City Journal Autumn 2014

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Autumn 2014
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Wendell Cox
Sunny Again « Back to Story

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Itís no surprise that markets with more restrictive land-use policies have much greater housing-price volatility

Like Las Vegas?
I know why this bothers me now. It's just another case of right-leaning folks celebrating the supposed wisdom of our dullest minded states. Everyone who knows Florida appears to know that its fortunes ride on bringing in fresh retirees. If it loses those, all Florida has to employ folks is sandwich shops on the beach and uncle Walt.

Why can't Mr. Cox acknowledge such a universally known truth? Oh, then he could not claim to have an insight.

Florida is a real estate venture with tourist shacks. It is no model for us on how to build a society where our children will prosper.

http://www.heraldtribune.com/article/20130613/article/130619862?p=1&tc=pg
Florida seems a poor model for drawing conclusions about how public policy affects job and population growth. Unlike nearly every other rapidly growing State, Florida grows primarily because it draws seniors - not because of a dynamic economy. Based on the two reports linked below, it appears that a huge chunk (about one half or so) of Florida's growth is retiring seniors moving to Florida from other States. They're drawn by sun, lower cost of living, and safety. As they need no further income to live (or many of them don't) , they're not directly concerned about availability of good jobs in Florida. Further, the cash these seniors earned in other States is what grows Florida's economy; not predominantly creative ideas hatched in the sunshine State. This is noted by the Florida State paper below. Florida's economy is dependent on construction of senior housing. This is why Florida's economy is rebounding with the return of immigrants. Mr. Cox seems aware of this, but doesn't note its criticality to Florida's economic growth.

http://www.bebr.ufl.edu/files/FL%20Focus6_1_2010.pdf

http://assets.aarp.org/rgcenter/il/migration_2.pdf
I'm not sure about the author's point here? Is it that "smart growth" causes housing bubbles? If so, why not explain why? Is iit that Florida is a model economy? If so, why is it 37th in Median US household income vs other States? Is it that Texas' lack of bubble argues against "smart growth"? If so, why not also discuss Texas' retention of tougher lending standards when other localities eased theirs? (Most folks point to this retention as saving Texas from the bubble.). Also, why not point out that California and Florida have much less undeveloped land than Texas? In short, why not provide some useful information?
While it is true that Smart Growth policies can lead to higher costs and demand greatly exceeding supply, I submit that the key to this is whether compensating policies are adopted that foster urban infill development and, in general, greater development density. Advocates of Smart Growth never intended it to constrict supply - it was intended to channel development into increased urbanization and transit oriented development rather than suburban and exurban sprawl, with all the automobile reliance and congestion that attends it. But for Smart Growth to have the intended effects, it has to be accompanied by smart land use policies, and not just result in a freezing of existing land use, which can only lead to dramatic price increases, whether through speculation or naturally emerging imbalances of supply and demand.
Repeal of the state-level "Smart Growth Law" in 2011 had no effect on the county-level laws that had implemented the state law. In practice, nothing changed automatically at the counties.

Florida has also led the region in decline of workforce participation as people retired in droves. Florida also led in foreclosures, including the joke foreclosures where the scamsters filed papers on houses that hadn't had mortgages in more than a decade. (Oops....)

Smart Growth was a typical Reagan Era idea, where theory of a "Free Market" got hammered with 1%er twists to law that supported folks who already owned the most of the property. That 93% rise to house prices was quite the windfall -- but hardly an accident of random market forces.

Falling workforce participation is the big fallout from the Bush Recession. The country loses big.
This is not up to Cox's usual high standards of scholarship. His thesis would fall apart if he had included an analysis of Arizona, which has few land controls but experienced a massive housing bubble.
As a resident of the Central Valley of California, I can assure you that there are plenty of stupid houses built in stupid places by greedy fools who thought "smart growth" was a bad idea. The authors of can purchase one of these boarded up disasters of misguided housing policy for a about a third of what they were sold for to speculators, back in 2007. You can still purchase them at foreclosure auctions on courthouse steps, although the numbers have declined. Meanwhile, properties in well planned communities with good work opportunities available, (Santa Cruz, for instance) are experiencing excellent appreciation.