How Regulation Creates Montgomery County’s Affordable Housing Shortage
The real estate website Trulia recently conducted a fascinating analysis of the nation’s housing markets. Trulia categorized the 100 largest metro markets as red or blue depending on their 2012 presidential votes.
In the 32 red markets metros,the Republican candidate, Mitt Romney, got more votes than the Democrat, President Obama. These include places like Houston, Cincinnati, and Salt Lake City. In 40 light blue markets, including St. Louis, Austin, and Buffalo, Obama beat Romney by less than 20 percentage points. And in the 28 dark blue markets, including Los Angeles, New York, and San Francisco, Obama’s margin exceeded 20 points.
The results are fascinating. In short, housing is more affordable in Republican-leaning America.
No doubt prospective homebuyers in “Deep Blue” Montgomery County would be thrilled to find a listing for a property priced at “only” $227 per square foot and many owners would be underwater on their mortgages if their properties were priced at that level.
Neither differences in household income or constructions costs among metro area can account for these wide variations. The key variable is the scarcity of buildable land created by zoning.
Under Montgomery County’s land use policies, more than half our land area has been re-zoned for open space uses, including agriculture and parkland, 53 percent to be precise. The county’s residentially zoned land is limited to just 33 percent. The county’s million-plus population is limited to living on about 100,000 acres.
To be honest, Montgomery County’s sky-high housing costs create significant beneficiaries. Long-term owners benefit from the substantial appreciation of their homes. Some “cash-out’ by selling and moving to less costly communities, others “cash-in” by borrowing against their appreciation.
However, these housing price differences also produce real costs and burdens. The percentage of Montgomery County homeowners who spent more than 30 percent of their income on mortgaged housing costs increased from 15 percent in 2000 to 37 percent. For renters, the share of cost-burdened households rose from 35 percent in 2000 to 54 percent in 2010.
Government’s response has been to impose additional layers of regulation to “solve” the problems caused by their policies. Builders are expected to add non-market rate, affordable housing units to their plans. While some lucky affordable housing lottery winners benefit, the added cost contributes to additional expenses for new construction costs.
The advocates of these land use policies are fond of calling them “Smart Growth.” A better name for them seems to be “Expensive Housing” policies.