* "smart growth": subsidize the rich & leave the poor homeless
Topics: Housing
24 Oct 1999
From: Ervan Darnell
Anti-growth policies have become quite popular (see [10] for a good
overview of the debate). Here in the Bay Area, San Jose recently declared
a "green zone", a belt beyond which no new homes could be built. Hollister
and Gilroy, among others, both recently put strict quotas on new home
construction. Palo Alto tried to keep Stanford from building student
housing (on land Stanford owned).
Somehow not letting people have anywhere to live is supposed to make us all
better off. This strikes me as so obviously silly I cannot believe how
popular it is. I'm surprised how many of my non-libertarian but otherwise
sensible friends are in favor of this. This is such a bad idea that even
Al Gore is advocating it [1,2] as part of his campaign, for instance he
wants to use federal dollars to buy farm land to prevent new homes from
being built. Somehow this connects to his claim "that livable communities
-- [...] -- are more economically competitive" [2]. A local newspaper
wrote "It's time to stop sprawl [...and...] stop building major new
highways in our cities. They create congestion." [17] In that case, let's
tear down the ones we have in order to solve the congestion problem! I'm
reminded of the Clinton executive order to discourage medical specialists,
and his (or Hillary's) government run plan that would have outlawed new
specialists in the name of lowering prices. Specialists cost too much
therefore if we outlaw them prices will go down! They are applying the
same reasoning to the housing market, that it will somehow get better by
making less housing available and roads will be less congested by making
them more precious.
Even if this made any kind of sense, there is no reason to federalize
it. The issues are local. Different localities should be able to set
their own standards according to their own sensibilities. To think
otherwise is the height of conceit: to want to use the power of the federal
government to force your idea of housing on someone else in another state
when it has no impact on you.
The reality of it is this: people who now own homes don't want anyone else
to have one because they believe it spoils the view, congests the roads,
and harms the environment. Of course, none of those were concerns when
they bought. Even uglier, preventing new homes from being built generates
extra capital gains for the usually older and wealthier at the cost of the
usually younger and poorer who are trying to move into a home. That the
Democrats advocate such a policy speaks to the crocodile tears they cry for
the poor.
The political motivations, beyond representing existing land owners, are
that it's harder to control people when they have viable options for which
city they live in (while keeping their jobs). Ultimately, competition
between cities keeps a lid on high taxes and oppressive regulation, neither
of which freedoms suits politicians [16].
This is not a minor quibble over which side of the road to live on. The
effect in the Bay Area (on the Peninsula) is that a small 1200 sq ft house
costs about $450K. People with low incomes often live one family to a
room, with several in the same house. Moderate income people are forever
cramped in small apartments. The common objectives (not necessarily mine)
of wanting to move to a safe neighborhood, with a yard for the kids to play
in instead of gang infested streets, and good schools are out of reach for
many people. This is real harm for real people. Even people who can
afford homes make many other compromises, like quality of schools (I
mention this since the liberal mind set often considers this extremely
valuable and it's the liberal mind set advocating smart growth).
The dynamic that allows such an economically inefficient arrangement is the
tyranny of the majority inherent in democracy. The amount that a farmer
might gain by selling his land to developers (and net benefit to society
thereby derived) is often greater than the net loss to the surrounding
neighbors. Never mind the neighbors did not even pay for the farmer's
land, nor even paid for the privilege of gazing over it unobstructed, they
can go to the polls and by virtue of superior numbers in effect confiscate
the farmer's land for their benefit. The problem is further exacerbated
because people who would move to an area are not yet voters in that
area. And, as with most regulation, it's the potential benefit that is
destroyed before the beneficiaries could even know who they are, in order
to object. Simply selling the land at market values is far more efficient
(in the economic sense of making more people happier) and has none of these
problems.
Let me turn to the reasons I have heard offered in defense of prohibiting
new housing:
(1)
"The Bay Area is special because rapid growth has forced up prices"
[implying that high prices should not indicate we need to expand
housing]. Only in the short run. Houston has grown over 1000X in the last
90 years with relatively little (constant dollar) increase in housing
prices. The bottom line is that it is effectively illegal in the Bay Area
to build sufficient new housing to meet the demand. The political
system/voters are at fault, not growth.
(2)
"Sprawl is ugly." This is so weak, I shouldn't even dignify it with a
response. I'll note simply that people who live in the middle of "sprawl"
don't think it's ugly, at least not in the balance. If you think "sprawl"
is ugly, stay in the inner city.
(3)
"Save us from strip malls". Why? They're convenient. They spring up
where people want them. If they were so unpopular, they wouldn't be in
business.
(4)
"It makes congestion worse." For instance, Al Gore claims his proposal
will give parents more time with their kids. But, parents often move to
the suburbs precisely for their kids (better schools, less crime, bedrooms
for each kid, a backyard to play in). "Smart Growth" leaves families worse
off, at least as families see it. In the interest of the federal
government telling you how to raise your family, new home construction
would be prevented. That's a lose-lose deal.
There are four problems with the congestion argument:
First, it isn't true that commute times are increasing [13, 14, 15], even
if congestion is. It's not entirely clear why this is so however.
Second, it's an example of what I think of as the "false externality"
fallacy. Who bears the cost of the supposed longer commutes? The very
people who willingly move to the suburbs and accept the longer
commutes. People left in the inner city have no reason to
object. "Sprawl" makes the life of the supposedly virtuous inner-city
dweller better by partially removing people from city streets, and leaves
the supposed cost born by people who willingly accept it.
For people who already live in the suburbs, making this argument is usually
hypocritical even though possibly true. The deeper problem is what I think
of as the "pigeon-hole fallacy": even if banning housing is a local
solution to congestion, it's not a global one. It only pushes the problem
elsewhere. As a policy debate at a metro-wide level, local bans don't help.
Third, even if "sprawl" increased congestion, that's only an argument for
building more roads. Most unlike public transit fees, the gas tax is
sufficient to cover the cost of building roads[9]. For instance, in '94
the feds spent $20G on highways[4] and collected $20G in gasoline tax[5].
California collects about 1% of all personal income in gas taxes[6]; the
highway department had $3.0G[7] in its budget for '97 (for highways and
seismic retrofit, but excluding federal funds already counted) and raised
$2.9G in gas taxes[8] (excise tax only, not even including the sales tax on
gasoline). Thus, the cost is fully internalized to people doing the
driving. People moving to suburbia drive more, pay more in gas taxes, and
should get the roads they paid for. If moving to suburbia creates
congestion, it's only because politicians are misappropriating tax dollars.
Fourth, the "smart growth" solution to congestion is to concentrate
businesses in a downtown area, i.e. have everyone commute to the same
point, and to have more people live in the same inner city space, instead
of spreading out. That's surely a recipe for more congestion, especially
since streets in the inner city are already laid out and less easily
changed to accommodate growth. Of course, some "smart growth" advocates
understand that and deliberately want to congest the roads to induce people
to take more public transit. Take your pick of "smart growth" positions:
either "sprawl" lowers congestion and that's why it's bad, or squeezing
more people into less space lowers congestion by some miracle yet to be
specified.
There is another irony here, "sprawl" is supposed to be stopped not by free
people acting in their own interest, but by the collective oppression of
Democracy. It's exactly that mechanism which prohibits taller buildings,
which is the objective of "smart growth". For instance, San Mateo
recently passed a zoning change prohibiting building two-story homes,
where previously legal. Even if you bought your home with the then-right
to add a second story, the government comes along later to prohibit
it. The reason is again simple tyranny of the majority: the majority would
lose some small value by having their neighbor's house taller. It doesn't
matter how much the would-be builder stands to gain. In this instance,
even advocates of smart growth would be better off with a system of
enforceable property rights.
(4b)
"It causes more smog because of longer commutes". This is wrong for the
first and fourth reasons offered in point (4). Even if the claim were
true, banning housing often exacerbates the problem by making people move
even further away to find a community with weaker zoning
restrictions. Absolute worst case, convert highways to toll roads and
raise the toll high enough to lower the traffic to the desired point. That
efficiently generates a car pooling and public transit incentive as well
(assuming one thinks that's valuable). You can still let people move to
better/more affordable neighborhoods.
(5)
"We have reached our carrying capacity". This just isn't so. For
instance, Japan is 10 times as dense as the U.S. at 332 people/km^2 versus
29 [11]. It may not be everybody's idea of paradise, but clearly Japanese
lead reasonably comfortable lives without the disasters that presumably
befall such population densities.
More importantly, banning housing does nothing for total carrying capacity
of national (or global) goods that can be easily shipped (like power and
raw materials). People are still going to live somewhere. Unless the
purpose of outlawing housing is to make people so miserable they won't have
children, this is a senseless objection.
(5b)
"Affordable housing causes more smog by permitting immigration". I take
this to be a confession that "smart growth" intends to create un-affordable
housing and view that as a good thing. In any case, merely pushing the
smog somewhere else doesn't achieve much. Point (4b) also applies to this
argument.
(6)
"We must protect farmland." Why? There is plenty of food. Farm
productivity is high. Some farmers are going out of business because
others are farming so efficiently we have a huge food surplus. We export a
tremendous amount of food as well. We are nowhere near the limit (so far
as the U.S. is concerned). Liberals even confess this in arguments over
converting grazing land to crop land.
That's not necessary of course, there is plenty of land. Farmers are happy
to sell. Developers are happy to buy. Farmland is already the most
environmentally compromised land (that is suitable for housing), having had
herbicides & pesticides applied, and nearly all indigenous species long ago
wiped out (there is little room for bears amongst garlic stalks). The
options are wildlife preserves/national forests or lifting building height
limits, both of which are even more politically objectionable. Okay, the
other option is just to continue to increase the misery level while feeling
smug that farm land has been left idle (in an economic sense). It's rather
like passing laws to clean up bad housing. Middle-class liberals feels
good they have helped the poor by outlawing the only housing they can
afford. There is another irony: liberals want to make it illegal for
developers to buy farm land, then they want to bail out farmers who don't
earn "enough".
(7)
"There isn't enough water". This is different than point 5 since it's
expensive to ship long distances.
If water is too expensive for some new home site, then no one will want to
buy. The water cost is (or can easily be) born entirely by the buyer. Let
him/her decide how much it's really worth. Banning construction cannot be
justified this way. One might as well ban the sale of Mercedes because
someone might pay "too much".
There is plenty of water in any case. Taking California as a bad case
(large population, lower than average rainfall), urban use is 8.8 maf
(million acre feet) / year and agricultural use is 33.8 maf [3]. Even if
no more water could be gathered, a 50% increase in population would only
decrease agricultural consumption by 13%, an amount that could easily be
compensated by other truck farming regions. Even that's not
necessary. Desalinization is already in use in California and costs from
$30-$90/month/household[12]. For a modest price increase, we could have
all the water we wanted in coastal states. While $90/month is not dirt
cheap, it's peanuts compared to the mortgage cost of financing another
$100K induced by the artificial housing shortage, and people are now
willing it.
(7b)
"We don't have enough sewage plants". Okay, build more. They cost about
$20/month/family. Modern sewage plants are very clean. Adding more to a
region would not significantly increase the amount of pollution in the
environment.
(8)
"There isn't enough [park-like] green space". "Sprawl" lowers the cost of
land per square foot. It seems like that would make nearby parks (as
opposed to forests at some great distance) more affordable, not
less. Regardless, if one grants this as being a sensible argument, the
answer is simply to raise the property tax in a given suburb enough to
finance however many parks people are supposed to need, and then let them
decide if they want to move there.
(9)
"We must save the environment". This is the only argument that has any
merit. It's not necessary to delve into sticky questions of how much the
environment is really worth or how much of it should be saved. Rather,
it's clear that many people gain some abstract sense of satisfaction out of
thinking it's preserved and that's a legitimate goal independent of its
utility value.
But the question is: how much is that next increment worth? I've posed
this question to everyone I've met who is opposed to growth because they
think they are saving the environment. I never get an answer. I hear
things like "some things don't have a price". What does that mean? It's
infinitely valuable? If it's infinitely valuable, let's tear down existing
housing and expand habitat. I don't hear any calls for that. There won't
be any of course, because it's usually hypocrisy. People who now have
their homes are willing to impose restrictions on other people, that cost
the now owners/voters nothing. Make them pay the fair cost and then see
what it's worth. That people don't tear down existing houses establishes
that open spaces have some finite value.
There is a simple solution to this: sell it for what it's worth. If it has
value as special habitat, then let the government pay fair market
value for it so everyone can presumably enjoy it. If it's really worth
it, then it's worth paying for it. Stop stealing its value from the
current owner. Nothing is more valuable than we perceive it to
be. Banning housing is just a way to make the person who benefits least
pay the most. "Doesn't have a price" is an excuse which means "I refuse to
reckon who badly someone else is being cheated".
If it's value is just as buffer zone or scenery for the neighbors (which is
really the case, more so than environmental sensitivity), then let them buy
it collectively from the farmer and preserve it. While I don't
particularly like new taxes, it would at least be more fair to have a
special referendum for a city or subdivision to buy its neighboring open
spaces than to simply cheat the farmer by devaluing his land and leave the
would-be new occupant with a much worse second choice.
---------------------------------------------------
[1] http://www.whitehouse.gov/WH/Work/090298.html
[2]
http://www.pub.whitehouse.gov/uri-res/I2R?urn:pdi://oma.eop.gov.us/1999/1/11
/14.text.1
[3] http://rubicon.water.ca.gov/pdfs/b160cont.html#es
[4] http://ibert.org/civix.html
[5] http://www.cnie.org/nle/eng-35.html
[6] http://www.caltax.org/RESEARCH/gastax.htm
[7] http://www.osp.ca.gov/documents/finance/budget/bth.pdf
[8] http://www.dof.ca.gov/html/BUDGT9-0/Rev-19.gif
[9] http://www.publicpurpose.com/pp-hwyuser$.htm
[10] http://www.reason.com/bisprawl.html
[11] http://194.95.119.6/basis/e/ausl/ausllae1.htm
[12] http://ceres.ca.gov/coastalcomm/desalrpt/dkeyfact.html
[13] http://www.psrc.org/t11trend.htm
[14] http://reason.com/9908/ci.html#jw.undiscovered
[15] http://www.reason.com/9901/fe.ro.densethinkers.html
[16] "Federal Snob Zoning", Washington Times, 4/21/99, had a good essay
along with a similar slant
[17] "Facing the true cost of our cars", 10/10/99 San Jose Mercury, p. P-1
[18] 9/27/99 San Jose Mercury
===============================================================
Ervan Darnell |"Term limits are not enough.
ervan@iname.com | We need jail."
http://www.appsmiths.com/~ervan | -- P.J. O' Rourke
------------------------------------------------------------------------
eGroups.com home: http://www.egroups.com/group/ragnar
http://www.egroups.com - Simplifying group communications
Home