Affirmative: Wendell Cox
In too many metropolitan areas, housing is no longer affordable for middle-class households, especially in markets subject to "urban containment," now the world's dominant planning regime. According to planning experts
Arthur C. Nelson and Casey Dawkins, urban containment draws "a line around an urban area"; it includes urban growth boundaries and greenbelts. It is "explicitly designed to limit the development of land outside a defined urban area, while encouraging" infill, to limit or block organic urban expansion.
Urban containment is intended to increase urban land costs. Shifting demand inside the contained area produces an abrupt increase in land values at the boundary, distorting the land value gradient. As Nelson and Dawkins say, "This shift should decrease the value of land outside the boundary and increase the value of land inside the boundary"(emphasis added), which effectively sets a higher "floor value" for urban land. This is the "urban containment effect."
Land values have indeed risen across urban growth boundaries, from eight to 20 times according to research in the U.S., Australia, and New Zealand. Housing has become shockingly unaffordable, despite expectations that boundary expansions and densification would keep housing affordable. The key to materially improving affordability is neutralizing the consequences of urban containment.
A permanent seller's market in land has developed, making it too expensive to build housing for the middle class. International housing expert Shlomo Angel stresses that "supply must be adequate to allow competition to determine land prices," and that "the explicit containment of urban expansion—by greenbelts, as in Seoul, Korea or in English cities, by urban growth boundaries, as in Portland, Oregon, or by environmental restrictions as in California—has inevitably been associated with declines in housing affordability."
Alain Bertaud, former World Bank principal planner, wrote that "arbitrary limits on city expansion (such as green-belts or urban growth boundaries)" result in "predictably higher prices."
In the U.S., the U.K., Canada, Australia, and New Zealand, median price-to-income ratios have escalated under urban containment from 3.0 or less. By 2019, the range between the most and least affordable U.S. major markets increased by five years of median household income. The median multiple had tripled in the least affordable markets, while all severely unaffordable markets had urban containment, according to the Demographia International Housing Affordability Survey.
In the five-county San Francisco market,Edward Glaeser and Joseph Gyourko estimate that land values for the median priced house are 10 times the normal 20 percent.
Meanwhile, house construction costs vary far less than land values.
The Organization for Economic Cooperation and Development (OECD) reports that housing costs have been growing "three times faster than household median income over the last two decades" and have been the "main driver" of rising middle-class expenditures. The OECD maintains that "the current generation…has lower chances of achieving the same standard of living as its parents." Much of the middle class could be facing an existential crisis.
Cost-of-living differences arise principally from housing affordability differences.
Paul Cheshire of the London School of Economics finds a "fatal mismatch" between planning and the market, concluding that urban containment is irreconcilable with housing affordability and price stability.
In contrast, removal of density restrictions in municipal zoning is unlikely to materially improve housing affordability. Virtually all major markets have multiple local jurisdictions (in the U.S., the average market has more than 100), while urban containment is typically imposed by higher-level governments (nations, states, provinces, and metropolitan areas). Municipal zoning cannot trump the consequences of urban containment.
Vancouver, Canada, has nearly doubled its density within its already developed 1951 limits (unparalleled among the high-income world's central cities), and its suburbs are densifying. Yet the Vancouver market has become the least affordable in Canada and the United States, with a 13.3 median multiple. As Patrick Condon of the University of British Columbia concludes, "No amount of opening zoning or allowing for development will cause prices to go down."
Negative: Christian Britschgi
An increasingly uncontroversial view among policy wonks on the left, right, and center is that housing in America is too expensive and government regulation is to blame.
The question, then, is which regulations we should prioritize repealing—urban growth boundaries that limit greenfield single-family development on the exurban fringe, or zoning restrictions that ban apartments and other forms of dense housing within the already-developed urban core.
As a libertarian, I think neither set of regulations is a good idea. Both interfere with property rights, reduce housing production, and raise housing costs.
That said, expensive urban metro areas would benefit most from upzoning already-developed neighborhoods to allow more infill development. If forced to choose, we should prioritize the legalization of more town homes, apartments, condos, and high rises downtown over eliminating restrictions on exurban McMansions.
We should do that because that's what America's heavily regulated market for land suggests people want.
The economist Jed Kolko has shown that the past decade was one of densification. The percentage of Americans who lived in the densest census tracts increased. The densest neighborhoods grew faster than lower-density urban neighborhoods and suburbs. Only exurban census tracts grew faster.
That last datapoint might suggest urban growth boundaries are the real constraint on housing production. But real estate prices also grew fastest in the densest tracts, suggesting that's where demand for new housing really is. If we're prioritizing reforms, we should prioritize building in places where people are saying with their dollars that they want to live.
Libertarians who focus on urban growth boundaries argue that high urban land prices are themselves a creation of growth boundaries: Would-be suburbanites are crowded into cities against their will, and prices go up as a result. This isn't necessarily wrong—but it is overstated.
The growth boundary in Portland, Oregon, certainly raises prices. It's also been expanded three dozen times since it was created. It wasn't until 2020 that the city implemented reforms abolishing the single-family-only zoning that had covered 77 percent of residential land.
Likewise, it strains credulity to think the primary reason apartment rents are high in downtown D.C., where developers are building as many units as they're allowed, is because agricultural zoning in Montgomery County, Maryland, 35 miles away, is stopping new subdivisions.
Lowering housing costs for people who demonstrably want to live in the city is going to require legalizing more housing supply there, and that requires lifting density restrictions.
The good news is where urban density restrictions are lifted, builders respond by building a lot of new housing. That happens even in places where there are few restrictions on exurban growth.
Houston, Texas, famously has no zoning code. Neither the state nor surrounding jurisdictions put many restrictions on exurban development either. Yet in 1998, when the city loosened the few density restrictions it does have—in the form of setback requirements and minimum lot sizes—within its urban core, the construction of newly legal town homes exploded and population densities in some neighborhoods doubled. Town home–buying Houstonians weren't legally constrained from getting a new house out in the sticks. When given an affordable option, they opted for something closer to downtown.
Critics of upzoning sometimes argue America's densest cities are also its most expensive. Allowing more dense housing, they say, will just get you a larger, more expensive city. This confuses stocks and flows.
San Francisco and New York City are expensive not because developers started building dense housing but because downzonings stopped them from adding more to meet continually rising demand. To suggest dense cities can never be affordable is like arguing that eating a meal won't nourish you because you'll eventually be hungry again.
Look at liberally zoned, ultradense Tokyo. It has built a lot of housing to match its growing population, and housing costs have been flat there for decades.
Generally speaking, we should let people build whatever, wherever. When multiple laws unjustly constrict that freedom, we should focus on eliminating the ones that most bind people's behavior. In housing policy, that would be inner-city and suburban apartment bans. If we can't wipe out all the restrictions in one fell swoop, then those bans should be the first to go.
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The post Debate: Make Housing Affordable by Abolishing Growth Boundaries, Not Ending Density Restrictions appeared first on Reason.com.
]]>Despite California's budget deficit rising to $16 billion recently, Gov. Jerry Brown is asking state legislators for $6 billion in bonds to launch construction on the proposed high-speed rail system. Voters approved a $9.95 billion bond package for the "bullet train" in 2008, but just about everything about the rail system has changed since then.
The California High-Speed Rail Authority (HSRA) issued a revised business plan in April that calls for a 130-mile segment running from Bakersfield to Madera in the state's Central Valley. If the Central Valley leg is built, the plan says the system would eventually share tracks with commuter trains in the Bay Area and Los Angeles, in what it is calling a "blended" approach. Not exactly the bullet train from San Diego to Los Angeles to the Bay Area and Sacramento that voters were sold back in 2008.
The last thing California should do right now is add billions more in bond debt. Beyond the most obvious—the state simply cannot afford it—there are at least five major reasons California shouldn't move forward on this rail project.
1. Broken Proposition 1A Promises: The Costs Look Nothing Like What Voters Approved
The text of Proposition 1A asking California voters to approve $9.95 billion in bonds for the project in 2008 said: "The total cost to develop and construct the entire high-speed train system would be about $45 billion."
Now the High-Speed Rail Authority says the price tag for a scaled down system will be $68.4 billion. Last year, the HSRA actually estimated the costs would be over $98 billion but to lower the sticker shock by $30 billion they've shifted to a "blended" plan that uses slower, existing rail tracks instead of building the exclusive tracks capable of handling high-speed trains that they originally planned on.
The official proponent's argument in the Proposition 1A ballot pamphlet also promised voters that ticket prices would be "about $50 a person." Now, they are saying tickets would cost an average of $81 each way, with "express" tickets for the fastest trips costing $123 one-way.
The costs have changed so much from what voters were promised that funding should be halted until the HSRA fulfills its 2008 promises to voters, or until voters get to approve the changes. Several groups, including popular KFI radio talk show hosts John and Ken in Los Angeles, are starting to get the signatures needed to put a re-vote of the high-speed rail initiative on the ballot.
2. There's Still No Legitimate Funding Plan
The California High-Speed Rail Authority says it will need $53 to $62 billion to build the Phase 1 Blended System, which would run from Los Angeles to San Francisco. Sacramento and San Diego appear to have been dropped from the plan. The state currently has the $9.95 billion in taxpayer-backed bonds originally approved by Proposition 1A plus an additional $3.5 billion in federal grants. But where is the remaining $40-$50 billion going to come from?
In April, the nonpartisan Legislative Analyst's Office wrote, "We find that HSRA has not provided sufficient detail and justification to the Legislature regarding its plan to build a high–speed train system. Specifically, funding for the project remains highly speculative and important details have not been sorted out. We recommend the Legislature not approve the Governor's various budget proposals to provide additional funding for the project."
If the state starts building a high-speed train system somewhere between Bakersfield and Fresno it will run out of money well before the system is finished. That's okay with many train advocates, who figure once construction begins the government will be forced to find the rest of the money to avoid having a partially built $10 billion train to nowhere sitting in the Central Valley. But the legislature can't afford to be so fiscally reckless. It needs to demand a detailed plan showing how the full rail system will be funded before approving the bond money to start construction.
3. The Train Trip That Keeps Getting Longer
When voters approved the bonds in 2008 they were promised a train trip from Los Angeles to San Francisco in 2 hours and 40 minutes or less. The new business plan is surprisingly silent on travel times but an HSRA document circulated to the board of directors says the fastest "express" trip will take three hours.
Even that time is highly unlikely because it depends on trains operating at a peak speed of 220 mph, faster than any train in the world, and an average speed of 198 mph. Such average speeds are going to be next to impossible to reach because trains won't always be running on dedicated tracks designed for high speeds and, as the plan admits, they would be forced to slow down to 100-150 mph in Los Angeles and the Bay Area for safety reasons. Hence, it's likely that non-stop express trains will take three hours and 40 minutes.
Travelers will also find that most of the trains will make local stops and be slower than that. The business plan doesn't provide times but it's likely that San Francisco-Los Angeles travel times would be between four and six hours, depending upon the number of stops made.
4. Shrinking Ridership Numbers
The estimated costs have gone way up since 2008 but the HSRA keeps lowering the number of people it claims will ride the trains.
As the Legislative Analyst's report notes, "Specifically, the HSRA estimates that the projected ridership would be about 30 percent lower than estimated in the November 2011 draft business plan." For example, the earlier plan projected between 29.6 million and 43.9 million one–way trips per year in 2040 while the latest plan assumes between 20.1 million and 32.6 million one–way trips per year."
The Institute of Transportation Studies at the University of California at Berkeley says the HSRA ridership estimates are way off the mark. "We found that the model that the rail authority relied upon to create average ridership projections was flawed at key decision-making junctures," said study principal investigator Samer Madanat, director of ITS Berkeley and UC Berkeley professor of civil and environmental engineering. "This means that the forecast of ridership is unlikely to be very close to the ridership that would actually materialize if the system were built."
The current plan claims people will choose the trains over driving. It makes this assertion by arbitrarily doubling the real costs of driving from Northern to Southern California. But the new rail plan's reliance on blended tracks would mean slower travel speeds. Add in the time it will take getting to and from train stations and to final destinations, and it's clear that the trains would not offer a significant time or cost savings for people driving.
Similarly, even factoring in airport security hassles and the time it takes to get to and from airports, air travel will continue to offer most travelers a faster trip from LA to San Francisco—and there won't be a major cost difference. The rail system would find it difficult to attract large numbers of people who would normally fly between Northern and Southern California.
5. The Train Won't Reduce Greenhouse Gases
Proponents often say the high-speed rail system is needed to reduce the state's greenhouse gas emissions. The United Nations has estimated that effective greenhouse gas reduction efforts should cost $20 to $50 per ton. The California high-speed rail system's emission reductions would come at a monstrous cost of $1,800 a ton.
Just as troubling, research at UC Berkeley concluded that if rail ridership met HSRA's mid-level estimates, it would take 70 years for the rail system just to negate the emissions created by its own construction. If rail suffers lower ridership the system would "never" negate its construction emissions.
California is drowning in debt and deficits. State leaders like Gov. Brown are calling for major tax increases. The California High-Speed Rail Authority keeps raising costs, lowering rider estimates, and lengthening travel times. Its current business plan reneges on promises made to voters in Proposition 1A. It would be a major mistake for California legislators to borrow billions of dollars to start building a train system that is far inferior and far more expensive than the one voters were promised when they approved Proposition 1A in November 2008.
Adrian T. Moore is vice president of research at Reason Foundation. Wendell Cox is the principal of Wendell Cox Consultancy/Demographia. Joseph Vranich is an Irvine, Calif.-based business consultant. They are co-authors of "California High-Speed Rail Proposal: A Due Diligence Report."
The post 5 Reasons the California High-Speed Rail Project Shouldn't Get More Money appeared first on Reason.com.
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