Witnessing explosive suburban growth, Arizona will decide the future of its development this fall by voting on Proposition 202, the Citizen’s Growth Management Initiative. Many of the consequences of this debate are well known and hotly debated. One study estimates that as many as 200,000 jobs could disappear during a construction-industry recession as local communities grapple with new mandates. Still, many voters see this as an opportunity to do something, anything, to reign in growth. Indeed, the Sierra Club lauds this measure for ensuring that “all of Arizona” has “a strong voice in how their communities grow.”
On the surface the initiative appears reasonable. Maybe even “good government,” bringing decision making back to the public. Behind the glossy veneer, however, lie consequences that will create new strains on the housing market, harming those least able to afford it.
Under Proposition 202, the ballot box becomes a fundamental feature of Arizona’s growth management efforts. If passed, the law can only be changed by another costly statewide initiative. At the local level, voter approval will be required for every growth-management plan amendment (or rezoning) and development larger than 20 acres. Environmental groups and citizens will have the right to file lawsuits “alleging violation of this act” against any city or community, giving antigrowth groups a particularly effective tool to stop new development.
While some may see these results as precisely what they hope to accomplish, Arizona should consider the impacts ballot-box zoning can have on housing for low and middle income families. Moreover, unintended consequences may only exacerbate land use challenges.
If the initiative is enacted, developers will incur substantial up-front costs to win public approval for new projects. Picking their battles wisely, they will likely focus on building higher-income communities where housing prices can offset the increased planning costs, campaign expenditures to sway voters to approve the project, and the risk of failure at the ballot box. Building in lower-income neighborhoods and communities will simply become too risky and uneconomical.
Affordable housing, even for middle class communities will also take a hit. In today’s real estate market, affordable housing depends on standardizing construction techniques and high volumes, the same projects that will be subjected to voter approval through the Citizens Growth Management Initiative. Since Arizona can—t keep people from moving in, demand for housing will increase as the supply of new housing dwindles. Inevitably, home prices will increase as demand outpaces supply. These impacts are not purely theoretical.
The research on “ballot-box” planning is sparse, but an analysis of housing growth in Ohio cities over a 14-year period revealed some startling impacts. Ohio, like Arizona, is a referendum state with a strong tradition of local control.
Even after taking into account factors such as population, income growth, and infrastructure investment, cities that subject rezoning decisions to the ballot box experience a “growth penalty.” In other words, housing growth is slower in cities that put planning decisions to a public vote compared to those that do not. The penalty even outweighs the impact of income growth and transportation improvements. And the impacts exist regardless of whether a community votes in favor of the rezoning or against it—merely putting the decision to local vote is enough to discourage housing development.
Finally, development will quickly become the province of large mass builders. This has already happened in California where significant costs associated with environmental laws have driven most small builders out of the market. Smaller companies that build just a few hundred units per year will not be able to afford to operate in the inevitably uncertain, risky, and litigious environment of the post-Proposition 202 era.
Environmental interest groups often argue voter approval of new development projects is the best way to manage growth. In reality, “ballot-box planning” shuts down the housing market and restricts the supply of new affordable housing. Fortunately, there are alternatives far less restrictive and far more consumer friendly.
The key is to ensure that all housing decisions are fully informed, so that new housing is neither encouraged nor discouraged through public policy. Full-cost pricing for new infrastructure is one step in the right direction. Reducing barriers to revitalizing urban neighborhoods is another. Flexible zoning laws and streamlined planning approvals can foster diverse living options in both inner city and suburban locations, including higher density and mixed use development. By giving real estate markets flexibility and certainty in the planing approval process, the variety of living options can grow dramatically. None of these options requires a carved -in-stone statewide initiative that will endure well past he election night celebration.
Samuel Staley is director of urban and land use policy at Reason Foundation and co-editor of the book “Smarter Growth: Market-Based Strategies for Land-Use Planning in the 21st Century.”