| Forced affordable housing reduces supply and increases prices |
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| Sunday, 25 November 2007 19:47 | |
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CRMS warns that forcing developers to supply houses at below-market prices actually reduces housing supply and raises prices. New Zealand should learn the lessons from California. "The Government should abandon any plans to force 'affordable housing' on to land developers ", said Owen McShane today. Mr McShane has recently returned from presenting a group of papers to an international conference, in San Jose, California, with the theme "Recovering from Smart Growth". "Many of the conference speakers focused on means of achieving affordable housing within the high-priced housing markets in California, and the other highly-regulated markets in the US, and in other countries round the world. Papers from urban economists provided persuasive evidence that forcing developers to provide 'affordable housing' as part of their resource consents actually reduced the supply of housing and increased prices," he said. "Sadly, recent statements in the media indicate Government is considering requiring land developers to provide a percentage of their housing at below-market prices in return for consent to proceed with large scale residential subdivisions. Furthermore, a Government invited 'expert' from the UK has recommended such schemes. "In England" said visiting Professor Bramely, "if developers want planning permission they have to provide affordable housing within projects." "However", Mr McShane points out, "four visitors from the UK attending the San Jose conference pointed out that the UK was a housing "basket case" with some of the least affordable housing, with the worst standards, and the lowest build-rate, of any country in the developed world. "These presentations indicate that seeking advice from a proponent of UK housing policy is like asking President Mugabe to advise us on how to manage inflation," said Mr McShane. "In their 2004 paper, Housing Supply and Affordability: Do Affordable Housing Mandates Work? Benjamin Powell and Edward Stringham concluded that "By restricting the supply of new homes and driving up the price of both newly constructed market-rate homes and the existing stock of homes, 'inclusionary zoning' (forcing developers to provide below market-priced homes) makes housing less affordable." "At this 2007 Conference Tom Means, Edward Stringham, and Edward Lopez presented Below Market Housing Mandates as Takings: Measuring their Impact a DRAFT chapter from a book on takings" said Mr McShane. "A California court recently rejected the notion that 'inclusionary zoning' is a 'taking' without compensation, and found that such zoning 'necessarily' makes housing more affordable. This paper shows why the court was wrong. The three economists have updated the 2004 findings and present more rigorous and detailed statistical analysis. Once again their conclusions should kill off any thoughts of forcing developers to provide a percentage of below market priced housing in return for development consents in New Zealand' said Mr McShane. "The three University economists conclude: Over a ten-year period, cities that impose a below-market housing mandate on average end up with 10 percent fewer homes and 20 percent higher prices. These results are highly significant. The assertion by the Court in "Home Builders Association v. Napa" that “the ordinance will necessarily increase the supply of affordable housing” is simply untrue. Dr Don Brash, Chairman of Centre for Resource Management Studies, supported these findings, saying "We have been warned, and before any government forces New Zealand home builders and land developers to provide houses at below market prices someone will need to demonstrate why these findings regarding supply and price will not apply in the housing markets of New Zealand. "That will be a difficult task" said Dr Brash, "because both papers are based on the simplest and most firmly established economic principles linking supply, price and demand". |
