When I asked Theo Eicher if he was surprised by the furious reaction to his study on land-use regulations and housing prices, he answered...
When I asked Theo Eicher if he was surprised by the furious reaction to his study on land-use regulations and housing prices, he answered with the maddening care of an economist: “Yes and no.”
As reported recently in The Seattle Times by Elizabeth Rhodes, the study argued that rules, including growth-management restrictions, had added perhaps $200,000 to the price of a house in Seattle.
The story was widely read, and readers weren’t shy about giving their opinions.
“As a developer of in-city multifamily housing, I face the costs and barriers referenced in your article on a day-to-day basis,” wrote a reader named Clay, on Rhodes’ “Home Forum Extra” blog.
Most Read Business Stories
- Facing populist assault, global elites regroup in Davos
- Boeing overhauls quality controls: more high-tech tracking but fewer inspectors
- 5 investment tips from Vanguard founder John Bogle
- Alaska Airlines flight diversion leads to a 30-hour nightmare for passengers WATCH
- King County property tax bills are coming, and the housing market slowdown won't lower your bill
More readers seemed to respond like Seth: “Not everyone wants to live in a traffic-wracked, zero-amenity, low-infrastructure slurb. Allowing less regulated growth does keep house prices lower, but at the expense of everyone already living in the area who have to pay for roads, schools, sewers and so on.”
Strong words for an allegedly dismal science.
Eicher, an economics professor at the University of Washington, said he could understand the vehemence.
“Housing is a necessity, so people care about its cost, and also because the stewardship of our environment, an exhaustible resource, has been increasingly receiving the attention.”
Still, he was also surprised. The university’s Economic Policy Research Center had “worked similar projects in the past that did not produce the same level of interest.”
That’s probably because the study and its coverage are surrogates for highly emotional issues beyond house prices: quality of life, property rights, environmental degradation, affordable housing, pressure on the middle class, particularly in Seattle, and a rapidly changing city. They ignite polarizing political debates, often involving powerful special interests.
For his part, Eicher said, “Talking about costs, $200,000 is a large number, but even more staggering for me is that the data highlight the tension between land use and affordable housing. Apparently it is quite difficult nationwide to design land-use measures that are consistent with affordable housing.”
He has put up a Web page (http://depts.washington.edu/teclass/landuse) to further explain what is a complex study, and one with national data and implications. But it won’t end an argument that has been going on for decades.
For years, scholars have worked to put a price tag on development regulations. But they’ve also looked at the costs of sprawl.
That was the title of a landmark 1974 report that sought to quantify the economic, environmental and social costs of the kind of development that dominated America after World War II. It found, for example, that planning and density could save 44 percent in energy consumption, as well as reduce pollution.
The federal study was updated for the turn of the century as “The Costs of Sprawl 2000,” led by Robert Burchell of Rutgers. It concluded that “there appear to be more costs than benefits of sprawl growth and many of the costs are measurable.”
It consumes more land and infrastructure than compact development, for example. Personal travel costs are higher.
All this took on urgency because the study contemplated the additional land that would be consumed in the coming decades if development patterns remained the same.
“It’s undoubtedly the case that far-flung subdivisions are terribly expensive” in terms of external costs to the public, Stuart Gabriel told me. Gabriel, a professor of finance at UCLA and director of the Richard Ziman Center for Real Estate, is a leading scholar in the field.
Growth management adds costs, too. But, Gabriel said, “it’s not easy to quantify what’s growth management and what are other things.” For example, high demand, limited supply and relatively scarce land can also be drivers beyond development restrictions.
In Seattle, the evolution of a knowledge economy that creates vast wealth and high wages bids up housing. That economy also sees rising inequality and highlights the decline of good blue-collar jobs and economic mobility.
Terry Moore, a vice president and senior planner at ECONorthwest in Eugene, Ore., has watched the debate evolve. He has managed more than 400 projects analyzing such issues as land use and transportation.
“Historically, the discussion about the costs of sprawl was fuzzy,” he said. The more recent research has looked at “whether growth is paying its own way.” In the past, Americans didn’t worry about that.
But if costs are the only element discussed in land-use planning, he warned, “you’re almost certainly going to get it wrong.” The policies also have to address economic development, fairness and other issues.
In the end, we may be asking too much from economics. From the popularity of the book and blog Freakonomics to the ubiquitous quoting of (often contradictory) studies in political battles, many Americans have come to expect economics to offer bottom-line answers to almost every question.
Unfortunately, those answers aren’t always clear. Land-use restrictions cost money. Lack of them may cost even more, although many of those costs are deferred for decades and dumped on the public.
We’re left with what economists call “normative” questions. In other words, values, judgment, what ought to be.
Those values are different across America, from the relatively planned density of the urban Northwest to the laissez-faire “master planned communities” of Phoenix and Las Vegas. In most places, people are happy with their housing choices. Even so, the American automobile suburb arose in a time of cheap energy, easy driving, abundant land close to cities and no knowledge of global warming. The “American dream” was packaged as a consumer product, the single-family detached house in suburbia or exurbia.
Now these forces are turning the other way, right down to the growing number of Americans who want to live in cities.
The suburbs and exurbs are the epicenters of the subprime-mortgage disaster. They will be stressed in coming years by higher energy prices and, in much of the West, water shortages.
All of this will echo some of Eicher’s most important points. Policy involves trade-offs. It can have unintended consequences. And finding the balance is devilishly difficult.
You may reach Jon Talton at email@example.com
Jon Talton is a journalist and author living in Seattle. For more than 20 years he has covered business and finance, specializing in urban economies, energy, real estate and economics and public policy. Talton has been a columnist for The Arizona Republic, Charlotte Observer and Rocky Mountain News, and his columns have appeared in newspapers throughout North America on The New York Times News Service.