In particular, decision-makers can implement no regrets actions that reduce risks with minimal costs and maximum co-benefits.

The most common objection to emission reduction targets is that they are economically harmful. However, this is not necessarily true. There are many no-regrets or win-win strategies that can reduce emissions and support economic development. Many of these involve policy reforms that increase transport system efficiency. Let me explain.



According to economic theory, an efficient market must reflect the following principles:

·         Consumer options (also called consumer sovereignty). Consumers need viable options and information about those options, so they can choose the combination of goods that best meets their needs.

·         Cost-based pricing. Prices should reflect costs as much as possible. There should be no significant external costs unless specifically justified.

·         Economic neutrality. Public policies (laws, taxes, subsidies, and investment policies) should apply equally to comparable goods and users.


These principles apply to transport and land use "markets," which includes the supply, design, pricing and management of facilities (sidewalks, paths, roads), inputs (vehicles and fuel), and locations (land use development patterns). Inadequate transport options, underpricing of transport inputs, and planning practices that unintentionally favor automobile travel over more resource-efficient modes tend to reduce economic efficiency. Policy reforms that correct these distortions tend to both support economic development and reduce pollution emissions. 

Below are examples of win-win emission reduction strategies:

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



Michael Lewyn's picture

low-hanging fruit

It seems to me that transportation is the low-hanging fruit of climate change policy, in the sense that most of the policies discussed above can be justified on grounds unrelated to climate change (quality of life, social equity, regional pollution, etc).

Because of the collective action problems related to climate policy, it seems to me that policies based SOLELY on concerns about climate change may be harder (though not impossible) to justify.

Todd Litman's picture

Yes, low-hanging fruit

Thanks for your comments, Michael.

Yes, that is exactly my point: win-win emission reduction strategies are justified for their economic and social benefits and so are economically efficient regardless of the value placed on greenhouse gas emissions. This expands their political feasibility since they can gain support from a much wider range of stakeholders besides people concerned about climate change risks. For example, transportation professionals should support the strategies that help reduce traffic congestion, parking costs and accidents; social service agencies should support strategies that improve mobility for non-drivers; and public health officials should support strategies that reduce local air pollution and increase physical activity and fitness.

The challenge we face is most planning is reductionist - each problem is assigned to an individual profession or agency with narrowly-defined responsibilities. These various interest groups are unaccustomed to working together. More comprehensive and integrated planning is needed to identify and implement win-win solutions, which represents true sustainability planning. See:

Todd Litman (1999), “Reinventing Transportation; Exploring the Paradigm Shift Needed to Reconcile Sustainability and Transportation Objectives,” Transportation Research Record 1670, Transportation Research Board (, pp. 8-12; at

Todd Alexander Litman
Victoria Transport Policy Institute
"Efficiency - Equity - Clarity"

Evolution versus design

One of the problems with using "GDP" as the comparison, is that it does not reflect the cost of living. Nor does it reflect the practical possibility of replicating the high-GDP-high density cities. MOST sources of employment simply cannot pay Manhattan rents.

No national economy can cope with trying to turn back the economic development that has brought efficient and competitive suburban industries and surrounding workforces with abundant personal space at low cost. Patrick Troy, in "The Perils of Urban Consolidation" (1996), calls the idea that urban form and transport infrastructure can be imposed and the rest of the economy can evolve around that; "physical determinism".

Both Troy's book and Robert Fishman's "Megalopolis Unbound" provide a helpful remedial education on the evolution of urban form.

On the other hand, the effects of "physical determinism" can be seen in the cities of the U.K. outside London, which have not benefited from developing and retaining the kinds of employment that has made the USA prosperous, and the affordable housing and the democratisation of property ownership. These cities are like Detroit only without the redeeming low density tree-lined suburbs, AND with severely unaffordable housing of appallingly low average size, quality, and modernity.

London survives because it is a center of international capital going back centuries. The extremely acute Oliver Hartwich pointed out recently in the Business Spectator, that the David Cameron government is the main opponent of an international financial transactions tax - because this would destroy London, and hence the British economy. The advocates of high density cities need to consider what are the underlying flows of "economic activity" that underpin their favourite examples - it is disproportionately economic rent-seeking and zero-sum wealth transfers, while low density urban economies tend to be actual creators of wealth through the utilisation of resources.

GDP and Cost of Living

"One of the problems with using "GDP" as the comparison, is that it does not reflect the cost of living."

It does in international comparisons if you state the GDP in Purchasing Power Parity dollars. It is easy to find GDPs in PPP dollars.

I don't know if Todd uses PPP dollars or dollars converted at the exchange rate.

Charles Siegel


I don't know if Todd uses PPP dollars or dollars converted at the exchange rate.

I thought that too. The low R^2s on several of the figures makes me think there is no PPP in there. Florida in the Atlantic Cities recently tried to tease some of this out.



PPPs and Low R^2s

I don't see why the low R^2 make you think they use exchange rates rather than PPP dollars. Can you explain that? I think I am missing something. Are you saying that, if they used PPP dollars, the effect would be more similar in different countries, yielding a higher R^2?

By GNH, I presume you mean Gross National Happiness.

Charles Siegel

PPP and slope.

Sure, Charles, I think slopes on Figs 2 and 3 would be opposite globally using PPP/Gini coefficient, as the results seem to show total wealth rather than individual purchasing decisions.

That is: transit ridership is higher among those who can't afford a POV or where the wealth is spent on good transit (e.g. CH, SWE, etc). And surely there is some skew in the BRIC countries with folks flocking to cities who have not built up their income yet, so the slope would be decreasing with PPP.

My ego isn't wedded to these assertions and corrections would be welcomed.



Todd Litman's picture

Comparing Cities and Countries

Thanks Dano and Charles for your comments.

For this type of analysis, I think it is important to avoid focusing too much on any one data source. This column investigates one issue: whether emission reduction policies necessarily reduce economic development as conventionally measured, using gross domestic product (GDP) or incomes. I've provided both theoretical and empirical evidence that policies which increase transport system diversity, more efficiently price automobile travel, and encourage more compact development support economic development.

It is true that these conventional indicators do no account for differences in costs of living, which tend to be higher in large and growing cities than smaller towns and declining cities, but the T&H Index indicates that within most cities, combined housing and transport costs are lower in more accessible neighborhoods, and my research shows significant cost savings to households located in transit-oriented neighborhoods, all else being equal, and many of the proposed strategies can further reduce transport and housing costs by improving affordable travel options and reducing certain housing costs (parking, land per unit, and infrastructure costs).

The scatter graphs I presented only indicate two variables each. It would be useful to apply a more detailed regression analysis to truly understand these relationships. Purchasing Power Parity (PPP) is a different way to measure currency exchange rates and so would only apply to Figure 5 - all other graphs are for the U.S. alone. I doubt that you would find significant differences in the GINI coefficient or gross national happiness indicators between U.S. cities since key factors, such as tax rates, education and healthcare policies, are consistent. It would require much more research than I can afford, requiring data that I doubt is available, to tease out significant differences between U.S. cities.

I think it is reasonable to conclude that the preponderance of theoretical and empirical evidence indicates that appropriate win-win strategies really can reduce emissions in ways that support economic development, and in most cases increase overall affordability. This indicates that critics are wrong to claim that emission reduction targets, such as the Kyoto Accord, are economically costly.

For more information see:

Chuck Kooshian and Steve Winkelman (2011), "Growing Wealthier: Smart Growth, Climate Change and Prosperity" ( ).

Todd Alexander Litman
Victoria Transport Policy Institute
"Efficiency - Equity - Clarity"

City Indicators.

Ah - I missed the italicized in Figs 2 and 3 stating 'US points only'.

Thank you Todd. I'm on board with your assertions, and perhaps this thread teases out a hint of a concern over the utility of these indicators. I'm not sure I'd find them compelling if I were giving a presentation or in a meeting with decision-makers. :o)



Todd Litman's picture

City Indicators

You are right that these graph alone do not "prove" that reducing automobile travel, increasing transit travel and density, and increasing fuel prices will automatically increase economic development. However, I think they provide a very strong counter-argument to claims that emission reduction arguments are economically harmful - such as those made by Canadian federal officials to justify withdrawing from the Kyoto Accord.

Equally important is to show how specific win-win strategies reflect market principles: improving consumer options, more efficient pricing and correcting existing biases that favor mobility over accessibility and automobile travel over more resource-efficient modes.

Todd Alexander Litman
Victoria Transport Policy Institute
"Efficiency - Equity - Clarity"

British experts need to be heeded

My concern is not so much PPP, although that probably does capture the cost of housing to some extent. My concern is really that what matters most, is the ratio of urban GDP to urban land prices and hence cost of living (particularly for the oncoming younger generations). It is all very well to "increase GDP", but if the "total value" of urban land doubles while GDP increases only 10%, I say there are some serious distortions occurring in that urban economy, which ultimately will cause a whole range of undesirable effects. These include reduced household discretionary spending, increased inequality, reduced social mobility, reduced productivity, depressed income levels, low rate of new business formation, and numerous others.

The UK actually provides numerous working examples of the consequences of decades of urban growth containment policies in particular. The McKinsey Institute estimated in their 1998 paper "Driving Productivity and Growth in the UK Economy", that the UK Urban Planning system and inflated urban land prices, was a major factor in the UK economy being 20% to 40% less productive than those of its major trading partners, including the Netherlands which is more short of land than the UK. McKinsey specifically states, too, that "a phenomenon like Silicon Valley could simply never occur in Britain" because of its planning system.

Alan W Evans discusses and builds on the McKinsey Institute findings, in his 2 books from 2004, "Economics, Real Estate, and the Supply of Land"; and "Economics and Land Use Planning". Evans succeeded Sir Peter Hall as the director of the Spatial Economics Research Centre at the University of Reading.

The rest of the world, currently experimenting with growth constraint, should pay more serious attention to the British experts, like Hall, Evans, and the team at the London School of Economics Spatial Economics Research Centre, particularly all the papers authored and co-authored by Paul Cheshire. Britain has many serious economic and socio-economic problems which stem from their urban growth containment policies.

Useful Indicators.

Todd, I'm not so much concerned about "proving" as I am using a graphic that clearly tells a story. If I were to use these I fear I'd have to spend too much time explaining them, which would take away from my argument.



Todd Litman's picture

Smart Growth Affordability

Thank you for your comments, Wodehouse.

Yes, I agree that affordability (meaning that households can afford basic goods and services, and that lower-income households have better opportunities to save money) is an important planning objective. Much of my research identifies way to evaluate affordability, and strategies that help achieve true (see and

Most of the win-win strategies described in my column help achieve affordability by improving transport options and by offering consumers new opportunities to save money. For example, with current policies, residents are generally required to pay for parking spaces at homes and apartments regardless of whether or not they need them; with efficient parking pricing and parking cash out, residents have a new opportunity to save money if they own fewer than average vehicles. Even some strategies that directly increase costs, such as efficient road and parking pricing, and increased fuel taxes, can increase affordability overall since these are economic transfers, so their overall cost impacts depend on how revenues are used. For example, financing roads and parking facilities through user fees, so people only pay as much as they use, can be more affordable than financing such facilities though general taxes. Similarly, fuel tax increases can increase affordability if revenues are used to reduce more regressive taxes or to finance services used by lower-income households.

Similarly, many smart growth policies can increase overall affordability by improving accessibility and reducing transportation costs, by reducing the amount of land required per housing unit, by reducing parking facility costs, by reducing infrastructure and household energy costs. A number of studies indicate that considering both housing and transportation costs, smart growth communities tend to be more affordable overall (see the "Housing + Transportation Affordability Index" at, and "Evaluating Smart Growth Savings" at ).

It is true that under certain circumstances smart growth policies can increase housing costs (for example, if urban growth boundaries are implemented without reducing restrictions on development density or excessive parking requirements) which some people, including Wodehouse, use as a justification to oppose all smart growth policies. I am happy to analyze smart growth benefits and costs, and explore possible ways to maximize net benefits including affordability, but critics such as Wodehouse fail to do this. They only consider costs without acknowledging the significant benefits of smart growth policies - including substantial increases in overall affordability in many situations - and they present inaccurate claims.

For example, a while ago, Wendell Cox criticized my research by providing evidence that smart growth reduces housing affordability, based on data from the "ACCRA Cost of Living Index" which reflects expenditures by the highest income quintile households (the index was designed to help calculate executive pay rates for different cities), and so is inappropriate to use for evaluating affordability as the concept is usually defined. I pointed out this error in my report, "The First Casualty of a Non-Existent War: Evaluating Claims of Unjustified Restrictions on Automobile Use, and a Critique of 'Washington’s War On Cars And The Suburbs'" ( ), but Cox continues to ignore the issue, and his analysis was subsequently used by Tory Gattis, which Wodehouse used to criticize my Planetizen Column "An Inaccurate Attack on Smart Growth ( ). Wodehouse never acknowledged his error. All of this suggests that these critics either do not really understand issues such as smart growth's impacts on household affordability or they are intentionally misrepresenting these issues.

* Good planning considers all significant objectives and impacts in order to identify strategies that provide the greatest total benefits.
* Affordability is an important planning objective.
* Many win-win strategies help achieve affordability.
* Smart growth critics tend to consider a limited set of objectives and inaccurately define affordability.

For more information see:

"Evaluating Criticism of Smart Growth" ( ).

“Can Smart Growth Policies Conserve Energy and Reduce Emissions?” Portland State University’s Center for Real Estate Quarterly ( ).

"Critique of the National Association of Home Builders’ Research On Land Use Emission Reduction Impacts ( ).

Todd Alexander Litman
Victoria Transport Policy Institute
"Efficiency - Equity - Clarity"

Sorry, Urban Growth Constraint ALWAYS eliminates "affordability"

Here is where I have recently come to realise, all the wishful thinking by advocates of urban growth containment fail. (I am not against "smart growth", just urban growth boundaries or other blunt instrument regulatory proxies for them).

The inflation in the value of RAW urban land, always completely swamps any ability to "trade off size" to compensate. The price of one tenth of an acre of lot ALWAYS ends up MANY TIMES more expensive than what a quarter, or even a half of an acre costs in unrestrained markets.

Furthermore, because the inflation in land value is in the "raw" land, the opportunity cost of "public space" is inflated enormously. When the raw land cost is hundreds of thousands of dollars per acre instead of $10,000 or less, setting aside HALF the land as public space imposes an equivalent inflation in the price of each lot. A typical outcome of this, is that instead of half acre lots at approx $45,000 each, a development has one-tenth-of-an-acre lots at approx $200,000 each.

The only people who conceivably do trade off sufficient space and transport costs to compensate, are "singles" who live in TINY apartments. But even then, their costs are similar to that for which their counterparts in an unrestrained market could obtain an apartment SEVERAL TIMES THE SIZE.

The cost of parking spaces is derisory by comparison - considering the extremely low cost of raw land if prices are not inflated by regulation. Of course when the prices of raw land have been inflated to hundreds of thousands of dollars per acre, the cost of a car park becomes significant. But even the cost of mandatory large minimum lots is also derisory when raw land prices are uninflated. A one acre lot might be $50,000, a half acre $45,000, and a quarter acre $42,500. Big deal.

A further fallacy I have addressed before, is this:

"......A number of studies indicate that considering both housing and transportation costs, smart growth communities tend to be more affordable overall...."

The "studies" that allege to prove this, inevitably contain the following egregious failure of scientific method: they calculate "actual" housing costs for the incumbent population, including large proportions (of residents) who bought their home long before prices inflated, and who have already paid off much or all of their mortgage. This completely fails to recognise the options that confront new households in the current time of regulatory-inflated housing costs. Furthermore, even the incumbent households with 100% equity (and "no" housing costs at all) could better their financial position by selling up and moving to a cheaper, "automobile dependent" area and incurring higher "transport" costs in the process.

The "Costs of Sprawl 2000" Report got this right, and Anthony Downs has been bashing his head against a brick wall ever since, trying to get urban policy "experts" to take any notice of this and interpret the findings correctly.

Ironically, after a housing bubble bursts and prices fall to sensible levels again (and these price shifts are ENTIRELY in the "raw land" component of housing prices, making these shifts far more volatile than when the prices of "total land plus improvements/structures" is analysed) AND central bankers slash interest rates, there will be a phenomenon of people moving inwards from automobile dependent suburbs again. This is because the "housing plus transport costs" equation has been changed in favour of "location" rather than transport costs. The effect of high unemployment also strengthens this effect because of unemployed people vacating pricier homes in the favoured locations.

Of course advocates of "smart growth" claim victory at this point, without realising how Pyrrhic the victory is.

Todd Litman's picture

Smart Growth Policies Can Increase Affordability

Thank you for your comments, Wodehouse.

You have made these same assertions and predictions frequently in the past in response to other columns, but you have yet to offer verifiable evidence.

Smart growth policies - more flexible limits on development density, height and mix; reduced parking and setback requirements; improved alternative modes; and reduced development fees, utility fees and taxes for more locations with lower public service costs - can provide significant savings. Yes, if you assume that "home" can only mean a large-lot, single-family house then in rapidly-growing communities, natural or regulatory growth boundaries may significantly increase unit land costs, but alternative housing types, such as small-lot single-family, townhouses and apartments require far less land per unit, a quarter to a tenth, and provide other cost savings. These savings often offset any housing cost increases.

As evidence see the 'Housing and Transportation Affordability Index' (, which calculates average housing and transportation expenditures for a neighborhood (represented by a census block group), divided by average neighborhood income (for details see ), based on actual consumer expenditure survey data. The results indicate that in most urban regions the most affordable neighborhoods have smart growth characteristics: density, mix, accessibility, and multi-modalism. Regional unaffordability seems to result from a lack of such neighborhoods, indicating that the best way to increase overall affordability is to implement smart growth policies which reduce housing and transport costs. The urban expansion that you recommend cannot deliver true affordability because reductions in housing costs are offset by increased transportation and public service costs.

I believe you are wrong to cite either the Costs of Sprawl report or Anthony Downs as advocates of sprawl. The Costs of Sprawl indicated that urban growth boundaries sometimes increase housing costs, but it also identified many cost savings of more compact and mixed development. Similarly, although Downs does warn that urban growth boundaries can increase housing costs, he also acknowledges that more compact development provides various economic and environmental benefits. Please indicate evidence from either of these that compact development necessarily reduces overall affordability.

Other researchers have used various techniques to evaluate the impacts of smart growth policies on housing affordability. The results are ambiguous: more compact development can increase land costs but other factors are more significant, and land cost increases may be offset by other cost savings.

I therefore challenge you to provide real empirical evidence of your assertions and predictions.

For More Information

Todd Litman (2009), "Evaluating Criticism of Smart Growth," VTPI (; at

Arthur C. Nelson (2002), “Effects of Urban Containment on Housing Prices and Landowner Behavior,” Land Lines, Vol. 12, No. 3, Lincoln Institute for Land Policy (

Arthur C. Nelson, Rolf Pendall, Casy Dawkins and Gerrit Knaap (2002), "The Link Between Growth Management and Housing Affordability: The Academic Evidence," Brookings Institution Center on Urban and Metropolitan Policy (; at

Robert W. Wassmer and Michelle C. Baass (2006), "Does a More Centralized Urban Form Raise Housing Prices," APPAM “Suburbanization and its Discontents” Journal of Policy Analysis and Management, Vol. 25, No. 2, Spring, pp. 439-462; California State University Sacramento (; at

Todd Alexander Litman
Victoria Transport Policy Institute
"Efficiency - Equity - Clarity"

I am the one dealing in harsh realities

Dear Todd,

Both you and I are mostly dealing in theory. You say I cannot prove what I am arguing. I say that you cannot point to one single example of a long term growth contained city that will have affordable housing - that is, median multiples of around 3.0.

There is indeed an appalling lack of concrete research into exactly what I am arguing - hence a global financial crisis with reams of false explanations, and spreading popularity of "urban growth constraint" policies that will only increase economic cyclical volatility.

Here is what I can observe. The annual Demographia surveys reveal dozens of cities with low, stable urban land prices and steady median multiples of around 3.0. Not ONE of these cities has "affordable" housing "because of" small lot sizes and compact development. Quite the contrary - every one of these cities is despised by "smart growth" advocates for their extremely LOW density. Ironically, the residents of these cities are consuming a LOT of land AND staying far more within their incomes in the process.

In contrast, there are dozens of cities in these surveys that have serious problems with housing affordability - median multiples never below 4.5, AND severe cyclical price volatility, with spikes up to 7.0, 8.0, and even higher. I have in fact referred to academic analysis that is far more up-to-date and thorough than the outdated and excuse-making work of Chris Nelson and colleagues. I refer to the work of Alan W Evans and colleagues, and Paul Cheshire and colleagues. These British academics have every cause to be extremely focused on these issues given the massive economic and socio-economic damage done in Britain, by their 6 decades of urban growth containment.

In every case, the severe affordability problems and cyclical volatility is accompanied by a sustained period of policies akin to "smart growth" - but always involving urban growth constraint - under which lot sizes and land space per person has been steadily constrained to a small fraction of that in the preceding class of affordable cities to which I refer.

Furthermore, even in cities where urban growth boundaries have been more recently enacted, the result within a decade, is that even the small apartments developed under the local plans, are more expensive than large-lot suburban McMansions were - and still are, in non growth constrained cities.

The Wassmer and Baass study does not attempt to prove anything about urban growth constraint. If they re-did the study on the basis of "urban growth constrained" cities versus unconstrained, their results would be heavily not in favour of growth constraint, precisely because of the number of properties of all types that are pushed over their trigger point of $300,000. Their study findings are heavily biased in favour of conclusions that favour inner urban area locations precisely because it includes so much data from cities that do NOT have inflated prices, and furthermore, some of which still have unrenewed slums in the inner areas.

This is just another example of what I have said again and again - that studies that purport to "prove" that urban growth constraint "works", ALL utilise data that does NOT relate to comparisons between urban growth constrained markets and unrestrained markets - which is the ACTUAL issue that really NEEDS to be studied.

You referred to the 'Housing and Transportation Affordability Index' ( in your first comment and I already explained what was wrong with that study. As you say, this is "based on actual consumer expenditure survey data". I explained, this is exactly what is WRONG with it. I said:

"The "studies" that allege to prove this, inevitably contain the following egregious failure of scientific method: they calculate "actual" housing costs for the incumbent population, including large proportions (of residents) who bought their home long before prices inflated, and who have already paid off much or all of their mortgage. This completely fails to recognise the options that confront new households in the current time of regulatory-inflated housing costs. Furthermore, even the incumbent households with 100% equity (and "no" housing costs at all) could better their financial position by selling up and moving to a cheaper, "automobile dependent" area and incurring higher "transport" costs in the process."

I am quite aware that Anthony Downs is not an advocate or apologist for sprawl. But he has the honesty to be quite frank that delivering housing affordability in tandem with planning that attempts to concentrate population at preferred nodes and central areas, "requires some sort of collective control over land".

Anthony Downs; "A Growth Strategy for the Greater Vancouver Region", 2007:

"......The cost of land poses a key dilemma for urban planners everywhere who
want to concentrate jobs together so they can be best served by public transit.
Such concentration raises the costs of land near centers; in fact, it would
confer a monopoly advantage on landowners who owned such land and could exploit
firms trying to locate there. Now firms want to locate elsewhere to cut their
land costs.

Planned concentration of jobs in a few centers is not consistent with private
ownership and control of land. Some type of collective control over that land
would be necessary to prevent monopolistic exploitation of land values. In
theory, this could be done with high land taxes in such areas and special zoning
rules. But adopting those devices is politically difficult in a free enterprise

"......A similar but less intensive dilemma concerns land near transit stops,
where it would be most efficient to concentrate high-density housing and jobs.
That also creates ownership monopolies over such land unless it is specially
controlled or taxed. Yet focusing development near transit stops is a key to
using more transit....."

You misunderstand me when you challenge me to provide evidence that ".....compact development necessarily reduces overall affordability...."
Compact development, of itself, improves housing affordability slightly. This is what Anthony Downs' whole concept was in "New Visions For Metropolitan America" (1994). But Downs did not envisage at that time, that urban growth constraints would force up the price of all urban land to such an extent that the affordability gain from more compact development would be more than swamped. What I have argued all along is that "more compact development" of the kind advocated by Downs, would be affordable if incorporated in a selection of policy approaches that did NOT include growth constraint. In other words, affordable housing in a city requires affordable fringe McMansions to still be an option, if affordable compact development is also to be affordable.

I have also pointed out, from the work of Alan W Evans, that the Netherlands compulsorily acquires land for development so as to avoid the monopoly type "planning gain" that accompanies growth constraint.

I have said, and will say again, that urban growth constraint policies deliver capital gains to land owners, especially inner urban area land owners, and hence the onus is on advocates of urban growth constraint to prove that they are not in cahoots with these vested interests. These capital gains themselves create a situation where the greatest proportion of the number of people that the planners wished to locate in the preferred areas, are "priced out" and therefore the whole exercise is self defeating unless the PURPOSE of the exercise was to deliver capital gains.

Young urban policy students and professionals will be the best placed to confirm what I am saying, or will be just as soon as they start making life choices over settling down, location, and type of home. If they get the connections I am talking about, they will not be happy with the fraud that has been perpetrated on them by cosily-placed advocates from the baby boomer generation who got on the property ownership ladder when it was still affordable, and proceeded to pull it up after themselves.

You ask for academic evidence

CHESHIRE, Paul, and SHEPPARD, Stephen: "The Welfare Economics of Land Use Planning" (2001)

CHESHIRE, Paul, and SHEPPARD, Stephen: The introduction of price signals into land use planning decision-making : a proposal (2005)

CHESHIRE, Paul, and VERMEULEN, Wouter: "Land markets and their regulation: the welfare economics of planning" (2009)

CHESHIRE, Paul: "Urban land markets and policy failures". (2009)

CHESHIRE, Paul (2009): "Urban Containment, Housing Affordability and Price Stability: Irreconcilable Goals"

EVANS, Alan: "Economics, Real Estate and the Supply of Land" (2004)

EVANS, Alan: "Economics and Land Use Planning" (2004)

EVANS, Alan; and HARTWICH, Oliver: "Unaffordable Housing: Fables and Myths" (2005)

EVANS, Alan; and HARTWICH, Oliver: "Bigger Better Faster More: Why Some Countries Plan Better Than Others" (2005)

EVANS, Alan; and HARTWICH, Oliver: "Better Homes, Greener Cities" (2006)

EVANS, Alan; and HARTWICH, Oliver: "The Best Laid Plans: How Planning Prevents Economic Growth" (2007)

EVANS, Alan; and UNSWORTH, Rachael: "Densities and Consumer Choice" (2008)

GARNETT, Nicole: "Land Use Regulation, Innovation, and Growth" - Chapter 13 in "Rules For Growth" (2010)

GARNETT, Nicole: "Suburbs as Exit, Suburbs as Entrance" (2007)

BRUECKNER, Jan: "Government Land-Use Interventions: An Economic Analysis" (2007)

BRUECKNER, Jan: "Urban Growth Boundaries: An Effective Second-Best Remedy for Unpriced Traffic Congestion"?(2007)

I have actually read all the above, and everything else on THIS web page:

Possibly the most important paper I list above is unfortunately not on that site, it is

Todd Litman's picture

True Affordability Includes Both Housing and Transport Costs

Thank you for your comments, Wodehouse.

However, you have simply repeated the same arguments and provided the same citations as you have frequently in the past. Yes, some academics argue that land use regulations are a key factor in housing unaffordability, but the analysis is incomplete: they only consider land or housing prices without considering total housing and transportation costs.

Wendell Coxes analysis posted on Demographia is particularly incomplete and biased. He does not account for confounding factors such as city size and growth rates, restrictions on development density, and natural geographic constraints on urban expansion, and so not surprisingly concludes that smaller and slower-growing urban regions in the central U.S. areas are more affordable than rapidly growing, coastal urban region such as Boston, Seattle and San Francisco. Most importantly, he fails to account for the higher transportation costs of sprawled area, and when he did try to account for this he used the ACCRA Cost of Living Index, which compares consumer expenditures by the top income quintile. Using this data he claimed to prove that New York and San Francisco are more costly than Atlanta and Houston, although standard consumer expenditure surveys that consider all income classes indicate otherwise. These biased results were incorporated in analysis by Tory Gattis, which you have cited as proof that smart growth reduces affordability. This all indicates that the sources you rely on, either through ignorance or intent, misrepresent these issues.

Todd Alexander Litman
Victoria Transport Policy Institute
"Efficiency - Equity - Clarity"

Wendell Cox absolutely ignores physical constraints

Hi Todd,

I absolutely agree with one of the points you make, which is that Wendell Cox's analysis completely ignores physical constraints. Look at the cities he cites as the worst offenders in smart growth related affordability (SF-a peninsula surrounded by the bay and the ocean, with the East Bay ringed by hills, Portland- a river valley with hills, and a small mountain (mount?)) and compare them with his free-market nirvana's (Phoenix - flat as a pancake, until you hit the mountains to the north, Houston - flat as a pancake until you hit...well, Denver!). Smart Growth has its dark origins (see Mike Davis analysis of the racist motives of the San Fernando valley No-Growth movement), but it also works in places with natural features where there is a consensus to preserve those features.

Todd Litman's picture

Confusing Cause and Effect

Yes, critics such as Cox often confuse cause and effect. Most areas with urban containment policies are rapidly growing cities with geographic constraints and high value environments such as coastlines, river deltas and mountains. Lots of people want to live in these areas and so they naturally have relatively high land costs. Cities with cheaper housing tend to be smaller, less desirable areas with lots of flat land to develop: you can purchase plenty of cheap housing in most small mid-western cities because there is relatively little demand.

However, I believe that cities with growth constraints can have more affordable housing if they implement other smart growth policies which allow more compact, infill development, particularly basic, lower-priced multi-family housing, by reducing restrictions on density, height, and generous minimum parking requirements. For example, here in Victoria, BC many arterials are lined with one- and two-story buildings which would be perfect for conversion to three to six story mid-rise residential-over-commercial. The limiting factor is often excessive parking requirements. Fortunately, the city eliminated minimum parking requirements in the downtown core which has resulted in several new, lower-priced condominiums there. This is a true win-win, since it reduces housing and transportation costs, and provides other economic, social and environmental benefits. Critics such as Cox often assume that smart growth policies are motivated only by environmental objectives, but they can also provide important economic and social objectives including consumer savings and affordability, improved mobility for non-drivers, improved public safety and health, more cost effective infrastructure and public services, and support for local economic development.

For information see:

EcoDensity ( )

"Understanding Smart Growth Saving," ( ).

"Where We Want To Be: Home Location Preferences And Their Implications For Smart Growth," ( )

"Memo From Future Self: Hope For The Best But Prepare For the Worst," Planetizen (

"Affordable-Accessible Housing In A Dynamic City: Why and How To Support Development of More Affordable Housing In Accessible Locations" ( ).

"Affordable-Accessible Housing Photo Essay ( )

Todd Alexander Litman
Victoria Transport Policy Institute
"Efficiency - Equity - Clarity"

Cause and Effect of Equilibrium Rents.

Most areas with urban containment policies are rapidly growing cities with geographic constraints and high value environments such as coastlines, river deltas and mountains. Lots of people want to live in these areas and so they naturally have relatively high land costs. Cities with cheaper housing tend to be smaller, less desirable areas with lots of flat land to develop: you can purchase plenty of cheap housing in most small mid-western cities because there is relatively little demand.

Yes, exactly.

Critics like our occasional drive-by commenter on this thread cannot cough up studies that show what the price of land or rents would be in containment areas. That's right: you'd think the Catos and FFs of the world would have people working night and day on white papers calculating how much gummint is costing patriot-Americans with their lawwws. How come there are exactly zero such papers for people like poor Wodehouse to quote?

Because of what Todd explains, and the fact of equilibrium rents in desirable areas. That's how reality works.



See my comment above about Australian Cities

See my comment above about Australian cities. Th planning saps in Australia think their cities are more expensive than Vienna, Munich, and Zurich, because they are NICER?

Knowledge in comments.

Th planning saps in Australia think their cities are more expensive than Vienna, Munich, and Zurich, because they are NICER?

Take some microecon classes to find out the context as to why this may be true. And while you are attending junior college, take a rhetoric class to find out why some are looking silly with words like 'saps'. And what 'mirror-matching' is.




What amount of Micro-econ waffle can explain THAT away?

And you, take some classes in urban economics that actually teach you for the first time in your life, that urban planning can introduce distortions to markets that have a far more powerful effect on prices, than any "amenity" theories that utopian theorists can dream up.

You are the one in a deeply contradictory position. I never expected this response from you. What is it about Australian cities that makes them so "superior" to BOTH cities in Texas AND cities in Austria, Germany, and Switzerland, that their housing prices have inflated to two to three times higher, just in the last 15 years? The institutions? The opportunity? The climate? The scenery? What a joke. What an absurdity.

You call large minimum lot sizes "exclusionary" but you don't believe urban growth containment drives up the prices of urban land to far higher levels (per home)? And you expect to maintain an illusion of credibility on sites like this one?

At least minimum lot sizes DO create some amenity at a moderate cost that most citizens are quite happy to pay. But I will agree with Alan W Evans' authoritative assessment that the comparative prices of different lot sizes indicate whether people are being forced to consume more land or less land than they would freely choose - Evans concludes convincingly that 1 acre minimums in parts of the USA are too large, but that the one twentieth to one tenth of an acre that most people can barely afford in Britain, is FAR too small.

Explain the hand-flapping.

Wowie. Lots of hand-flapping, mischaracterizing, fishing, confident assertions, false assertions and no specifics nor indication to whom you are replying.

Just what we expect from the personality type right about now. Just the rhetorical tactics that are so commonly employed. Always this way.

That's how it's done folks. Learn it, live it, love it. The playbook.



Happy to leave the reader to judge.

Wowie right on, the "drive by commenter" is happy to leave the reader to judge at this point. Dano the master defender of smart growth, engaging objectively with objective criticism and emerging unbeatable every time. I am sure students reading this blog will be SOOOOO convinced about the reasons they have to pay three times as much to "house" themselves in cities run YOUR way, and/or 3 times as much in real terms, as their parents did in the same city.

I am sure they will be convinced that there are no vested interests driving this, the advocates of urban growth constraint are as pure as the driven snow, no connections at all with the city property owners who rake in the capital gains. Perhaps they too will happily accept donations to their cause when they become paid smart growth advocates, without asking themselves too many hard questions and rationalising it mentally, they are just honestly doing Gaia's work, after all.

The "Baby Bust" Generation


TWO articles - one more to follow

'Baby bust' generation: Today's young 'will end up 25% worse off than their boomer parents'
By Becky Barrow

11 Oct 2011

A generation of young people will be 25 per cent less well off than their parents were when they reach the age of 65, research reveals.
They are the ‘baby bust’ generation who face a long list of crippling financial problems from sky-high house prices to poor pensions, it claims.
In fact, they face a far bleaker future on every front than the ‘baby boomer’ generation before them, according to the report.
On average, a young professional will have accumulated £400,000 less in wealth than their parents, born at the end of the ‘baby boom’, by the time they turn 65.
Buying a home will be a ‘distant dream’, and they will be forced to remain ‘generation rent’ far longer than they would like, the report by accountants PricewaterhouseCoopers said. It compared two men – one born in 1963, the other in 1993 – who have identical careers and personal lives.
Both study medicine, become NHS doctors and eventually consultants. Both marry and have two children. Both buy homes, starting with a small terraced home before upgrading to a detached house.
However, their financial fates are very different, the report points out. For example, a typical baby boomer managed to buy their first home at the age of 29, and put down a deposit of only ten per cent of its value.

By contrast, the average baby buster will not get onto the property ladder until his 35th birthday, and will need a 25 per cent deposit. Their homes will not rocket in value the way the housing boom benefited their parents.

And while the baby boomer left university with no debts, the baby buster is graduating when he is £90,000 in the red. After a lifetime of hard work, the baby boomer can retire at 66 with a pension worth about £60,000 a year.
The baby buster’s fate is bleak by comparison. He will retire at 68 with a pension into which he will have paid much more money during his career than the previous generation of doctors.
What is more, returns on their investments will be lower, with poorer interest on savings and a disappointing stock market. Overall, the report, which allows for factors such as inflation, concludes the doctor born in 1963 has accumulated wealth, including a home, pension and other investments, of £1.63million at the age of 65.
The baby buster, despite living the same life, will have £1.23million.
The report’s co-author John Hawksworth, chief economist at PwC, said the findings reflect ‘significant financial headwinds’ facing the young.
Tanya de Grunwald, of careers advice website Graduate Fog, said: ‘Young people are starting to realise they will not enjoy the same quality of life as their parents.’

Read more:

The Selfish Generation should be ashamed

'I am part of the most selfish generation in history and we should be ashamed of our legacy,' says Jeremy Paxman
By Jeremy Paxman

31 Oct 2011

(EXTRACTS - Wodehouse)

As it’s revealed today’s young will be 25 per cent worse off than their parents, the Newsnight presenter says he and his fellow Baby-Boomers have bequeathed little worth celebrating...
A few years ago, an American author wrote a book about the men and women who endured the Depression and then fought in World War II. He testified to their courage, vision and resilience by calling his book The Greatest Generation.
If anyone attempted to name their children — those born between about 1945 and 1965 — the so-called Baby-Boomers, they might consider calling them The Worst Generation.
It is now received wisdom that today’s young people may be the first generation in modern history to expect to be poorer than their parents.
Earlier this month, a report suggested the young will be 25 per cent worse off than their parents when they reach the age of 65 — the so-called ‘baby bust’ generation, having accumulated £400,000 less by the time they retire.
This may not be entirely their parents’ fault. But we should certainly take a good share of the blame.
A kinder author would perhaps choose a title like The Luckiest Generation for us Baby-Boomers. But how you handle good fortune is surely just as important as how you deal with adversity.
I belong to the Boomer generation — a fact I feel increasingly uncomfortable about. No wonder we thought we had it all. Compared to those who came before, we did.

Those born at the end of the World War I spent their adolescence in the Depression and by their early 20s could expect to be wearing a military uniform and risking their lives.
As the Care Quality Commission report has revealed, some of the last survivors are lying in filthy hospital beds surrounded by uneaten food. The Greatest Generation might also be called the Unlucky Generation.
By contrast, if you were born after World War II, you spent most of your adolescence enjoying the freedoms of the Sixties, were never obliged to serve in the Forces, could expect a more-or-less constantly improving standard of living and, as a consequence, never forsook many of the habits of teenagerdom...........

............In contrast, consider the children (and grandchildren) of this fortunate age group.
Almost a million young people between 16 and 24 today have no work — for the jobs many might have expected to fill have been exported to China, India or Vietnam. Those who do find employment will enjoy none of the pension expectations of their parents.
Yes, it’s true, they do not face the apocalyptic anxieties of the Cold War. But those concerns have been replaced by the possibility of looming conflicts over energy, water, migration or religion. And let’s not mention what the Luckiest Generation have done to the environment we all share.
It is not just that the Boomers were the first generation in recent history to grow older while never having to fight in a war. We were also the happy inhabitants of a consumer wonderland in which everyone seemed to be getting constantly richer.
‘Let us be frank,’ said patrician Harold Macmillan, in July 1957, ‘most of our people have never had it so good.’
He was right.
We have lived in a world in which medical science made such strides that we could confidently expect to outlive our parents — and be in better health.
Holidays grew in length and were ever further away: a couple of weeks at some blustery British seaside resort was replaced by the confident expectation of sunshine in southern Europe and then all over the world.
We had machines to wash our clothes and crockery, owned our own houses and our parents bequeathed us a National Health Service so we might all look forward to free treatment with ever-improving drugs.

The Baby-Boomers could expect to find — and afford — somewhere to live, for it was the building boom which made Harold Macmillan’s reputation.
Those of us lucky enough to go to university could take it for granted that the state would tax the Unlucky Generation that came before to pay our fees and demand nothing from us in return.
Ours was truly the first cohort in history which could call itself both healthy and wealthy.
Not that we really admitted to our wealth. As our possessions grew, so did our expectations, to the point where luxuries became essentials.
Our grandparents aspired to mangles and meat-safes. For us, the conviction grew that we were deprived if we didn’t have freezers and flatscreen TVs.
These were not merely items it would be nice to have, but to which we had a right. The sense of entitlement made ideas of duty to some collective entity the preserve of fools in old-style hats and coats.
We had become not merely the luckiest but also the most selfish generation in history..........

...........Opinion surveys show surprising numbers of this solipsistic generation still consider themselves — absurdly — ‘anti-establishment’ and ‘less trusting of those in authority’.
The truth is, the Lucky Generation are in authority and have been for years now.
Between us, we have been on the first binge known to science in which the hangover was inherited by our children. Take the example of housing. The soaring cost of putting a roof over your head is surely one of the most unattractive — and pernicious — characteristics of the past 40 years. And yet for decades the media have reported a rise in house prices as being somehow a cause for celebration and a fall as a bad thing.
But the consequence of this obsession — and the borrowing that made it possible — was to destroy the relationship between property prices and wages: housing is now so far beyond the reach of many young people that significant numbers doubt whether they will ever be able to buy decent accommodation.

The only explanation for the nation’s obsession with property prices is the Baby-Boomers’ smug conviction that, having entered the market, the only thing they need to do to become wealthy is to sit on their backsides.
And who can blame them?
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, because by the Nineties, the former student leaders of the Lucky Generation had made their way into the Labour Cabinet........

.................For those with rich mummies and daddies, the way into tax-paying employment is that familiar feature of the early 21st century — taking jobs as the willing, unpaid office dogsbody or intern.
For the less fortunate, a life beckons of short-term contracts with a much less comfortable dotage than their parents would ever have entertained.
You might ask why governments don’t try somehow to even out this great fiscal imbalance between older and younger. The answer is if it comes to an outright fight for state resources between generations, the Luckiest Generation has an ultimate deterrent. Unlike many young people, they vote — and their numbers in an ageing country are huge. So, the Baby-Boomers are Those Who Must Be Obeyed.
I have, by contrast, lost count of the number of young people who say that recent experience — especially the Lib Dems’ volte face on tuition fees — has convinced them never to vote again.

The Luckiest Generation will be around for a long while yet, strumming their guitars and enjoying their concessionary fares, ensuring young people keep working to pay their pensions, outraged at demands they cash in their property wealth to fund their future in care homes, consuming the vast — and increasing — quantities of National Health Service funds necessary for geriatric medication (half the NHS budget is spent caring for old people).
They have already persuaded the Government to make it impossible for employers to get rid of them just because they reach the age of 65, while also ensuring that many Boomers will be able to claim their pension two or three years earlier than anyone entering the workforce now.
Getting on for a million of this generation have taken themselves off to live in parts of continental Europe where they think the weather is kinder and the fags and booze are cheaper.
In southern Spain or rural France they watch Sky television, demand the assistance of British consuls paid for by their hard-working offspring and are begged by the big parties to register for postal votes.
Thousands more enjoy a healthier old age than they had any right to expect jetting around the world on holidays of one sort or another.
You can hardly blame them for thinking the world belongs to them. It really does.
Their children and grandchildren, meanwhile, have been sent out into a plundered world, shackled by debt, unable to contemplate early home ownership or starting a family.
And then the Luckiest Generation tut at the level of anti-social behaviour they claim to see........."

Read more:

Yeah, Sydney really SHOULD be worth 3 times as much, ay.....

Here we are:

Dallas scores consistently similar to or higher than Sydney and consistently near the top of the pack on things like "labour attraction" and "comfortable climate".

It comes in at No 6 overall. Sydney is no 13. Vancouver is No 14.

Sydney rates at the bottom on "transport", well below Dallas, in spite of the fact that its planners have been restraining urban growth and investing in mass transit for longer than Portland has.

Dallas is no 4 for "economy overall" while Sydney is no 17.

Dallas is no 5 for "comfortable climate" while Sydney is no 10 (and I think that is over-rated).

Dallas is no 2 on "commuting time" while Sydney is no 15.

I am NOT quoting Wendell Cox or think tanks. BUT.....

I am not quoting Wendell Cox or any of your public enemy number one think tanks. My knowledge comes from serious study of the INTERNATIONAL academic literature, especially regarding the situation in Britain, Australia and New Zealand.

I think I have said enough for readers of these arguments to make up their own minds now. Especially the ripped-off young as-yet-to-be-first-home-buyer. The people flooding to Texas are not wrong.

The think tank people you despise still have my respect though - at least they are on the side of truth in this issue.

BTW Dallas is not a lot different to Australian cities for climate, topography, etc; one study rated Dallas as one of the most pleasant cities in its sample set. I'll see if I can find it tomorrow. But Australian "urban growth containment" advocates kid themselves that THEIR cities are the world's most pleasant because prices are so high.....!

Ideological and psychological similarity.

o public enemy number one
o My knowledge [sic] comes from serious study [sic]
o The people flooding to Texas are not wrong
o urban growth containment

Ahhhh...nice brief compendium of the trendy standard ideological talking tropes are there. Thanks for projecting them in the typical and expected way.



WHERE in the USA is there a housing market with no flat land?

"......Most areas with urban containment policies are rapidly growing cities with geographic constraints and high value environments such as coastlines, river deltas and mountains. Lots of people want to live in these areas and so they naturally have relatively high land costs. Cities with cheaper housing tend to be smaller, less desirable areas with lots of flat land to develop: you can purchase plenty of cheap housing in most small mid-western cities because there is relatively little demand....."

What area with urban growth containment policies ends up sustaining rapid growth for long? Ed Glaeser's new book at least gets this right. The most popular regions, having enacted urban growth containment policies, end up NOT growing very rapidly at all, while less temperate places end up growing extremely rapidly because their housing remains affordable. Glaeser calls this "The Lorax Fallacy": "think globally, act locally" has unintended consequences. An extra 10 million people in Texas is far worse for the planet than those 10 million people being in California where they will not need to use so much airconditioning. Glaeser says we should "think globally, period". If coastal California matched Japan for population and transport infrastructure, it would be one of the best possible things for the planet.

And what becomes of your correlation between "smallness" and cheap housing, in Dallas, Houston, and Atlanta? And in fact many extremely rapidly growing US cities that are reaching the "millions" in population?

Lastly, no city-region lacks flat land except one on an island in the ocean, like Honolulu. Coastal cities generally have "inlands", even if these are on the other side of mountains or other geographic constraints. Providing high-growth, cheap-housing "new cities" and "regional development" would help keep popular coastal cities housing prices down to a level where new infill and brownfields development in those cities was affordable to greater numbers of in-migrants.

Yes, some proportion of higher housing prices does reflect desirability. But in regulatory growth constrained cities, there is a proportion over and above "desirability premium", what Paul Cheshire calls "artificial scarcity premium", that actually REDUCES the numbers of people buying in to the area. Simple supply and demand curves show the effect, that when the supply curve is moved to higher price levels, the equilibrium price ends up at a higher price level and a lower quantity. This is precisely what is happening in all your growth containment cities - and as Glaeser's "Lorax Fallacy" indicates, the result is worse "globally". The "local" gain is entirely parochial self interest, especially regarding the capital gain - "saving the planet" is no more than false pretext.

By the way, I am quite clear that abolishing minimum lot sizes is all part of what needs to be done for California - these can act as de facto restraints on growth on adjoining municipal areas. But abolishing minimum lot sizes will still only lead to still more heinously overpriced small lots unless there are "wide open" fringes somewhere in the region. If California learned from Texas, they'd get all the growth back and Texas would lose it. And this would be good for the planet.

Selection bias.

Note both the cherry-picking and incomplete refs to thwart checking the assertion.

Standard tactics. Misinformers from think-tanks use them all the time, which is why these tactics are so familiar.

Jus' sayin'.



Dr Housing Bubble has discovered Vancouver

Do read the whole thing, look at the graphs etc.

The other CA bubble – Canadian housing bubble ripe for popping. Vancouver real estate increased by 142 percent from 2002 to 2011. Average detached home in Vancouver costs roughly $1 million while the median household makes $67,000 per year.

"In the last few years I’ve noticed that many of the cable finance and housing shows highlight families in Canada. Shows that talk about debt or home buyers are usually focused on families in Canada which is rather odd given that we are here in Southern California. Yet the funny thing about these shows is that they rarely identify that they are in Canada although I recognize locations like Vancouver. If one simply tuned into the show it would appear that a bubble was still going on in the states. This is probably the point. After all, the cable shows focused on flipping houses or making quick bucks on real estate started going off the air yet another bubble was still going on up north. Obviously these shows had an audience otherwise they would not be on the air. Now the focus is on the Canadian bubble and American audiences can swim in the nostalgic dreams of the glory days of domestic housing. Yet the shows rarely mention their location as if English-speaking families and cookie-cutter condos and homes are so easily interchangeable that they will fool an audience. Yet one thing the shows fail to acknowledge is that the Canadian housing bubble is even more pronounced than that in the United States.

Let us first get one thing out of the way; the Canadian housing bubble will burst. Just like real estate bubbles in Ireland, Spain, England, and the United States real estate bubbles do burst. Timing is always hard to predict but undoubtedly these bubbles pop because they are fueled by easy and hot money. Even at the apex here in California arguments were bandied around regarding foreign money, low interest rates, and other nonsense trying to support a ludicrous bubble. Once the ego was put on the shelf and the credit markets imploded, the housing market came crashing down. Canada seems to be where the United States was in 2007. Let us examine a couple of charts:

The U.S. housing market peaked in 2006 and it looks like Canada is five-years behind the curve. The rise in Canadian real estate is simply unjustified. Household incomes in Canada have not come close to keeping pace with real estate values in each respective market. Take a look at the insane Vancouver market:

Real estate values in Vancouver have shot up by 142 percent since 2002. There is absolutely no justifiable reason for this except for massive speculation. Let us look at household incomes for this area:

The median household income in Vancouver is $67,550 yet the average detached home price is above $1 million. That is simply madness and even makes the California housing bubble look modest in comparison.

Internal warnings of a bust are already running rampant:

“(CBC) The influx of multi-unit builds has led some economists to warn of overbuilding in the Canadian housing market, which could leave a glut of unsold homes on the market in the case of a downturn.

A downturn in demand would also likely lead to an easing of Canadian home prices, which The Economist magazine recently declared are about 25 per cent overvalued.

Interest rates are not expected to increase in the coming year, but analysts noted that Canadian households are already at record high debt levels, and the growth of both jobs and income has stalled.”

Canadian households are in deep debt just like U.S. households. Even some of the “financial rescue” shows highlight Canadian families that suffer from the same delusions as many American households. You see the same patterns that led us into this crisis:

-“I can’t give up our home!” – a person in massive debt who really can’t afford their home

-“But we can’t give up our condo!” – trying to buy a $600,000 condo with a $60,000 household income

-“We are doing fine.” – a family in deep credit card debt and a negative net worth

It is little wonder why television programmers have merely swapped out American families for Canadian families. The pattern is the same and aside from a few glances at Canadian cash, these families are replicating the same debt hunger of American families during the bubble heyday.

Canada bubble locations use same bubble logic as peak U.S. locations

The bubble talk is similar in locations with major bubbles like Vancouver. By the way, I think Vancouver is a great place but it is in a major bubble. A lot of hot money from outside has inflated values:

“(The Province) Cam Good, president of The Key, a Vancouver-based real estate marketing firm that caters to Asian buyers, said that about 60 per cent of the estimated 1,500 condos he sold this year, in Vancouver and Toronto, were to Chinese buyers.

While an October report by Royal LePage recorded a 16.9per-cent price increase of a standard two-storey house in Vancouver ($1.142 million) compared to the same time last year, local realtors and experts think restrictions are the last thing Vancouver’s market needs.

The report, which defined Vancouver as composed of the city’s east and west sides, West Vancouver and North Vancouver, pegged the average price of bungalows and condominiums at $1.02 million and $513,500, respectively.”

Patterns like this are short-term just like Japanese buying in California during a previous bubble. These bubbles will burst because any housing market is going to be supported over the long-term by local households and what they can afford. These short-term speculative bubbles simply become landing grounds for hot money. The home price-to-rent ratio is already absurd in Canada:

While many in Canada and places like Vancouver would like to deny a real estate bubble it is rather obvious to most outsiders. The bubble will burst and is looking very close to reaching a peak already. All the arguments and justifications were played out here in California as well. This is something that is very familiar especially now that we enter year five of the housing market crashing here in California. And just like the U.S. fringe markets pop first:

“(The Globe and Mail) What drives the housing cycle up, inevitably drives the market down as well. Builders in the multi-unit segment are currently responding to elevated home prices and robust pre-construction sales. Anecdotal evidence suggests the vast majority of pre-construction sales are to investors who intend to sell the units on completion or rent them out. As these condos in the construction pipeline are completed, this inventory of units will be dumped on to the rental and/or re-sale market just as sales momentum and housing demand ebbs. Our estimates indicate there will not be enough renters in Toronto to occupy these units as they are completed. As a result, some investors will be left holding vacant units. Since most investors are unlikely to hold onto negative-carry investments without a reasonable prospect of price appreciation; this will put downward pressure on home prices. We have already seen this dynamic play out in some smaller markets on Canada’s west coast where prices have corrected 15 per cent.”

Welcome to your housing peak, Canada. The good news is that things will continue even after your real estate bubble pops. In fact from data I have seen and stories I have heard, many of those harmed by the current real estate bubble are your local families who are unable to purchase without going deep into debt...."

Housing affordability, density, and "bucket of cold sick" quote.

Congratulations, Vancouver. If Hong Kong wasn't now included in the Demographia Survey, Vancouver would be the most unaffordable market in it.

It is also a concern that Toronto's median multiples are escalating into seriously unaffordable territory. If unaffordability is meant to be related to pleasant climate etc, I do wonder how we explain UK cities, Australian cities, and Toronto.

And while we're on this topic, it looks like the public in Auckland, NZ, are starting to wake up now that some consultants have produced visual representations about what a planned increase in density will look like:

Here's some "New Zealand Herald" (mainstream daily paper) reportage:

"......The Birkenhead/Northcote area was one of 14 studied and one image showed blocks lining the picturesque historic waterfront, an image which left Nick Kearney, deputy chairman of the Kaipatiki Local Board which represents the Birkenhead area, seeing both sides of the debate:

"In one sense, it's predictable because if we're going to have this compact city and one million more people to house, then really what alternative do they have? That's what you're going to have to expect. On the other hand, being a locally elected representative it will go down like a bucket of cold sick in my area.......""

Work tasks.

I guess his boss has told him to spam comment boards with "evidence" for "planning is bad". I hope the author doesn't expect a raise from this output (or previous either)...



Not Much Evidence

He links to a blogger in Aukland, NZ, who has not gotten any comments on his post about this plan - hardly a sign of a mass movement. He also links a news article that quotes three local politicians in Aukland, NZ.

I am gobsmacked that anyone would consider this to be evidence of a widespread revolt against smart growth.

It is not news to say "NIMBY opposes smart growth," any more than it is news to say "dog bites man."

But I don't think Wodehouse is working for any boss. I think this is his own effort.

I am surprised to see that Wodehouse opposes this up-zoning. He has often said that his main concern is housing costs, and that he is opposed to urban growth boundaries because they limit supply of housing and push up prices. Why would he support low-density zoning within the city that limits supply of housing and pushes up prices?

It seems that he supports NIMBYs who want to limit housing construction in the city, just as strongly as he opposes environmentalists who want to limit housing construction on the furthest peripheries of the city. Both push up prices, so it seems that Wodehouse is more interested in promoting low densities than in promoting low housing prices.

Charles Siegel


But I don't think Wodehouse is working for any boss. I think this is his own effort.

That could be, if someone gave him (or he came across) the standard playbook. His rhetorical tactics are right out of the standard template.

Speaking of using the standard playbook (and turnabout is fair play), did you see the Brit scientists using a page out of the Denialist Playbook and asking a denialist think-tank for its records? Benny Peiser is their manager, and he and I used to go at it quite a bit when I used to point out the falsehoods he used out of the playbook when he was a cub cutting his teeth in the FUD industry. His tactics were very much like our cub here on our little site.



Standard template? ME?

What I oppose is the forcing up of raw land prices. No amount of trading down size of lots, ever compensates for this. Aucklanders are already paying about 5 times as much for a tenth of an acre, as most Americans pay for half an acre plus.

The study I referenced actually points out that all the property at the upzoned locations, is already so expensive as to prohibit redevelopment.

Glaeser et al back in the 1990's condemned large lot zoning that, they said, forced the price of housing up 4% per half acre mandated. This is a bit petty compared to regulations that double the costs along with reducing the sizes several-fold.

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