April 10, 2001

April 10, 2001 | News Releases on Smart Growth

Limits on "Urban Sprawl" Also Limit Home Ownership, Analysts Say

WASHINGTON, Apr. 10, 2001-So-called "smart growth" strategies, enacted by localities nationwide to curb urban sprawl, frequently place home ownership beyond the reach of low- and middle-income Americans, says a new Heritage Foundation paper.

"Smart growth" takes on a variety of forms, but its goal remains the same-to stop or slow suburbanization by limiting the amount of land available for construction. According to Senior Research Fellow Ronald Utt and Visiting Fellow Wendell Cox, these restrictions drive up the prices of homes and put one of America's greatest public policy successes-its historically high rate of home ownership-at risk.

Much of the credit for that success goes to post-World War II prosperity and pre-war reforms in America's finance and mortgage markets, the analysts say.

Thanks to such high rates of home ownership, Americans live better than their counterparts-even those in other wealthy countries. Homes are bigger: The United States averages 718 square feet of housing space per person; only one other country in the world averages as much as 500. Low-income Americans average 440 square feet per person, compared to 343 for a family of average income in London, 256 in Amsterdam and 170 in Tokyo.

And homeownership helps families build net worth. The average American homeowner was worth $132,000 in 1998, compared to $4,200 for the average renter.

"Homeowners have a powerful interest in how their surroundings affect their property and quality of life," Utt and Cox say. "This interest in the external environment contributes to a sense of community and civic spirit that is considerably greater than critics of the owner-occupied suburbs are willing to admit."

Smart-growth advocates usually try to restrict suburban growth-or guide it into more compact forms-by establishing growth boundaries or zoning requirements that rigidly define where growth can occur and by mandating smaller lot sizes. Or they require minimum lot sizes (for instance, allowing only one home to be built on an acre, rather than four) or charge "impact fees" to developers. They also mandate amenities-such as requiring grass be sodded rather than seeded-that drive up costs directly.

"Unfortunately, these methods have proven all too effective at not only limiting growth but at creating some undesirable side effects," say Cox and Utt.

Many residents in Portland, Ore. would agree. In 1974, the state legislature voted to require all communities of a certain size and above to establish growth limits. In 1979, Portland drew up a plan that called for rigid boundaries. But by the early 1990s, most other available land within the boundaries had been developed, and land prices soared.

As a result, so did home prices. More and more Portland residents were priced out of the market as the rest of the country reached record levels of home ownership. Portland's "housing opportunity index"-the percentage of houses sold in a community in a year that are affordable to those at the median income-tumbled from 69 percent to 27 percent in eight years.

Smart-growth proponents say growing population and faster income growth fueled the rise in prices, but national comparisons prove otherwise, Utt and Cox say. And given that other Oregon cities suffered similar (in some cases, worse) setbacks in housing opportunity, the blame belongs squarely on its smart-growth policies.

"The last thing we need to do, at a time when our economy is sputtering, is to imitate Portland's smart-growth strategies," the analysts say. Communities should instead consider "land trusts" and innovative zoning techniques that preserve open space without spiking property values.

"A little common sense can go a long way toward keeping the dream of home ownership alive," they conclude.

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