Welcome back to Sunday reading.
Here are a bunch of housing stories starting with one from the Yale professor Robert W Shiller on the supply constraints responsible for the housing crisis in the States. Robert Shiller, “Why Do Cities Become Unaffordable?“, Project Syndicate.
In many cases, the answer appears to be related to barriers to housing construction. Using satellite data for major US cities, the economist Albert Saiz of MIT confirmed that tighter physical constraints – such as surrounding bodies of water or land gradients that make properties unsuitable for extensive building – tend to correlate with higher home prices.
But the barriers may also be political. A huge dose of moderate-income housing construction would have a major impact on affordability. But the existing owners of high-priced homes have little incentive to support such construction, which would diminish the value of their own investment. Indeed, their resistance may be as intractable as a lake’s edge. As a result, municipal governments may be unwilling to grant permits to expand supply.
Insufficient options for construction can be the driving force behind a rising price-to-income ratio, with home prices increasing over the long term even if the city has acquired no new industry, cachet, or talent. Once the city has run out of available building sites, its continued growth must be accommodated by the departure of lower-income people.
Closer to home we have a recent study that finds that land use restrictions may make up a whopping 56% of the cost of housing. David Hargreaves, “A Government-commissioned report has found that land use regulations add about 56% to the cost of houses in Auckland; ‘prices far outweigh costs in most major NZ cities“, Interest.co.nz.
A Government-commissioned report has found that a staggering 56% of the cost of Auckland houses may be due to land use regulations. The report, which looked at housing in seven major cities in the country, says that land use regulation is hampering the flexibility of housing supply.
“Relative to a world with no land use regulation, regulation could be responsible for 15% to 56% of the cost of an average dwelling across a range of New Zealand cities,” the report says.
“In Auckland, land use regulation could be responsible for 56%, or $530,000 of the cost of an average home.”
Here is a smart opinion piece from Los Angeles comparing the use of development fees which penalise developers and slow building to taxing land value which broadly distributes the cost of housing. Michael Manville, Paavo Monkkonen, Michael Lens, “A better way to solve the housing crisis — tax land, not development“, Los Angeles Times
Perhaps most important, land taxes put the responsibility for solving our housing crisis where it belongs — on every property owner in the city. Linkage fees place that responsibility on developers alone. The logic of linkage fees suggests that building housing makes housing unaffordable, that developers alone benefit from high housing prices, and that developers should pay to make things right. Because most of us aren’t developers, this message is morally comforting and politically convenient.
But it is also wrong. Housing becomes less affordable when we don’t build it, not when we do. Most important, it is not developers who benefit from our housing crisis but everyone who owns property. Yes, some deep-pocketed developers have profited handsomely in our overheated market. But so have landlords, who with limited competition have charged ever-higher rents. So have homeowners, whose property values have ballooned. And unlike developers, landlords and homeowners have prospered without increasing our housing supply. Many, in fact, have fought to stop new housing from being built.
Housing scarcity delivers unearned wealth to people who own housing, and it imposes unwarranted burdens on people who don’t. To solve our housing crisis fairly and effectively, we should tax that wealth and use it to ease those burdens. It’s easy to wish that someone would help our disadvantaged fellow citizens. It’s harder to acknowledge our own role in their distress — to admit that our capital gains are their housing crisis. But that is the situation: Linkage fees feed the false belief that some of us in some neighborhoods can keep blocking development and growing our nest eggs, while the city helps the poor by taxing someone else to build affordable housing somewhere else.
Here is a great video on the insidious practice of requiring parking with development. Auckland is thankfully reforming parking requirements which is compared here to “blood letting” by Donald Shoup.
There has been a lot of discussion about how driverless cars will transform city streets since people will be able to walk across any street without the fear of traffic. It’s useful to recall how the use of city streets was systematically transformed to favour traffic by the auto industry. While we may not have “jaywalking” in New Zealand, our road rules, street designs, and customs remain a shameful reminder of what remains king of the street.
Separating people on bikes from fast moving traffic is the foundation of cycleway design in countries with high levels of cycling such as the Netherlands. In countries with under developed cycling facilities, there has been a gap in research and understanding about the safety record of separated/protected facilities. As cities begin to build out high quality cycle networks, not surprisingly, cycling become safer and more attractive. “Study: The Quality of Bike Infrastructure Matters“, via Planetizen.
That’s all for this week. Please add other links in the comments below.