Smart Growth to Blame For the Housing Crash? Not By a Long Shot.

This guest post was written by Abigail Gardner of Smart Growth America.

The Wall Street Journal yesterday posed the question of whether smart growth policies and land use restrictions were to blame for the housing boom and bust. The hypothesis comes from Wendell Cox, a long-time critic of smart growth, who, in a recent paper, recycled a specious argument that land use regulations caused housing prices to increase unsustainably, creating the real estate bubble and, eventually, the collapse of the housing market. Cox claims to show that differences in how metro areas regulated development explain the recent housing crisis.

Densely built urban neighborhoods, like this one in Baltimore, fared better during the foreclosure crisis than the sprawling exurbs. Photo: ##http://thevolunteacher.wordpress.com/2009/08/24/local-o/##The Volunteacher##

Cox’s argument is full of holes. He examines a few cherry-picked cities while ignoring what happened nationally.

The irrationally exuberant housing market affected real estate prices in most of the country in the decade before 2006, with a pronounced increase after 2003. The only national variable that correlates clearly with this overwhelmingly national trend was the loosening of mortgage lending rules and Wall Street’s invention of new ways to profit from bad loans — not land use restrictions.

In contrast to Cox’s hypothesis, rates of foreclosure correlate most strongly with the year a home was built. All other things being equal, newer neighborhoods – built during the boom and financed with non-traditional loans – have more bank-owned homes now. In other words, areas that pulled out all the stops on new development suffered more than those that took a more measured approach. Rather than impacting neighborhoods that built according to smart growth strategies, the foreclosure crisis is now a much bigger problem for peripheral suburbs that sacrificed quality and access to jobs in exchange for more taxable properties.

As Chris Leinberger, fellow at Brookings and president of Smart Growth America’s LOCUS project, told the WSJ, the price decline on the “drivable fringe” was generally twice as bad during the crash, “and it was that part of the market that is the least regulated.” Walkable, compact neighborhoods essentially “held their value, thank you very much,” he said.

Communities that developed more along the lines of sprawl than smart growth are struggling to recover from the housing crisis. Recent census data show suburban growth is slowing for the first time in decades, and it’s not just the housing crisis that’s to blame. Neighborhoods without transportation choices and located far from employment centers are less attractive to home buyers and are suffering more in the downturn. Desperate developers in the far-flung exurbs are having to include free cars with home purchases in empty neighborhoods, but it’s getting harder to persuade potential homeowners to commute 60 miles each way to work. Consumers increasingly understand that buying a home with a long, car-dependent commute — especially when gas prices are hitting record highs — can lock a household into an ongoing expense that can blow up their budget.

Smart growth neighborhoods, by contrast, offer insurance against foreclosure and can reduce the combined cost of housing and transportation. Due to consistent demand for walkable neighborhoods with a mix of uses and good access to jobs and public transportation, homes in these neighborhoods are much easier to sell and
tend to hold their value
. Places that invest in smart growth principles not only survived the housing crisis better, they protect their residents against spiking fuel prices as well. That is good for the homeowners in these communities as well as their local economies, and that’s news we think the Wall Street Journal should be pretty excited about.

ALSO ON STREETSBLOG

Anti-Smart Growth Tirade Sounds a Lot Like Urbanism

|
What do proponents of healthy cities — or smart growth, if you prefer — really want? Is it top-down government bureaucracy interfering with everyone’s lives, or is it more choices? Like the choice not to live in tract suburbia and drive to work alone each day. In a pretty paranoid screed at Investors Business Daily, […]

The Sprawl Machine Started Winding Down 20 Years Ago

|
When exactly was the point when American sprawl stopped accelerating and started to slow down? It’s tempting to point to dramatic recent events like the housing crisis and the great recession. But Payton Chung at Network blog West North shares the above graph, showing that the growth rate of developed land started to wind down […]

A Post-Housing-Bust Prescription for Federal Real Estate Programs

|
The federal government subsidizes housing and real estate to the tune of about $450 billion a year. Roughly 50 uncoordinated programs influence the housing market, often in unintended and insidious ways. The Federal Housing Administration’s Single-Family Loan Program, for instance, decreases the relative attractiveness of building multi-family housing — which is more energy efficient and […]

New Urbanists: No Economic Recovery Without Smart Growth

|
What happened to the United States over the past several years is most commonly described as a recession. By the technical definition of the word we’re two years into a recovery. But it sure doesn’t seem that way. Meanwhile, a growing chorus of intellectual leaders says the country is experiencing something different than a normal […]

Is the Realtors’ Survey Really a Ringing Endorsement of Smart Growth?

|
Urbanists are celebrating the results of the National Association of Realtors’ 2011 Community Preference Survey, which, according to the NAR, shows a clear preference for mixed uses, shorter commutes, and transportation options. The survey shows that people are asking for more walkable amenities and shorter commutes: a good sign. But the survey is also rife with […]