– especially when it’s free!

My NBR columns on Houston have generated several commentaries on blogs both in New Zealand and around the world, even though the mainstream media have kept their gaze focused firmly inwards.

One of these blogs caught the eye of Tauranga City Councilor Rick Curach, who responded by sending the following memo to the CEO, Stephen Town:

Hello Stephen,

Below is a very interesting blog sent to me, which refers to housing costs. Particularly interesting are the links e.g. Dallas Federal Reserve webpage. They seem in stark contrast with ‘SmartGrowth’s’ recent strong assertions that development regulation has no effect on housing affordability.

Given how critical such information is to our growth planning, this certainly warrants a proper response from the ‘SmartGrowth’ consultants.

Housing affordability is a very important matter. Are we being given the wrong advice and heading down a slippery slope? Are their textbooks outdated – out of touch with actual reality?

Stephen, can you please forward this to ‘SmartGrowth’ for a response.

Thanks, Rick

The consultants – SmartGrowth – responded with a brief report that “explained away” Houston’s affordable housing and essentially concluded that in New Zealand “there is no other way” than smart-growth, even if the end result is severely unaffordable housing.

Some of SmartGrowth’s main claims in rebuttal were:

·        Despite a low median house price compared to other major cities in the USA, only the houses on the Houston city fringe are relatively inexpensive.  

·        Houston has some of the worst traffic congestion in the US.

·        Houston is well known for its sprawl and air pollution.

·        The explanation for Houston’s housing affordability does not lie in the absence of zoning regulations. Both Dallas and Houston have virtually the same housing affordability index ratings (2.6 and 2.7) and they are both fast-growing cities. Dallas has zoning while Houston does not.

Cr Curach evidently remained unconvinced because the report was passed on to me, via a blogger, for comment. I referred the memo to Wendell Cox of Demographia, and to Randal O’Toole of the American Dream Coalition seeking their responses. Demographia have posted their report “Consultant Memo on Houston Misleads Tauranga Council” on their website. (Just Google “Memo on Houston Misleads” – it will take you straight there.)

Demographia’s key responses to the SmartGrowth claims (slightly edited for brevity) are:

Houston and Texas: Superior Housing Affordability

The city of Houston has no zoning, which the memo rightly points out. … [While] local government authorities in Texas outside the city of Houston generally have zoning, they are forced to operate in a competitive environment under which housing can be readily built, without zoning, in adjacent unincorporated areas. Indeed, given this competitive environment, it is appropriate to think of the state of Texas as unzoned (Environmental regulation, which is established at the state and federal level, is observed).

The memo notes that Dallas (actually the Dallas-Fort Worth metropolitan area) has slightly better housing affordability than the Houston metropolitan area as measured by the Median Multiple (median house price divided by the median household income). The important point is that the Median Multiples for both metropolitan areas are below the historic maximum norm of 3.0. By comparison, the Median Multiple in Tauranga was 7.5 in the third quarter of 2007 (Auckland was 6.9). This means that residents of these New Zealand urban centres face relative home ownership costs more than 2.5 times those of Houston, Dallas-Fort Worth and a number of US and Canadian metropolitan areas that have not adopted smart-growth policies.

Affordable Housing in Houston: Not Limited to the Fringe

The memo indicates that housing is affordable only on Houston’s fringe. This is absurd and betrays an acute unfamiliarity with Houston housing markets. Affordable housing is to be found throughout the metropolitan area. Indeed, the low band of the highest price category is lower than the median house price in Tauranga.

Houston’s “Sprawl”: Like Portland

As for Houston's suburbanization, (pejoratively called “sprawl” in the memo) the urban area (urban footprint) is approximately the average density for a US urban area over 1,000,000. Houston is only 10 percent less dense than Portland, despite that urban area’s strong smart-growth policies. Houston’s density is virtually the same as that of Dallas-Fort Worth and a quarter higher than that of Boston.

Smart Growth Land Use Policy: The Root of New Zealand’s Unaffordable Housing

The report misses the point that New Zealand’s housing affordability loss is the result of overly prescriptive land use planning (smart growth or urban consolidation policy). This connection has been identified by some of the world’s top economists and is detailed in our 4th Annual Demographia International Housing Affordability Survey. The situation was best summed up by former Reserve Bank of New Zealand Governor Donald Brash,[1] writing in the Demographia report: the affordability of housing is overwhelmingly a function of just one thing, the extent to which governments place artificial restrictions on the supply of residential land. In short, where there are no prescriptive land use policies, housing is affordable. Among the six nations surveyed in our report, there are no exceptions.

Randal O’Toole first put forward the following suggestion:

Refer the Councilors to Joel Kotkin's “Opportunity Urbanism” paper.

I agree. Anyone interested in urban development and productivity should read this magnificent paper. (It takes a while to download because it is full of wonderful photos.)

Randal then responded to several claims in the SmartGrowth paper, as follows:

·        Re: Their comparison of Dallas and Houston, no one says zoning is the problem. The problem is smart-growth, and neither Dallas nor Houston have that.

·        Re: Pollution – Houston is polluted due to local petro-chemical industry, not traffic.

·        Re: Congestion – Houston's congestion has grown by less than almost any other major urban area in America.

·        “Houston is a wealthy city” – Actually, median family incomes are no higher than average for the U.S. as a whole.

·        What is amazing is that Houston has permanently absorbed 90,000 Hurricane Katrina evacuees with hardly a blip in the region’s housing prices. The city of Houston is growing by more than 40,000 people a year. The Houston urban area is growing by 90,000 people a year. The Houston-Galveston metropolitan area is growing by 130,000 people a year. How fast is New Zealand growing?

No doubt the debate will continue, especially given that smart-growth is so strongly endorsed and driven by central Government – and right from the very top. (More of that later.)

The main point of this story is that a Councilor has sought independent advice when confronted with a report that he found less than convincing. One of the main complaints I get from councilors is that all their information comes up through the system, and they do not have the technical expertise to challenge these reports even if they seem contrary to their common sense.

I point out there is nothing to prevent any Council setting up a policy review committee charged with examining all tabled reports and seeking independent advice if necessary. However, it seldom happens.

I suspect they are reluctant to spend the money.

However, this exercise shows that many top quality international experts will provide advice at no cost at all. Wendell and Randal are both incredibly busy people but gave their time to respond to this plea for help from a Councilor in a small town on the other side of the world.

That is the miracle of the internet.

Many of us are building up networks of experts who exchange favours as their stock-in-trade.

1267 words

For 11^th July 2008