Wall Street continues to back off as a global credit crunch looms and the U.S. housing market seems poised to go into freefall. Part of the problem is too many people buying too much house - living too large for their income. At my workplace, we sometimes refer to these as 40k millionaires. An entry level 20 something, ink still hasn’t dried on his bachelors degree, and already has a house payment, BMW lease and living expenses adding up to more than his $40k yearly income. If some blindsiding event occurs, be it a pregnancy or loss of job, there is no flexibility in the 40ker’s finances and it all comes crashing down. Thus he begins his adult life with a bankruptcy. Shame on them. Double shame on the lenders.
There is also a flip side to this coin. The people who have little choice but to buy more house than they can afford and to live on a razor sharp budget. These people also run the risk of default and foreclosure. Maybe it’s a family that must live in an urban area to be close to the father’s work. Living somewhere cheaper might not be an option, as commuting can be expensive and jobs can be hard to come by. Anyone who’s lived in a large city knows just how ridiculously expensive it can be when there’s too much demand for housing and not enough supply. But what can these people really do? They’ve got to live somewhere.
The tragedy is that the problem of soaring real estate costs in urban areas is worse than it needs to be, and as you might be able to guess, government interference in the marketplace is at least partly to blame. Matt Woolsey at Forbes reports on the state of the housing market.
Los Angeles is sometimes called the “Sultan of Sprawl.” But you wouldn’t know it by looking at the country’s fastest-growing suburbs. Not a single one falls in the L.A. metropolitan area.
Instead, Angelenos are packing their bags and heading 60 miles east to San Bernardino, where 12 of the country’s 100 fastest-growing suburbs are located(…)
It’s easy to understand why. Home prices in the Riverside-San Bernardino metropolitan area are 30% less expensive than in L.A., and household incomes are comparable.
The move from basin to valley makes enough sense that San Bernardino’s rate of net domestic migration has near quadrupled since 1990, while the Los Angeles metro area posted negative net migration figures over that same period. Last year, it lost 72,000 more residents than it gained.
Some of this may be due to jobs moving out of L.A. because of the escalating state and local taxes required to feed the blob. As the productive citizens and wealth generating businesses continue to abandon ship, no doubt the ones who stay behind will face ever increasing tax burdens to maintain the desired level of welfare benefits. It’s also cheaper to live elsewhere because restrictive development policies jack up the cost of housing.
Texas has the lion’s share of the country’s 100 top-growth suburbs, with 20. (Twelve of these are in the Dallas-Fort Worth metro area.) That’s partly because geographic growth is almost completely unregulated in the Lone Star state. Sprawl has its pros and cons. These areas have some of the most affordable homes in the nation, because there is plenty of supply to meet demand. But transportation expenses are often high.
What a concept. When left alone the free market provides people what they demand at prices they can afford.
But progressives in government see right through this capitalism nonsense. They understand that real estate development is the rape of the natural world. And it is therefore their duty as a citizen of the planet earth to pass laws stopping evil men from building cheap houses for people to raise families in. Like Wile E. Coyote their plans predictably backfire.
Cities that engage in restrictive growth policies find themselves with different trade-offs. In Boston’s inner suburbs, including Chelsea and Cambridge, zoning and growth restrictions designed to prevent sprawl instead force people to look farther outside the city for affordable housing. According to the same Brookings Institution study, metro areas with growth-exclusion plans have the most expensive housing in the country, because there is a limited supply of homes close to the city.
Last year, about 16,000 more people left the Boston metro area than moved in, and the suburbs continued to expand geographically. The result is a thinning of the area. If sprawl is defined as the density of population over a geographic space, that makes Boston more of a sprawl than places such as Phoenix and Las Vegas, which are spreading out faster but with a more concentrated population.
Adding insult to injury, Ryan Balis at the National Center for Public Policy Research explains how these ill-conceived utopian policies end up hurting the poor and minorities the worst.
Environmental groups such as the Sierra Club and NIMBY suburbanites support these policies because they want to protect open space.6 They claim that concentrating people together through restrictive urban growth boundaries encourages mass transit use, reduces automobile dependence, cuts air pollution and preserves the “aesthetic and natural assets of communities.”7
But smart growth development restrictions pose a distinct problem for regions experiencing population growth. The overall shortage of housing can create affordability and quality of life problems for families entering the housing market, particularly those with low and moderate incomes and upwardly mobile minorities.
The problem is largely overlooked but could have far-reaching consequences. According to an econometric report commissioned by The National Center for Public Policy Research, one million households who bought homes between 1992 and 2002 would not have been able to do so had smart growth policies such as those found in Portland, Oregon been extended nationwide. Smart growth proponents consider Portland’s policies a model for other metropolitan areas. Of this displaced group, a disproportionate number - 260,000 - would have been black.