Common Real Estate ¢ents

You always hear about the housing problem; how it's so unaffordable, and how it's the business of the gubmint to help develop housing for low-middle income families.

Welcome to "Shooting-yourself-in-the-foot" 101, or how government can take a valuable and abundant resource, and make it more scarce; thereby driving up the market price when the housing supply can't meet the demand.

For example, and probably the biggest factor is zoning regulations. Crafted in the early 20th century, the concept spread like wildfire, for local governments around the country to join the frenzy of dictating who can build what, where, when & how.

Couched in arguments espousing controlled, organized, and intelligent urban and rural plannings, the statists established an outrageous attack on the sovereignty of property, with incalculable consequences of financial harm and housing shortages done to generations forward.

But for the moment, put aside any arguments against zoning regulations which recognize it for the debasement and gross violation of individual property rights, which it certainly is. Instead, understand that it is also a self-defeating proposal, in that it does not promote a better use of the land, no matter what the authoritarians tell you to the contrary.

First, allow me to quote a point made by a poster named Dave H. on Gothamist regarding the knee-jerk aversion that people have to development:

"This is ironic because NYC has historically been a very dynamic city development-wise. Fashionable districts migrating uptown, abandoning downtown for industrial uses. Abandoned industrial areas downtown being revitalized 100 years later as fashionable districts. The urge of some NYers to try to freeze the city in some imagined halcyon configuration goes against everything NYC actually ever was. Neighborhoods change; the city constantly changes. The West Village used to be the domain of bohemians (latter day hipsters) where adventurous wealthy people came to slum with "artists." The slaughterhouses and tanneries on the East River waterfront eventually evolved into Turtle Bay."

His other comments border on criminal, but at least he was right on the money regarding the anti-development crowd, and why their chief arguments are wrong, on the emotional level (as an aside, can emotional arguments be considered right or wrong in contrast to opposing emotional arguments?)

But now, putting aside the ethical and emotional arguments (thanks BK for the lesson on the 3E's approach of Minimum Wage), we will try a thought experiment on the futility of zoning regulations which among many "benefits" is supposed to stregthen the housing market, so that its affordable and available to all.

The first point is that the government dictates what type of use a land can have, for example- commercial, residential, educational, medical, industrial (light and heavy), agricultural, etc. This is the probably the greatest facet of the problem, because it implements arbitrary limitation on what usage a particular land can sustain. To developers, they see wide tracts of opportunity for affordable housing (the usage being a random example), on the other hand they see the demons of bureaurocacy, numerous townhall meetings, wasted time, wasted effort, and mounds of costly legal paperwork since a government decree declares it insuitable for housing.

At that point, the developers might walk away, and never develop the land for those imagined usages. So who loses? Everyone who lost the availability of using those lands, furthering both the scarcity of housing, and driving up the price for the unmet demand for everyone. This all goes back to Frédéric Bastiat's argument of "That which is seen, and that which is not seen". In this case, most people do not see the price of homes being driven up when usuable lands go undeveloped because of useless government usage laws.

But wait, suppose we eliminated land usage restrictions, and let the ultimate buyers of those properties decide if they think the land is suitable for their homes/business/etc. If the land is truely unsuitable, the developers would know that and find ways make it so that it is attractive to buyers. They can sell them at affordable prices; soundproof them for noisy neighborhoods; plant more greenery, and incorporate private gardens; build the structures so that the sun exposure is maximal; furnish with high-quality fixtures; etc. In short, only lands which are suitable would be developed, and those which have minor or major inconveniences would be mitigated by the developers in numerous ways.

The second most serious problem of zoning regulations is in the dimensional restrictions- those concerning height, length, width, setbacks, floorplates, usable floor areas, common-to-private usage ratios, and many more. With these laws, government tells you how to build your apartment or office building, home, shop, garage, pool, parking lot, etc.

If one is only allowed to build 4 stories, and not 20 or more, he will have fewer spaces for homes, offices and businesses in that structure. He may decide to build fewer, and higher-priced residences in order to gain back his investment (and which was only expensive in the first place because of the unmet demand for developable land which drove the prices sky-high!)

The third most serious problem is building codes, which are not just regulations to make contractors follow a set of expensive construction standards, but they also mandate the use of licensed professionals for installation of electric, gas, plumbing, workings and the materials they must use in the buildings construction.

For example, it is common nationwide for plumbers to use PVC piping materials, but in NYC the plumbers union and its paid shills in government only allow the use of metal pipes, ignoring the benefits and cost-savings that PVC brings to the table.

So the next time, some neighborhood organization moans about the rising prices of housing, tell them to point to the government as the source of their problems, not the benign agency who will help them alleviate the problem.