Housing Policy

We Can Make Housing More Affordable

Housing regulations thwart economic mobility.

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The smoke from the dumpster fire of the 2016 presidential election has obscured many important issues, not least of them economic mobility. The difficulty of climbing the economic ladder may be overstated, but it also could be reduced.

Some ways to improve economic mobility are notoriously difficult—e.g., improving the public schools in areas where improvement is needed most. But other ways to improve mobility are not nearly so hard. Here's one: making housing more affordable.

Rents and mortgages present barriers to people who want to move for the sake of a better job (or even just a job, period). Reduce housing costs, and you lower the barriers. In the process, you also make it easier for those of modest means to start accumulating capital and building good credit.

Too many minorities are missing out on the chance to lay down those important financial markers. So are many millennials, who are living with their parents at record rates.

Several factors affect housing costs, and there's little to be done about some of them: Nobody is making more land, for instance. On the other hand, governments are making more regulations—and the price of housing would shift dramatically if they would just stop.

You don't have to be a bleeding-heart libertarian to think that, either. Even the Obama administration has come around to that view; in September Politico reported the White House was urging localities "to rethink their zoning laws, saying that antiquated rules on construction, housing and land use are contributing to high rents and income inequality, and dragging down the U.S. economy as a whole."

It has good reason to say so. In recent years new-home prices generally have been at least a third higher than resale prices. This summer The Wall Street Journal cited "several recent studies (that) have documented how increased regulatory and permitting costs" have driven them up. The rules cover everything from impact fees and stormwater runoff to species surveys and architectural mandates.

Even building permits matter. An analysis by the real-estate tracking firm Trulia recently showed that housing prices correlate highly with the length of time it takes to get a permit: the longer the wait, the higher the price.

Planners claim the price of real estate and market swings matter a whole lot more, but it's striking to note two figures: 33.8 percent, which is the growth in new home prices from 2011 to 2016, and 29.8 percent, which is the growth in the regulatory costs of new home construction during the same period.

Those numbers help explain why modestly priced new homes—those that cost under $200,000—now make up only 19 percent of the market. That's precisely half the share of the market they enjoyed just five years ago.

Higher-end homes (those costing up to a half-million) have increased their share of the market from 22 percent to 34 percent during the same period. Little wonder that first-time home buyers make up a smaller share of the housing market than at any time in the past three decades.

The connection between housing regulation and economic mobility shows up again in a recent examination of regional migration patterns. Historically, people from poor parts of the country moved to richer parts of the country in search of better work. Those who moved included both low-skilled workers and high-skilled workers, because migration benefited both.

In the past three decades or so, however, while both blue- and white-collar earners can make more money by moving to New York, the advantage for the blue-collar worker has largely disappeared. Reason? As the Brookings Institution explains, "regulation boosted housing costs in richer states so that migration was no longer an attractive option for low-skill, low-wage workers. But migration remained attractive for high-skilled workers, and they continued to move to wealthy places… This divergence in the migration patterns of skilled and unskilled households contributed to rising income inequality."

You can see the effect of government policies on housing prices—and economic mobility—by looking at regulation-heavy California, where a home now costs, on average, two and a half times more than the national average and rents in the Silicon Valley are double the U.S. average. Two-thirds of California's coastal metro areas have imposed measures to limit growth—i.e., measures to limit supply. Result: Housing prices skyrocket, leaving those of modest means priced out of the market.

California is not an anomaly. A recent article in City Journal by Joel Kotkin and Wendell Cox notes that "restrictive planning policies that slow development" have exacerbated the inflation of housing in places such as New York and Chicago—which also have seen only modest job growth, and even more modest growth (or even contraction) in middle-class and STEM jobs.

By contrast, Houston has been enjoying record growth in jobs overall, middle-class jobs, STEM jobs and population—and may overtake Chicago as the third-largest city in America within two decades.

Kotkin and Cox note that net migration between California, New York, and Texas has all been to Texas' benefit: an influx of young, well-educated and socially diverse people. The most diverse county in America is now Fort Bend, on the edge of Houston. Low home prices have helped make that possible: 52 percent of Latino households own their own home in Houston, which is twice the rate in New York (in L.A., it's 38 percent).

And low regulation has helped make those low housing prices possible. Houston famously has some of the most relaxed zoning and land-use regulations in the country. That doesn't mean hog-rendering plants sit cheek-by-jowl with hospitals, but it does mean developers face fewer roadblocks when they want to knock down old buildings and put up town homes.

Such an absence of restrictions has produced "a mash-up of architectural styles," notes another piece in City Journal. "Everything about Houston screams spontaneous." That no doubt would curl the hair of Virginia's historic preservationist class; Richmond's Commission of Architectural Review claims jurisdiction over everything from porch railings to paint colors.

Houston might not be able to boast hundreds of homes preserved in antebellum splendor like dragonflies encased in amber. But it does boast a median-home price of just $145,000. And more than 60 percent of Houston's housing stock is affordable for a family with a median income—which helps explain why so many young, diverse people are flocking there.

Texas has a reputation for being arch-conservative territory. But on the metrics that matter most to economic and social mobility, it's one of the most progressive places in the country.

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  1. Having just purchased a lovely house with my lovely wife, I am absolutely opposed to anything that causes housing prices to drop.

    1. Being that I will soon be selling the home that I bought with my soon-to-be-ex wife, I concur.

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    2. Hey t, I’m going to link my handle to my email for a bit. Ping me.

    3. The expectations that people have a right to expect appreciation – achievable via govt intervention to distort the housing market – is the toughest cronyism to eliminate.

      One thing that isn’t mentioned in this story is that Texas actually has high property/resource taxes – and uses that to lower more distorting taxes on income/sales. Which does limit unearned housing appreciation and leverage and thus puts pressure to deregulate the silly zoning stuff.

  2. a bleeding-heart libertarian

    *makes sign of cross, spits*

  3. When I watch old movies I often marvel at the conditions that the people were living in. Living like that would be illegal today.

    America is rich because it is a crime to be poor.

    1. FYI Sarc, there was a thread last week where several folks offered to donate to a defense fund for your troubles (don’t worry, I’m not asking for specifics as I understand this is tough). I didn’t comment on that one, but that doesn’t mean I wouldn’t be willing to donate along with several others who have gone through similar things as well. Let us know if there is a gofundme or something of that nature.

      1. So I heard. I appreciate the thought.

    2. I grew up in a poor family. We only had one used car and two TVs in the house. We didn’t have any cell phones or computers. There was no intertoobz and no drive through fast food. Yes, that was primitive savagery, but I managed to survive it.

      1. I’m talking about stuff from the frontier times. Back when it actually was a free country.

    3. Census has collected homeownership info for at least a century – http://www.census.gov/housing/census/…..er_tab.txt They don’t measure ‘real homeownership’ (ie free and clear of mortgage) but I find it interesting to see how many states have seen falling homeownership over the last century.

      Housing may not have been great back then. But people OWNED it. And they didn’t have to keep paying 30% of their income for it (mostly on interest) for most of their life.

  4. But how do we ensure that the wrong people don’t move into the neighborhood if our home prices are not inflated way beyond the real value? There’s still plenty of good bridges one can set up a good cardboard box under.

    1. I am sure you’ll be shocked to learn that one of the most lefty places in CA (Marin County) has elevated this to an art form. Funny how they really love the poor, the unfortunate, illegal aliens…except not too close to them.

  5. Spend, spend, spend!

    This particular pledge, though, would significantly hem in Mrs. Clinton if she wins, particularly by blocking her from doing the very thing the economy desperately needs.

    Economic growth has been sluggish since the Great Recession, as the Republican primary candidates were all too happy to point out. Growth in the gross domestic product has run under 2 percent this year. The recovery has been weaker than past recoveries from recessions and worse than what officials originally expected.

    At the same time, interest rates on the country’s debt are incredibly low, hovering around 2 percent. That means we could borrow more money at a very low cost. What would we do with it? New money could be put to incredibly good use, rebuilding deteriorating roads and bridges or investing in education.

    ——–

    We’re also not in danger of being unable to pay back what we owe. The cost of paying interest on the government’s debt is at a 50-year low, consuming just 6 percent of the federal budget.

    *Bryce Covert is the economic policy editor at ThinkProgress and a contributor to The Nation.*

    Free money! Get your free money here!

    I’m convinced.

    1. Damn party of no!

    2. before i saw the link, i thought “is that some stupid crap from the New York Times?”

      It’s amazing how diluted people can be. Remember, Venezuela is all because of oil prices

      1. Progressive brains are homeopathic?

        1. Yes they are: They don’t work.

    3. “New money could be put to incredibly good use, rebuilding deteriorating roads and bridges or investing in education.”

      800 Billion Dollars wasn’t enough to rebuild deteriorating roads and bridges? Don’t we already spend a ridiculous amount of money on education?

    4. New money could be put to incredibly good use, rebuilding deteriorating roads and bridges or investing in education.

      Didn’t GILMORE and I go over “rebuilding deteriorating roads and bridges” and determine that, first, most of those “deteriorating roads and bridges” were used by only 1 car a week or something and, second, that of the busiest “deteriorating roads and bridges”, nearly all were in California where CalDOT is deferring required State maintenance in hopes that the Feds would step in to pay for maintenance?

  6. Studies have shown for ages that housing regulations can have disastrous unintended consequences, including achieving the opposite of their intended purposes. But if you try to talk sense into the NIMBY/drawbridge/all-profit-is-evil crowd, they’ll shout you down as a tool of those Satan-worshiping developers.

  7. A better promise than Mrs. Clinton’s no-debt vow would be something like this: “I will not significantly run up the national debt to pay for projects that won’t make the economy grow.” That’s more honest and more sound, and it would leave her free to make necessary policy decisions in the White House.

    Necessary policy decisions, like… you know… subsidized pre-schools, and maternity leave, and “re-training” coal miners to be computer programmers, and global warming research, and on, and on and on.

    1. “re-training” coal miners to be computer programmers”

      That money is totally not going to be wasted.

  8. Increasing Supply decreases prices, news at 11.

    Seriously, the people who usually bitch about “affordable housing” have no fucking idea how markets work, and how supply and demand works. In the bay area, they can’t get it through their head that prices are high because demand goes up, and we don’t build any more units (usually because of zoning, protests, and regulations).

    I used to work with a guy who was at a home construction firm, and you wouldn’t believe the crap they had to go through to build, if they got to build at all. Then people look around like “Why are prices so high? Those damned corporations hating on poor people!”

    1. “Then people look around like “Why are prices so high?”

      It’s Venezuelan economics in action.

    2. Where I live, people cannot process the idea that a cap on development density is not a terrifibly effective way to reduce sprawl. You’d think they’d learned logic at Bizarro Middle School.

      1. Sounds like LA? they want people to walk, bike, subway, etc., like NY but not have the skyscrapers and housing density like LA but don’t want the sprawl that comes with limiting density.

    3. There was recently a big fiasco round here over “affordable housing.” A local city was getting ready to contract with some cronies to build an apartment complex or two for poor people. The unit cost was over $200k. Not sure what happened after that. That was about the time I got so sick of talk radio that I stopped listening to it.

      1. 200k/condo would be dirt cheap here…

  9. If you want to do away with zoning laws (which I am all for) you also going to have to get rid of the Fair Housing Act of 1968 (and it’s state analogues), allow judicial enforcement of racially restrictive covenants and come up with a new way of paying for public schools.

    1. allow judicial enforcement of racially restrictive covenants

      Wait, what? Why is this necessary?

  10. In NYC we just demand that the luxury buildings (which are the only profitable ones due to the regulations) include set-asides for the poors. Problem solved!

    1. I used to live in a county that had such a requirement for all subdivisions of 50 or more houses. A friend asked me who all of the new subdivisions had exactly 49 houses.

  11. Moonbeam is backing state-wide limitations on how many busy-bodies can stick their noses into a development plan:
    http://www.latimes.com/politic…..story.html
    SF (and I see LA) slimeballs are aghast that they wouldn’t be able to extort money and/or favors from the developers, all the while claiming to want ‘affordable housing’.

    1. More set-asides for “the poor”. The rest of the units will be for “the rich” to make up for it. The “middle class” can go fuck themselves.

  12. Regulations are certainly a problem, but by far the largest factor in housing pricing is the credit availability for people who have no business being in the home they are in.
    From top to bottom income, people are paying tremendous amounts to banks in interest fees because they have been sold on that as ‘normal’ by a prolonged propaganda campaign.
    When people are allowed to put minimal down in exchange for predatory interest rates, balloon financing, and other sketchy crap, it inflates the home prices for everyone. Get rid of that and watch housing prices drop 10-20% across the board. Get rid of the mortgage interest deduction and watch housing prices drop another 10-20% on top of that.
    Sponsor infomercials and government education programs on financial management around mortgages and the reality of what people are paying and tack on another 10-20% drop.

  13. I’m talking about stuff from the frontier times. Back when it actually was a free country.

    Sure. Back when ten year old children were “free” to work twenty hours a day, for a scrap of bread and a sup of water straight from the horse trough, while robber barons raped the land and lived like kings!

    Freedom, BAH!

    1. good times, good times.

    2. Robber Barons are a myth

  14. In the bay area, they can’t get it through their head that prices are high because demand goes up, and we don’t build any more units (usually because of zoning, protests, and regulations).

    Typical made-up libertarian “economics”. Everybody knows it’s because Googletarian gentrifiers and their infernal inequality.

    1. Everybody knows it’s because Googletarian gentrifiers and their infernal inequality.

      This, Brooksie, is why I keep coming back to H&R. That’s vintage, classic, P Brooks alliterative snark right there!

      Well done.

  15. Awww, shucks.

  16. RE: We Can Make Housing More Affordable
    Housing regulations thwart economic mobility.

    Of course housing regulations thwart economic mobility.
    Isn’t that why the ruling elitist filth enact them in the first place?
    Otherwise the ruling elitist turds would have to live next to those icky little people?
    What elitist would want that?

  17. Can we Build it!

    Yes we can!

    As soon as the environmental impact, low cost housing, and traffic abatement studies are completed

  18. There is plenty of low cost housing and land available for same. Look in Cleveland, Detroit, Baltimore, Ferguson, San Berdoo, etc. Plenty of low cost housing is available. The trouble is that no one with any money or a well paying job wants to live in those places.

    It is flatly impossible to build “low cost” housing in desirable places that are either attractive to moneyed people or have a lot of well paying jobs around. People will simply bid the prices up if they want to live there. Even if one finds a perfect site, at low land and utility access cost, and (somehow) locks in future price increases somehow by rigging the market, the simple construction cost of a unit of housing is too high to be “affordable” to low income, low asset people.

    Add in the fact that municipal organizations want a tax base that includes the most revenue with the least expected service base. Expensive homes occupied by people with no children are the preferred target. No kids to educate, and a not a lot of potential criminals (mostly young men, regardless of race or income level) are plusses.

    The solution (if there is one) to this is simply having policies that let people earn more, keep more of the money they earn, and let them spend it on the size and style of housing they prefer. That will still irk a lot of people, but it is as good as it gets. Poor people would make pretty good decisions about their housing, you just might not like those decisions.

    1. “It is flatly impossible to build “low cost” housing in desirable places that are either attractive to moneyed people or have a lot of well paying jobs around.”

      In SF, we have one particularly dim supervisor who proposed outlawing residences priced at or above some number she pulled out of her ass. This was going to make sure that people making some other number from the same source could afford it.
      It didn’t last long. I’m hopeful that some staff member pointed out that those with higher incomes would simply bid up the asking price on those residences priced at (her magic number) minus $1.00.
      Unfortunately, having met one of her staff (really proud of the poly sci masters she recently got), I’m not confident.

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