The 1000 Friends of Washington published a critique of Reason Public Policy Institute's recent study Smart Growth and Housing Affordability: Evidence from Statewide Planning Laws. The RPPI study analyzed housing price trends in Oregon, Washington, and Florida, and found that about one quarter of the price increase in Washington and Florida could be attributed to complying with each state's growth-management laws.
1000 Friends of Washington claims the study has three "flaws" that undercut its conclusions, but these claims do not hold up under closer scrutiny and are based more on "spin" than substantive analysis.
Criticism #1: Counties fully planning under Washington State's Growth Management Act (GMA) and non-GMA counties are too different to conclude that changes in housing costs are due to the GMA.
RPPI Response. The 1000 Friends of Washington's criticism is invalid as it applies to both the methodology and interpretation of the results in the study, and further, demonstrates a misunderstanding of basic statistics. The RPPI study considered the effects of the GMA and the widely different characteristics of the counties in Washington State before reaching its conclusions. Indeed, the fact that only some of Washington State's counties plan under the GMA is actually a strength since it creates a unique opportunity to examine the effects of the state law on housing prices by using a control group (non-GMA counties).
The RPPI study controlled for the most important factors that could influence housing prices among counties, using multiple regression statistical analysis to separate out the effects of several key non-planning related factors, including population change, household income, household size, density, and location. In essence, statistically, the effect of the GMA on housing prices was estimated while holding the influence of population growth, income, household size, density, and location constant across counties. Several alternative variables were also considered, including whether a county was rural or metropolitan, but these factors were not statistically significant. The only geographically significant variable was whether a county was located in the Seattle-Tacoma metropolitan area, indicating that this housing market functioned in a fundamentally different way than the rest of Washington State. These results as well as the reasoning behind the choice of variables were discussed extensively in Appendix A of the full study, as well as pages 20 through 23.
Criticism #2: The RPPI study did not account for significant increases in home size and home quality in many Washington counties during the 1990s.
RPPI Response: The RPPI study extensively discussed the potential influences of the size and quality of housing (see especially pages 8-9, 35). Unfortunately, data on housing size and quality are not collected on a statewide basis, and therefore could not be included in the analysis. However, these characteristics of housing would likely be captured in the income and location variables included in the analysis. In fact, income is one of the major factors that drives the demand for larger bedrooms, high-end kitchens, vaulted ceilings and other housing amenities.
Importantly, the RPPI study does not claim that all the housing-price increase is attributed to the GMA, only about a quarter of the increase. Moreover, the key GMA variable measured planning compliance directlyï¿½how long each county had been planning under the stateï¿½s growth management law. Our conclusions are based on the strength of this variable.
Criticism #3: The RPPI study does not consider the public costs of development, noting that one analysis in Oregon estimated that each single-family home receives a $12,000 subsidy from taxpayers even after impact fees and tax revenues were considered.
RPPI Response: This criticism is irrelevant and deflects from the RPPI's study's main focus: the impact of statewide planning laws on housing prices and affordability. The RPPI study was not intended to analyze the costs and benefits of alternative development patterns.
Even if the claim by 1000 Friends of Washington were accurate, however, the existence of a subsidy does not in and of itself warrant restricting housing choice and land use. The 1000 Friends argument essentially assumes that any land-use pattern that is associated with lower spending on core public services (e.g., roads, water, sewer, or schools) is efficient. In fact, the opposite may be true. As long as Washington families are willing to pay the full cost of public services, growth management policies that restrict housing choices (including consumer preferences for low-densities and large lots) will reduce their quality of life while placing the state at a competitive disadvantage economically. Policymakers may be able to preserve housing choice and innovation more effectively by pricing core services more efficiently, not using urban planning to narrow housing choices and types.
In short, the 1000 Friends of Washington critique of RPPI's analysis of housing price increases in Washington State is weak and fails to significantly challenge the study's methods, data interpretation, or conclusions. On the contrary, the study results raise a red flag, providing evidence that the stateï¿½s growth management laws may be working against one of its key goals: improving housing affordability.
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."
Leonard Gilroy is a senior fellow in urban and land use policy at the Reason Foundation