Commentary

Reason.org
May 19, 2004

Smart Growth Snake Oil
By Owen Courrèges

In the past, you could easily spot a snake oil salesman, because they always promised a panacea.

“Step right up, and take a gander at this little potion,” the salesman would bark. “It cures arthritis, appendicitis, arrhythmia, and acne. It erases blotches and splotches; it even cures the common cold. There is nothing this miracle elixir will not cure!”

If you listen closely to advocates of “smart growth,” you quickly hear similarities between their pitches and those of these swindlers of old.

Case in point: When Gregory Chew of the Sacramento Area Council of Governments recently gave a talk in Davis, California, he emphasized the relevant aspects of smart growth – higher density, more public transit, more parks, more ‘pedestrian-friendly’ neighborhoods, etc, – but also added one more advantage tying it all together: housing affordability.

Chew observed that, “in a perfect economy, 50 percent of your community should be able to afford a median-priced home.” He then asked “Can your adult children afford to move back to your community?”

It’s not exactly difficult to accept this line, even for a discerning individual. “Wow, smart growth can fix that? It actually makes housing more affordable? Well, sign me up!”

For smaller communities, this spiel is especially appealing. It offers the comfort of a more controlled environment, replete with sidewalks and mom-and-pop shops – like something out of a Norman Rockwell painting. It’s difficult not to be drawn in, especially when the salesman claims that it will actually save you money.

That’s the pitch, but here’s the reality: The tighter land use controls that smart growth advocates push would actually increase housing costs for all Californians. This is due to the fact that they ignore market forces by necessity.

If planners mandate construction of high-density housing projects, they will be creating an artificial supply. After all, if the market was demanding that type of housing, no government intervention would be necessary; developers would be scrambling to meet the demand, and would only desire that bureaucrats get out of the way.

Now supply can affect price, but it doesn’t fundamentally change demand. The simple truth is that most California families aren’t demanding apartments, condos, and lofts, with the result being that prices are higher for what they do want, namely single-family homes. Adding insult to injury, the prices of these are made even higher by the efforts of smart growth advocates curb any development that utilizes more land.

As a result, average housing costs increase, and there’s a glut of housing the likes of which nobody asked for to begin with. That’s smart growth in a nutshell.

Nor is any of this idle speculation. The Reason Foundation has documented this phenomenon as it has played out in numerous cities and states. For instance, in Washington, Oregon, and Florida, states widely considered to be on the forefront of smart growth, Reason found that housing affordability dropped significantly during the 1990’s. It had actually risen nationwide.

Likewise, in a study of Portland, Oregon’s smart growth designs, the Cato Institute found that despite the installation of light rail and a significant housing shortage, developers simply weren’t building in areas zoned for high-density development.

And in 1989, Cato noted that over two-thirds of Portland’s households could afford a median-priced home. By 2001, however, fewer than one in three households could afford the median price. That makes Chew’s claim appear more than a little dubious. Smart growth doesn’t increase housing affordability. Quite the opposite – one can expect prices to skyrocket following the implementation of traditional smart growth strategies.

So much for Norman Rockwell.

Still, this isn’t to say that high-density housing is never viable. Housing costs already increase naturally because real estate is a scarce resource. The market already can and does dictate what areas are better suited for high-density living.

However, this is not something that can simply be forced. Fighting market forces is like trying to empty the ocean with a bucket; its far too big an entity to stand against, and so eventual failure is assured. In denying this, smart growth stands against reality. It stands to reason that its most vocal supporters must lie and obfuscate in order to gain any ground at all.

But this all comes natural to these salesmen, because what they’re selling… is snake oil.

Owen Courrèges is a research fellow in urban and land use policy at the Reason Foundation