Thursday, October 06, 2005

Mandatory Inclusionary Zoning

A group called Empower Hampton Roads is pushing Virginia Beach to adopt mandatory inclusionary zoning, a policy that would essentially require developments of a certain size to include some housing affordable to someone making $50,000. There's a hearing on the proposal tonight.

Says the Virginian-Pilot in an editorial this morning:
'...the shortage of affordable homes in the region is severe and worsening. Teachers, sales clerks, secretaries, sailors — just about anybody who has to pack a lunch and bring it to work — are often forced to live far from their jobs in order to afford adequate housing, safe streets and good schools.'


At 7:53 AM, Blogger Jim Bacon said...

The problem of unaffordable and inaccessible housing is a very real one, one of the central challenges of state and local government. The solution of mandating developers to provide affordable housing, however, is not a good solution. Local governments need to cut back the freedom of developers, not add another layer of regulation. Local governments need to revisit their zoning codes, subdivision ordinances and comprehensive plans and delete the regulations that inflate costs and restrict supply -- and we're talking about everything from mandated street widths to limits on density -- and then let the free market work.

At 8:10 AM, Blogger Bob Burke said...

Let me pose the obvious question - why would the free market choose to build housing with a smaller profit margin? And why would it choose to raise the stock of housing high enough to lessen the demand that drives prices up? After all, the actual construction cost of a house often doesn't have much to do with its price.

At 10:30 AM, Blogger Ray Hyde said...

So it's not OK to mandate inclusionary zoning, but it is OK to mandate controls on developers.

And we are going to cut back on their freedom by removing most of the restrictions we have on them now.

I'm confused.

At 10:46 AM, Blogger Ray Hyde said...

A builder looks at his costs of construction, land acquisition, regulatory compliance, and proffers included, then adds his desired profit margin.

If he concludes his homes can be sold at or above that price, then he will move ahead. To this extent, you are correct in saying the cost of construction MAY not have much to do with the price. Then you have to decide whether artificially high land prices, regulatory costs, and proffers are to be considered legitimately related to actual costs of construction, like plywood and labor.

But the free market consists of more than one builder, and many buyers. When multiple builders make the same decision to build, the availability goes up and their opportunity to get a price higher than costs plus profits goes down, maybe even below their target price.

Our present development rules so favor large developers, that it is easy for them to know each others plans and avoid true competition. This is vastly different from previous years when individual contractors built individual houses with little knowlege of overall market conditions.

There are many areas where new homes can be purchased for near their actual construction costs, but they tend to be in areas where construction is not unduly prohibited, and as EMR points out, also in areas where other opportunities may be low, at least at present.

In some places, telecommuting is changing that. Other facors may come into play as well, over the longer term. But some people would argue that these early adopters are really parasitic speculators who are counting on government and existing (?) residents to create a capital gains situation purely for their benefit.

Again, the market suggests that if you want uncongested roads, low housing costs, and long term capital gain, then you should measure that against opportunity and transportation costs, and then, probably, opt for sprawl.


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