Is Deregulation the Solution to Homelessness?

Hoisted from the Davis Vanguard's comments on an article touting deregulation as a solution to the US housing shortage (edited for clarity):

Your conclusion that regulation is the culprit for a housing shortage is at least less-than-complete. First, from the Wharton Index you cite: “Markets around the national average (WRLURI2018 index values within one-tenth of a standard deviation from zero) include Houston, TX, Columbus, OH, San Antonio, TX, and Pittsburgh, PA” Note that Houston is “average.” 

Just a reminder: Houston has no zoning at all. None! Yet it’s “average”! If zoning and regulation were the big factors responsible for a housing shortfall, how did it only achieve “average”? Why isn’t it the top of the list? 

As for whether zoning is dumb…of course! Houston has absolutely none and yet looks almost identical to Sacramento (both are inland ports, and have allowed auto-centric sprawl to dominate the landscape). One interesting note (to me): your illustration is a New Urbanist low-density neighborhood. The streets are a grid, the sidewalks are set back, and the curb radius at the corners is small and pedestrian-friendly. That’s not sprawl. Sprawl has spaghetti streets that twist and turn, disorienting the inhabitants (and terminating otherwise unpleasant views), sidewalks that put pedestrians in peril as they walk next to traffic, and massive curb radii that make pedestrian crossings at corners even more perilous. Thank goodness California has adopted “complete streets” for all new development…although Newsom turned down retrofitting the sprawl with better pedestrian amenities. 

Meanwhile, you ignore something that powerfully influences the current housing “shortage.” (Quotes because there are still more vacant homes than the US homeless population.) After the New Deal, the federal government built affordable housing until Nixon put a stop to it. Then, the Reagan administration cut HUD’s affordable housing budget 75% as it reduced taxes on the wealthy by roughly half, and with Bush 41, raised payroll taxes eightfold. After the New Deal, there was no significant homeless population until the ’80s. Surely that deserves a mention! 

Sprawl is “conspicuous consumption” of land, eliminating the “missing middle” (medium densities) of housing that might make land costs less onerous in housing, and imposing perhaps the most regressive tax possible. It requires all driving age inhabitants to own an automobile. We desperately need pedestrian-friendly mixed-use neighborhoods that allow people to conduct their business without auto commuting. Nevertheless, we’re building sprawl after sprawl after sprawl. 

Incidentally, if you want to cut per-unit costs in half, just build duplexes rather than single-family homes. Of course that would mean providing services (parks, security, public health) and we can’t have that! De-funding the public realm is the current agenda. 

One other nice way to influence what’s built: Change FNMA/FHLMC property standards for new development. You may believe (with Frank Lloyd Wright) that “form follows function,” but in today’s economy, it’s really “form follows finance.” We’d stop building sprawl in five minutes if those loan underwriting standards changed to support something other than sprawl–really a racist “white flight” invention. 

Finally, you omit mentioning the land speculation that’s at the root of many of our current problems. Land speculation is an “industry” in California’s Central Valley, and the foundation of several large fortunes. It’s one reason land is expensive. We’ve got to pay those speculators! 

One example: North Natomas was once vacant farmland, and was 20′ under water floodplain surrounded by weak levees. It was deemed so unsuitable for development that a federal grant to increase regional sewer capacity specified a $6 million penalty if that capacity served North Natomas. 

The speculators weren’t bothered; they went to then-vice-president George H.W. Bush and got the $6 million penalty pay-as-you-develop rather than a prohibitive up-front fee. At the same time, they got $43 million in levee improvement grants to bring the weak levees up to pre-Katrina standards. Long story short, they sold land they optioned at $2,000/acre to builders, once they got Sacramento City’s approval, for as much as $200K/acre. That profit margin is called the “unearned increment,” and it’s 10,000%, gross(!) The current occupants of that neighborhood are now on the hook for all the post-Katrina levee improvements, but what matters is our land speculators have walked away with an enormous payday. 

Naturally, the speculators exchanged out of the sale to income-producing real estate, so they deferred even income tax indefinitely. 

In contrast, in Germany, the developers have to sell the outlying land they propose to develop to the local government at the agricultural land price, then purchase it back from that government at the buildable-land price. All that unearned increment inures to the benefit of the public, not lining some speculator’s pocket. And Germans have nice infrastructure, free college tuition and the arts budget for the city of Berlin exceeds the National Endowment for the Arts for the USA. 

Incidentally, there’s a reason Sacramento’s main public library has no free meeting room as most other public libraries do. Instead it has the “Tsakopoulos Galleria.” Why? Because we gave all the money to Mr. Tsakopoulos. 

Omitting these things and relentlessly celebrating the rollback of development regulation, as indefensibly stupid as it often is, just makes the Vanguard one more public voice calling for less intelligence in building our so-called civilization. (“Western civilization would be a nice idea” – Gandhi)

--Adam Eran