Questions for California’s Next Governor

Written by Landlord Property Management Magazine on . Posted in Blog

By Edward Ring

An article just published in City Journal, “Is Texas’s Affordable Housing Endangered,” describes how housing prices in Texas are becoming unaffordable. The article notes how the average home price in the Austin metropolitan area has doubled in just 10 years. In the Dallas suburbs a decade ago, more than 50 percent of homes sold for under $200,000 compared to around four percent today.

One of the reasons people move to Texas is that homes there are more affordable than in other places. Writer Connor Harris invokes California as a cautionary tale. Because Texas relies on high property taxes instead of having a state income tax, if property values surge, there is a risk that Texas voters will follow the example set by the 1978 tax revolt in California. A Proposition 13-like revolt, which prevented annual reassessments of home values, could lead to Texas passing and raising income taxes, which would penalize productive activity.

That theory involves quite a few dominoes, however, which may or may not make it predictive. For example, if housing prices rise, the Texas legislature could simply lower the property tax rate, since higher assessments and lower rates can offset each other, resulting in a revenue-neutral impact. But Harris really goes off the rails in his discussion of policies to mitigate rising home prices.

Claiming “the main culprit for the rising prices is legal restrictions on housing,” Harris blames single-family, residential zoning for the housing shortage. His solution is for the state legislature to pass a law “capping minimum lot sizes in undeveloped areas,” and requiring all cities to allow small “auxiliary dwelling units” in single-family residential areas.

The “Environmental Impact” Myth

It’s troubling to see what Harris advocates published by the normally redoubtable City Journal, because it is further evidence of a libertarian-progressive consensus forming on housing questions that rests on flawed premises and hidden agendas. 

The biggest flawed premise is the idea that low-density suburbs are somehow causing climate change. The libertarian response is “stop building suburbs that subsidize the car,” which pairs nicely with the progressive response to “densify cities.” But low-density suburbs are not necessarily bad for the planet.

The greenhouse gas theory — the notion that longer commutes result in more automotive emissions harming the planet — should have been put to rest by the pandemic. Americans realized, if they hadn’t already, that a huge percentage of the workforce can work from home. 

But even before the pandemic hit, cars were getting greener, and jobs have had a way of following people into the suburbs. In the future, driverless cars will form up in high-speed convoys in smart lanes, moving far larger numbers of people on the same stretches of road. Eventually, passenger drones will take additional pressure off roads. Getting from distant suburbs into urban cores is going to get easier in the future, not harder.

The “Inclusive Zoning” Myth

The other flawed premise of Harris’s essay appears further in, where he writes “when central areas of cities become unaffordable, jobs move to the richest suburbs—typically less accessible for working-class residents.” Much is buried in that sentence that will escape the uninitiated. In essence, it is an innocent-sounding echo of a progressive litany, which is to mandate “inclusive” zoning in order to atone for the “exclusionary” zoning of single-family residential suburbs.

There’s nothing wrong with converting, organically and in accordance with local sentiment, residential neighborhoods in urban centers from single-family use to higher density. But when state-mandated high-density affordable housing is imposed, wherever it may be, the result is the destruction of neighborhoods where people have worked their entire lives to earn the right to live in accordance with a certain quality of life.

To better understand the danger posed by this growing movement to stigmatize — and then destroy —intact suburbs, consider the layers of abuse that accompany such mandates. It is bad enough that people who struggle to make a mortgage payment in order to have a home in a spacious suburban neighborhood suddenly have to deal with the random demolition of homes up and down their streets, which are then replaced with apartments, or find the backyard behind their own backyard suddenly has a second home and driveway coming nearly up to the property line. And it isn’t unfair to mention that, especially in Texas where property taxes are reassessed for every one annually, people who pay mortgages on four-bedroom homes are going to have divergent lifestyles and expectations compared to people who rent one-bedroom apartments.

And to be clear: This is not an issue of race. It is an economic fact that should be respected. Plopping low-income housing into middle-income neighborhoods is not fair to the people, of all races, who have worked hard to move up and out of low-income neighborhoods.

The Hidden Agenda

But this is just the first layer. “Inclusive zoning” is rarely market-based. In California, where it has become impossible to build affordable housing of any kind without subsidies, developers take advantage of tax credits and direct subsidies to pad their already inflated costs. The result is the average “affordable housing” complex in California costs more than $500,000 per unit. At this price, the supply will never equal demand, rents are always subsidized, and admittance is by some form of a lottery.

The solution to housing affordability is indeed to increase the supply of housing, but state-mandated densification is not the answer. If Texans are not careful, the next restriction, already well-established policy in California, will be to cordon off every urban area, making new construction of any kind extremely difficult outside the “urban service boundary.” 

The moral premise: Save the planet. The hidden agenda: Artificially elevating home values, which creates collateral for homeowners to borrow against so they’ll consume more, higher property tax revenue flowing into government, and capital appreciation for real estate investment portfolios.

The Real Solution

Instead of using state mandates to cram the burgeoning population of Texas into the footprint of existing cities, allow cities and town councils to decide at the local level how and where they want to increase density. At the same time, and this is absolutely critical, continue to take pressure off of urban housing stock by new construction of suburbs and entire new cities on open land. Focus on building enabling infrastructure—energy, water, roads—and minimize regulatory obstacles to new suburbs: excessive building code mandates, punitive fees, and permitting delays.

Protecting America’s middle class requires not only nurturing a strong economy to create well-paying jobs: It also requires deregulation designed to lower the cost of living. Nothing impacts the average American family’s ability to pay its bills so much as the price of housing.

The vision of progressives, abetted by libertarians, is to open the borders and admit at least another 20 million people into the United States within the next 20 years. Depending on border enforcement, that number could grow much higher. 

Obviously, there is a robust debate over the economic and demographic impact of this policy, but regardless of where one may stand on the issue of immigration, one thing is clear: If we’re going to expand our population, we need to build new towns, cities, and suburbs. And when the price is right, “market demand” is for detached single-family homes. We’ve done it before. We can do it again. We have plenty of room.

Ultimately the policies surrounding housing come down to a basic question: Are we going to nurture an economy of competitive abundance, or one of scarcity and rationing imposed by monopolistic business interests that hide behind environmentalist and anti-racist rhetoric? And even if the choice is to nurture abundance, there is no clear ideological polestar from which to design policies. 

Libertarians are right to want deregulation. They’re wrong to oppose local zoning laws. Progressives are right to care about the planet and about the disadvantaged, they’re just wrong in almost every possible way they’ve come up with to address those challenges.

This article originally appeared on the website American Greatness.

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