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Thursday, February 14, 2008

Straw Density—Debunking that Anti-Growth Management Study

posted by on February 14 at 19:00 PM

In this week’s In the Hall column, I argued that growth management “isn’t working”—citing growth projections that show ever more residents flocking to far-flung suburban areas that are ill-served by transit.

Today’s Seattle Times cites a new UW study that argues the opposite: Growth management is working too well. The study, by UW economist Theo Eicher, concluded that fully $200,000 of the increase in housing prices over the last 20 years can be attributed to government regulations—primarily the Growth Management Act, which was intended to promote inner-city density instead of far-flung suburban sprawl. That means, if you believe it, that fully 88 percent of the growth in housing prices can be laid at the feet of government. Well, I didn’t buy it, and neither did Eric de Place at Sightline, who did a three-part analysis ripping that figure—and nearly everything else about this study—to shreds.

Here’s where my own bullshit meter went off:

A key regulation is the state’s Growth Management Act, enacted in 1990 in response to widespread public concern that sprawl could destroy the area’s unique character. To preserve it, the act promoted restrictions on where housing can be built. The result is artificial density that has driven up home prices by limiting supply, Eicher says.

Long building-permit approval times and municipal land-use restrictions upheld by courts also have played significant roles in increasing Seattle’s housing costs, he adds.

First of all, density IS supply—by definition, “density” is dense housing. So density doesn’t limit housing supply, it just creates a different type of housing than Eicher’s suburban single-family Platonic ideal. Second, “artificial density” is one of those terms like “social engineering”—it’s used by anti-density activists to argue that density is somehow contrary to the “natural” course of development. Yes, government regulation can help produce density. I guess in that sense it’s artificial. But you know what else is artificial? Sprawl. Government subsidies that pay for roads; developments that are kept low-density by zoning regulations that privilege single-family houses; laws barring street grids in favor of cul-de-sacs, forcing people to drive everywhere; and big box retailers with massive parking lots—those are artificial. They’re just a type of artificial the study’s author likes.

Eicher goes on to cite a controversial provision of King County’s Critical Areas Ordinance, which requires landowners with undeveloped rural land in unincorporated King County to keep 50 to 65 percent of their property in its “natural state.” The provision was intended to stifle out-of-control subdivision of rural land; suburban developers opposed it, because that’s how they make their money. The study argues that such rules “forced greater density in Seattle” and drove up housing prices throughout the county.

It’s hard to see how regulations that only affect a small amount of land in rural King County could have “forced greater density” onto a city several miles away, but what about driving up housing prices countywide? Well, Sightline crunched the numbers on that one, too. They found, in de Place’s words, that “it’s too close to call”—home prices in unregulated versus strictly regulated parts of rural King County were virtually identical.

Moving on:

According to the Wharton study [by researchers at the University of Pennsylvania], cities such as Seattle that have high median incomes, high home prices and a large percentage of college-educated workers tend to have the most land-use regulations.

[Kriss] Sjoblom [an economist for the anti-regulation Washington Research Council] says that makes sense: “People with higher incomes want the kind of amenities that regulation provides,” he says. “If you’re a homeowner and growth controls are imposed and housing prices shoot up, you’re grandfathered because you own the place. In theory people will say it’s [rising prices] a bad thing, but in practice it’s not hurting them.”

Well, except for the whole ever-rising property taxes thing. And, you know, if you ever want to move. Moreover, it’s not, as de Place points out, as if housing prices haven’t been rising in the rest of the country. In fact, they’ve been rising faster. Seattle ranked 57th in the nation in terms of annual housing price appreciation; Tacoma, for comparison, ranked 49th. The highest appreciation rate was in a place that must sound like paradise to regulation opponents like Eicher: The virtually unregulated Sun Belt.

In the final analysis, Eicher believes Seattle’s regulatory climate exists because its residents want it. “My sense is land-use restrictions are imposed to generate socially desirable outcomes,” he says. “We all love parks and green spaces. But we must also be informed about the costs. It’s very easy to vote for a park if you think the cost is free.”

Yeah - and it’s easy to drive on the freeway to the suburbs Eicher finds so idyllic if the cost of that road is hidden. But to regulation opponents, amenities like freeways are “natural,” so the subsidies that pay for them must be natural, too.

RSS icon Comments


You have a bullshit meter?

Posted by elenchos | February 14, 2008 7:15 PM

See - that's unnecessary. I dislike ECB's stance on the presidential race as much as the next Obama supporter, but this wasn't about that and it's a very well reasoned argument. Lets leave the other stuff in the other threads and either respond or stay quiet about the other stuff.

Posted by Ed | February 14, 2008 7:27 PM

I read the story, but not the report. But It seems that the rates of increase, and the high median prices, are two different problems. Rising prices benefit existing homeowners because houses are typically the biggest asset most people own. The property tax increases suck mostly because they are a tax on unrealized gains. High prices suck most for people trying to buy their first house.

It seems that our geographic constraints are the biggest obstacle to expanding supply. There are plenty of places to build houses, but hills and water make it difficult to get to work. If you look at places with similar geographic constraints, you'll see high median prices. San Fran and New York come to mind. Manhattan has great public transit, but there aren't many ways on/off the island. Houston and Phoenix can keep adding ring roads.

Posted by Curmudgeon | February 14, 2008 7:33 PM

ECB - the guy was on the radio and didn't at all sound pro sprawl. It does seem that if land is restricted for building the buildable land will go up in price. You have been complaining about how people are being priced out of Seattle and now you say that prices aren't that bad in Seattle after all.

Anyway you should talk to the guy before you label him.

Posted by ouch | February 14, 2008 7:34 PM

Isn't 70% of the city zoned detached single-use housing??

It seems to me that that must make apartment prices go way up... It would have been really interesting if he considered that.

Posted by John | February 14, 2008 7:37 PM

The Seattle Times spin on this is ridiculous. They hope home price sticker shock will sell papers, but even the economist acknowledges that we regulate at about the level people want. It ain't Europe, but at we're not willing to destroy all of our surroundings so that mcmansions can be standard middle class fare.

Posted by jonglix | February 14, 2008 7:41 PM

Boise at 15th had an average house price of $154,000 in 2004 - Seattle at 57th was the top 20%.

Once again I don't think the guy was making a value judgment on GM from how he sounded.

Percentage increase would be less important than total increased costs.

Posted by ouch | February 14, 2008 8:03 PM

Parks and green spaces make neighborhoods more livable and real estate more valuable. No, parks aren't free, but no one wants to live in a neighborhood that doesn't have them.

Does the study bemoan the existence of good schools in some neighborhoods, thus making homes more expensive?

Posted by keshmeshi | February 14, 2008 8:07 PM

Government subsidies that pay for roads; developments that are kept low-density by zoning regulations that privilege single-family houses; laws barring street grids in favor of cul-de-sacs, forcing people to drive everywhere; and big box retailers with massive parking lots—those are artificial. They’re just a type of artificial the study’s author likes.

They're also the type of artificial that the people living in it like.

Posted by JMR | February 14, 2008 8:30 PM

ECB had good points especially that everything is social engineering, except she's wrong to conclude land supply restrictions don't affect the price. If you want cheaper housing AND more density you need more supply of land for density which means upzoning choice pieces of that 75% of the land on which it is PROHIBTED to build up.

Denying the whole principle of supply and demand just to criticize one writer who talks about it and seemingly reaches a fightening conclusion seems short sighted.

You end up throwing out the strongest tool that exists for promoting density. The government can magically create more land for density for free thru the magic of upzoning. This increase in supply then creates more multifamily housing and more affordable multifamily housing without a need for billions of government pramg dollars.

Indeed, there is little else that will actually help boost density more dramatically.

The writer's right -- GMA restriction on supply of land push up prices. How much? who knows? The problem is we have used the GMA to take away supply in the outer burbs, but we haven't used GMA rules further to add supply (via upzoning) in the inner urban core.

Six story buildings all over Seattle. Great. Why not 12 stories or 18 anywhere in the multifamily zones all over Seattle?

You can't get there politically unless you explain it will work via supply and demand.

Posted by Ricardo Hume-Mills Smith | February 14, 2008 8:32 PM

My charts and graphs show the more dens of iniquity the more affordable housing becomes.

Posted by collie | February 14, 2008 8:55 PM

Well of course restricting the amount of buildable land will push prices up as do building, fire, ectrical and plumbing codes and our desire for parks, schools and sidewalks. The UW study was OK that far, but as ECB said he neglected the costs of suburban sprawl that affect all of us. The additional gas taxes to expand Hwy 167, the additional sales taxes for more Metro busses serving ever more distant burbs and so on. What really set off my bullshit meter though was the assumption that this could be measured relatively easily, it can't. It is extremely complicated and highly subjective. I would argue that the effect on utility rates, water and sewer would have to be calculated and the increased cost of disposing much larger amounts of garbage that has to be shipped ever further. It all gets too confusing and is not a productive exercise. When oversimplified as was the case in the UW study the results are misleading.

Posted by ratcityreprobate | February 14, 2008 9:03 PM

Thanks so much for linking to the Sightline debunk effort and laying out some great points.

I love that this UW fella really is a very well-respected economist. There is nothing more simultaneously funny and cool than when respected economists openly take each other on, trying to out-study and out-data-crunch each other. If this report gets attention at that level, an egghead slapfight might result--at last, at last--in some coherent economic theory around growth management. This could be just the opening bell.

Posted by tomasyalba | February 14, 2008 9:18 PM

Whatever the reason, thank Jebus for the increase in housing prices. It's financing my new furnace, and repairs to the hot tub.

I can totally believe that the growth restrictions have pushed up the price of housing. (A) high density is more expensive than low density, (B) I come from Minneapolis, which ten years ago had similar prices to Seattle but is sprawl-tastic. No longer. Average prices there are still "mired" in the mid 300s, rather than the vibrant 500s and 600s of my adopted land.

Posted by Big Sven | February 14, 2008 9:34 PM

Just to help those with a lower reading comprehension level:

"Artificial Density" means density created by zoning restrictions and not free market forces. It's not making a value judgement about the "artificiality" of density in general.

Posted by Mr. Joshua | February 14, 2008 9:35 PM

I come from Minneapolis

We kind of assumed that from your name, Sven.

Posted by JMR | February 14, 2008 9:40 PM

Good analysis. I disagree with one point:

First of all, density IS supply—by definition, “density” is dense housing. So density doesn’t limit housing supply, it just creates a different type of housing than Eicher’s suburban single-family Platonic ideal.

True, but it's a supply of high density housing. You can't just assume that consumers demand generic "housing" and that any old box with a roof can meet that demand. #9 alluded to this, but if you're only supplying high density housing and consumers are demanding low density housing (picket fence, two car garage, no shared walls, all that good stuff), then the price of low density housing will go up. This could conceivably drive up median home prices.

The fact is that not everyone is stoked to cram into a high rise condo, ride the bus everywhere, and live the city life like you and I are.

Posted by w7ngman | February 14, 2008 10:06 PM

I heart ECB.

Posted by Brendan | February 14, 2008 11:23 PM


Posted by is on fire today | February 15, 2008 8:39 AM

Good call, Erica. I thought I smelled something fishy when I read the article. The part that really makes no sense is that, if regulations account for $200,000 of home price after adjusting for inflation, why did median home price go up from $282,500 to $477,000 in the last five years? Surely inflation can't account for much of that increase, and neither can regulation, since the GMA has been in place from 1990 on.

Posted by Greg | February 15, 2008 9:32 AM

Greg the question is how much would housing go down if there were little or no regulations. Currently a building lot is a couple hundred thousand dollars in rural Snohomish County - about $175,000 per townhouse lot in Seattle - then there is design review, new building environmental requirements, redoing streets, etc etc.

So if we dropped most all regulations and people could build anywhere on 1/4 acre lots I could see the costs of housing going down $150,000 or more.

Posted by ouch | February 15, 2008 10:01 AM

See, this is why we got ECB that valentine in The Stranger.

Posted by Will in Seattle | February 15, 2008 11:05 AM

Well, if you think you should live in a two-story house with a two-car garage and a large yard to play and barbecue in... then, yes, prices are rising dramatically.

And, if you think that's what your family has to have, then you're having to move further and further out of the city to afford it.

It's certainly arguable whether that's a good or a bad thing. Look to Phoenix or Atlanta as examples of relatively un-regulated sprawl.

What we're saying here, and we should push even harder, is that the opportunity cost of choosing that housing further out is we're no longer going to spend the $$$ to build big new highways and other infrastructure out there. Instead of encouraging the sprawl, you're going to have to accept longer commutes and increased traffic congestion.

My husband and I only have one car, looked for housing on a bus line, and I work in Downtown so that we can better afford to be closer in. That's our economic trade-off and our choice.

Posted by Mickymse | February 15, 2008 11:26 AM

@21: My point is, design review and all that stuff existed before the major bump in home prices, so why the delay? You would expect to see a big change after 1990 if regulation was the main culprit.

Posted by Greg | February 15, 2008 12:17 PM

Greg this isn't a fight with you but the costs that were added in 1990 (not much at that time), 1991, 1992 ... 2006 all could be reversed - all the regulations are in current pricing. As lots have been used up in the city and new lots are limited.

If we took off the UGB and reduced permitting and other mandates Eicher is saying that costs would come down $200,000. Not sure I "buy" the number but I'm sure it's big.

Posted by ouch | February 15, 2008 12:54 PM

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