Why is it so hard to get enough projects approved to hold down the cost of land?
Because our process for entitling projects is completely dysfunctional. It would in fact be hard to design a system less inclined to produce housing. Here are the key impediments:
Land use approvals are local, not regional. While it is possible to get elected claiming to be for affordable housing, politicians have rarely received votes for approving an actual project. They do, however, routinely lose votes for approving a project. When neighbors don’t want a project, they will vote against politicians who were in favor. But the people who move into a new residence don’t automatically vote for the politicians who voted for the project they live in.
Rather than using the expertise of their planning staffs to provide the broad guidelines for developers to create a physical environment that facilitates a balance between jobs and housing and a variety of densities and socio-economic status, most politicians now are simply “reflecting the will of the people”. Unfortunately, the will of the people as a practical matter is simply what the neighbors want on any given project.
If land use were determined on a regional level, it would be easier (not easy) for politicians to navigate this dynamic and sacrifice a few votes out of tens of thousands. We’re asking a lot of our politicians to pursue policies that will get them voted out of office.
Property tax policy is heavily and unfairly skewed to support those who already own homes. In many parts of the country, residential property tax rates are very low. But because they’re so low, municipalities believe, in many cases with justification, that new residential development will be a burden on community services and not pay for itself. These low rates are often justified (famously by Proposition 13 in California) as being necessary to prevent property taxes rising on homeowners who can’t afford it. Do we really think that a few people struggling with property tax increases from rising values (a quality problem) offsets many more people having no place to live at all? In any case, it’s a circular argument. If we had a property tax policy that worked and enough units were built, home values would not rise dramatically. Related to this, is the excessive reliance on sales taxes by many municipalities. Most cities have an excess of retail zoned land, because that is the holy grail of their budgets. Car dealerships are good, housing is bad.
New development must pay for itself! Sounds good. Unfortunately, (a) the homes we already live in did not fully pay for themselves, and now we ask new homeowners to pay for past failures to fully fund growth and maintenance; and (b) we aren’t asking new homeowners to just pay for their infrastructure, we’re asking them to pay for theirs and a portion of the existing community’s. New homeowners often pay for special tax districts used to finance infrastructure and/or the impact fees charged for development which were added to their house price or apartment rent. But they don’t get a credit on their base property tax that goes to cover the existing infrastructure and services. It’s double charging of the worst kind. And unfortunately, it’s not transparent.
In many areas of the country, per-unit fees are $40,000-$50,000 (and sometimes more). This is extraordinary. If a builder sells a $400,000 home, fees are 10% of the cost! To make matters worse, the fees are assessed per unit, not per square foot. So, a 1200 SF home and a 4200 SF home have the same fee. How would you expect a builder to be able to support a $40,000+ fee on a 1200 SF affordable home? Imagine the reaction of homebuyers if they were charged an advertised price for a home and then told at closing there is an additional $50,000 in impact fees they will have to pay directly to the government?
Hypocrisy regarding “smart growth”, “green”, “sustainable” and “maintaining our character”. Laudable goals. Who would want “dumb” and unsustainable growth? Let’s look at Boulder, CO, one of the hardest jurisdictions in the nation to gain approvals for housing. Job growth in Boulder has been strong, while residential construction lags way behind. They take pride in being green. Are they? What’s greener – allowing very little building but requiring it to have solar panels, community gardens, etc., or allowing enough residential units to be built so those who work the jobs in Boulder don’t have to commute 30+ miles to work?
Perhaps you’ll say that the new residential buildings will change the character of the town, that the new apartment building is out of character (to use that favorite phrase) with existing development. At what point in time does the character of a town become exactly right, never to change? I suspect the Native Americans believe that point occurred a long time ago. I also suspect those who lived in our town before we moved in think it was before the unit we live in was built. The reality is that the character of a place evolves over time. What right do we have to say “my house was the last house in this area that should be built”.
Does this mean we should allow anything? No, but we should stop hiding behind these great sounding words while simultaneously claiming to be for affordable housing. And every time we make it harder or impossible to build a project, we should be forced to look the people in the eye who will have to live in substandard housing because of the shortage and explain why our aesthetic sensibilities trumps their need for shelter.
In Part IV, we’ll look at both the failed solutions being tried and look at what we should and can do.
