Why Urban Growth Boundaries Fail

Advocates of smart growth have been concerned about declining housing affordability in their "city of a hill," Portland, Oregon. So when Georgia Tech's Dr. Arthur C. Nelson hypothesized that rising costs represented capitalization of Portland's desirability in housing prices, straws were grasped throughout the movement. Nelson's hypothesis was repeated as sacred truth. But the foundations are as sand.

Portland's housing affordability, as measured by the National Association of Home Builders Housing Opportunity Index fell 56 percent from 1991 to 2000, the worst performance of any of the largest 85 metropolitan areas. (The Housing Opportunity Index measures the percentage of families in the metropolitan area that can be afforded by the median income household.)

Worse, the capitalization theory would require similar cost escalation in metropolitan areas growing faster than Portland. But this is not the case. Housing affordability increased four percent in Atlanta and eight percent in Phoenix (which grew 45% and 70% respectively faster than Portland).

Just as prices rise when OPEC limits the supply of oil, housing costs rise when planners limit the supply of land --- whether through Portland style urban growth boundaries or heavy handed policies that distort development markets.

The timing could not be worse for America's minorities. For half a century, public policy has sought to create equality of economic opportunity for all people, non-Hispanic White, Hispanic, African-Americans and all others. Minority home ownership rates remain a full third below that of non-Hispanic Whites. The good news is that they have been rising at twice the non-Hispanic White rate. Smart growth's land rationing could turn this around.

Minorities have faced discriminatory housing policies before. A federal agency started the practice of "red lining" in the 1930s, a policy which for decades denied mortgage loans to entire minority neighborhoods. By drawing lines outside of which development cannot occur and thereby raising prices, Smart Growth offers to resurrect similar outcomes, through "green-lining." Green-lining excludes many entry level buyers, a disproportionate share of whom are minorities. For example, if housing affordability had declined in Atlanta as in Portland, it is estimated that 25,000 fewer African-American households would have been able to purchase homes between 1991 and 2000 ( see American Dream Boundaries: Urban Containment and its Consequences ).

Further, equity in owned homes represents the most significant source of wealth accumulation for lower middle income people. Thus, this elitist assault on the American Dream will not only injure minorities, but it could also retard overall economic growth.

Wendell Cox is principal of Wendell Cox Consultancy, an international public policy firm. He has provided consulting assistance to the United States Department of Transportation and was certified by the Urban Mass Transportation Administration as an "expert" for the duration of its Public-Private Transportation Network program (1986-1993). He has consulted for public transit authorities in the United States, Canada, Australia and New Zealand and for public policy organizations.