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How to Help on Housing

Reversing policies that restrict housing is far more effective than grants

There was much smiling and clapping last week when Richmond officials handed out more than $1 million in grants to help solve the city's affordable-housing crunch. There might have been less if anyone had pointed out that much of the fault for that crunch lies with the city itself.

Estimates suggest almost half of the households in the city pay more than 30 percent of their income for housing - the standard measuring stick for affordability. Twelve thousand families are on waiting lists for housing assistance. "The need is much greater than the supply," says Greta Harris, head of the Better Housing Coalition. So the city has tapped a housing fund that was created seven years ago, and then left to lie fallow.

Using the fund might help to some degree. But the city could do far more to address affordable housing by correcting policies that deter it.

Earlier this year residents of two trailer parks sued the city over an inspection program that threatened the poor, mostly Latino residents with eviction, condemnation, prosecution, and fines of up to $2,500, per day, for everything from bad wiring to "improperly built decks." And the residents couldn't satisfy the bureaucrats simply by fixing the alleged problems. They had to get sign-off from licensed engineers, electricians, and even "HUD-certified engineers." One minor detail: HUD doesn't certify engineers.

When the residents complained to the mayor's office, they were met with stony silence. When housing advocates offered to intercede, they got the same response. Families got tossed out on the street, sometimes even after making repairs.

This is an acute example. But Richmond restricts the supply of affordable housing in chronic ways as well, such as zoning. In R-1 residential zones, the minimum lot size is 20,000 square feet, and the front yard must stretch at least 35 from the street to the house. Lot sizes step down from those requirements in other districts, but that merely reduces the effect. And large portions of the city are off-limits to apartment complexes.

Minimum lot sizes drive up housing costs two principal ways: First, they artificially increase the price of a given residence, since it has to come with X amount of real estate. Second, they artificially depress the number of houses that can be built, because each house takes up much more of a finite space. And when you limit supply, you raise prices.

That should be intuitively obvious. But it is also backed up by research. The Mercatus Center at George Mason University in Fairfax has just issued a new report: "How Land-Use Regulation Undermines Affordable Housing." It surveys the existing economic literature and finds "a wide majority of empirical studies demonstrate that the more regulated jurisdictions have higher housing costs." Restrictions such as minimum lot sizes, the report says, amount to a hidden "regulatory tax" on housing.

Mercatus lies to the right of center on economics, but even liberals like Paul Krugman would agree with it on this point. In fact, Krugman does agree with it. As he put it Monday, citing White House Council of Economic Advisers chairman Jason Furman: "national housing prices have risen much faster than construction costs since the 1990s, and land-use restrictions are the most likely culprit. Yes, this is an issue on which you don't have to be a conservative to believe that we have too much regulation."

You can drive up the price of housing by other means, too. One method near and dear to the heart of many Richmonders: historic preservation. Richmond has more than a dozen historic districts. Together, they encompass more than 700 acres - and more than 3,300 structures, a great many of them residential.

Changes within the districts are overseen by the Commission of Architectural Review, which provides a handy guide for residents that explains, in 100-plus pages, what is and is not allowed. Demolition - say, to make room for a building filled with affordable apartments - is mostly verboten. "Demolition is considered an option of last resort," the city's handbook says. It is "strongly discouraged" and permitted only "under extreme circumstances." You can't get a "certificate of appropriateness" - the review board's rather precious term, unless "there are no feasible alternatives."

But historic-district restrictions go far beyond such brutish options. They cover everything from porch railings ("balustrades are important character-defining features of a structure") to paint (colors not on the approved palette "will be reviewed by staff on a case-by-case basis") to proportion ("new structures should have the same number of stories as the majority of structures on the block"). Even minor changes require a lengthy application; be sure to include exterior-elevation drawings and paint chips for color approval. And the rules are meant to preserve not just the stately mansions along Monument Avenue, but even the " 'pre-fab' bungalow-style homes" in Springhill. There is a fine line indeed between historic and just plain old.

Does this mean Richmond should raze St. John's Church, where Patrick Henry cried "Give me liberty, or give me death"? Of course not. But it's worth noting, as Diana Thomas wrote in "Regressive Effects of Regulation" (another Mercatus study)  that "well-intentioned regulation often represents the preferences of the wealthy." Poor people can appreciate history as much as anybody else. But when a poor family replaces a window, it wants to keep the cold out. It's probably less interested in the architectural review commission's demand that the window's character "should not be altered by inappropriate materials or finishes that radically change the sash, depth of reveal, muntin configuration . . . or color of the glazing."

So yes, handing out grants for affordable housing is good. But it is good in the same way that emergency rooms are good: It would be much better to need fewer of them in the first place.

This article originally appeared at the Richmond Times-Dispatch.

http://www.richmond.com/opinion/our-opinion/article_b3703db5-2567-520a-ac68-3432fa3594e3.html

Photo Credit: dstanley/flickr

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  • Scarecrow & WoodChipper Repair||

    Same thing with all occupational licensing and zoning. The ones that particularly gall me are barbering, hair dressing, nail salons, and that sort, which require very little capital and experience, and has few consequences for poor execution other than the business failing; tailor-made for the poor and unskilled. Taxi driving requires more capital and good insurance, and has potentially worse consequences in the form of DUIs or bad drivers, but is otherwise of the same sort.

    Government hurts the poor most of all. The rich and well-connected merely lose income hiring lawyers and accountants; the poor never even get a chance at helping themselves.

  • Lorenzo Zoil||

    Occupational licensure has very little to do with protecting the public. The real goal is to create artificially high barriers to entry in order to protect those currently in the field. As time goes on professional societies lobby for increasingly high barriers. All the while whining about how changes in the market are affecting their fee structures. So they lobby further to expand their scope to decrease competition.

    There is reason to believe that licensure is actually bad for public safety. Take architects for instance. They have created this convoluted process of education and experience as well as continuing education in order to practice. Few have any real experience in constructing buildings beyond classroom learning and they rely very heavily on the building codes. When things go wrong, and they do, the code rather than the incompetence of the architect is blamed. Architect keeps his job, more draconian regulations are passed and the professional society uses the incident as evidence of the need for higher barriers to entry.

    Meanwhile the livelihood of the unlicensed designer is threatened by the state because of the professional society, when this individual actually knows how to build. Why, because he can make a living changing 25% of what the architect does for the same job. Were the market allowed to work, incompetent architects would get fired and the cost of services would be lower.

  • ace_m82||

    Wait, so Krugman was right about something? How do I...

    I actually couldn't keep reading the rest of the article. I think I need to lie down a little while...

  • Unicorn Abattoir||

    Try building a house in the New Jersey Pinelands:

    First, get your plans approved by your municipality, just like you would anywhere else. Expect your lot grading plan to be rejected 3 times (I've been told by others that I used the "wrong" engineer - not the one related to the construction codes officer).

    Second, get your plans approved by the state (the Pinelands Commission). They need to re-review your plans a few times because of their mistakes, but you'll still have to allow 90 days for each review.

    And don't forget your Pinelands Development Credit! You can't build without one of these, which are pieces of paper the state gave people in exchange for seizing their land back in the '80s. No need for eminent domain in this case.

  • Win Bear||

    Well, you chose to move to a state operated zoo... so what do you expect?

  • Craig Smith||

    Great googley moogley. Why would anyone move there? What a headache...

  • Sevo||

    We can add 'rent control' as a time-proven technique to raise rental costs.

  • BambiB||

    So yes, handing out grants for affordable housing is good.

    Really? Stealing from one group to subsidize housing for another is "good"?

  • ||

    By giving you a grant, they can claim that they helped you get a home and then make you look like a dead beat because you cannot pay the property taxes. Isn't that called a Win-Win?

  • Thomas O.||

    This whole housing situation is a Catch-22.

    On the one hand, you have people complaining that housing prices aren't low enough, that people are either forced to take in 5 roommates (sometimes illicitly) to barely pay the rent or forced to move two hours away and face the commute from hell every weekday.

    On the other hand, you have homeowners complaining that housing prices are TOO low, that any devaluation of their property will seriously damage their investment portfolio, that they can't believe they're forced to take $500,000 for the sale of their 2-bedroom house, it was maybe a third of the appraised value, and hey, don't you know real estate is what ultimately drives our economy?

    So what do we want... more affordable housing or stabilized property values? It seems like we can't have both, and propping up one side will get the other side hopping mad.

    I've a feeling that THIS is what's really driving the whole "the 1% vs. the 99%" meme.

  • retiredfire||

    The thing about these regulations is that they didn't just appear from the ether.
    The smaller the governmental jurisdiction, the easier it is for the people to make political changes to alter such rules. Unlike regulations that come from the behemoth that is FEDGOV.
    Implicit in the criticism is the concept that "someone" should be in a position to decree which of the regulations is "unfair".
    Who is that "someone" going to be and by what right do they get to override democratically elected representatives?
    Despite Barton's recitation of what is considered "affordable", it is a relative term. Your housing is related to how you are willing to allocate your resources to providing shelter. We are free to move anywhere we want but there will be a restriction as to if we can afford that area in which we decide to settle.
    Only the few can afford Calabasas, California, the rest of us must house ourselves where it is within our price-range, to try to engineer the business of real estate is fascism.

  • MaleMatters||

    Great stuff, as per usual in Reason.

    Readers should bookmark this report and cite the following the next time they hear a Democrat say Republicans want to throw people out on the street.

    "When housing advocates offered to intercede, they got the same response. Families got tossed out on the street, sometimes even after making repairs."

    The Richmond mayor is Dwight C. Jones, a Democrat. He is also black. Imagine a white Republican mayor allowing families, doubtless including black families, to be tossed out on the street. We'd certainly hear about it on the liberal news outlets such as the NBC Evening News.

  • macsnafu||

    A nice, back-to-basics article. Good stuff. But they're still not listening.

  • Jason Vick||

    Reversing policies that restrict housing is far more effective than grants

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