Wednesday, May 31, 2006

"A Sad Distortion of Social Priorities"

Well, I guess I am not alone afterall in claiming that strict environmental zoning and artificial land-use restrictions are counter-productive and socially disruptive. Further, despite our claims that we are oh-so-progressive, this article claims that such land-use restrictions are in fact anti-progressive.

Land-use restrictions were started, or so it is claimed by their proponents, in order to make the Bay Area more "livable" (insert your favorite intangibles here). To no one's surprise the artificially created scarcity of land has made housing unaffordable in the Bay Area and has no doubt inflated our egos to match ("Wow! I live in a million dollar 2 br 1 ba hill shack. We must live in the best place ever!"). This pathetic situation has only been exacerbated by the run-up due to the incredibly easy access to credit, exotic "toxic" loans, etc. all of which add up to the housing bubble mess that we are currently living in. But like this article says, "how livable is a place if you can't afford to live there?"

It was well known in the 70's (as attested to by my boomer parents and their friends who still live here) that these restrictions would primarily preserve if not increase land values and that was a big part of it. Property values clearly took precedence over building a healthy community, kids' education and development, social mobility, diversity, business, etc.

That was the choice made by the previous generation. But we don't have to sit idly by.

Marin County's (and others') land-use restriction policies are best summed up by the article as "a sad distortion of social priorities". As much as I like pasture land and trees, I couldn't agree more. It is at best an experiment that has gone awry. Flame away if you must, but someone has to ask the hard questions in public and it might as well be me and besides, what better medium than a blog?

The sooner that we acknowledge that a problem exists the sooner we can address it. I don't think more of the same can be tolerated. I'm afraid that if things do continue on as they have been then there may be no businesses left or the only way to make sufficient money to live here will be more frequent and more extreme boom-bust cycles, more get-rich-quick schemes (e.g., options), more who-knows-what.

Some choice quotes (emphases mine):
Most people know that the San Francisco Bay Area has one of the most expensive housing markets in the nation. However, not everyone realizes that, as recently as 1970, Bay Area housing was as affordable as housing in many other parts of the country.

Data from the 1970 census shows that a median-income Bay Area family could dedicate a quarter of their income to housing and pay off their mortgage on a median-priced home in just 13 years. By 1980, a family had to spend 40 percent of their income to pay off a home mortgage in 30 years; today, it requires 50 percent.

What happened in the 1970s to make Bay Area housing so unaffordable? In a nutshell: land-use planning. During the 1970s, Bay Area cities and counties imposed a variety of land-use restrictions intended to make the region more livable.

These restrictions included urban-growth boundaries, purchases of regional parks and open spaces and various limits on building permits. These regulations created artificial land shortages that drove housing prices to extreme levels. Today, residents of Houston, Texas, can buy a brand-new four-bedroom, two-and-one-half bath home on a quarter-acre lot for less than $160,000. That same house would cost you more than five times as much in Marin or Contra Costa counties, seven times as much in Alameda County, and eight to nine times as much in Santa Clara, San Mateo, or San Francisco counties.

In fact, planning-induced housing shortages added $30 billion to the cost of homes that Bay Area homebuyers purchased in 2005. This dwarfs any benefits from land-use restrictions; after all, how livable is a place if you can't afford to live there?

The benefits of protecting open space are particularly questionable. The 2000 census found that nearly 95 percent of Californians live in cities and towns that occupy just 5 percent of its land. Many San Francisco Bay Area counties have permanently protected more acres as open space than they have made available for urban development. When such actions make it impossible for middle-class families, much less low-income families, to afford their own homes, they represent a sad distortion of social priorities.

Moreover, as in the 1980s, California's fast-rising home prices have attracted speculators who have created huge bubbles in the state's housing markets. Bay Area prices fell by 10 percent in the early 1980s, 20 percent in the early 1990s, and are likely to fall even more as the bubble deflates in the next few years.

The impacts of high housing prices are also reverberating throughout the region's economy. First, economic growth has slowed as businesses look elsewhere to locate offices and factories. High housing costs have also increased prices for food and other consumer goods; retailers now pay $1 million per acre or more for store locations. Far from reducing driving as planners desire, high housing prices force many commuters to live farther away from their jobs, forcing more cars onto the roads. Ironically, an obsessive focus on protecting Bay Area "farmlands" (in fact, mostly marginal pasturelands) forces people to move inland and more rapidly develop the highly productive croplands in California's not-yet-so-unaffordable Central Valley.

The people most enthused about all these planning rules like to call themselves ''progressive.'' But the effects of planning on home prices are entirely regressive. Planning-induced housing shortages place enormous burdens on low-income families but create windfall profits for wealthy homeowners. Does this steal-from-the-poor, give-to-the-rich policy reflect the Bay Area's true attitudes?

Homeownership is more than just a dream, it is a vital part of America's economic mobility. Most small businesses get their original financing from a loan secured by the business owner's home. Children in low-income families who own their own homes do better on educational tests than those who live in rental housing. Barriers to home ownership reduce this mobility and help keep low-income people poor.

Predictably, planners' solutions to the housing affordability problem often make the problem worse. Planners typically require that homebuilders sell or rent 15 percent of their homes at below-market rates to low-income families. The homebuilders simply pass that cost on to the buyers of the other 85 percent of the homes they sell. Existing homeowners, seeing that new homes suddenly cost more, raise the price of their homes when they sell. The result: A few people benefit and everyone else pays more.

The solution to the Bay Area's housing affordability crisis is not a few units of affordable housing, but widespread land-use deregulation that will make housing more affordable for everyone.

27 Comments:

Blogger rejunkie said...

Sure, I would be open to relaxing the building rules with one caveat: no more McMansions. There are precious few condos (read: affordable entry-level homes) in Marin and no one has built a decent sized condo development here in at least 15 years. Everything of late has been 2500SF houses on 4000SF lots with $900k+ price tags in Novato. These homes do nothing to address affordability nor efficient land use and public transportation. I would insist that higher density condo's near existing transportation but with square footage to accommodate a family (1500SF) be the bulk of the new housing stock. Many of the smaller in-fill developments in San Rafael are the sort of projects I would favor. When you run out of infill projects, then you can start paving over pastures. We don't need to be "Livermore-ized".

May 31, 2006, 8:22:00 PM  
Blogger marin_transplant said...

Nice article, but politically, any change in the status quo is basically impossible at this point.

Do you honestly think that the voters of Marin will voluntarily allow more housing to be built, and thereby allow their property values to be pushed downward?

Oh, I suppose the state goverment could try to go over the heads of the voters in Marin, and impose some time of law that would allow more housing to be built here. But, given the millions in campaign donations that flow out of the county every year, how likely do you think that is?

May 31, 2006, 8:52:00 PM  
Blogger Rob Dawg said...

Randall and I agree on a great number of things but over a great many years we still disagree on this one point. I respect him too much to say he is outright wrong but Ineed continually remind him that the introduction of restrictive land use policies and subsequent price pressures are not cause and effect. This latest article is but a minor refinement of a lonf running series. I shall reproduce my letter to Randall from the last version published in March:

Randall,
As much as we agree almost all of the time, I take exception on one issue within your new Planning Penalty Series. When you calculate "Median Value" you use a "value-to-income ratio of 2.24."

There are at least three problems with this metric. 1, For counties like Ventura transitioning from rural to urban over the time periods studied means changes at the margin are being applied to the whole. 2, For places like Ventura with new housing stock drastically different from the existing stock, sales price doesn't matter, it is price per square foot. A home in Ventura in 1959 was 1100 sf on 1/6th acre. My 1961designed house was a semi-custom luxury mansion at 2600 sf when first sold in 1963. Today it is -extremely- modest amongst its peers. 3, Then there is the quality issue; 1959 saw two prong 40 amp service, no insulation, formica maybe. 2005 sees 200 amp, triple pane window, Corian and low flush toilets.

Sure there is a massive planning penalty. Sure there is also a massive shift in consumer spending away from food and durables to housing. Sure there is a PREMIUM for restrictive policies. All I suggest is that they aren't responsible for all of what you are measuring.

Then there is a density penalty unrelated to restrictive zoning issues even if they overlap. You need to include this. LA and NYC are dense and expensive because of this. I think upon further analysis you will find the places, like Ventura, are "overpriced" disproportionately because of the density components and not the more general planning restrictions you cite.

Finally there is, for want of a better phrase, a "stability premium." All of California is more costly because buyers know what their property taxes will be for as long as they own. Places like Ventura, Napa and Marin also have land use stability in that they have enacted the very laws you decry. People resent being told that the neighborhoods they chose to invest in need to be changed and it is for a greater good and they are expected to pay for it.

In summary, I think when you adjust for changing area characteristics, changing housing stock and market premiums for stability and then use monthly costs (TCO) as opposed to sales price unadjusted you will see that the differences are far smaller than you suggest.

Highest Regards,
Robert

Jun 1, 2006, 7:55:00 AM  
Blogger Fortunate One said...

Today, residents of Houston, Texas, can buy a brand-new four-bedroom, two-and-one-half bath home on a quarter-acre lot for less than $160,000. That same house would cost you more than five times as much in Marin or Contra Costa counties, seven times as much in Alameda County, and eight to nine times as much in Santa Clara, San Mateo, or San Francisco counties.

Are you sure this guy has his facts straight? Marin costs less than Alameda, etc?

Jun 1, 2006, 8:35:00 AM  
Blogger hemorrhoidforhousing said...

I'm of the mind to have a bumper sticker made which reads:

Shove it up your open space,
build more homes.

Jun 1, 2006, 8:53:00 AM  
Blogger marin_explorer said...

This comment has been removed by a blog administrator.

Jun 1, 2006, 9:11:00 AM  
Blogger marin_explorer said...

This comment has been removed by a blog administrator.

Jun 1, 2006, 9:21:00 AM  
Blogger Rob Dawg said...

>Forcing development into ever-diminishing urban corridors--ie strangling people so cows run free.

Agreed. Developed densities is a trick by urban planners to... wow... increase density.

>The naive concept that preserving cow pastures equals sound environmental management.

Yes and no. There are conflicts in land use. Land use regulations aka zoning are supposed to address these. Cow pastures can be incompatible land uses. So can CSD. There is no uniform analysis that prefers one over the other.

>Pushing no-growth ("environmental") policies as an appeal to local vanity, rather than actually planning for future growth needs.

This is a fallacy. No-Growth is a radical extremeist appelation. The problem is that there are competing and synergistic complements.

>Is it possible to debunk the idea that inflated home values are “good” for homeowners, cities, and the overall economy?

Not only possible but easy. The problem is that like most economic measures this requires an agreement as to what is good.

For example, a tax base from more family-targeted housing could be more advantageous than fewer, more expensive homes.

This example is inoperative. There is NO example of what you posit. Luxohomes are the bestest things ever from the municipal perspective. Fewer services, more taxes.

Jun 1, 2006, 1:39:00 PM  
Blogger poguemahone said...

OT: I plotted all the latest OFHEO data released today:

www.housedata.info

Jun 1, 2006, 1:52:00 PM  
Blogger peterbob said...

Well argued Marinite. If the price of housing outpaces wages and other goods over a few decades, then it seems to me that the government has thrown a monkey wrench into the gears and is distorting prices. Why hasn't supply of housing risen to keep pace with demand over the last few decades? Because of zoning restrictions and Prop 13.

When will people on this and other blogs turn their attention away from RE agents and toward city zoning boards that choke new development? If you are really concerned about long run affordability, act locally!

Jun 1, 2006, 1:53:00 PM  
Blogger Marinite said...

Posted on Charles Smith's behalf:

Hi:
Important topic today, three comments:
perhaps not in Marin but in many places developers simply ran out of land close to the urban centers (i.e. san fernando valley and silicon valley). Two: condos don't get built in Calif. because the laws favor construction defect lawsuits, usually filed on the last day before liability expires. If the Legislature changed that high litigation exposure, more affordable housing would be built. Three: in the good old days, a bldg. permit cost a few hundred bucks. Now, with sewer and school tax fees, the cost of just getting approval can cost tens of thousands of dollars. This huge upfront expense encourages builders to go with McMansions because the overhead is a smaller % of the cost if the house is blown up to the max. This is a complex topic, much more to be said. Thanks for opening the subject up for debate/comments.

I tried to post this but don't want to register and get a blogger blog. I got enough technology loose ends as it is! Feel free to post the above as a comment if it has any merit.

best regards,
charles smith

Jun 1, 2006, 1:55:00 PM  
Blogger burbed said...

I was excited by this entry and link, until it cited Houston as a positive example.

I'm all for affordable homes, but any time someone cites Houston as a positive example, there's something wrong. Houston is a freemarket, libertarian's dream city.

Have you been there? Housing is more affordable there, but the worst neighborhoods are 10x worse than the worst neighborhoods in the Bay Area. There, everyone has a long traffic jammed bumper to bumper commute. It's a developer's dream.

Yeah the open spaces do seem a bit wasteful at times, but if you've ever been to Houston you'd appreciate it.

I'm surprised the article didn't refer to Prop 13 at all - which is also another fine product of the 1970's. Not surprising because of the liberatrian slant of the site/piece.

Jun 1, 2006, 2:43:00 PM  
Blogger burbed said...

The author of the linked piece is a scholar from the infamous Cato institute.

Here's a piece from Cato proclaiming the wonders of Prop 13:

http://www.cato.org/dailys/7-30-98.html

"Even supporters of Proposition 13 never envisioned that it would unleash the spectacular entrepreneurial and commercial explosion that it did over the next decade."

What Cato really means is "An explosion of auto malls, Walmarts, Targets, Best Buys, Bed Bath and Beyonds, and other box stores - at the expense of building more housing."

That's funny - from what most people would say, all Prop 13 did was shield commercial real estate owners from high property taxes (see: Capitol Records and their 10cents per sqft tax) and drive up property prices to unreasonable levels.

Personally, if I were you Marinite, I'd take down this post. That article is just a deflection of the root cause of the problem: Prop 13.

Jun 1, 2006, 2:48:00 PM  
Blogger marin_explorer said...

This comment has been removed by a blog administrator.

Jun 1, 2006, 5:22:00 PM  
Blogger marin_transplant said...

People resent being told that the neighborhoods they chose to invest in need to be changed and it is for a greater good and they are expected to pay for it.

No truer words have ever been written on this blog.

Jun 2, 2006, 8:17:00 AM  
Blogger anon149 said...

No truer words have ever been written on this blog.

People's feelings of resentment are irrelevant. They can feel whatever they want. Eminent domain exists for good reasons (i.e., the greater public good) regardless of what local residents may or may not feel. Governm,ent and their acts exist for the greater public good regardless of how people feel about it. When a system gets so out of whack like what we see now, when the people can no longer be counted on to deal with it, a higher power needs to step in and if necessary act in a more draconian way.

The situation is out of control and needs to be dealt with. The sooner people wake up to that the better. feelings of resentment be damned!

the neighborhoods they chose to invest in

If by "invest" you mean in the financial sense, then to freeking bad. Houses are places to live, not investments or at least they should not be in my opinion. Houses should be like cars. The investment mentality is what has caused this bubble and the sooner it pops the better.

Jun 2, 2006, 9:56:00 AM  
Blogger Rob Dawg said...

reskeptic said; "For example, a tax base from more family-targeted housing could be more advantageous than fewer, more expensive homes."

RC replied; "This example is inoperative. There is NO example of what you posit. Luxohomes are the bestest things ever from the municipal perspective. Fewer services, more taxes."

reskeptic rejoined with; "Huh, really? In case you missed my point, it was a question of overall population, and how that feeds local infrastructure."


I will repeat, you cannot provide an example more family oriented housing patterns being more advantageous. This is just plain old wrong. Totally indefensible. This is just plannerspeak all too commonly used to advance specific agendas. McMansions are cash cows for municipalities. EVERY municipal spreadsheet shows that cheaper housing both raises costs and reduces revenue.

reskeptic continues with another common tactic, since I'm not from Marin I don't know the vreal situation; "I'm not sure of the situation down in Ventura, but here we have a wide swath of land that is not available to residential development. I'd have to wonder if that land were developed, providing more revenue from property tax, kids in school, and retail spending/taxes--would that provide more revenue for city budgets? No offense, but I'm not sure you can answer that off-the-cuff, from your chair down south.

It is precisely because I am in Ventura and extremely familiar with land use policies that I am qualified to answer off the cuff from my chair. This is a subject that other people call me an expert on. Ventura has more restrictive polices than even Marin. And I actually support them. I can tell you from my extensive analysis and public testimony and political consulting exprerience that you are wrong. Urbanization never introduces municipal efficiencies. Marin does have two problems, planner driven density issues and misguided transportation policies. The built environment is too dense and too much is spent on transit and you don't have enough or the right kinds of roads. The density results from onionskin instead of nodal development and the transit fantasy from proximity to SF. -If- you had read and understood my letter to Randall you'd have seen the close parallels twixt Marin and Ventura.

Jun 2, 2006, 11:21:00 AM  
Blogger rejunkie said...

Two: condos don't get built in Calif. because the laws favor construction defect lawsuits, usually filed on the last day before liability expires. If the Legislature changed that high litigation exposure, more affordable housing would be built. -Charles Smith

I had forgotten about this. I had read that detached houses without HOA's were preferable for developers because the collective power of homeowners associations were more of a threat to builders than complaints from individual homeowners. It is the "union effect" of being part of an HOA.

I would argue that the flip side of your "litigation is deterring builders" argument is that builders of many condos in Marin in the 70s and 80s (when most of them were built) did shoddy work and deserved the litigation that ensued. I live in one that was built in 1979 and went into construction defect litigation through most of the 80s. Finally in the late 80s, the builder (Shea Homes, if you must know) was required to perform seismic retrofits (among other tasks) to all 81 units here. Without the power of the HOA with its resources to hire decent lawyers, we would be living in substandard, non-code compliant, seismically vulnerable housing. (It still is non-code compliant in some respects -- like my 34" wide hallway, for instance, but that's harder to fix).

The solution to this is NOT to take away homeowners rights to sue builders.

Jun 2, 2006, 11:37:00 AM  
Blogger burbed said...

>I'd have to wonder if that land were developed, providing more revenue from property tax, kids in school, and retail spending/taxes--would that provide more revenue for city budgets?

No. No. And No.

See Prop 13.

Due to Prop 13, property tax revenue for the most part goes to the state. There's no incentive to build more housing for a city as residents are nothing but a drain. It's all about retail. Just read about the bitter fights between Santa Clara city and San Jose city over revenue from different parts of Valley Fair Mall.

http://en.wikipedia.org/wiki/California_Proposition_13_(1978)#Aftermath_in_California

Remember - Property Tax goes to the state and is then redistributed. Sales tax goes to the city.

If you were a city, would you want to build more housing? or more stores?

Jun 2, 2006, 1:30:00 PM  
Blogger marin_explorer said...

This comment has been removed by a blog administrator.

Jun 2, 2006, 3:24:00 PM  
Blogger Rob Dawg said...

"...reskeptic continues with another common tactic..

Tactic?


Yes, tactic. You said No offense, but I'm not sure you can answer that off-the-cuff, from your chair down south.

That is pure sophistry, a sophomoric debate tactic. My answers are not off-the-cuff and you clearly imply that location renders anything said less valuable before you've even heard it.

And what am I supposed to conclude from your turgid responses?

My reponses a lengthy because I know a lot about the subject and it is not as cut and dried as many would wish. The obvious conclusion is that I am well verse in the nuances of planning policies wrt density, new urbanism, smart growth and associated transportation issues.

Honestly, I can't tell if you're an expert or not--irrespective of where you live. There's something to be said for pursuading people with more tact; keep your ad hominem to yourself.

Well "off the cuff" I'd say I was only responding to ad hominems and I generally value advice more from people who practice what they preach.

Most of the friction it seems to me comes from your not liking the answers more than the answers being inadequate. We all know the scarcity of land complaint is partly false and partly manufactured by bad policy. We also all agree that congestion is bad and getting worse. It isn't even disputed territory that NIMBYs are impeding the prefered planner urbanist solutions. While the Marin/Ventura delicate balances of power are not perfect they are IMHO better than anything else being proposed. If you could provide the example of mixed use or even the affordable inclusive neighborhood that isn't a relative drain on municipal resources I could be swayed. That example would be groundbreaking new information in the field and would earn you accolades from many. I haven't been able to find this example and if you honestly look and cannot find one either then it might be time to reconsider what muncipalities have known since the mid 80s.

Jun 2, 2006, 3:53:00 PM  
Blogger marin_explorer said...

This comment has been removed by a blog administrator.

Jun 2, 2006, 4:24:00 PM  
Blogger Marinite said...

Please stop.

Jun 2, 2006, 4:26:00 PM  
Blogger marin_transplant said...

Forcing development into ever-diminishing urban corridors--ie strangling people so cows run free

Yes, the cows run free - and they also put food on your table.

Wanting agriculture to go "someplace else other than Marin" is just as NIMBYish as wanting people to do the same.

Jun 2, 2006, 6:57:00 PM  
Blogger rejunkie said...

Yes, the cows run free - and they also put food on your table.

Milk, my friend, not beef. These are dairy farms. Strauss, Giacomini, etc. Besides, there is no shortage of land for cattle in California but there is a shortage of affordable housing in the Bay Area. Would YOU rather commute 100 miles to work (to live in an affordable home in Vacaville, which coincidentally means "cow town") or would your prefer the milk travel 100 miles to get to you?

I am a fan of true, publicly accessible open space as I use it almost daily but fenced off, private farms are of no benefit to the general public whatsoever. The fact that MALT exists is at all (in that it raises millions of dollars to preserve farmland) is a testament to how it is essentially a section 8 housing program for cows.

Jun 2, 2006, 9:06:00 PM  
Blogger Marinite said...

and they also put food on your table.

LOL! You don't know what you are talking about I'm afraid.

Jun 3, 2006, 11:02:00 AM  
Blogger marin_transplant said...

LOL! You don't know what you are talking about I'm afraid.

What do I not understand here my friend? Are you suggesting that these cows are being raised as pets?

Jun 3, 2006, 5:04:00 PM  

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