Friday, August 6, 2010

Did We Cause the Crisis?, cont.

To get our extended, “Livability” topic started, we thought we’d feature some responses to our “Did We Cause the Crisis” post from Monday. In case you missed it, the questions we were addressing came from Jonathan Hiskes, on whether smart-growth land use restrictions can actually cause housing bubbles (in other words, whether “livability” can be affordable and sustainable in the long term).

Open House reader, Kurt, makes a solid point:
"We have to be very careful in interpreting [Huang and Tang’s] results… The index [that the report draws from] measures a whole range of supply restrictions [including land use regulation]. Very few, if any, of the supply restrictions actually measured have anything to do with "smart growth." Actually, if you look at the data carefully, communities that engaged in "dumb growth" (only single-family, detached on large lots, no transit, mixed-use, etc.) had the highest rates of house price appreciation and then fast rates of decline with the substantial weakening of demand starting in late 2007. The data is equally consistent with a hypothesis that smart growth areas performed better because they did not have the drastic swings in house prices. Of course, that argument too is way too much of a generalization."
It’s true, the research Jonathan Hiskes was looking at doesn’t address smart growth directly, but rather looks at land restrictions of all sorts. In terms of regulation, that could include “things like gated communities and large lot restrictions which are actually anti-smart growth,” as Alex Steffen puts it. Hiskes’ main question – which we picked up on – was how the report related to smart growth laws specifically. Overall, it seems Kurt hits the nail on the head: the report does not, in fact, appear to discredit smart growth. It’s findings are too broad, and the ways in which it deals with “smart growth” are much too narrow.

Another reader has an opposing view:

“The crucial factor that has to be examined is the price of land… All the objectives of "smart growth" are good; but if your urban growth boundaries have forced up the cost of land, all your other objectives become harder to realize. This is the lesson that planners need to grasp.
They need to compare the price of raw land inside their urban growth boundary, with the price of land outside of it. This is where the bubble started, in every region that had a bubble. Every region that has a loose enough boundary that the land inside it cannot all be cornered by land bankers, is "bubble proofed".

Yes, in some areas the suburban fringe is where prices have collapsed the most. This is simply because the urban fringe was the "least unaffordable" option for lower income earners; it was, however, still many times too expensive.In metros where the price of ALL land is successfully kept down by relaxed urban boundaries, there remains a lot more options for "affordable" homes, many of them quite conveniently located…"

It’s important to remember that urban growth boundaries are a specific type of land use regulation. To say “every region that has a loose enough boundary” was “bubble-proofed” does not take into account that most regions don’t have designated urban growth boundaries. And the ones that did are surely not the only ones that saw a bubble burst.

There are also many types of smart growth policies, just as there are many types of land use restrictions that have nothing to do with smart growth. We need to see the full picture here – and to do so, we need to remember that the out of wack “cost of place” that sprawl creates has done great damage to our economy. The system of providing the “least unaffordable” options for working Americans simply isn’t sustainable.

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