As big-city affordability crises continue to sweep the nation, the voices insisting that it is time for state governments to intervene grow in numbers, and louder by the day.
In calling for last summer’s special session of the Texas Legislature, Gov. Greg Abbott attempted to focus lawmakers’ attention on one of the primary drivers of the affordability issue: permitting. A draft summary of Abbott’s priorities indicated that the governor wanted a bill to shield private property owners from additional or enhanced regulations enacted after acquiring their property.
To conservatives’ dismay, that legislation (along with another aimed at expediting permit issuance) failed to gain traction. Additionally, during the regular session, Sen. Kelly Hancock (R-Fort Worth) filed a bill that would have preempted local regulation of short-term housing rental (STR) marketplaces. Those STR ordinances, like the one in Austin, interfere with private property rights and operate as economic protectionism for the hotel industry.
A new trend is emerging, with states taking another look at their role in defining how and where housing and land use regulation at the local level should apply. Care should be taken when examining these efforts as a single corpus, however, because their approaches could not be more different.
Take for instance California, where the term “affordability crisis” has become a definitive part of the local vernacular, and a generous starting point when describing the problem. Predictably, the liberal progressive solution presented in a recently filed bill in the California legislature, SB 827, is to throw money at the problem.
That measure would require a local government to grant developers a “transit-rich housing bonus” from the local coffers for projects built within half a mile of a major transit stop, or a quarter mile of a “high quality” transit stop. Notably, under California state law, local governments must provide “density bonuses” and other incentives for the production of lower income housing units.
Scott Beyer of The Market Urbanism Report, in an analysis of supply-side vs. demand-side approaches, concludes that liberal demand-side policies “ignore or worsen the fundamental problem of under-supply.”
This view from California is a vast departure from what Abbott was trying to do: unleash free market forces being hampered by local regulation. Permits are a form of land use regulation, and along with other rules, builders in Austin, for example, are faced with a bevy of city-imposed hurdles.
In a hypothetical test case, the cost of satisfying all of Austin’s regulations and permit requirements would cost a developer an additional $112,831 to build on a single lot in the central part of the city. A closer study of this issue was conducted by The University of Texas at Austin, where research shows that it typically takes 3.5 additional months to receive site plan approval in addition to the code-mandated four-month cycle.
The long list of regulations and permits suppresses not only the interplay between supply and demand, but also price signals. Based on national averages, government regulation accounts for almost 25 percent of the final price of a new single-family home. One estimate of development lost to overbearing regulations put the annual cost to the U.S. economy at $1.5 trillion.
One of the major obstacles to local reform, and thus calls for state intervention, stems from the NIMBY phenomenon. Shorthand for “Not In My Back Yard,” established homeowners are incentivized to oppose the influx of new residents. Higher supply means lower asset prices, but other reasoning deployed by residents and their neighborhood association proxies include parking concerns, aesthetics, and apartment sizes. Often, zoning laws, appeals, and open-ended design, permit, and environmental reviews are weaponized to stifle new growth.
Local officials more interested in votes than sound public policy are happy to assuage their existing voter base rather than a prospective one. Meanwhile, newcomers suffer housing scarcity and higher prices.
In Boulder, Colorado, a citizens’ group called Livable Boulder pushed ballot measures increasing fees on new development and allowing a vote on zoning changes in their area. A former city councilman refreshingly spoke candidly on his position, saying “We don’t need one more job in Boulder. We don’t need to grow anymore. Go somewhere else where they need you.”
How bad has affordable housing gotten? It’s so bad in Miami that a plan being considered by the city proposes building apartments for teachers on or around school property – essentially, teachers living at the school because they have no other options.
Houston, at least in this case, is your shining city on a hill. Looking at five- to six-year snapshots of U.S. Census data, Houston issued the most housing permits (316,639), maintained a low ($44,000) increase in average median home prices and the second-lowest median home prices ($176,000), and accomplished all of this despite seeing the most population growth (736,531).
How did they do it? Permitting, in large part, but also Houston’s ban on citywide zoning in their charter.
[E]fforts to establish [zoning] in Houston, which had a longstanding tradition of minimal government, repeatedly went nowhere. The major obstacle has been that the city’s charter bars the council from enacting a zoning ordinance unless it is first put to a popular vote […] In 1948, a contingent of zoning advocates, led by influential financier and Houston Chronicle owner Jesse Jones, fought a political battle with antiregulatory activists led by oilman Hugh Roy Cullen, who reportedly considered zoning to be socialistic and un-American. That year, voters rejected zoning by a greater than two to one margin, and similar ballot measures in 1962 and 1993 also failed.
Back in Austin, median home values exceed the national and large-market Texas average by roughly 26 percent, and median home prices since 2010 have risen $81,000. Local businesses are citing the red tape as the reason they’re turning their back on the city.
When asked about the Texas Legislature’s foray into his city’s housing and land use policies, Austin Mayor Steve Adler said, “I’m not sure what the problem is they are trying to solve.” Such an obtuse response would seem to cry out for state lawmakers to show the concern and competency that local officials clearly lack.
Texas Scorecard has previously published commentary on the role of the state vis-à-vis local governance. An analysis by State Sen. Konni Burton (R–Colleyville) of how these concepts should properly be treated can be found here.