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Hello Smart Growth, Goodbye Affordable Housing

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This week's Big Idea is a bad one, and you'll find it featured in the Clean Energy Jobs and American Power Act (S.1733) now before the Senate.

No, we're not talking "cap-and-trade." We're talking about larding up metropolitan planning agencies with financial incentives to shift transportation funds and passengers away from cars and into public transit, bikeways and walkways.

The bill also suggests that the agencies use "zoning and other land use regulations" to create more crowded communities. This, the sponsors think, will help coerce people out of their cars and into the more "enlightened" modes of transportation that most folks reject when given a choice.

The assumption behind the provisions is that Washington can lower the nation's greenhouse gas (GHG) emissions by re-creating the crowded living conditions and limited transportation options Americans have fled for generations.

It's a nice thought, but there's scant evidence to suggest the scheme can work. Indeed, what evidence there is indicates that program will succeed only in reinflating the housing bubble — sending home prices back up to the unaffordable levels of a few years ago — while making no discernable improvement in GHG emissions.

The academic community is just beginning to investigate the influence of land use and transportation options on GHG emissions and other energy-related measures. But findings to date — including studies from the National Academy of Sciences (NAS), Demographia, Abt Associates Inc. and the U.S. Department of Energy, as well as data reported by the Australia Conservation Foundation — suggest tighter land-use regulations or denser populations have little if any effect on energy use or emissions.

Indeed, these studies indicate that to achieve even minimal environmental benefits through this approach, the government would have to use coercive measures so extreme that no free society would tolerate them.

Fortunately, there are better options. As Phil McKenna observed in the Sept. 3, 2009, issue of MIT's Technology Review, "Urban planners hoping to help mitigate CO2 emissions by increasing housing density would do better to focus on fuel-efficiency improvements to vehicles … [The NAS study] concludes that increasing population density in metropolitan areas would yield insignificant CO2 reductions."

Despite the lack of evidence that more intensive land-use regulations can reduce GHG, enthusiasm for population-densification measures runs high among White House officials and congressional leaders. But in clinging to the slim hope that their "smart growth" schemes will somehow work, they ignore the lessons of the housing-market collapse and risk making it worse.

Demographia, for one, has published several studies indicating that smart growth and New Urbanist housing policies would disrupt the already wobbly housing market, make housing less affordable, reduce housing quality and substantially limit consumer choice.

For more than a decade, numerous independent sources have studied the influence of land-use regulations on housing affordability. One of the better summaries of these findings was written in 2005 by Paul Krugman — Nobel laureate in economics and columnist for the New York Times — just as the housing price bubble was about to burst:

When it comes to housing, however, the United States is really two countries, Flatland and the Zoned Zone. In Flatland, which occupies the middle of the country, it's easy to build houses. When the demand for houses rises, Flatland metropolitan areas, which don't really have traditional downtowns, just sprawl some more. As a result, housing prices are basically determined by the cost of construction.

But in the Zoned Zone, which lies along the coasts, a combination of high population density and land-use restrictions — hence "zoned" — makes it hard to build new houses. So when people become willing to spend more on houses, say because of a fall in mortgage rates, some houses get built, but the prices of existing houses also go up.

The record shows that when communities embraced the sort of land-use regulations and restrictions championed by the Clean Energy Jobs and American Power Act, housing became painfully unaffordable for the typical American family. It contributed mightily to the housing bubble that ultimately collapsed and brought down the national economy with it.

Home prices are slowly approaching affordable levels. It would be a sad day indeed if congressional actions — taken in the vain hope of improving the environment — brought the return of housing affordability to a screeching halt.

Wendell Cox, principal of the Wendell Cox Consultancy in St. Louis, is a visiting fellow at the Heritage Foundation.

First appeared in The Washington Times

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