Housing supply

How left-wing planners are canceling housing supply

Left-wing planners see duplexes and triplexes as the antidote to racist walkers and ranches.

It’s been twelve years since I suggested to a Seattle developer that the cause of the housing “crisis” was a lack of supply. She dismissed my argument, saying the word “offer” was “too republican.” Today things have changed – you are allowed to propose supply-side reforms, as long as you balance them with a proposed intervention, such as taxing the production of new housing to pay for affordable housing.

Consider this example. A piece in the Voice of Denver with the headline, “Denver Seeks to Capitalize on Homebuilding Activity with New Affordable Housing Regulations”, discusses the city’s attempt to boost the supply of “missing mid-range housing” – housing units grouped and multi-family adapted to single-family neighborhoods.

How exactly is the city of Denver proposing to increase its supply of missing intermediate housing? By increasing fees, of course.

For urban planners on the left, missing mid-range housing is all the rage — they see duplexes and triplexes as the antidote to racist backpackers and ranch houses. It’s a way to get progressives to embrace density – eliminating zoning regulations because they limit production is, as my fellow developer put it, “too Republican”. The argument must be dressed in the language of race.

In Denver and across the country, local governments are generating cash to subsidize the production of housing for nonprofits by taxing the creation of missing intermediate housing. When you read that a jurisdiction has ended single-family zoning as we know it, you will generally find that what happened is similar to what happened in Denver: the relaxation of zoning restrictions was nullified by abuses and demands for inclusion.

the Voice of Denver The story illustrates how, on the surface, the initiatives that make city planners squeal with delight — like eliminating single-family zoning and increasing the supply of affordable housing — are actually efforts to change the racial makeup of neighborhoods and punish profitable real estate developments with fees. the VoiceThe story begins with a local official who complains that “incomes have not risen as much as rents and house prices”. Why are the prices rising? The answer challenges the Seattle developer:

Colorado’s residential construction activity has slowed by about 40% between 2010 and 2020. At the same time, the state’s population has increased by 15%. This dislocation of supply and demand has pushed up house prices.

But there is also good news. Denver has seen a lot of housing permit activity, the article explains, as “the number of multi-unit and mixed-use permits soared between 2020 and 2021,” while “the number of dwellings built in structures housing rose 45% to 6,585 last year while the number of mixed-use permits quadrupled to almost 1,700.”

It looks like the time has come for local government to step back and allow a building boom – perhaps even reduce and eliminate existing fees and regulations to keep the boom going for as long as possible. We all understand the relationship between price and supply and demand, right? No.

With all these new permits and new buildings in Denver, the government and non-profit organizations are seeing a housing subsidy slot machine. The time has come, they say, to increase taxes per square meter on the construction of high-end housing by 330%:

Currently, connection charges range from $0.66 per square foot in residential units to up to $1.86 per square foot in commercial and industrial settings. If passed, the plan would raise those fees to between $4 per square foot and $8 per square foot by July 2024.

Why do this now? Because the increased fees “will help the city build more housing for the missing middlemen and for the workforce.”

Here. Housing prices are rising because housing is scarce and many people need it. People with less money to spend on housing see a greater share of those dollars consumed by housing costs. When more housing starts to be built, the government’s proposed ‘solution’ is to increase construction costs, costs which will be passed on to consumers in the form of higher prices, thus ensuring that housing inflation – “the crisis” – remains in place. . Then, people with less money can line up to wait for the grants to offset the increased costs caused by the extra fees imposed to fund the grants.

This “more money, no more housing” logic is rigorously-not just in Denver, but across the country. The costs are real. You can read a case study I did on Forbes which found a $25,000 increase per unit in Seattle caused by taxes like the one used in Denver.

Curiously, the developers aren’t bothered by the snake biting its own tail. Inflation, as long as someone can afford it, rationalizes their rising costs. And the bribes they pay for permits don’t hurt as long as the market stays hot. Everyone “wins”: developers build, the government can say it’s done something, and non-profit housing agencies get more money. In Denver, left-leaning planners can have it both ways: support the construction of missing mid-range housing and impose a tax on greedy developers.

Roger Valdez is director of the Center for Housing Economics, a nonprofit housing research and advocacy organization, and visiting scholar at the Foundation for Equal Opportunity (FREOPP).