Middle-Income Housing Affordability Presentation by Wendell Cox to the American Dream Conference November 7, 2015 Brisbane

MIDDLE INCOME HOUSING AFFORDABILITY G-20 Priorities: Better Standard of Living Alleviating Poverty Requires Middle-Income Housing Affordability

Discretionary Income (=) Gross Income Minus Taxes and Necessities (Such as Housing, Transportation & Clothing ) Discretionary Income DEFINES THE STANDARD OF LIVING & POVERTY

From Levittown NY to Lakewood Democratization of Prosperity ASSOCIATED WITH HOME OWNERSHIP Lakewood, California

9 Nations 86 Major Markets 378 Total Markets MEDIAN MULTIPLE Median house price divided by Median household income Measuring Housing Affordability THE DEMOGRAPHIA SURVEY

Figure 6 Urban Growth Boundary & Land Values THE THEORY  AFTER URBAN GROWTH BOUNDARY LOCATION OF URBAN GROWTH BOUNDARY  (Land Value Gap) Leading theorists: Lower costs of higher density housing would negate land price increases

OUTSIDE UGB $16,000 Per Acre INSIDE UGB $180,000 Per Acre Impact of Urban Growth Boundary PORTLAND RAW LAND VALUES: ADJACENT TO UGB

House Price to Income Ratio INTERNATIONAL:1980s-2000s 3.0 Maximum Affordability Standard All major markets were below or near 3.0 before urban containment. Source: Federal Reserve Bank of Australia

Land Rationing is the Issue DESTROYS HOUSING AFFORDABILITY Donald Brash, Governor, Reserve Bank of New Zealand Introduction to 4 th Annual Demographia International Housing Affordability Survey... 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.

Recognition of the Problem GOVERNMENT OF NEW ZEALAND Bill English, Deputy Prime Minister New Zealand Introduction to 9 th Annual Demographia International Housing Affordability Survey Land has been made artificially scarce by regulation that locks up land for development. This regulation has made land supply unresponsive to demand.

Paul Cheshire ECONOMIST Urban containment is Irreconcilable with Housing affordabilit y

Virtually all increased inequality is in higher housing values Much due to Housing regulation -Rognlie, MIT All Lost Equality in Housing? THE “DISAPPEARING” MIDDLE CLASS

London Reduced employment in Amsterdam/Rotterdam -Vermuelen & Ommeren Netherlands Bureau of Econ. Rsch. Excessive Land Regulation: Lost GDP EUROPEAN & US RESEARCH $2T GDP Loss: US -Hsieh & Moretti UIC & UCB 20% less job growth than expected in metropolitan areas with strongest land use regulation -Raven Saks US Federal Reserve Board Higher commercial Development costs -Cheshire & Hilbur London School of Economics

Annual Data Begins at 1980 Middle-Income Housing Affordability MAJOR US METROPOLITAN AREAS: 1950 – 2014  Median Multiple: Median House Price divided by Median Household Income Derived from Census Bureau, Harvard University and Demographia.

Housing Adjusted Poverty Rates: 2013 UNITED STATES, CALIFORNIA & MISSISSIPPI Source: US Census Bureau Mississippi has historically had the worst poverty California Legislative Analysts Report

CALIFORNIA: NEED TO LIBERALIZE REGULATIONS Far from helping, they are making it particularly difficult for Latino and African American households to own a home

" Suburbs rarely cease growing of their own accord. The only reliable way to stop them … is to stop them forcefully. But the consequences of doing that are severe."

welcome foreigners

New Zealand – Legislation – Productivity Commission Auckland – Affordability target Florida – Repealed Smart Growth Progress: New Zealand & Florida REFORM COMES FROM THE OUTSIDE, NOT PLANNING Auckland

NEW ZEALAND PRODUCTIVITY COMMISSION Proposal Housing affordability greenfield land release The purpose of urban areas is to improve the affluence of their residents

Outcomes…. decline in home ownership rates; increasing shares of their income to housing, with associated impacts on wellbeing; a more uneven distribution of national wealth; ongoing overcrowding, with associated health and social costs; a greater risk of economic volatility and macroeconomic instability; barriers to labour market mobility; an undermining of the effectiveness of monetary policy to manage economy- wide inflation pressure on fiscal policy, through direct and indirect paths.54 For example, through social housing.

The Commission does not have a preference for whether cities grow out or up. Our larger cities will always have an element of both. In any event, what matters ultimately are the preferences of households and whether they have available to them choice of housing types at different price points to cater for a range of income levels. Non-Ideological Approach

Councils in our largest cities should be able to pursue the goal of a compact urban form if that is what their communities want. The key test is whether they deliver sufficient development capacity to house a growing population while delivering a choice of quality, affordable dwellings of the type demanded by purchasers.

Where large discontinuities emerge between the price of land that can be developed for housing and land that cannot be developed, this is indicative of the inadequacy of development capacity being supplied within the city

OUTSIDE UGB $16,000 Per Acre INSIDE UGB $180,000 Per Acre Impact of Urban Growth Boundary PORTLAND RAW LAND VALUES: ADJACENT TO UGB

Productivity Commission Recommendations – Right to plan – Obligation – Plans not reflecting preferences – Differential at UGB – Creates national externalities – Event based trigger: Release greenfield land

What we are saying is we have to take into account the whole of New Zealand and future generations…

"That's denying a whole generation of New Zealanders affordable housing options in areas where they want to live. We are going to say from central Government's view that affordable housing is a matter of national importance and we are going to require councils, like Auckland Council, to restrict the use of density and height controls so they can't be used to prevent affordable housing being built." "It will be a reduction in the veto power of existing residents. At the moment... they put a premium on the right of neighbours to object in a community. What we are saying is we have to take into account the whole of New Zealand and future generations who desperately need affordable housing."