Cascade Policy Institute has released a new report examining the links between anti-sprawl, “smart growth” regulations and increasing housing costs in Oregon. The report measures the extent of supply restrictions in Oregon and their impact on housing prices. It concludes that “smart growth” policies contribute substantially to the decrease in affordable housing and single-family housing options in Oregon.
The report, The Housing Affordability Crisis: The Role of Anti-Sprawl Policy, was written by Randall Pozdena, Ph.D. Pozdena is president of QuantEcon, Inc., an Oregon-based economics consultancy.
Over the last fifty years, many states have adopted “smart growth” or “anti-sprawl” policies. Enough time has elapsed for the effects of these policies to be studied. The evidence shows that many urban areas now have housing prices that make either home ownership or rental increasingly unaffordable.
In the face of resulting “affordable housing crises,” cities and states are currently considering additional regulations and subsidy policies to attempt to provide residents with more affordable housing options. There is virtually no public policy discussion of whether regulatory interventions precipitated the housing crisis in the first place, let alone consideration of abandoning these damaging policies.
In The Housing Affordability Crisis, Pozdena examines the links between anti-sprawl regulations and the spectacular increases in housing costs and the virtual disappearance of affordable housing in many markets. Specifically, he measures the extent of site supply restrictions and its impact on housing prices using an economic model of housing markets, data on the economic conditions in housing markets, and trends in development revealed in satellite inventories of U.S. land uses. At the national level, using state and Metropolitan Statistical Area data, Pozdena concludes:
- Twenty-three of the 50 states studied fail to provide housing units at a volume adequate to keep housing prices and incomes growing at a rate consistent with affordability. On average, these states under-provided housing units by 6.4 percent of their current stock of housing units.
- Those states that fail the affordability and supply adequacy test are overwhelmingly those with documented adoption of one or more aggressive anti-sprawl growth regulatory initiatives.
- Annual housing price inflation exceeded annual income growth by 14 percent each year during the study period in those states that failed to provide housing in sufficient quantity to keep it affordable. Extrapolating the findings to the nation, the housing stock is smaller by as much as 4.5 million housing units than it should have been to preserve affordability.
Cascade Policy Institute President and CEO John A. Charles, Jr. said, “Oregon land-use planners have long pretended that Urban Growth Boundaries and other site restrictions have no real effect on housing supply. Dr. Pozdena’s analysis clearly shows that this is wrong. We cannot solve the housing crisis by simply ‘throwing money’ at public housing projects; growth controls need to be reduced or repealed if we want to make the American Dream affordable.”
The full report, The Housing Affordability Crisis: The Role of Anti-Sprawl Policy, can be downloaded here.
Founded in 1991, Cascade Policy Institute is Oregon’s free-market public policy research center. Cascade’s mission is to explore and promote public policy alternatives that foster individual liberty, personal responsibility, and economic opportunity. For more information, visit cascadepolicy.org.