Why you can’t have affordable housing and a compact city together

Auckland Council and politicians are seeking an impossible dream, an affordable housing city, yet compact in design.

There problem is there is nowhere in the world where this occurs.

The Wall Street Journal investigates:

Across the country, a divide is emerging between cities that are growing outward and remaining affordable and ones that are hemmed in by geography and onerous zoning codes and are becoming  more and more expensive.

As a whole, U.S. cities are expanding as rapidly as they have throughout the last half-century. From the 1950s until the 2000s they have added about 10,000 square miles per decade, or an area roughly the size of Massachusetts, according to research by Issi Romem, chief economist at real-estate site BuildZoom, to be released Monday. But beneath the surface a divide is deepening.

On the one side are cities such as San Francisco, Boston, New York and Miami that have slowed their pace of expansion dramatically since the 1970s, in part as they have added layer upon layer of building regulations. On the other side are cities concentrated in the southeast and Texas, which have grown outward and seen much slower price growth.  

The developed residential area in Atlanta, for example, grew by 208% from 1980 to 2010 and real home values grew by 14%. In contrast, in the San Francisco-San Jose area, developed residential land grew by just 30%, while homes values grew by 188%.

The developed residential area in Raleigh, N.C., grew by 219% in the same period, while home values grew by 27%. In Seattle, the developed area grew by 69%, while home values grew by 119%.

Mr. Romem draws the distinction succinctly: expansive cities versus expensive cities.

“If you don’t let the city grow, you’re going to get prices going upward…and see the middle class being pushed out,” Mr. Romem said.

Mr. Romem’s research reads on its face like an argument for suburban sprawl, which has come under fire both for its environmental consequences and tendency to lead to oversupply that can lead home prices to crash.

Mr. Romem said ideally cities would relax regulations and build upward rather than outward. But, he said, promoting development on empty fields is more politically feasible than building apartment towers in single-family neighborhoods, and thus likely to ease affordability pressures more quickly.

If you want affordable housing then you can’t create tight rules for a compact city. They are incompatible.

The chart is telling.

BN-NO777_kusist_J_20160415153900

If politicians want affordable housing then they are going to have to commit to expanding the city. You can’t have both, it has never been done anywhere in the world.

It is a pipe-dream of professional liars that you can have both.

 

– Wall Street Journal

 


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  • Orca

    “Mr. Romem’s research reads on its face like an argument for suburban sprawl, which has come under fire both for its environmental consequences and tendency to lead to oversupply that can lead home prices to crash.”

    So in the US, people are complaining that if you let the city spread it will make property prices crash. Our town planners are saying the opposite. The first of those is based on factual evidence, such as that given above, while the second is based on what they teach them at town planning school. I know which one I believe.

  • Just me

    Have recently been house hunting in Auckland… to witness just how bad this issue is firsthand has been nothing short of eyeopening. There is an unwillingness (total inability) of local government to address the issue – but there is also a major central government issue.

    In the last 8 weeks, nine auction nights/attended just one house was sold to Kiwis, i.e. born and bred New Zealanders. In EVERY other case the house was bought by a Chinese/Asian person with language capabilities that range from poor to none at all.

    This is what John Key and Len Brown have collectively inflicted on Aucklanders; an under supply and an escalating price that is better indexed against foreign investment and not the earning capabilities of locals. It’s shoddy, and frankly embarrassing… The National Party are busy cozying up to China for more trade deals even though John Key is blithely put back in his box by the communist elite who get fat and rich of the back of the Chinese peasants.

    The very fabric of Auckland and New Zealand is changing and not for the better…
    We need to immediately stop nonresidents holding property and residents should be able to own one property only.

    This is a real issue… despite what Simon Bridges would have us believe.

    • cows4me

      It’s a ponzi scheme, a death spiral, an ever consuming beast. What would be worst . No rising house prices due to no offshore investment or rising house values due to off shore investment ?. If off shore investment stops prices drop the bubble bursts. Plus how much of this off shore wealth goes to the obese ACC ? If this influx of wealth was to cease could those remaining take up the slack and continue to feed the beast ?. We have created a beast that needs to forever grow for when it stops, well it’s all over.

      • Just me

        I agree to a point… but it needs to be better managed… if we look at the migrant investment issues as “tap” – then it’s time to turn it down. Not off completely.
        Not only for financial reasons… but social ones as well. Where’s the benefit for any culture to literally be swamped by another? Two or more cultures with limited interaction because there is no requirement for it? Chinatowns popping up everywhere?

        Key’s selling our souls on this… and I don’t think he’s getting a great price.

        • Raibert

          The real issue is do we want this “housing bubble” to destroy the fabric of our society? It has already led to heightened inter- generational tension and some issues over ethnicity of immigrants and investors. Surely the government has a fundamental responsibility to look after all New Zealanders, and put NZ citizens needs before overseas speculators.

    • CheesyEarWax

      I have been house hunting too and yes, the Chinese buyers do stand out but I wouldn’t blame entirely on them. Yes, foreign money is flowing into the Auckland housing market, not just Chinese money, but there are other factors. I’d start with post-GFC resulted in a big reduction of supply, there were long periods where new houses were only financed by owner-occupiers. Leaky house syndrome leads to tighter regulations and higher building costs, a big factor in con-straining supply. Positive net migration and the penultimate constraint of land supply leads to this pickle we are now in.

  • Larry

    So all over the world, people, communities, cities are striving for economic growth. Then they get growth and everyone screams for controls. If they left it alone market forces would sort it out eventually. But they start to regulate and everybody loses.

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