The Housing Bubble: The Planner's Role and Lessons Learned

Restrictions on expanding into urban peripheries are responsible for the significant lack of affordable housing in the U.S., U.K., Australia and New Zealand, argues Hugh Pavletich, co-author of the Demographia International Housing Affordability Survey.

Photo: Hugh PavletichIn January of each year, the Annual Demographia International Housing Affordability Survey is released. The 2008 4th Edition (data September Quarter 2007) covers the 227 major urban markets of the United States, Canada, the United Kingdom, Republic of Ireland, Australia and New Zealand.

The methodology employed in assessing affordability is the "median multiple" – as recommended by the United Nations and World Bank – where the median house price is divided by the median annual household income of individual urban markets to arrive at a multiple.

The Demographia Surveys clearly illustrate that house prices should not exceed three times annual household income.

If housing does exceed three times household income, it is a warning sign that there are likely regulatory impediments to that particular urban market's ability to supply affordable housing around the urban periphery.

So if the median annual household income of a particular urban market is $50,000, the median house price should not exceed $150,000. And as the urban peripheries are the supply or ‘inflation vent' of an urban market, we should expect peripheral starter housing to be priced lower, possibly around $125,000.

By restricting the supply of land around the urban peripheries – coupled with inappropriate infrastructure financing arrangements – city planners and officials set the stage for housing bubbles to form. This is exactly what has happened to many North American urban markets (other than 59 middle North American urban markets identified within the Demographia Survey), the United Kingdom, Republic of Ireland, Australia and New Zealand.

The housing bubbles of these dysfunctional urban markets are wreaking havoc throughout the global financial system – distracting policymakers from dealing with the underlying structural problems – which provided the environment for these bubbles to form in the first place. One only has to compare the comparative performances of the urban markets of Texas and California to see that the reasons for the housing fiasco in California are blindingly obvious.

Put another way – where are the $140,000 conventional starter homes and $73,000 manufactured homes including lots on the peripheries of the Californian urban markets? The reality is that they are not in California – because the regulatory environment simply does not allow them to be built.

Within its 2007 World Population Report, the United Nations was scathing of urban regulatory authorities that failed to act responsibly and allow affordable housing to be built – where it states within the Introduction:

"Three policy initiatives stand out in this connection. Preparing for an urban future requires at a minimum, respecting the rights of poor people to the city. As Chapter 3 shows, many policymakers continue to try to prevent urban growth by discouraging rural – urban migration These attempts to prevent migration are futile, counter-productive and, above all, a violation of peoples rights".

The question that then needs to be asked is – how has the planning profession internationally performed over recent decades in its duty to protect the rights of the poor to basic shelter?

Sadly, it is clear that the planning profession has too often lost its way by allowing itself to become captured by ideologues, less important aesthetic issues and those (both commercial interests and existing home owners) determined to exclude others from their rights to ownership and community participation.

As the devastation – in economic and social terms – of these unnecessary urban housing bubbles become obvious, there is a growing recognition within the planning profession internationally and outside of it that "things must change".

This necessary process of change will be assisted enormously by the survivors of the finance sector, who will be in no hurry whatsoever to provide the debt finance to fuel further housing bubbles. As the political and commercial pressures grow for more disciplined lending practices, urban regulatory authorities will be forced to act responsibly, as happened after the Second World War when the housing needs of returning troops had to be met.

Already, the housing construction industries of California and the United Kingdom have virtually collapsed – with build rates well below replacement – simply because the regulatory authorities do not allow affordable housing to be built on the urban peripheries.

Within my discussion paper "Getting performance urban planning in place" (hyperlink below), I suggest the need for the establishment of Local Government Performance Authorities at the state and national level – and the inculcation of simple performance measures in to Local Government Plans – to allow housing affordability to be restored over a reasonable and realistic timeframe. There is no simple solution, and each jurisdiction should discuss the best way to incorporate the appropriate Phased Housing Affordability Targets and performance measures into Local Government – mindful of its own political culture and traditions.

I am of the view that the Phased Housing Affordability Targets and performance measures should be as simple as possible. After all, this is not a complex issue, and both historically and currently, there are abundant examples where affordable housing is provided.

Nothing needs to be "invented" here.

The key performance indicator or measure should be the Median Multiple as outlined above – supported by further easily understood Supplementary Indicators. Within this discussion paper, I suggest six supplementary indicators – for population, peripheral urban / rural land price differentials, housing stock per 1000 population, build rates per 1000 population, age of housing stock in decadal bands and residential rental vacancy rates.

With these simple indicators in place, one has a helpful "snapshot" of the health or otherwise of a particular urban market and, most importantly, a clear picture of the pressures impeding the provision of affordable housing.

Therefore, the focus must be on (a) getting performance indicators in place, and (b) ensuring provision of adequate peripheral land so that raw peripheral urban land is near the price of adjoining rural land, and (c) infrastructure is appropriately financed. We have the examples of the Municipal Utility Districts (MUDs) of Texas as a guide, which no doubt could be refined further as well.

I was privileged to spend May and June of this year in the United States, studying various housing markets and enjoying immensely the civility, openness and tolerance of all I met. And enjoying "temptations" such as the Cheesecake Factory and Texas barbecues! In my view – there is no nation on the planet with America's capacity to "make things work" – when Americans decide to do so.

Within the United Kingdom, Australia and New Zealand over the past few years, there has been comprehensive public discussion of these urban structural issues impeding the provision of affordable housing. This "public conversation" has yet to get underway in the United States and Canada.

It needs to – with urgency.


Hugh Pavletich is a New Zealand commercial property developer, fellow with the Urban Development Institute of Australia, Past President of the South Island Division of the Property Council of New Zealand and co-author of the Annual Demographia International Housing Affordability Survey.

Comments

Comments

Michael Lewyn's picture
Blogger

If this was true...

Then the foreclosures would be concentrated where housing is most expensive - e.g. the most affluent parts of California.

From what I have read, my sense is that this is not so: that in fact the crisis is most serious in poor, relatively affordable areas, often in cheap Rust Belt cities like Cleveland.

Am I missing something here?

Missing pieces of information

1. The other co-author is Wendell Cox.
2. Demographia's website has this:
"DEMOGRAPHIA and THE PUBLIC PURPOSE
are undertakings of
WENDELL COX CONSULTANCY"

Article from National Business Review (NZ)

Pavletich pleased with progress on affordability
by Chris Hutching

Property researcher Hugh Pavletich has good reason to feel pleased with his lobbying of political and industry players about housing affordability.
Only four years after his first annual Demographia survey many of the basic premises have now become an accepted part of the lexicon used by political leaders, property players and researchers.
http://www.nbr.co.nz/home/column_article.asp?id=20225&cid=16&cname=Property

Missing the template.

You're not missing anything, Michael, except the parroting of the standard anti-planning line by the one-trick ponies. Perhaps the fact that you missed it is a good indicator of how wide their message has spread...

Best,

D

Close

Sorry, D, but you're missing it too because you thought you already knew the answer.
You understand the line to be that planning is what forces supply down incrementally because it insists on quality, and since urbanistic quality of life is more right than quantity, it's misguided to call on planners to back down. It's an inferior set of values.
Stabling that one-trick pony for a moment, let's turn to the other. The recently formulated founding-myth-in-hindsight of places which feel ascendant on their own terms - principally Vancouver, Manhattan, San Francisco, Portland, and elsewhere on the East and West Coasts - is simply that "it's so expensive because so many people want to live here(: they can feel the superior way of life)". Yes, Glaeser and Gyourko, or maybe Glaeser and Kohlhase, have shown that a lot of housing cost is not replacement cost or land price but simply the admission premium tied to being able to locate in the confines of a particular discrete neighborhood.

What this report is saying is not that magnitude of supply accounts for much, but that the magnitude of the gap between demand and supply accounts for much, and that is both more explanatory and more intelligent than the self-congratulatory, "Magnitude of demand accounts for much", which the smart urbanists cheer. We planners and planning supporters won't begin to have a less culpable role until we get it straight.

Missing a little bit

Michael,

I think you are missing a little bit. The housing price reductions/shot sales/foreclosures are mostly in places that saw a large run-up in prices the 4-5 years preceding the correction (Sacramento, Phoenix, LA, San Diego, Las Vegas, Boise, Boston, south Florida). Cleveland and Detroit are anomalies, I believe, because they have been driven more by job losses and economic stagnation. The other areas (the more widespread decline) were driven by the unraveling of speculators and overleveraged owners.

I don't know who this guy is, but I think he has a few decent points, although skews the bigger picture. With all planning's faults, as a profession, it is still the policy set by elected officials that allows or doesn't allow development and where, in the aggregate. To blame planners for this is kind of like blaming the tobacco company product manager for lung cancer.

In addition, I think there is a terminology gap between subsidized affordable housing and market rate affordable housing. Many planners are active in trying to develop or get developed subsidized affordable housing. But, not so many seem to care at all about making sure they don't inadvertently deter the development of affordable market rate housing.

Michael Lewyn's picture
Blogger

Anamoly shnamoly

I don't think its much of an argument to say that just because a place is hurting economically, its high rate of foreclosures is an "anamoly." That makes the high-prices-causes-foreclosure argument nonfalsifiable- any place that doesn't fit the generalization, one could write off as an "anamoly."

Or to put it another way: the key issue seems to me to be: is the predominant cause of the housing crisis poverty (and in particular, reckless lending to, and reckless borrowing by, poor people in economically troubled cities) or is it prosperity and overregulation (high housing prices causing people to borrow recklessly to buy homes in prosperous areas)?

The question is an empirical one, and I can't pretend to have researched the issue. There are lots of websites showing the number of foreclosures in individual zip codes- but I think the more useful statistic would be the percentage of homes within a zip code foreclosed, since not every zip code has the same number of homes.

too narrow focus

I think your focus here is too narrow. Foreclosures is but one symptom of the bursting of the housing price asset bubble which is the undesired outcome that the article is focused on. What about short sales? Price reductions that didn't end in foreclosure? That is still a bubble bursting. Foreclosures capture only a small portion of the widespread price declines.

Your key issue is a false choice. There is not one cause of the bursting of the housing bubble and I don't think "poverty" depending on how we define it, is one of them. Reckless and unsustainable lending and borrowing - check; unrealistic expectations about future price increases - check. Prosperity and overregulation may have contributed to higher house prices, but to your point, does not cause people to buy recklessly. Nevertheless, they did - see previous point about reckless borrowing.

So, I don't think simple empirical evidence of geographic clustering of foreclosure rates compared with income is going to help you determine causes. The causes of the asset price increase and subsequent decline are many and they are nuanced. It doesn't mean we can't study it, but it will take more than what you are suggesting.

Michael Lewyn's picture
Blogger

I see your point, but...

I worry more about foreclosures than I do about price declines, for the simple reason that foreclosures are more socially harmful because of their effects on neighborhood stability.

No.

The impossibility of owning a home in the most affluent parts of California, combined with the impossibility of building enough homes to meet demand in those same parts, pushed those who wanted to own a home out to the only places where "relativley" cheap housing was being provided (Central Valley of CA, Riverside/San Bernadino, etc.). Those are the places (formerly booming exurbs) where the foreclsure crisis is predominantly happening in CA (due to decling asset values combined with economic instability). It is a completely different dynamic than what is taking place is ageing rust belt cities (as that is not the result of a "bubble").

Unfortunately, the author above is correct when it comes to much of urban California... the rules, laws and process have made it economically impossible to build an "affordable" home (and I'm including small, multi-unit condo buildings here, not just single-fanily homes). It is a very large long-term problem for CA. However, I would not lay the blame solely on planners.

Michael Lewyn's picture
Blogger

Gets to a good point...

Which is that even if it isn't particularly relevant to the foreclosure crisis, unaffordable housing is a bad thing in itself.

And I would add that the real cause of same is NIMBYism more than planners - but that's the kind of regulation that the sprawl lobby won't touch.

Affordable housing in CA.

    Unfortunately, the author above is correct when it comes to much of urban California... the rules, laws and process have made it economically impossible to build an "affordable" home..). It is a very large long-term problem for CA. However, I would not lay the blame solely on planners.

Exactly. Lay the blame on the environment instead.

The environment cannot support the human population in that state, and the population's demands for high quality of life. The environment can support fewer people, or a lower quality of life. I left the Sacto area because of the degrading quality of life: poor air quality, increasing urban heat island, too many people necessitating building on floodplains (increasing my taxes to cover levee work), etc.

Best,

D

Affordable Housing Not Allowed???

I have been involved in urban development in Florida since 1977 and the developers on edges of our communities rarely (I can't think of once) ask to build affordable housing. In fact I once worked for a developer who pulled out because he was asked to build affordable housing.

Nonsensical

The average price of housing in the US in 1990 was six times the average dual earner income. This is a frightening change from the postwar Baby Boom in America during which a single earner income could afford the new government-backed mortages for "$140,000 starter homes" your article references. The answer to your question about the supply of these homes is: It no longer exists.

This article, while intriguing, fails to make any connection between the dramatic increase in housing prices (and the lowering of interest rates) and land use planning or urban growth regulation. Furthermore, it fails to articulate why affordable housing should be built along urban peripheries. Many of our existing suburbs have ample room for increased densification and the inclusion of affordable housing. There's surely no need to expand our cities' hinterlands further in pursuit of increasing the supply of affordable housing. The sort of expansion you allude to has resulted in the increased reliance on private vehicle travel, the decay of existing commercial and residential centers, increased crime, the waste of land, increased pollution, the inability of localities to offer public transportation options, and the general lowered quality of life and community cohesion throughout America and countries such as New Zealand that followed its lead.

I think the problem your getting at is: Our "economists" who tell us that their scientific modles should have eliminated volatile housing bubbles, the same who advise our leaders, were wrong. That the neoconservative ideals that would privatize our lending markets and eliminate all government oversight of lending institutions have failed our cities and our communities, and miserably.

Much to the contrary, the supply of affordable housing can be provided in conjunction with land use regulation that discourages sprawl, with investment in public transit, and with funding for schools and healthcare provide through increased taxes. Our national policy makers and our cities simply have to decide where their priorities are. I won't mention the wars and military contracts that our tax dollars currently fund. All the while our society and our cities rot.

The idea that land use regulation has in any way "...[impeded] the supply of affordable housing" is nonsensical.

I agree with you, however, that nothing needs to be "invented" here. We just need to determine what are our priorities through the "public conversation" you suggest.

Actually, it's quite sensical...

land use regulation is one of the, if not the, primary driver of housing unaffordability:

http://www.economics.harvard.edu/pub/hier/2002/HIER1948.pdf

Also, the ability to provide housing supply (as a function of the above) is one of the many reasons behind housing bubbles:

http://www.economics.harvard.edu/faculty/glaeser/files/bubbles10-jgedits...

Your first statement is confusing national averages and national incomes with local market conditions... even today $140,000 starter homes exist in much of the United States (just browse some realtor.com listings in much of middle America). The increasing unaffordability of the coasts is what is driving the averages up.

While I agree with you that we can provide for affordable housing without sprawling needlessly (most likley contrary to the article's ideas), I don't think increased land use regulation is the answer as the numerous regulations already in place are casuing the very unaffordability that is driving much of the sprawl in places like CA (even counting that some of the "affordability" is subsidized).

Michael Lewyn's picture
Blogger

Or more precisely...

Decreased land use regulation of infill allows us to have both less sprawl and more affordability.

Good point

and wisely put.

I agree with so many of the points in the adjacent threads here. I agree that land use regulation does indeed inflate land values; a Harvard report is not necessary to prove it. It just doesn't mean that an ample supply of affordable housing cannot be provided along with resonable land use and growth regulations. It does mean, however, that areas under land use control are less vulnerable to the vagaries of the national housing market, clearly.

Sensical rides the hobby horse

This paper is the favored citation from the usual suspects.

What is key in the paper is the description of how these regulations are enacted. Read the paper again and quote them here, please?

Well, seeing as how that likely won't be done as it wrecks the implicit argument, the authors say that it is regulations pushed by homeowners to protect their private property that drives scarcity and thus house prices go up. Protecting private property by mandating large lots, thus excluding others such as those seeking affordable housing.

So one could easily argue that maintaining government zoning rules to help protect private property is eliminating affordable housing in some markets.

Best,

D

Ouch! Nice Jab.

So now I can't read, I do love your snarkishness... Yes, you are actually precisely correct with your last assertion (see the Sue Hestor's of the world). Many communities use zoning to exclude the "undesireables". There's an interesting study, which I can't find at the moment, that has found the price point whereby homeowner's are likely to begin pushing for more restrictions on development to drive up their property values (from what I recall that price point is around $300,000) (which, incidentally also proves that homeowners are aware that restricting supply through regulation drives up property values even if certain folks are loathe to admit it). It should not come as a surprise that wealthy (and some non-wealthy folks to be fair) homeowners use the government to protect their investment...not like that's never happened before.

Still, I fail to see how this disproves the argument that land use regulations are one of the primary reasons that make housing unaffordable... whether invoked for the "public good" or private gain, the main point remains the same (as the gentleman responding above claimes that the assetion is completely nonsensical).

LU regs and affordability.

Still, I fail to see how this disproves the argument that land use regulations are one of the primary reasons that make housing unaffordable... whether invoked for the "public good" or private gain, the main point remains the same (as the gentleman responding above claimes that the assetion is completely nonsensical).

;o)

It doesn't disprove the argument, it contextualizes it. LU regs are not always the primary reason, nor were they in the past the first thing to drive up prices.

The point is that, say, in the Bay Area were all regs to be eliminated tomorrow, housing would not become affordable because of topography, water, seismic, environmental protection. The demand cannot be met. Folks want to live there, so they bid up rents to live there.

High-amenity areas in this country all have this issue. Cities know this too and provision amenities to attract the sort that has money to spend.

Best,

D

I Disagree

I will respectfully disagree with your assertion. They are the primary reason. I will readily admit, and do believe, that their are other contributing factors (topography, water, etc...) that would increase the price above what it would otherwise be. However, demand can be met, and it has been done before.

The Housing Bubble: The Planners Role and Lessons Learnt

Unfortunately - too many of the comments are wandering off topic and not addressing the real issue being - how to supply affordable housing to stressed bubble markets.

I have been very careful within my paper "Getting performance urban planning in place" (please read this carefully) - not to apportion all the blame to planners for the creation of these unnecessary bubble markets.

Indeed in a further article "Understanding Housing Bubbles" (search Google) I have plenty to say about what I believe to be the inadequacies in the training of economists too.

The planning profession has a particular responsibility to discuss frankly and opennly how it can play a constructive role to ensure that these unnecessary bubbles do not happen again.

I have been involved in development long enough to know that there are serious inadequacies in the training of planners and economists - which leads in turn to poor quality advice being provided to politicians.

Planetizen is a superb forum for planning professionals and others to discuss these issues and suggest constructive solutions to these serious problems.

Come on you Americans - are you going to let us Kiwis, Brits and Aussies lead the charge on these issues?

Hugh Pavletich
Co author
Annual Demographia International Housing Affordability Survey
Christchurch
New Zealand

Performance zoning.

the real issue being - how to supply affordable housing to stressed bubble markets.

Like so many of the ideas coming from this ideological corner, this is great in theory but doesn't work so well in practice.

Perf zoning on the Front Range in the US has largely been dropped, as it takes forever to front-load the code in such a way to make it easy to review, and then you have to have extra staff to understand it and enforce. Some places are trying to revive this practice, but end up with a hybrid because of the difficulties involved.

Best,

D

The US Already Leads The World

"Come on you Americans - are you going to let us Kiwis, Brits and Aussies lead the charge on these issues?"

The US already leads the world in sprawl. We don't need to encourage even more.

Instead, we should take the lead in smart growth and greenhouse gas reduction. Needless to say, this article completely ignores the issues of energy consumption and greenhouse gas emissions.

Of course, this article also ignores the obvious point that sprawl promoters always ignore. We can produce more housing by changing zoning to allow increased density in already developed areas, as well as by allowing more sprawl in what is now open space.

Charles Siegel

deregulating infill

This seems to be an area of agreement of almost everyone. I was not under the impression Hugh was against this, though he doesn't specifically address it. (Maybe this is his chance).

I think a lot of "free market" thinkers favor this so long as it's not the only thing that is deregulated. The interesting question in my mind is that if local governments only allowed infill housing development, as broad as can be defined, would that alone meet the market during future housing booms? I, personally, think greenfield development is ok, but what public policy should address is how to create incentives for compact, less impervious cover greenfield and penalize land-intensive, destructive, sparse greenfield development.

To Hugh's point, I'm not sure sure it is even the role of planners to try to affect the market rate of housing prices, either way. Perhaps the role of housing planning/policy is to simply supply some aid to those who can not participate effectively in market rate housing (i.e. help the poor). Brookings had a great suggestion a while back recommending simply modifying the EITC. You can't successfully address housing affordability without discussing income.

Infill and other housing encouragement.

Brookings had a great suggestion a while back recommending simply modifying the EITC. You can't successfully address housing affordability without discussing income.

One day, maybe soon, we'll re-do the perverse tax structure in this country, and we'll tax the bads while encouraging the goods. Environmental policy encourages this scheme - e.g. consumption tax to replace income tax.

Same thing with housing, if the country wants to ensure housing for all. I'm not sure how we can do this with the entrenched vested interests in this country, but we know how to do it.

Best,

D

Housing Bubble?

Many U.S. planners and planning organizations have been working for years to counter the flow of sprawl into valuable and disappearing agricultural lands citing precisely the reasons that have caused the "housing bubble" to explode.

We (and least most of us)planners have been vigorously supporting infill, density and transit-oriented living, and walkable communities for the past decade or two.

If you look at a forclosure map of the Bay Area, you'll see that the most forclosures are happening in the areas with the most precipitous losses in value, and that those areas are the outermost suburbs. You can probably gage the forclosure rate by the age of the neighborhood. These are the places in America where planners have had little or no influence and are, rightly, IMO, becoming ghost towns or "slumburbs." Hopefully we'll be able to grow organic vegetables there ater the swift removal of the MacMansions that should never have been built there in the first place.

Meanwhile, NIMBY forces in the suburbs (try building something in Palo Alto!) fight any new development on unfounded fears of scarce parking and living near people who don't need a quarter-acre to be happy.

Most San Franciscans, meanwhile, are happy to host good development, and realize that neighborhood services and better public transport need a neighborhood to support them.

The big gap in Mr. Pavletich's theory, at least in California, is that it is not possible to build any kind of dwelling for $150,000., and in this world of dwindling natural resources, this figure can only continue to rise.

In San Francisco, the city-mandated inclusionary housing percentages are also rising, and are seen by many as a tool to keep housing in the city accesible to middle and working classes. It doesn't seem to be scaring away too many developers (despite sword rattling) but it must add to the price of the non-affordable housing, widening the economic gap in the short run, at least.

So don't blame planners! Blame a backwards tax system. Blame lending prejudices tilted towards new development. The Federal Highway program. Landowners-rights groups fueled by greedy developers. Cheap gas. Inequitable federal and state transportation funding. The politicians. Car companies. Suburban homebuyers. All the usual suspects.

Flawed Affordability Measures

The Housing + Transportation Affordability Index, developed by CNT and its collaborative partners, the Center for Transit Oriented Development (CTOD) tends to support many of your points - nominally 'affordable' residences, located in sprawling developments far from the residents' work/school/shopping sites, are not so affordable when the costs of transportation are factored in:

http://htaindex.cnt.org/

I think the author fails to

I think the author fails to realize that there are no poor people in America...

If you believe that the only

If you believe that the only role of planners is to make it possible for every household to have a ranch house on an acre of land, then then this proposal might make sense to you. Fortunately, I think most of us believe that planning should further resource conservation, the protection of farm and forest land, the creation of better cities and neighborhoods, etc., as well as housing affordability. Good planning is more than handing out building permits.

We can meet environmental goals *and* provide housing affordability by directing development to infill locations and by building more urban housing types. It's good to see so many American cities (like Portland) moving in this direction.

Unregulated growth is not the answer

I’m weary of articles that misquote and misuse data to support the author’s own tenuous positions. One could respond with a 30-page epistle to this op-ed, but I will try to limit myself.

First, the author quotes a passage from the UN report that is addressing a very different issue in the developing world, namely China, where government regulations specifically limit mobility and do not allow rural residents seeking employment opportunities in urban areas to relocate to job-rich cities. This is not the same issue that we have in developed countries where we enjoy freedom of mobility, but may not be able to afford to live exactly where we would like, since the construction of affordable housing has become very difficult in many urban areas.

Like any industry with high capital costs that is profit driven, you are going to have a significant portion of the population that cannot afford the product. And yes, supply and demand play a HUGE role. There is no end to the number of people who would like to live in a place like San Francisco. And the Silicon Valley, the state’s economic engine, provides plenty of income to local buyers. But SF is a global market as well, and where local buyers haven’t stepped up, national and international buyers are more than happy to step in and purchase a pied-à-terre in one of the world’s most coveted markets at the seller’s asking price or higher, continually bidding up the market. Rental units have not been able to fill this affordability gap in areas like SF, NYC, etc., because the limited number of rental units also means higher rents.

But yes, there are enormous problems with regulations that affect affordability as well. Some of those regulations, such as rent control in SF, have exactly the opposite effect that they intend. SF rent control is tied to designated units based on the date of occupancy and only resets once there is tenant turnover. So for instance, the former law student who arrived in 1977 to attend Hastings still has his 2-bedroom rent controlled flat on Russian Hill for $850/mo, even though he now makes $450K as a partner in a prestigious firm. The same lawyer can, of course, afford two other homes in Napa and Lake Tahoe, while taking a rent controlled unit off the market in SF. There is no equity in this arrangement and it is just bad public policy.

So, do the costs associated with high land values, property taxes, construction materials, seismic upgrades, design guidelines, permit fees, connection fees, inspector fees, title fees, rent control, inclusionary housing, environmental regulations, real estate agent percentages, and real estate developer profits, etc. make housing exorbitantly expensive in a place like the Bay Area? Absolutely, it does. But is it the land use regulation portion of that equation that would seek to limit urban sprawl the real problem? Very doubtful!

San Francisco wastes an incredible amount of vertical space, even along major thoroughfares like upper Market Street where height restrictions and height-phobic residents are limiting the amount of housing in mixed-use developments. How much more housing could be produced if SF developers started building six to eight story buildings rather than three to four story buildings? How much untapped potential exists in downtown Oakland, west Oakland, Hunter’s Point, South San Francisco, San Bruno, etc. Is the answer to affordable housing and sustainable cities to continue to build greenfield developments one and two hours east of the Bay? Have you checked the foreclosure rates in Stockton recently? I would rather know how the state and local jurisdictions could better encourage infill development.

And wouldn’t our recent poor record on gauging the real costs of carbon-based emissions and the costs of subsidizing automobile transportation lead us to a more humble place? Just imagine all the imperfect pricing and long term effects that we currently don’t understand related to the housing market. What are the true costs to society if we deregulate growth at the peripheries of our cities? To our economic efficiency? To our environment? To our health and safety?

If you look at cities where unregulated (or less regulated) development has occurred in recent years, then you would have to look at cities like Raleigh or Atlanta. Beautiful vibrant cities in their own right, but is that the whole picture? Touting the successes of “affordable” homes in sprawling places like Raleigh and Atlanta would be ignoring the real costs of creating unsustainable cities. Most of these cities are among the worst contributors to carbon emissions per population in the US, according to a recently published Brookings Institute report. Southern cities also have some of the highest crime rates nationally, highest rates of obesity, most segregated neighborhoods, worst traffic congestion, fewest options for public transportation, and some of the greatest disparity of wealth between residents living in the suburbs compared to those living in the inner city. Hardly a model I would be quick to follow.

Not to mention that areas in Southern California that were developed in a similar pattern just a few decades ago have already experienced severe difficulties in maintaining the economic viability of their aging strip malls and cheaply constructed homes as newer developments have leap-frogged beyond their borders. What are the costs of the land devaluations in those areas? What are the impacts of traffic congestion and long commutes on pollution, on people’s mental and physical health, on our economic efficiency? What are the costs of redeveloping these areas? And, what are the societal impacts of declining neighborhoods and rising crime rates?

I’m still waiting for some cost models that make a faithful attempt at determining the real combined costs of some of these policies and development patterns over the long term. In the meantime I can use my own eyes and informed judgment and to spot those who would give us red herrings.

Stephen Prestwood, MPL
Consultant--Housing & Community Development

Missed two points

Let me admit at the beginning that I'm an amateur. That said, I'm very interested in affordable housing as both planning commissioner interested in the health of my community, and as modest-income retiree who'd love to have more than one or two choices available to me in this area. On the whole, I'd have to disagree with the author about building on the fringes. "The periphery" does not seem to me to be anything resembling a solution.

Two items occur to me that the author appears to have missed, and that I've not encountered in the comments I've read (I've read most of them, but not all).

First, it's been my experience as a planning commissioner in two Colorado Front Range communities that planners do not get to make land use or housing policies. Planners, as far as I can tell, are employees. They work for a combination of city administration and political leadership. The exact ratio of power, and relationship to each other of those entities tends to be in flux, but my point is that it's not the planners who bear the ultimate responsibility — it's the citizens of the areas/cities involved, since they not only elect their political leaders, but also often speak up regarding these issues at public meetings, and the "executive" level city administrators who, more or less under the radar, have both direct and indirect influences on the formulation of housing policy, as well as on how those policies are actually put into practice (or not).

Second, the crucial element missing from many of the comments is zoning, which certainly qualifies as land use regulation. Here again, it's not the planners who get to decide the specifics of how and why an area is zoned a particular way. If the community is politically dominated by a kind of "suburban" mind set that sees only the half-acre lot and large, auto-dependent, single-family housing as "normal" or desirable, it's going to be difficult for significant affordable housing to be built. This insistence on big houses built on big lots is a not-at-all-subtle form of economic bigotry, but even when planners recognize that, since they don't get to make policy, there's usually little they can do to change the situation.

Affordable housing requires a genuine community belief in economic diversity, something many suburbs built in the past half-century notably lack. It also requires political will on the part of elected officials. Since they're elected by the same people who usually don't want anything resembling economic diversity, this political will is likewise notably absent in most relatively recent suburbs.

I certainly don't argue with the author's "Median Multiple," but the communities I've served as a planning commissioner have little or no housing being built for individuals or families at the median-income level (or at 3 times that level for ownership). This doesn't disturb the general population at all — at least there's no public evidence that the general citizenry is concerned about this.

Behind the scenes, I hope planners lobby vigorously for fair and diverse housing, both rental and ownership, within their communities, but at the risk of being redundant, I must once again mention that planners don't get to make policy decisions. At best, if housing policies reflect the usual economic prejudices, planners can only try to mitigate the worst outrages initiated by misguided policies, and even that must be done behind the scenes.

Power, Politics and Persuasion.

Good comment. Your assertion

First, it's been my experience as a planning commissioner in two Colorado Front Range communities that planners do not get to make land use or housing policies. Planners, as far as I can tell, are employees.

is somewhat true, but the Front Range is a little different, what with the prevalence of Metro Districts and HOAs making an extra layer of 'government' - albeit amateur - on top of the land.

Planners make the comprehensive plans that set general land use and housing policy; these plans are supposed to guide decision-makers in their decisions.

The policies are there, do they get followed and are they enforceable is the key. The interplay of power relations makes comp plans work or not.

Specific to your point, Colorado is still coming out of the cowboy times, mistrusts th' dang gummint (thus the creation of private/amateur government in the form of Metro Districts and HOAs) and IME one may find that 'let's not reinvent the wheel' doesn't enter into the discussion when land use comes up.

Best,

D

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