Editor’s note: As many of you know, I have a long-standing interest in the role of capacity constraints in reducing the supply of affordable housing, particularly in high-productivity, high-cost regions. Yet many on the political right are instinctively opposed to efforts to increase density, particularly when these efforts involve reducing the discretion of local authorities to shape local land use regulation. I have asked an old friend, John Mangin, to offer his thoughts on this broader set of issues, with particular reference to the political controversy over affordable housing mandates in New Jersey.
I’m an affordable housing developer in New Jersey, a state with some of the country’s highest housing costs and the birthplace of exclusionary housing litigation. Until the landmark Mount Laurel decisions in the 1970s and 80s, town after town in NJ used large-lot, single family zoning and other land use regulation to exclude non-wealthy families. The NJ Supreme Court ruled that municipalities could no longer completely zone out townhouses, apartments, mobile homes, and other housing that lower-income families can afford. Mount Laurel served as the first precedent for similar decisions across the country.
These days, most affordable housing creation relies on government subsidies and set-asides to build new income-restricted units with capped rents. The system works great for the families who win the literal lotteries for units. They get the opportunity to live in better housing, sometimes in areas with jobs and schools that allow for upward mobility. (A lot can depend on whether you grow up in Mount Laurel instead of Camden.) It’s worthwhile work, but this strategy can’t do much for housing affordability more generally.
For ideas on that, it’s been heartening to see the writing on the uses and abuses of land use regulation burbling up from libertarian quarters and on the free-market left. I’m thinking of people like Ed Glaeser, Rick Hills and, more recently, Tim Lee, Stephen Smith, Ryan Avent, and Matt Yglesias. This writing gets back to the problem identified by the Mount Laurel court: that, left to their own devices, most localities will use land use law to restrict the property rights of newcomers and protect incumbent homeowners at the expense of everyone else.
The problems I see in NJ are emblematic of those in most areas with high housing costs:
First, regulations that cap housing density (i.e., supply). Normally, a builder will build new houses when demand sends housing prices higher than construction costs. When regulations cap density, this market response isn’t possible and prices get bid up. This dynamic is most obvious in places like Manhattan, San Francisco, and other urban hot spots, but it’s no less true in mostly suburban New Jersey. At issue in the Mount Laurel litigation were regulations that mandated large, detached single-family houses even where the market would create apartments instead. Regulations like that can be a double whammy – they mandate housing that’s expensive to build and also restrict the supply, sending prices even higher.
Second, onerous approvals processes. New Jersey is famous for this. This means all the approvals, permits and signoffs from the Planning Board and various agencies that have to happen before you get your building permits. In pro-development states, this process can take a few months. In New Jersey, it can take years, with property taxes and other carrying cost accruing the whole time. A state-funded study in 2001 found that the endless approvals process in NJ added $60,000 to the cost of the average house as compared to North Carolina. That figure doesn’t include the added costs of other features on the NJ land use regime.
Third, over-localized control of land use decision-making. Letting each little community decide what and whether to develop sounds like a great idea – home rule, right? In typical practice it turns every suburban planning board into a NIMBY group (i.e., Not In My Back Yard) with little concern for property rights or market demand. Think about it: Suburban planning board members are local homeowners. If you’re a local homeowner, your main concern is for the asset value of your house. You’re not going to engage in a policy program that results in lower housing prices for your region. In the absence of state or regional guidance, “planning” can become an exercise in incumbent benefit capture.
The giveth of subsidies and the taketh away of restrictive land use regs can lead to some truly head-smacking situations. Local governments in New York and the Bay Area have to subsidize housing for above-median income families in order to compensate for the high housing costs resulting in large part from the local governments’ own restrictive land use regs.
The regulations outlined above can have serious consequences for the regional and national economy. I’m not just talking about the housing market or decreased activity in the construction industry, although that’s nothing to sneeze at. Restrictive land use regulations divert people from the densest areas, where study after study shows they can be most economically productive, to areas that just happen to have housing costs that they can afford. Sometimes this means moving a town or two over and taking a longer commute, and sometimes this means moving to Raleigh or Phoenix instead of San Jose and taking an entirely different job. According to studies cited in The Gated City, Ryan Avent’s concise account of the nationwide economic costs of restrictive land use regs, half the variation in per worker productivity from state to state is attributable to differences in population density.
Back in New Jersey, Governor Christie is pushing forward a plan to give localities even more control over land use decisions than they already have. Many in New Jersey passionately resent affordable housing mandates and see unfettered local control of land use as a way to stop them. Regardless of how you feel about affordable housing, the policy will exacerbate New Jersey’s housing cost problem for everyone – not just low-income families – by giving local planning boards more power to keep densities low and restrict new development. It will hit especially hard in New Jersey’s big job centers – Morris County, the Route 1 Corridor from Trenton to New Brunswick, Cherry Hill/Mount Laurel, and Metropark-Edison.
Housing policy aside, I like Governor Christie and I’m generally sympathetic to his policy aims for the state. But I have to lodge a complaint from the right: If he’s serious about the economy, he should prioritize more and better development over the grievances of incumbent beneficiaries of bad land use law.
John Mangin, a recent graduate of Yale Law School, is a lawyer and developer in the Philadelphia area. With Rosten Woo, he wrote What Is Affordable Housing?, an illustrated guidebook to affordable housing policy.