Tag: Housing

Making a Good Budget Great

President Trump’s 2018 budget takes a meat cleaver to many federal programs. In my issue areas–transportation, housing, and public lands–it would end the Federal Transit Administration’s New Starts program; end funding for Amtrak’s long-distance trains; eliminate HUD community development block grants; and reduce funding for public land acquisition.

Trump calls this the “America First” budget. What it really is is a “Federal Funding Last” budget, as Trump proposes to devolve to state and local governments and private parties a number of programs now funded by the feds. In theory, the result should be greater efficiency and less regulation. However, in most of the areas I know about, Trump could have gone further and produced even better results.

Transportation: I applaud the elimination of New Starts, the program that encourages cities to waste money on obsolete transit systems, but am disappointed that Trump would continue to fund projects with full-funding grant agreements. There are several insanely expensive projects, including the Maryland Purple Line and the Minneapolis Southwest Line, that have such agreements but haven’t started construction and should be eliminated. A number of streetcar and bus-rapid transit projects also fall into this category. If Congress is willing to live with no more full-funding grant agreements, it should allow the administration to also review and eliminate projects that haven’t yet begun construction or have made only token construction efforts.

The proposal to eliminate Amtrak long-distance trains is politically problematic. Since Amtrak’s other trains reach just 22 states, while the long-distance trains add 26 more, this proposal will look like it is favoring some states over others. As an alternative, I would have suggested that the federal government offer to cover 25 percent (or less) of the fully allocated costs (including depreciation) of each train or route, including the Northeast Corridor. If fares don’t cover the other 75 percent, then state support would be required or the trains would be cut. This is much more fair, especially because some state-supported trains actually require subsidies per passenger mile that are much larger than many of the long-distance trains.

Three other transportation proposals look good. One would transfer air traffic control to an independent, non-governmental organization, which would quickly install new equipment and increase airline capacities and safety. A second would eliminate the so-called Essential Air Service program, which subsidizes airports in smaller communities. Trump also proposes to eliminate the TIGER grant program, a relic of the 2009 stimulus bill, that has funded streetcars and other ridiculous projects.

Fair Housing or Federal Agency Running Riot?

In case you missed it, Ben Carson has been labeled as being “at odds with fair housing.” During his senate confirmation hearing last week, Carson was required to defend his position on Affirmatively Furthering Fair Housing (AFFH), the Department of Housing and Urban Development’s (HUD’s) controversial 100-page-plus contemporary interpretation of the Fair Housing Act.

It may sound appalling that anyone anywhere would be against fair housing. Still, there are sane reasons to object to the rule. Carson suggested a couple of possibilities; for example, he worries about Washington, D.C. administrators demanding that local communities “go looking for a [racial] problem” when no evidence of such a problem exists a priori.

If you don’t like intemperate federal agencies running riot, there is another process-related objection that Carson missed: AFFH may insert the federal agency into policy areas not even remotely authorized by the legislation it purportedly interprets.

The table below provides a comparison of the original Fair Housing Act language and AFFH language, so that you can decide for yourself:

Fair Housing Act of 1968 (original legislation) Affirmatively Furthering Fair Housing of 2015 (HUD’s re-interpretation)
1)    Prohibits landlords from discriminating against minority tenants. 1)    Stated objective is to “replace segregated living patterns with truly integrated and balanced living patterns [within cities].” 
2)    Uses the word “segregated” or “segregation” a total of 0 times. 2)     Uses the word “segregated” or “segregation” a total of 126 times and urges“overcoming historic [geospatial] patterns of segregation.”
3)    The original FHA law uses the word “zoning” just 1 time, wherein it instructs the HUD Secretary to refer discriminatory local zoning or land use laws to the Attorney General so that he/she can file a lawsuit. 3)    The AFFH mentions “zoning” 53 times, wherein it suggests that communities change their zoning to improve racial integration (not a bad suggestion, but a departure from the original law).
4) The original FHA law uses the word “affirmatively” 2 times. Each time, it asks executive departments and agencies to administer their programs and activities in a way that affirmatively furthers “the purposes of this subchapter,” where the subchapter focuses on prohibiting a discriminatory relationship between landlord/seller and tenant/buyer. 4) The AFFH rule uses the word “affirmatively” 423 times, wherein it redefines the term to mean “replacing segregated living patterns with truly integrated and balanced living patterns” and “transforming racially and ethnically concentrated areas.”
5) The original FHA law uses the word “concentration,” referring to the concentration of poverty or concentration of minorities in cities, 0 times. 5) The AFFH rule uses the word “concentration” 56 times and urges “reducing racial or ethnic concentrations of poverty.”

HUD believes the rule merely implements the Fair Housing Act’s intent.  You can form your own view.

Seattle Millennials Should Move to Houston

The Seattle Post-Intelligencer says it has found the best Seattle homes for Millennials. Judging by the former paper’s suggestions, Seattle Millennials should move to Houston. Houston may not have Mt. Rainier, but it has beautiful lakes, a sea coast that is just about as nice as Washington’s (though not as nice as Oregon’s), and most important, it doesn’t have urban-growth boundaries which means it has much more affordable housing.


Click any photo to go to the listing for that property.

The P-I’s first suggestion is a 720-square foot, two-bedroom, one-bath home on a 5,000-square-foot lot. On the plus side, the living room has hardwood floors. On the minus side, the asking price is $259,950–and if Seattle’s housing market is anything like Portland’s, it will go for more than that. At the asking price, the cost is $361 per square foot.

As an alternative, allow me to suggest this 720-square-foot home in Houston’s University Area, not too far from downtown. It has new paint and an updated kitchen and, like the Seattle home, it is on a 5,000-square-foot lot. Unlike the Seattle home, the cost is just $86,500, just under a third of the Seattle house. That’s just $120 per square foot–and the sellers will probably accept a little less.

Obama’s Housing Toolkit: A Mixed Bag

Something striking happened last week: the Obama White House released its Housing Development Toolkit and Obama’s economic advisor, Jason Furman, wrote a follow-on op-ed about land use regulation’s negative consequences. While White House reports tend to be geared toward partisan political objectives, these two publications could have been written by non-partisan economists. Nevertheless, although the honest application of economic theory is welcome, libertarians will still find points of disagreement.

What’s good? The report highlights zoning policies’ influence on increasing housing prices, immobilizing workers in job deserts, creating costly uncertainty for developers, increasing inequality and racial segregation, and suppressing economic growth. These negative outcomes were attributed to “excessive barriers,” “unnecessarily slow permitting processes,” and “arbitrary or antiquated” zoning and land use regulations.

The White House even went so far as to say that “even well-intentioned land use policies” can have negative impacts. So far, so good.

What’s bad? The worst part of the report is the declaration that the President’s 2017 HUD budget includes a $300 million proposal for grants to help cities “modernize their housing regulatory approaches.” Since when does it cost $300 million to reduce regulation, which is all the “modernizing” that needs to be done?

More Regulation Won’t Make Housing Affordable

A new Housing Policy Toolkit from the White House admits that “local barriers to housing development have intensified,” which “has reduced the ability of many housing markets to respond to growing demand.” The toolkit, however, advocates tearing down only some of the barriers, and not necessarily the ones that will work to make housing more affordable.

“Sunbelt cities with more permeable boundaries have enjoyed outsized growth by allowing sprawl to meet their need for adequate housing supply,” says the toolkit. “Space constrained cities can achieve similar gains, however, by building up with infill.” Yet this ignores the fact that there are no cities in America that are “space constrained” except as a result of government constraints. Even cities in Hawaii and tiny Rhode Island have plenty of space around them–except that government planners and regulators won’t let that space be developed.

Instead of relaxing artificial constraints on horizontal development, the toolkit advocates imposing even tighter constraints on existing development in order to force denser housing. The tools the paper supports include taxing vacant land at high rates in order to force development; “enacting high-density and multifamily zoning,” meaning minimum density zoning; using density bonuses; and allowing accessory dwelling units. All of these things serve to increase the density of existing neighborhoods, which increases congestion and–if new infrastructure must be built to serve the increased density–urban-service costs.

Urban areas with regional growth constraints suffered a housing bubble in the mid-2000s and are seeing housing prices rise again, making housing unaffordable. Source: Federal Housing Finance Agency home price index, all transactions.

Oregon Legislature Repeals Laws of Supply & Demand

Like the apocryphal story of the state legislature that passed a law dictating that pi equals 3, the Oregon state legislature has passed two laws that pretend the laws of supply & demand don’t exist. The difference is that, in reality, no state legislature ever did pass a law saying that pi equals 3, but Oregon’s legislature is totally ignoring basic economic principles.

First, earlier this week, the legislature passed a new minimum wage law increasing the minimum to as high as 14.75 per hour in the Portland area by 2022 (with lower minima for other parts of the state). This will supposedly be the highest in the nation, but only in the unlikely event that no other state raises its minimum wage in the next six years. However, after adjusting for the cost of living, Oregon’s new minimum wage probably is the highest in the nation even before 2022.

Proponents claim the minimum-wage law will improve Oregon’s economy by putting more money in the hands of its residents that they will spend in Oregon businesses. The new minimum wage “is going to be good for Oregon families and is going to add to consumer purchasing power that will benefit our small businesses,” Oregon’s labor commissioner told a reporter. That’s like warming the bed by cutting off one end of a blanket and sewing it on to the other end. If increasing the minimum wage does so much good, why not increase it to $15 right away? Or $50? Or $500?

Will Obama Make Housing Affordable?

Property-rights and housing-affordability advocates were surprised and elated that the chair of President Obama’s Council of Economic Advisors, Jason Furman, gave a speech blaming housing affordability problems on zoning and land-use regulation. They shouldn’t be: while Furman is correct in general, he is wrong about the details and the prescriptions he offers could make the problems worse than ever.

There is no doubt, as Furman documents in his speech, that land-use regulation is the cause of growing housing affordability problems. Yet Furman fails to note the fact that these problems are only found in some parts of the country. This is a crucial observation, and those who fail to understand it are almost certain to misdiagnose the cause and propose the wrong remedies.

Citing Jane Jacobs (who was wrong at least as often as she was right), Forman blames affordability problems on zoning that “limits density and mixed-use development.” Such zoning is found in almost every city in the country except Houston, yet most cities don’t have housing affordability problems. Thus, such zoning alone cannot be the cause of rising rents and home prices.

Based on this erroneous assumption, Furman endorses what he calls the administration’s agenda, which is its Affirmatively Furthering Fair Housing program. Rather than making housing more affordable, this program is aimed at ending racial segregation of middle-class suburbs by requiring the construction of multifamily housing in suburbs that are not racially balanced relative to their urban areas. It assumes that multifamily housing is less costly (and thus more affordable to low-income minorities) than single family, but that is only true because units are smaller: on a dollar-per-square-foot basis, multifamily costs more than single family, especially for mid-rise and high-rise apartments. Multifamily also uses more energy per square foot than single family, which means heating bills will be higher.

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