Underproduction as a % of 2015 housing stock.
Between 2000 and 2015, 23 states fell 7.3 million units short of meeting the housing needs of their growing populations — equivalent to about 7.3% of the housing stock of the United States, according to a new study, “Housing Underproduction in the U.S.,” published by the Up for Growth Coalition.
Although not the worst offender, Virginia was one of the states notable for housing underproduction, falling short of demand by 131,000 units over the 15-year period.
Restrictive zoning and development policies in Virginia and elsewhere have created an imbalance in supply and demand imbalance that has dire economic consequences. States the report:
As people migrate toward cities in search of jobs, education and economic opportunities, the demand for housing in our most populous and economically productive regions has far outstripped the production of new housing units. Due to dramatic shifts in generational preferences and household demographic trends, migration to cities over the past decade are at the highest level since World War II, while housing production has fallen to historic lows. This imbalance has led to rapidly rising housing prices, economic displacement of lower income families and communities of color, and increases in homelessness.
Long-term Bacon’s Rebellion readers familiar our Smart-Growth-for-Conservatives critique of Virginia land use and development policies will be right at home with this study. The report blames “restrictive local development and land use policies that reflect opposition to high-density, multi-family urban growth in favor of low-density, single-family, suburban sprawl.” Offending policies include:
- Zoning restrictions, which create a shortage of zoned, high-density sites;
- Escalating and misaligned fee structures, such as impact and linkage fees;
- Poorly calibrated inclusionary housing requirements; and
- Lengthy review processes that invite gaming and abuse by growth opponents that can delay projects, create unpredictability, reduce incentives to invest and increase the per-unit cost of development.
Not only do dysfunctional housing markets produce fewer units than would be supported by demand, according to the report, they produce units in the wrong locations. The market for housing in walkable, high-density, high-value urban areas is significantly under-served, while housing continues to be built in lower-density suburban communities with a backlog of land zoned for residential.
Average change in home prices by county, 2000-2016.
The study advocates a loosening of anti-development restrictions to encourage a “smart growth” model of growth that promotes high-density residential development in major transportation corridors. Benefits will include increasing the housing supply, exploiting existing infrastructure, and increasing tax yields to local governments. Four broad tools would achieve these aims:
- By-right approval. Establish “by right” high-density residential development in a half-mile radius around a transit station (roughly 5 percent of a metropolitan region’s land area).
- Impact fee recalibration. Recalibrate impact fees to reflect actual costs of infrastructure service for high-density development.
- Property tax abatement. Use property tax abatement as a gap financing tool to enable denser and more affordable housing production.
- Value capture. Establish mechanisms to capture value created through up-zones and tax abatement investments to be used as dedicated funding for a range of housing programs.
Clearly, Virginia has a lot of work to do. We’re not as bad as the West Coast, the Northeast, or even our neighbor to the north, Maryland, but we’re the worst state in the Southeast (excepting Florida). The cost of housing is harming our economic competitiveness and hindering our ability to adapt to economic circumstances.
One of the ways to address rural poverty in Virginia, for instance, would be to encourage unemployed or under-employed workers in small towns and countryside to migrate to metropolitan areas offering better employment opportunities. When local governments in metro areas restrict housing development, they block this migration. Lower-income Americans literally can’t afford to make the move. The result is the worst of both worlds: sub-par employment opportunities in rural areas combined with job shortages in the major metros.
The higher cost of housing also helps explain another phenomenon — the shift of Virginia in recent years from a state from a people-importing state into a people-exporting state.
Finally, as the report alludes to, high housing costs disproportionately impact the poor and minorities. High housing costs, not racism, keep minorities trapped in public housing projects and slums. High housing costs block them from becoming homeowners, building home equity, and accumulating wealth, thus perpetuating income inequality.
Where is the General Assembly on the housing issue? Where was the McAuliffe administration? Where is the Northam administration? AWOL, all of them.
