You Got to Be Kidding Me!

Housing Prices, Cyburbia and Development Regulations

Posted in Economics, Urban Planning by Stacy McMahon on March 22, 2005

Just from the topics in that title, this could be a book. I’ll try to keep it down to post-length. A thread on the Cyburbia forums cited an article in The Economist (requires a premium subscription, so I won’t bother with a link) that blames development regulations for high housing prices in the West’s most successful cities. The user who started the thread blamed planners for the regs, and thus the affordable housing crunch. A couple of points bear answering.

First, the development regulations that cause housing shortages are the same ones that cause sprawl, and they’re substantially not the planning profession’s fault. In [most] planners’ ideal worlds, the landscape would contain a series of compact towns and cities. These urban enclaves would have office and industrial space to support their economic activites, a dense downtown featuring sidewalk cafes, stores and other businesses with dwellings extending some number of floors above, and a series of surrounding neighborhoods with townhouses or single-family homes on small lots lining a compact grid of streets. Sprawl-free farm, forest and parkland would line the railroads and highways between towns. If you’ve been to Europe, or Oregon, you’ve seen what this would look like.

Local residents, presented with such a plan, usually feel that their pristine small towns and subdivisions are under threat of being replaced with heavy-duty city streets (and all that that implies). So they respond by arguing the zoning down to two houses per acre in town, and 20 acres per lot out along the highway. At this point, all the people who would have lived and worked in the town if it were built up have to go another 10 miles down the road to find a subdivision to live in. The process both increases sprawl and drastically limits the supply of housing, resulting in price spikes. If they’d done it the planners’ way, a lot more people would live more affordably in a smaller footprint, without covering the countryside in half-acre lots for 60 miles around the city.

Second, the responses in the thread show an alarming lack of knowledge of basic economics among planners (or at least those who subscribe to Cyburbia). Almost nobody mentioned supply and demand, even though the article names constriction of supply as a causal factor in high housing prices. Some blame sprawl itself, as if the mere fact of placing a subdivision miles instead of blocks away has any substantial effect on the cost of building it. Others try to put a 100%+ increase in real-dollar cost down to updated materials, or building codes. The same codes apply, and the same materials are used, in places with slow growth where housing costs literally half as much as in a hot market like Washington. I’ve mentioned before that the planning profession has a decidedly mixed reputation with the public whose habitat we presume to design. Getting smarter about market forces that, after all, have an enormous effect on the work we do would be a solid step in the right direction.

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