The Shape of the Future

E M Risse

Solutions to the Shelter Crisis

The price of housing is getting out of reach for a majority of Virginians. The solution isn't more government subsidies, which are part of the problem, but putting houses in the right locations.

Prosperous New Urban Regions in Virginia and across the United States are facing a Shelter Crisis. This crisis is not limited to the homeless. It afflicts not only welfare recipients, or even the working poor. It impacts not only public service employees -– teachers, public safety personnel, administrative and support staffs –- or construction and retail workers.

Citizens are spending larger and larger percentages of household income and squandering nonrenewable resources to locate, build, maintain and access shelter.  All but those at the very top of the economic food chain cannot afford the cost of shelter at the July 2005 prices.

Even those with unlimited budgets for housing cannot find dwellings supported by a functional settlement pattern in the prosperous regions, nor can their employees or others upon whom they rely to support their lifestyle.

Yes, Virginia we are facing is a comprehensive Shelter Crisis. (See End Note One.)

This is the third of three columns on issues that must be addressed in Virginia's 2005 election campaigns. State government has the power and responsibility to address these, and citizens should insist that candidates for statewide office and the House of Delegates articulate intelligent positions on them. They are:

• “Reforming the Property Tax” (June 20, 2005)

• “Transportation in the November Election” (July 11, 2005)

• "The Shelter Crisis" (This column)

The Shelter Crisis is Different

Property taxes are a problem. However, beyond discerning the difference between property tax reform and property tax relief, the property tax issue is not complex, as noted in “Reforming the Property Tax,” June 20, 2005.

It is even more apparent that deteriorating access and mobility must be addressed.  In the case of transport, it is very clear what needs to be done to reverse the trend of accelerating traffic congestion. (See “Regional Rigor Mortis,” June 6, 2005, and “Transport in the November Election,” July 11, 2005.) As the latter column suggests, it would be wise if all candidates agreed upon a transport agenda so that solving the mobility and access problem could become a non-partisan goal.

Intelligent action on the Shelter Crisis is more difficult.  The “solution” involves profound challenges to what citizens believe is their inalienable right to:

• Continued rapid escalation of their house value, and

• Continued receipt of vast government direct and indirect housing subsidies, regardless of need

Despite the fact the fact that escalating values for every home across a subregion confers almost no economic advantage, most people see rising home values as a wonderful benefit. On paper they seem to be getting “rich.” 

The illusion of wealth based on inflated home values is a stark example of the Fallacy of Composition (what is good for one is not good for all) and clouds all other discussion of the Shelter Crisis.

Even though (or perhaps because) the majority of the benefit of the current massive, direct ($200 billion-plus per year) and even more massive, indirect housing subsidies go to those at the top of the economic pyramid, there is no political stomach for redirecting these resources to those that need the most help with shelter or for reversing the systemic causes of society-wide shelter dysfunction.

Most important, there is no current support for actions that would introduce new dwellings, different dwelling types or units with lower prices in existing dooryards (aka, not in my front yard), clusters (aka, not in my backyard), neighborhoods, villages or even in communities.

While some agree that a range of housing types and prices in a community is good in theory, few are willing to have dwellings less expensive than theirs anywhere around.

How these deeply held feelings and misunderstandings can be addressed is not easy to discern.

Bubble Talk

By now almost “everyone” knows about the potential for the house price bubble to burst in regions such as the Washington-Baltimore New Urban Region. The potential for eruption of the housing bubble captured the covers of The Economist, Money, Time and Business Week magazines all the same week in early July, and it is featured repeatedly in regional media.

There is lots of talk about the potential for a swoon in housing prices -- certainly not an attractive prospect for home owners.  But there is no discussion of the long-term, large-scale impact of the bubble not breaking. A continuation of rising prices would escalate the Shelter Crisis, as we have noted in prior columns on the topic.  (See End Note One.)

The media does discuss the impact of high housing prices, carrying stories such as “A Bane Amid the Housing Boom: Rising Foreclosures” (May 30, 2005), “Housing Envy: Soaring Prices Create Divide: Workplace Tension Between The Owns and Own-Nots,” (June 17, 2005), “Home prices Put Squeeze on Families: Poll Cites Stress Factor and Longer Commutes,” (July 13, 2005), “Greenspan Heightens Warning on Risky Mortgages,” (July 21, 2005).  These headlines all appeared in The Washington Post. But as they suggest, the stories focus on the individual impact, not on the cumulative impact.  No one is willing to make the connection to the systemic Shelter Crisis.

Getting a Handle on Reality

One of the best recent summaries of what ails housing in the United States appeared a column by Robert Samuelson titled “Homes as Hummers” (July 13, 2005) that appeared in The Washington Post and other regional papers. As the title suggests, Samuelson equates new housing with SUVs and compares what he calls “over-housing” with the biggest of the SUVs, the Hummer.  He suggests that over-housing soon may begin to  negatively impact home owners' financial security.  Samuelson quotes the latest information on unit size, notes the high-end beneficiaries of housing subsidies, the potential of a housing bust and other pertinent issues.  It is worth a careful reading if one has any doubt there is a profound Shelter Crisis.

In summary, citizens of the United States have for the past three-plus decades been building the wrong size houses in the wrong locations.  That is the genesis of the current Shelter Crisis.

It is beginning to be understood that it is insane to continue to directly and indirectly subsidize the construction of the wrong size house in the wrong location.  It is already widely understood that new housing should be built near (and ideally in the same community as) the jobs that occupants of the home would seek. In other words support for the evolution of Balanced Communities is growing, at least in the abstract.

In the northern part of Virginia, the majority of the jobs are in the core of the National Capital Subregion and the vast majority are within Radius=20 miles of the Centroid.  See “Where the Jobs Are,” May 24, 2004, and the updated information in “Antidote,” May 9, 2005. Yes, there are new jobs in western Prince William and in eastern Loudoun outside R=20.  Because there were very few jobs there 15 years ago, the percentage of job growth has been eye catching. However, there are not nearly as many new jobs beyond R=20 as there are workers living in the new housing in the Beta Communities of Greater Manassas, Greater Chantilly, Greater Ashburn, Greater Sterling/Cascades or Greater Leesburg.

The places with the largest imbalances of jobs over housing and mismatches between the type of job and the size of housing are in the Beta Communities close to the Centroid of the National Capital Subregion (Greater South Arlington, Greater North Arlington, Greater Tysons Corner, etc.  The goal must be to achieve Balanced Communities throughout this and every region.

Trickle Down Dead End

The truth is that the “trickle down theory” of housing does not work in the 21st century, especially in large, prosperous New Urban Regions. The trickle down theory holds that as the more well-to-do citizens build better homes, the less well off will move up to better (al be it “used”) housing. In fact, trickle down has not worked for the United States’ bourgeoning urban population for over a century. This is because of the limited role for self-help that has been institutionalized into the delivery of shelter in this country, as noted in The Shape of the Future. Only by self-help and sweat equity could those lower on the food chain improve shelter quality.

Trickle down would work much better if there were a full and fair allocation of location-dependent costs but it is not a comprehensive housing strategy under any circumstances. It is now becoming a dead end due to what Samuelson calls “over housing” and to the scattered locations of McMansions and orphan subdivisions. .

A tiny minority has discovered how to work the system to generate a large profit at the expense of the vast majority.  It is ironic that even these fortunate entrepreneurs cannot enjoy the fruits of their effort because they cannot find a place to live that is supported by functional human settlement patterns.

Isolated houses on big lots are about the only alternative for those who can afford them.  These McMansions make the settlement patterns ever more dysfunctional for the occupants and the rest of society. (See End Notes One and Two.)

If trickle down does not work what do we do?  The rational market response is to stop subsidizing the building of the wrong-sized houses in the wrong locations and to provide incentives to produce more of the sort of housing that is most desirable. What's needed is not million-dollar houses in scattered locations but modest houses in great locations.

The Masquerade

How does the process to start building the right size houses in the right location get underway?

Start by closing down the unreality Business-As-Usual sideshow about “affordable” housing.

The Shelter Crisis is masquerading as a transportation problem (“We need to build roads out to “cheap land” where ‘affordable housing’ will magically appear.”) There is a disingenuous chorus of false consternation about the need for “affordable housing” led by those who own land which they would like to sell for scattered urban housing. The chorus is orchestrated by those who would make money by continuing to build ever larger new houses in scattered locations at an ever faster rate.

Access to “cheap land” is not a solution.  In 40 years of working to create Balanced Communities in seven states and hundreds of communities, we have never seen a case where making more land available for development has increased the supply of “affordable housing” much less affordable and accessible housing.  The market does not work that way.

Creating “cheaper” one-, two-, five-, 10-, 20-, 50- or 100-acre lots for urban houses (dwellings for citizens who derive their livelihood from urban activities) is not an affordable and accessible housing solution.  The way that public regulation and the private market housing works, supplying more land only scatters the urban development and makes the settlement pattern more dysfunctional.

Land is “cheaper” only because it is not well located and thus not a good place for housing.

It is also important to note that in the current market, there is no direct connection between the cost of building a housing unit (including the cost of land) and the selling price.  Developers and builders look for the least expensive land they can find, build the dwellings for as little as they can and then sell them for as much as the market will bear.  You would do the same if you were in the business and were faced with the same constraints.

Further, municipal governments control development by the “dwelling unit” and not by population or functional components of human settlement.  For this reason the “smart” tactic is to build as big and as expensive a dwelling unit as the market will bear.  The agents, brokers, lawyers, lenders and others who live off of real estate churn favor big, expensive units as well.

Beyond the build-more-roads-to-get-cheap-land ploy, the Shelter Crisis is masquerading as a property tax relief problem. (“We need to give folks a break on high property taxes.”) This is also a ridiculous, unfounded position.  See  “Reforming the Property Tax,” (June 20, 2005)

What Should Candidates for State Office Do About the Shelter Crisis?

They can start by admitting there is a profound, systemic, comprehensive Shelter Crisis.  Then they could:

• Articulate a goal of creating more housing in configurations and locations that citizens really want -- attractive, modest-sized units that are efficient to maintain in locations near jobs, services, recreation and amenity

• Promise to start leveling the playing field by fairly allocating the full cost of location-variable goods and services

• Illuminate the Fallacy of Composition as applied to escalating home prices

• Promise to work to change the fact that most of the housing subsidy goes to those at the top of the economic food chain who need it the least

Candidates need to take steps to reform the property tax as noted in “Reforming the Property Tax,” (June 20, 2005).  Candidates need to get Virginia going as noted in “Transport in the November Election,” (July 11, 2005).  They should not, however, assume that property tax reform or improved access and mobility will by themselves solve the Shelter Crisis.

The good news is that Joseph Freeman has just finished a literate draft of the strategy document for PROPERTY DYNAMICS. (See “Rain Dance,” Jan. 4, 2005) and if you want to help out send him an e-mail at josephfreeman@msn.net.

-- July 25, 2005

End Notes

(1). S/PI has published five columns addressing aspects of the affordable and accessible housing equation:   “Affordable, But No Bargain,” Feb. 17, 2003, addresses the myth that building roads to access “cheap land” results in affordable much less accessible housing.  “The Housing Dilemma,” July 14, 2003, points out that smart growth is not the cause of the lack of affordable and accessible housing but it is not the cure either. “Gimme Shelter," April 25, 2005, considers the impact of the house price bubble bursting and the impact of there not being an eruption of the housing price bubble. “Antidotes,” May 9, 2005, addresses the issue of jobs/housing balance in the context of the current defense/security related job boom in the northern part of Virginia. “The Shelter Crisis,” May 256, 2005, considers the cumulative impact of building the wrong size houses in the wrong locations.

(2). From a full page add in the July 20, 2005, The Washington Post: “Get Rich With Real Estate,” “Home Sales at Record Pace: Prices also hit a high after big 12 month gain....” In the same paper, “Home Builder NVR’s Profit Jumps 45 Percent.”

Ed Risse and his wife Linda live inside the "Clear Edge" of the "urban enclave" known as Warrenton, a municipality in the Countryside near the edge of the Washington-Baltimore "New Urban Region."

Mr. Risse, the principal of

SYNERGY/Planning, Inc., can be contacted at spirisse@aol.com.

Read his profile here.