Regulation, housing prices, affordability …

The NYTimes magazine this week is a jam-packed real-estate-centric issue. There are several articles I found interesting, but the story on Edward L. Glaeser is fascinating, enlightening and truly eye-opening. What fascinates me the most is his recognition and articulation of the interconnectivity of all of these issues – land use, transportation, social cohesion, human capital, human settlement patterns and importantly the need for growth and evolution of cities.

A few choice snips regarding rising housing prices:

Glaeser and several colleagues considered two explanations. First, the possibility that builders in the metro area were running out of land and that home prices reflected that scarcity. The second hypothesis was that building permits were scarce, not land. Had the 187 townships in the metro area created a web of regulations that hindered building to such a degree that demand far outstripped supply, driving prices up?

Almost as a rule, Glaeser is skeptical of the lack-of-land argument. He has previously noted (with a collaborator, Matthew Kahn) that 95 percent of the United States remains undeveloped …

While many of his academic peers were looking at, and denigrating, how the majority of Americans have chosen to live, Glaeser (though no fan of the aesthetics of sprawl himself) didn’t think an economist should allow taste to affect judgment. “You shouldn’t go around thinking that all these people are just jackasses for deciding to drive an automobile,” he says.

Civilization is an organic, living thing, an entity that is constantly changing. How are we going to grow? I’ve said it before – we are a young, sometimes infantile, country. We are going to grow.  The solution is not as simple as saying “grow here;” as that just hasn’t worked in Albemarle County. Other areas are struggling with growth, but there does not seem to be any real community cohesion or planning.

Perhaps most applicable to our region is this –

Homeowners, he points out, have a strong incentive to stop new development, both because it can be an inconvenience and also because, like any monopolist, stopping supply drives up the price of their own homes. “Lack of affordable housing isn’t a problem to homeowners,” Glaeser says; that’s exactly what they want.

Update 3/7/2006: There is an excellent discussion about this article at Asymmetrical Information that touches on sprawl, politics, affordability and more. 72 comments and counting … if you can find the time, you’ll read gems such as:

In my experience, smart growth doesn’t lead to affordable housing because it produces neighborhoods that are highly desirable for professionals and people without children.

It’s not designed to make housing affordable, it’s designed to make a given area sustain a larger population with a smaller footprint and less traffic.

So are you agreeing then that there’s pretty much no policy prescription that Democrats can rally around as an entire party that actually leads to affordable housing?

Unchecked sprawl, for all its faults, does make housing more affordable than development restrictions.

Enjoy.

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Whew. One of the best parts of the New York Times’ real estate magazine is online. When reading a long story online, a great annoyance is clicking through to the next page (in this case, seven!) of the article. The whizzes at the NYT heard my silent groans and installed a nice feature. In addition to the “printer friendly” option, they have a “single page” option. So simple, and so appreciated. Thank you.

Nytimes Grab-1

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3 Comments

  1. Duane Gran March 6, 2006 at 12:19

    Lack of affordable housing isn’t a problem to homeowners

    I believe this quote captures the essence of the problem. Add to this the delusional thinking of many homeowners that their home is an asset rather than a liability and there is little incentive to do anything productive about affordable housing.

    But what really gets under my skin about this issue is the elephant in the room — which is that expensive housing is an opportunity cost for everyone alike. A Center for Housing Policy report (4mb pdf) outlines the multitude of ways that expensive housing precluded the poor and middle class from purchasing otherwise useful and necessary things. It is a real eye opener, but people who own homes are largely oblivious to the problem because they feel more wealthy when their homes appreciate. In truth, it saps wealth from all of us (in the form of property taxes and higher interest payments) when housing prices rise abnormally.

  2. Jim March 7, 2006 at 08:27

    Great article….thanks for posting- jf

  3. Jim March 7, 2006 at 13:30

    Duane –

    Thanks for writing. Until more people choose to become aware of, and do something about the affordable housing issues, the problem will persist. Unfortunately, many of governments’ solutions are for everybody rather than solely for those who want to be responsible homeowners.

    Thanks also for the link to the Center for Housing Policy report. Glad they have an Executive Summary :).

    Compared with working families in more affordable housing, families that pay more than half of household expenditures for housing reduce expenditures for other essentials such as food, clothing, and healthcare. But by far, the biggest tradeoff is for transportation.

    This is something that does not get the attention it deserves, and leads into another aspect of the affordable housing discussion. As people choose to relocate out of city centers to take advantage of gentrification, their jobs do not move with them. They tend to then commute into work, thus adding to transportation costs for everybody …