Of Inclusionary Housing, Environmental Regulations and Conservative Thinkers

Time to spout off about a couple of things I read over the past two days.

First, lets start with the column written by Thomas Sowell, conservative economist from Stanford. In the column Local environmental-protection laws to blame for housing bust, Sowell sets out to blame the housing crash on local planners. He approaches this in an interesting way. He takes the position that programs to provide affordable housing (specifically the funding mechanisms to place people into homes) was unnecessary. The "real problem" in Sowell's eyes are local zoning and other land regulatory mechanisms that increase the price of housing. Specifically, he targets environmental protection, open space laws and "smart growth."

It is interesting that some of the environmental protections he targets date back 37 years now, to a major conservative president. In 1972 the Clean Water Act became law, followed in 1973 by the Endangered Species Act. As Barry Goldwater is reported to have stated back then, conservatives put the conserve in conservation.

It is interesting that he targets a progression of strategies. First there was outright environmental protection. Soon it came to be realized that environmental protection and development could be balanced, that is what brought us open space laws. Laws that essentially concentrate development into smaller areas while protecting important environmental areas. Finally, we have arrived at "smart growth" which further seeks to targets accommodating higher densities of housing in areas where the infrastructure and other services are available to serve the development.

It is interesting that greed never came into the discussion - but that is a point I will reserve for later.

The second report I came across is the latest missive from the Rappaport Institute. The report, entitled Silver Bullet or Trojan Horse - The Effects of Inclusionary Zoning on Local Housing Markets In Greater Boston, concludes that local Inclusionary Housing By-laws do not work.

The study surveyed 187 communities in what they refer to as Greater Boston - most of the Worcester metropolitan area is included as "greater Boston." The study found that 48 communities adopted Inclusionary Zoning between 2000 and 2004, 60% of those with these type of by-laws. Of the 187 communities surveyed, 99 had inclusionary zoning, just over half of the communities. If one were looking for positives, the rising significance of inclusionary zoning at the local level should be applauded.

The study also notes that communities with inclusionary zoning in place for 5-14 years had a better chance of having created housing than those with less than two years experience. While this is kind of a no-brainer that longer exposure to zoning provisions will lead to a greater level of production, the time period of the study, ending in 2004, was also the middle of the economic downturn caused by the "dot com" bust. A period that had a significant economic impact on the Greater Boston area which saw many business failures. The study prefers to chalk this up to how long it takes to get a project permitted, rather than real economic issues.

Now we get to the fun part of the report, one that should call into question the entire Chapter 40B process. The study states

Many economists and developers believe
that, because IZ acts as a tax on new housing
development, it is likely to reduce the production
of new housing and increase prices of both new
and existing houses.

There analysis suggests that permits, based upon a regression analysis, permits will decrease in communities with inclusionary zoning! They actually suggest a 10% to 30% reduction in permit issuance the longer a community has IZ in place.

Finally, in coming to its conclusion that IZ has no benefit in Greater Boston, the report tries to suggest a lack of unit production. However, that conclusion is quite interesting. The report suggests that there were 21 units of housing created in San Francisco metropolitan area under inclusionary housing, and 180 units in the Washington DC metropolitan area, then states that 43% of the communities with IZ in greater Boston had no unit production. A little apples and oranges here! If the communities that did produce housing, produced only one unit apiece in this time period, at least 56 units of housing were produced! Far better than San Francisco which has had IZ far longer than our local brethren. The community I work for is not part of that study, but within the time frame of the study, more than 20 deed restricted units were created.

So, where does greed come in to play? Thomas Sowell and the Rappaport Institute attempt to place blame on local officials for increased housing prices. Predominantly and continuously looking at community character preservation goals, environmental goals and other local regulations as the catalyst for increased housing costs. No one looks at the rapid loss of land, which Mass Audubon suggests is as much as 40 acres a day in Massachusetts as being part of why housing prices are going up.

In fact, builders will, justifiably, try to earn as much as they can from every transaction. They do have families to feed as well, and can only work so many hours a year. And, they clearly need to be able to protect themselves against downturns such as the current one and the one of the late 80's and early 90's. However, there are others simply taking advantage of people, as noted in The Ponzi State; Florida's foreclosure disaster, flipping of houses became big business during the recent housing bubble. Similarly many builders only sought out high end projects since money was flowing freely. Who wanted to build smaller, more affordable units when one McMansion could generate as much profit as several less costly homes? Greed is found everywhere. Truly, it is the basic profit motive. People are in business to make money and take care of their own self interest.

I will leave you with one simple thought for today, and it is based upon a front page editorial in the Manchester Union Leader, everyone is in favor of affordable housing, until it is in their neighborhood. The Union Leader plasters Live Free or Die on its masthead. However, over twenty years ago endorsed a piece of legislation targeted to improving community land use tools (increasing restrictions on land) with the ominous statement "perhaps the next big housing project will be in your backyard...." On affordable housing people walk the walk, and talk the talk, until it comes close to home.

NH Work Force Housing

I wrote about the NH Work Force Housing planning requirement previously. When I reviewed the idea, I did not notice the requirement that towns accommodate a 60% of median income target. From this Concord Monitor article, Workforce housing changes on ballots ; Towns scramble to comply with new law, it appears that the communities in NH are having a hard time meeting this mandate within their local by-laws. I continue to think that this type of a mandate is important, and should be looked at here in Massachusetts as well, with the caveat, that Chapter 40B would go by the wayside.

It should be noted that this statute seeks the ability to create affordable housing, it is not a sheer housing construction numbers game that some feel is necessary here in Massachusetts.

And Now This From San Diego

Here is an article that reflects the staggering effect of overbuilding. Defaults drag down prospects for builders. One can only wonder if the nation would be in as bad a shape as it is if these builders and banks had insisted that there be identified qualified buyers for the housing before construction began.