Land-Use Regulation, Income Inequality and Smart Growth

A recent paper by Harvard economists Daniel Shoag and Peter Ganong titled, Why Has
Regional Convergence in the U.S. Stopped? indicates that land
development regulations tend to increase housing costs, which contributes to inequality
by excluding lower-income households from more economically productive urban regions. Does this means that planners are guilty of increasing income inequality?

Smart growth critics imply that virtually any policy intended to influence development patterns reduces economic development and
opportunity. For example, columnist Virginia
Postrel used this to label economist Paul Krugman elitist (why him?), and Randall
O'Toole used it to criticize urban planners, claiming, "Of course, many
urban planners still refuse to believe that land-use regulation makes housing
expensive."

But the research actually indicates something quite
different than what critics imply. Many of the development restrictions reflected
in this analysis are old, sprawl-inducing restrictions on development density and
multi-family housing supported by local residents, rather than progressive, smart growth policies intended to support more compact development supported by planners. Shoag and Ganong used the Wharton
Residential Land Use Regulatory Index and other studies, which indicate that regulatory intensity is:

• Negatively correlated with population density. Lower
  density towns tend to have the strictest regulations.
• Lower in central cities than suburbs.
• Strongly positively correlated with indications
  of wealth (median family income, median house value and share of adults with
  college degrees).
• Higher in coastal states than in the Midwest and
  Southern states. This probably reflects a combination of natural development restrictions
  (such as shorelines and mountains).
• Positively correlated with direct community
  democracy in the form of town meetings that require land use issues to be put
  to popular vote.

It is true that some smart growth policies increase unit land costs (cost per acre), but others increase affordability by reducing per unit land requirements, reducing parking costs, and reducing transport costs, as indicated in the following table:

Smart Growth Household Affordability
Impacts

Many Smart Growth
strategies can increase housing affordability.

Housing affordability and economic opportunity are important
planning objectives but they should not be considered in isolation. Rational planning favors "win-win" housing affordability strategies that also help reduce transportation costs, reduce traffic and parking congestion, increase traffic safety and public
health, improve accessibility for non-drivers, and protect environmental
quality. These
include:

• Allowing increased land use density and mix in
  accessible, multi-modal areas (walkable and transit-rich areas).
• Reducing minimum parking requirements and
  supporting more efficient parking management.
• Locating public facilities and services
  (schools, parks, shops, etc.) where they are accessible without a car.
• Reduce development and utility fees for more
  compact development, reflecting the lower costs of providing public services in
  more accessible locations.
• Improve affordable transport modes (walking,
  cycling, public transit and carsharing).

It is inaccurate to suggest that smart growth policies are the main cause of housing unaffordability: there may be correlation since smart growth policies tend to be implemented most in regions that have a combination of rapid growth, geographic constraints on development and high environmental amenities (such as shorelines, mountains or limited water supply), which tend to increase housing prices due to a combination of strong demand and limited land supply, but this does not prove causation. Put differently, high housing costs in these areas likely reflect the implementation of some smart growth policies, such development restrictions, without others that increase housing affordability such as increased allowable density, and reduced parking requirements and traffic impact fees in more accessible locations. The best solution, therefore, is more rather than less smart growth.

It is also inaccurate to claim that the restrictive regulations that reduce housing affordability are instigated by planners; on the contrary, progressive planners work hard to reduce unnecessary regulations and encourage more affordable development - after all, on a typical planner's wage that could be our home! However, we face resistance from local residents who fear change, particularly infill development.

For more information

Affordable Housing Design Advisor Website (www.designadvisor.org),
sponsored by the U.S. Department of Housing and Urban Development, provides
information on developing more affordable housing, redeveloping urban
communities and implementing smart growth.

AIA (2010), Promoting
Livable Communities: Examining The Internal Revenue Code And Reforming Its
Influence On The Built Environment, Smart Growth America (www.smartgrowthamerica.org ) and
the American Institute of Architects; at www.aia.org/aiaucmp/groups/aia/documents/pdf/aiab083048.pdf.

Ariel Bierbaum, Jeffrey
Vincent and Deborah McKoy (2010), "Linking Transit-Oriented Development,
Families and Schools," Community
Investments, Vol. 22, No. 2: Summer, Federal Reserve Bank of San Francisco;
at www.frbsf.org/publications/community/investments/1008/pdf_bierbaum.html.

CNT (2006), Paved
Over: Surface Parking Lots or Opportunities for Tax-Generating, Sustainable
Development? Center for Neighborhood Technology (www.cnt.org);
at www.cnt.org/repository/PavedOver-Final.pdf.

CTOD (2009), Mixed-Income
Housing Near Transit: Increasing Affordability With Location Efficiency, and Mixed-Income
Housing TOD Action Guide, Reconnecting America and the Center for Neighborhood
Technology (www.mitod.org); at www.reconnectingamerica.org/public/display_asset/091030ra201mixedhousefinal.

Deborah Curran and Tim Wake (2008), Creating Market and Non-Market Affordable Housing: A Smart Growth
Toolkit for BC Municipalities, Smart Growth BC (www.smartgrowth.bc.ca);
at www.smartgrowth.bc.ca/Portals/0/Downloads/SGBC_Affordable_Housing_Toolkit.pdf.

Jonathan Ford (2009), Smart
Growth & Conventional Suburban Development: Which Costs More? U.S.
Environmental Protection Agency (www.epa.gov/smartgrowth/sg_business.htm);
at www.morrisbeacon.com/images/documents/MBD%20EPA%20infrastructure.pdf.

HousingPolicy.Org (www.housingpolicy.org) is an online
guide by the Center for Housing
Policy that provides information on and examples of policies that increase
housing affordability.

HUD (2008), Impact Fees & Housing Affordability: A
Guide for Practitioners, Office of Policy Development and Research,
Department of Housing and Urban Development (www.huduser.org); at www.nmhc.org/Content/ServeFile.cfm?FileID=6877.

Marc Lee, Erick Villagomez, Penny Gurstein, David Eby and Elvin Wyly
(2008), Affordable EcoDensity: Making
Affordable Housing a Core Principle of Vancouver's EcoDensity Charter, Canadian Center for Policy Alternatives (www.policyalternatives.ca); at www.policyalternatives.ca/documents/BC_Office_Pubs/bc_2008/affordable_ecodensity.pdf.

Jonathan Levine (2006), Zoned Out: Regulation, Markets,
and Choices in Transportation and Metropolitan Land-Use, Resources for the
Future (www.rff.org).

Todd Litman (2007), Evaluating Affordability for
Transportation Planning, Victoria Transport Policy Institute (www.vtpi.org);
at www.vtpi.org/affordability.pdf.

Todd Litman (2009),
Smart Growth Reforms, VTPI (www.vtpi.org);
at www.vtpi.org/smart_growth_reforms.pdf.

Todd Litman (2009), Where
We Want To Be: Home Location Preferences And Their Implications For Smart
Growth, Victoria Transport Policy Institute (www.vtpi.org); at www.vtpi.org/sgcp.pdf.

Todd Litman (2010), Affordable-Accessible
Housing In A Dynamic City: Why and How To Support Development of More
Affordable Housing In Accessible Locations, Victoria Transport Policy
Institute (www.vtpi.org); at www.vtpi.org/aff_acc_hou.pdf.

Todd Litman (2011), Critique
of the National Association of Home Builders' Research On Land Use Emission
Reduction Impacts, Victoria Transport Policy Institute (www.vtpi.org); at www.vtpi.org/NAHBcritique.pdf.

Todd Litman (2012), Debating
Smart Growth, Planetizen (www.planetizen.com);
at www.planetizen.com/node/54830.

NMHC (2007), Overcoming
Opposition To Multifamily Rental Housing, National Multi Housing Council (www.nmhc.org);
at www.nmhc.org/Content/ServeFile.cfm?FileID=5717.

Dan Parolek (2012), Missing
Middle Housing: Responding To Demand For Urban Living, Better Towns and
Cities (http://bettercities.net); at http://bettercities.net/news-opinion/blogs/dan-parolek/17698/missing-middle-housing-responding-demand-urban-living.

USGBC Affordable Housing Initiative (www.usgbc.org/DisplayPage.aspx?CMSPageID=2031),
US Green Building Council. Provides guidelines for creating more energy
efficient affordable housing.

Vancouver EcoDensity (www.vancouver-ecodensity.ca)
is an integrated program to increase urban livability, affordability and
environmental performance through policy and planning reforms that encourage
more compact, mixed, infill development.