Six Impossible Housing Ideas: Unmasking Local Land-Use Policy

The thinking that brings you new local land-use “tools in the toolbox” – inclusionary housing, affordable housing fees, tax credits for buyers -- will not bring you homes for more people.

Scott Cox May 26th, 2021

“Alice laughed. 'There's no use trying,' she said. 'One can't believe impossible things.'
I daresay you haven't had much practice,' said the Queen. 'When I was your age, I always did it for half-an-hour a day. Why, sometimes I've believed as many as six impossible things before breakfast.”

Lewis Carroll

Ever feel like you’re Alice in Wonderland, when listening to people talk about housing? I do, all the time. Ours is not an easy business by any means, but it’s not rocket science, and yet we seem to keep running into misconceptions in the press and general population.

And it’s hard to solve a problem when you confuse symptoms with causes, as seems often to be the case. A few (only a few) of the worst:

A free market won't get us out of this mess. That's what got us into it!

In a free market, a producer (builders and developers) would study consumers, decide how best to serve them, and assemble a project. I’m not aware of other industries where producers are banned from using raw materials (land) as they see fit. We struggle to get it across to the public that we build what we’re allowed to build, not necessarily what we want to.

Homebuilders only recently have come to understand there is a big market for entry-level housing.

The housing market collapsed and low-priced home values fell below replacement cost. How do you build new ones, when you can’t compete with existing ones – especially when the majority of existing homes tend to be in more attractive, closer-in locations? Over time, prices rose, and eventually the price differential allowed profitable building.

Oh, and it would help if the public understood the magnitude of government fees, that they are assessed per unit, not per square foot. That alone makes it harder to produce a small home.

We need more “tools in the toolbox” – inclusionary housing, affordable housing fees, tax credits for buyers, etc.

We build insufficient homes (supply) for demand. Period. If the problem were that we build too much higher-end product, large vacancies and slow sales would be the result. But that hasn’t happened. Leaving aside the negative consequences of the regulatory ideas above, they will not create more supply.

Sorry, you can’t fix housing without more supply. All “tools” should have to face the question – how will new rule (a.k.a. tool) cause more homes than would otherwise be built, to be available?

Institutional investors bought/are buying up so many single-family homes they are absorbing inventory in the market and driving up sale prices.

Since they own 2% of the single-family rental market, it must be an awfully important 2%. Even if true, then they must have driven down rents, as there are more rentals than there otherwise would be, if the logic holds. Housing demand is a balloon. If you squeeze it in one place it will bulge out in another.
Related to this, we’re hearing that if only the baby boomers would put their homes on the market like they are supposed to, we’d have more inventory and things would improve. Where are they supposed to move to? I understand how playing musical chairs is good for those who benefit from transactions, but it does not produce more chairs. Don’t expect the boomers to move if we can’t build enough homes for them at the right price. Again, it’s supply - not faster turning resales but truly new supply – more housing being built.

Development needs to pay its own way!!!

Interesting, since most large-scale developments put in massive amounts of infrastructure and often require special tax districts. In days gone by, municipalities paid for and put in infrastructure (feeling nostalgic?), drawing on existing resident tax dollars. So, the very people screaming development needs to pay for itself, live in homes where it did not. And last I checked, buyers in new home communities not only pay their special taxes, but the same property taxes as older communities. It would seem the ones not paying their way are existing homeowners.

We have to listen to the will of the people

Which people? The ones who work in your community and can’t afford to live there? Ah, well, no, apparently not them. Or the two dozen with time on their hands to show up at a community meeting because the view they never paid for and was never promised, will be marred by a new happy family home? If we’re going to live in a direct democracy instead of a representative democracy (as the founders wisely designed) can we skip electing officials and having planning commissioners? Planning staff can put packages online and we can use Survey Monkey to determine the outcome.

Through the Looking-Glass, indeed.

We’re going to have to speak up every chance we get so the public starts to understand the real issues – entitlements and infrastructure – and does not get distracted by the next proposed or approved “tool.”

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Scott Cox

Scott Cox

Principal, SLC Advisors


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