Saturday, 25 January 2014

Housing affordability and the consequences of containment


Let's begin with a graph:

And then let's ask a question - why is this the case? Why are those places so expensive? Perhaps: urban containment policies have been implemented in some metropolitan areas, house prices have escalated well above the increase in household incomes. This is exactly the effect that economics predicts to occur where the supply of a good or service is rationed, all things being equal. 

The result is something of a trap. Containment policies become popular (and the bigger that multiple gets the more popular they become) leading to a preference for 'densification' strategies. However, as we have seen with proposals for downtown Hollywood, such policies are predicated on a growth in high net worth, childless young professionals when the population growth is in lower income families.

The problem - according to Alain Bertaud of the Stern School of Business at New York University and former principal planner of the World Bank - is resolvable if planners reprioritise:

...if planners abandoned abstracts and unmeasurable objectives like smart growth, liveability and sustainability to focus on what really matters –  mobility and affordability – we could see a rapidly improving situation in many cities.  I am not implying that planners should not be concerned with urban environmental issues.  To the contrary, those issues are extremely important, but they should be considered a constraint to be solved not an end in itself.

Even in a policy framework of contained cities, the mission creep of modern planning contributes to unaffordability and this could be altered with a more focused policy.


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