Send to a Friend <% dim printurl printurl = Request.ServerVariables("URL")%> Version

July 10, 2002, 9:20 a.m. Working Against the Grain HUD, DOT, EPA undermine president’s homeownership initiative. By Wendell Cox & Ronald D. Utt

ecently, President Bush announced new federal initiatives to expand home ownership especially among African-American and Hispanic families, who have much lower than average ownership rates, reflecting lower incomes and a legacy of discrimination. This renewal of the long-standing national commitment to home ownership could not be more welcome. The president pointed out that home ownership strengthens families and builds successful communities. At a time when the nation is threatened from without as never before, the American Dream has become all the more important to share with all Americans, regardless of race or ethnicity. Racial and ethnic minorities have long experienced far lower rates of home ownership, and efforts to improve that should be welcomed by all.

Unfortunately, policies popular with state and local bureaucrats are working directly against the goal of greater homeownership. More than a decade after the Kemp Commission found that overly prescriptive zoning and building regulations were putting home ownership out of the reach of many, the problem has not been abated; indeed, it has become much worse. Under the misleading moniker of "smart growth," states and localities have sought to ration land, housing and development to limit growth. And, as the most basic economics teaches, when valuable goods are rationed, prices rise.

For example:

Many communities have established impact fees that are added to the price of building new houses and multifamily units. In California, these fees average more than $20,000 and in some cases exceed $60,000. It is no wonder that middle-income families moving to the San Francisco Bay Area may have to travel 75 miles just to find affordable housing and why California's urban areas have some of the lowest home ownership rates.

Other communities are implementing "down-zoning" strategies to preserve rural character. A particular "hotbed" of this activity are the northern Virginia suburbs of Washington, D.C., which are increasing minimum-lot sizes, often from a quarter acre to a full acre. This is restricting growth, while "green-lining" lower-income households out of homeownership. A further effect is to artificially accelerate sprawl many miles farther out as starter homes "leap frog" areas that would otherwise be developed.

Still other communities have imposed urban-growth boundaries, beyond which no development can occur. The effect of the most rigorous such "green-line" is documented by the latest Census data, which shows that home values in Oregon rose at a far greater rate relative to income than that of any other state. Similarly, surveys show that Portland housing affordability dropped between 1991 to 2001 far more than any other major metropolitan area.

These strategies might be, at least on the surface, supportable if they were compelled by any crisis. But there is no threat to either agriculture or open space in the United States — the new census indicates that only 2.6 percent of the nation's land is urbanized. Governments that impose restrictive smart-growth policies deny the benefits of the American economy to lower-income families for no reason whatsoever.

Regretfully, these policies are being supported by programs of the federal government that formed the cornerstone of Vice President Gore's so-called Livability Agenda. Technical-assistance programs aimed at propagating these counterproductive policies continue in effect in at least the Department of Housing and Urban Development, the Environmental Protection Agency, and the Department of Transportation.

As a measure of just how costly smart-growth restrictions can be, the annual national expenditure on the Bush plan to promote home ownership would be less than one-half the extraordinary Oregon cost increase to homebuyers during the 1990s.

The first tactic in any strategy to improve housing affordability should be removal of the regulations that have caused the problem. Then, and only then, can any program to increase homeownership begin to have an effect.

— Wendell Cox is a visiting fellow at the Heritage Foundation. Ronald D. Utt is a senior research fellow at the Heritage Foundation.