1. Housing Affordability’s “Killer App”
Urban Containment:
Housing Affordability’s “Killer App”
American Dream Conference
Washington
Wendell Cox
7 August 2017

2. International Housing Affordability
DEMOGRAPHIA SURVEY: ANNUALLY 2004 TO PRESENT
MEDIAN MULTIPLE
Median house price divided by
Median household income
13th ANNUAL
9 Nations
92 Major Markets
406 Total Markets
Typical of liberal regulation 
10th ANNUAL
Introduction by Alain Bertaud

3. The Housing Affordability Crisis
PERSPECTIVE
Not an advocate of sprawl
“Sprawling Dhaka” 20x as dense as NY urban area
Not an advocate of suburbs
My interest: Preservation of the middle-class & poverty reduction
Opportunities for younger & minority households
Historical perspective: Rise of the middle-class (all in poverty 200 years ago)

4. The Housing Affordability Crisis
THREAT TO MIDDLE-INCOME HOUSEHOLDS
Housing is largest household expenditure
70%-100% of cost of living difference
Higher costs mean less discretionary income
Less household spending, less job creation
Greater relative poverty
California highest housing cost adjusted poverty rate
Fuels the need for subsidized housing

5. A Geographically Constrained Threat
HOUSING IS AFFORDABLE IN MANY MARKETS
The housing affordability crisis is focused on a few areas.
Much of the nation is still relatively affordable
Yet, all of the nation is threatened
Urban containment philosophy of Portland can be found across the nation

6. Why is San Jose 3x as Costly as Atlanta?
WHY THE DIFFERENCE IN 2016 & NOT IN 1970?
Median House Size
Atlanta 2,300 SF
San Jose 1,800 SF
Median Lot Size
Atlanta 0.50 Acres
San Jose 0.15 Acres
Atlanta
MSA
San
Jose
MSA
Atlanta
MSA
Data from Census Bureau & Demographia

7. Measured at the Housing Market Level
Housing Affordability HOW IS IT MEASURED?
Measured at the Housing Market Level
(Labor market, or metropolitan area)
Compared to incomes
(Need a metric, such as the median multiple)
Compared to other markets
(Metropolitan areas)

8. Housing Market: The Economic City
EXAMPLE: NEW YORK METROPOLITAN AREA
Distribution of
Population (2016)
Defined by U.S.
Office of Management
and Budget
Also NAR house price
reporting

9. Urban Containment Purpose
& STRATEGIES
PURPOSE:
Restrict or prohibit suburban tract housing on or beyond the urban fringe (anti-sprawl policy)
STRATEGIES
Urban growth boundaries and other land rationing (green belts, “growth areas,” etc.)
Infill mandates
Contiguous development requirements
Building permit caps

10. Land Value Gap Leads to Higher Prices
URBAN GROWTH BOUNDARY (& RELATED POLICIES)
LAND VALUE GAP AT UGB
Peter Hall 5-10x (1970)
Melbourne 12-20X (RBA)
Auckland 8-13X (Grimes)
UK up to 700 times (Cheshire)
Portland 11 times (Cox)
With Urban Growth Boundary
Urban Growth
Boundary
(Land Value Gap)
City Center
Exurbs
Adapted from Lincoln Institute of Land Use Policy

12. Consequences of Urban Containment
LOWER STANDARD OF LIVING & MORE POVERTY
Higher land and house prices
Destroys competitive market for land
Greater price volatility
Largely outlaws suburban tract development
Key to the advance of the US middle-class.
Generates speculation
Why are “foreigners” not buying in Atlanta?)

13. Deterioration & Urban Containment
INTERNATIONAL RECORD: LAST THREE DECADES
Source: Reserve Bank of Australia and Demographia

14. The Housing Affordability Crisis: US
URBAN CONTAINMENT EXPLAINS MUCH OF IT
1970 is a long time ago
Urban containment
started in the 1970s
Strong Urban Containment Markets
Liberal Markets
MEDIAN MULTIPLE
Median house price divided by
Median household income
Derived from Census Bureau, Harvard University and Demographia.

15. Median Multiple 4.5 or Higher (All are urban containment markets)
High Cost Markets Cost More Throughout
MEDIAN MULTIPLE BY CITY SECTORS (53 MMSA’S)
Median Multiple 4.5 or Higher
(All are urban containment markets)
MEDIAN MULTIPLE
Median house price divided by
Median household income
Median Multiple 4.4 or Lower
Derived from American Community Survey , City Sector Model.

16. Range: House Values & Rents: 2015
MAJOR METROPOLITAN AREAS
Metropolitan areas (53)
with over 1,000,000
population in 2015
Derived from ACS 2015 5

17. Comparing Between Housing Markets
LIBERAL V. URBAN CONTAINMENT POLICY:
MEDIAN MULTIPLE
Median house price divided by
Median household income
Portland
Denver
Kansas City
Plenty of Land (Sq. Mi.)
Portland: 2,500
Denver: 7,200
Kansas City: 8,000
Atlanta: 2,200
Atlanta
Derived from Census Bureau, Dept of Agriculture, Harvard, Demographia.

18. Problem is Not Shortage of Land
SAN FRANCISCO BAY AREA & NEW YORK COMPARED
SF & SJ MSAs
2010
Urban 1,200 sq. mi.
Available: 1,100 sq. mi.
(Excludes wetlands & flood zones)
Additional
Developable
Land
All major US
metropolitan
areas have
enough land
Urbanization
Urbanization
Estimated from California Department of Housing & Community Development and Census data

19. Densification of Existing Areas-I
URBAN CONTAINMENT WORSE THAT LARGE LOT ZONING
Strong Urban Containment
Large lot zoning
3.0: Historically affordable
Sources: Brookings Institution, Demographia.

20. Densification of Existing Areas-II
ELIMINATION OF HEIGHT LIMITS
Positive effect in urban cores
Such as city of San Francisco
At housing market level: No research
Would still be a land value gap with urban containment.
Concerns: YIMBYs (Yes in My Backyard)
Ignore urban growth boundaries (which must be removed to restore affordability)
High rise living is not a substitute for detached housing for many (especially families)

21. Unaffordable v. Affordable Markets
EXAMPLE: ATLANTA V SAN JOSE
Major housing affordability differences between markets are not likely due to:
Parking restrictions
Historic preservation
Zoning
Height limits
Large lot zoning
Building codes (construction costs)
Urban containment is the major issue

22. SUPPLY AGREED THE PROBLEM, CONTAINMENT IGNORED
A Code of Silence?
SUPPLY AGREED THE PROBLEM, CONTAINMENT IGNORED
State of California
Toronto & the Ryerson University report
Need to build ground oriented detached & town homes to restore housing affordability
There are serious attempts to spread urban containment policy to the rest of the country.
Yet there is progress

23. "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."

24. A Question of Values Poverty is worse than sprawl.
PEOPLE OR PLACE
Poverty is worse than sprawl.
Falling living standards are worse than sprawl.
All barriers to housing affordability need to be addressed
The most serious is urban containment

25. … the ultimate objective of urban policy is to improve outcomes for
Distorted Priorities Require Changing
PEOPLE RATHER THAN PLACES: CHESHIRE ET AL
… the ultimate
objective of
urban policy is
to improve
outcomes for
people rather
than places

26. AVOID AND ELIMINATE URBAN CONTAINMENT
Solutions
AVOID AND ELIMINATE URBAN CONTAINMENT
WHERE NO URBAN CONTAINMENT POLICY
Avoid “like the plague” (This is the priority)
WHERE THERE IS URBAN CONTAINMENT POLICY: REPEAL OR LIBERALIZE
Annual median multiple improvement goals
“Event triggered” greenfield land expansion
Permit average sized lot greenfield expansion
Municipal utility districts
HOPE: NEW ZEALAND LABOUR PARTY
Opposition to urban growth boundaries
(as suggested earlier today by Andrew Thomas)

27. Urban containment is irreconcilable with housing affordability
Paul Cheshire
London School of Economics
(paraphrased)