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Business Observer Friday, Feb. 13, 2004 16 years ago

Unaffordable Housing

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Why there's a shortage of affordable housing and how to end it.

Unaffordable Housing

Why there's a shortage of affordable housing and how to end it.

By Matt Walsh

Editor

Much of the wailing among local politicians these days seems to be all about affordable housing.

Nary a day goes by when you don't read of some do-gooder group or elected county commissioner or city commissioner intoning the call for more affordable housing and how we have a social obligation and responsibility to provide more affordable housing (whatever that is).

For them, of course, that means adopting more laws to force the marketplace to tilt to their altruistic ideals. But they are wrong.

They are wrong to force anyone to fulfill their altruistic wishes.

With apologies to Pogo, the comic strip character, "We have seen the enemy, and we are they."

We have no one to blame but ourselves. Over the past 40 years in Sarasota and Manatee counties - anywhere, for that matter - powerful trends that conflict with the sanctity and meaning of private property have destroyed, year by year, the supply of affordable housing and, in the process, whittled away everyone's personal freedoms. These trends are gaining momentum, too, because of rising ignorance, ignorance of the consequences, and because of rising socialism, the widespread acceptance here and throughout the United States that it is OK to take people's wealth and redistribute it through force of law to others according to the wishes of politicians and the powerful push-peddling special interests.

The evidence of these trends, just in Sarasota and Manatee, is abundant. Here are nine examples:

Example 1: Everybody loves to hate Wal-Mart these days. And about three weeks ago there were a lot of residents of the University Park Country Club who cheered wildly when the Manatee County Commission rejected Wal-Mart's application to build a super center at University Parkway and Honore Avenue.

But if you examine the record, county laws and the commissioners' rationales for unanimously rejecting Wal-Mart, you will find that the county planning department and commissioners squirmed mightily to find ways to reject what technically met and would have met legal requirements. The commissioners acquiesced to the small outspoken mob, to the detriment of the many (those who would benefit from Wal-Mart) and to the detriment of an even smaller voice, the property owner. Sure, the small voice in this case was the most powerful corporation in the nation. But if county commissioners accept the court of public opinion over the rights of the nation's biggest corporation, imagine what they can and would do to you, the little guy.

Example 2: The Sarasota County Commission, on the recommendation of the Sarasota County School Board, adopted last week new school impact fees on residential construction to help "pay" for growth. The Manatee County School Board also is urging its county commissions to do the same. These fees are supposed to extort dollars from people moving into this area from elsewhere to help pay for the costs the newcomers' children add to the school systems. But in Manatee County's Lakewood Ranch development, company officials there will tell you nearly 50% of the buyers of new homes already live in this region. On top of that, many of the buyers are retirees who do not have children who will impact the schools.

Example 3: Sarasota entrepreneur Larry Lieberman and his partners own 500 acres of bayfront property in west Manatee, between El Conquistador and Tidy Island. Lieberman and his partners have been trying for two years to obtain permits to develop this property.

Lieberman's plans include maintaining all of the mangroves and natural estuaries along his coastal property. In fact, his aim is to construct a development that is as sensitive to nature as any development of its kind in this area.

Away from the water, Lieberman has proposed constructing four or five 14-story condominium buildings. But the county has told him that's too high. In fact, it is now policy in Manatee County to place strict limits on the height of buildings.

With fewer units per acre, Lieberman says, the cost of his units will be higher than he originally planned. With strict height limitations, if Lieberman and others cannot build up, the alternative is to sprawl out.

Example 4: In March, Manatee County will ask voters to approve a one-half-cent sales tax, the proceeds of which will be used by the county to buy land and forever prevent it from being developed. This referendum is being sold to voters as a measure to preserve Manatee's quality of life and protect the environment for future generations. No one is talking about how it will further restrict the supply of developable land. No one is talking about how that adversely affects people's quality of life.

Example 5: In Parrish, county planning bureaucrats and the Parrish Civic Association are crafting new zoning laws, called an overlay district, that will set up new restrictions on commercial design, roadside buffers, greenways and trails and housing.

They want these new restrictions to encompass 128 square miles of the county - 17% of Manatee County land. They want these restrictions because they say they are being overrun with urban development and want to preserve rural Parrish. They want these restrictions, let's be honest, to curb, if not stop, growth.

Example 6: In Sarasota County last year, groups of residents in the master planned community of Palmer Ranch pressured the county commission to block Palmer Ranch Development Co. from constructing two small shopping centers on the Ranch - even though the county approved these centers 20 years ago in Palmer Ranch's original development order.

Palmer Ranch ultimately prevailed. The county attorney informed commissioners, despite their desires to pacify vociferous residents, rejecting the centers would violate the law. Palmer Ranch Development has since decided to postpone developing the shopping centers.

While this may sound like a victory for residents and quality of life, it also means that in the absence of commercial development taxation will rise on residents higher than it otherwise would have.

Example 7: Georgia developer Stan Thomas bought the 26-square-mile Taylor Ranch in southern Sarasota County in 2001 and 2002 for $78 million. He wants to create a tax improvement district - similar to the one that governs Walt Disney World's 27,000 acres and Lakewood Ranch's development. This tax district would be used to fund all of the infrastructure required to develop Thomas' property.

Sarasota County is opposed to this tax district. It is afraid of the effects of Thomas developing over the next decade or more as many as 15,000 homes on his property. This property, by the way, according to Thomas' attorney, already was designated in Sarasota's comprehensive plan two decades ago for 30,000 residential units.

County officials knew this development was coming, but they now want to block it until they, not the property owner, can control how it is developed.

Example 8: Sarasota County is inching ever closer to adopting its "2050 plan," an amendment to the county's comprehensive plan that is intended to determine how east Sarasota County will be developed over the next 46 years. Stripped to its bones, the real aim of this amendment is to prevent what no-growthers call "urban sprawl."

The details of this amendment try to address affordable housing. In one of the original drafts, here's what the county wanted to codify as law: If, say, you are the developer of a village in the 2050 plan, you would be required to set aside 10% of the homes as "affordable housing."

Deed restrictions would prohibit the sale of these units at market price for 20 years. They could be sold only at the original price, plus adjustments for the Consumer Price Index and the cost of improvements. If units are rented, rental rates could increase only at the CPI.

What's more, all of these affordable housing units must be dispersed throughout a village - you could not segregate expensive homes from the less expensive homes.

Question: Who in his right mind would invest in anything that prohibited him from making a profit for 20 years?

Example 9: The Sarasota City Commission adopted two weeks ago a new ordinance that will force developers of large downtown condominiums to contribute cash to an affordable housing trust fund if they want to exceed the city's limits of 50 units per acre. Developers would be taxed $2,500 for every unit built in excess of 50 units per acre. Commissioners have yet to decide how this money would be administered.

And this just may be the start. One city commissioner says she wants the city to offer down payment assistance to low-income families. Or she wants to give tax breaks and subsidies - i.e. take wealth from one and give it to another by force of law - to developers who build "affordable housing."

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Given these nine examples, is it any wonder "affordable housing" is in short supply?

And the above didn't even touch on the mounds of building and environmental regulations that are imposed - all with good intentions but which require actions that drive up the price of housing.

Clearly, all of the above examples illustrate the overpowering trends of anti-growth and the assault on property rights and freedom - and the resulting consequences: the increasingly out-of-reach cost of housing.

And yet our elected officials, the social engineers and the masses seem oblivious to what they are doing. The very people who decry the lack of affordable housing are the same people, typically, who complain about "overdevelopment" and who lead the enactment of public policies that limit supply.

They refuse to accept the 50-year trend that people will continue to move to Florida - no matter what. They insist on adopting policies that inhibit economic growth and the construction of an ample supply of streets, housing and stores that logically come with population growth.

Are they, in fact, protecting our quality of life with these policies? To the contrary, the case is easily made that these policies are adversely affecting quality of life.

Take the Wal-Mart Super Center on University Parkway. Wal-Mart clearly has demonstrated that Americans overwhelmingly approve of its concept of offering goods at low prices. Otherwise it would not be the world's largest retailer and grocer. And yet, government bodies and neighbors who buy property next to areas zoned for commercial use are increasingly trying to deny all of those shoppers access to goods that improve their quality of life.

When the Sarasota City Commission adopts policies to limit the number of housing units downtown, it adversely affects the quality of life of people who desire to live downtown but cannot afford it.

Likewise, when the Sarasota County Commission forces a developer to construct a certain percentage of "affordable housing" units in his development, the commission is denying that developer's freedom to choose how best to use and profit from his own property. This adversely affects his quality of life. And on and on.

If you are an advocate of free enterprise, this war against growth and property rights is increasingly becoming a lost cause. Here's why:

To begin with, those who want to move into a market and buy affordable housing are virtually powerless. They have no voice. They are not here yet and cannot vote.

Conversely, the anti-growth constituents inherently have enormous power. Think about it, when an individual is able to afford, say, a downtown condominium, he immediately acquires an interest in restricting further development. Once he is "in," growth restrictions increase the value of his property greater than what it would have been without restrictions.

On top of this, politicians are not stupid. They know that government intervention always increases their power. Recommending interventionist "solutions" helps politicians portray themselves as statesmen willing to tackle the tough issues and "get something done."

But as economist Milton Friedman has so aptly said many times: Every government intervention begets more intervention to correct the unintended consequences of the original intervention.

Consider Longboat Key. If you want to see the future of this area, all you have to do is look at Longboat Key.

More than 20 years ago, Longboat residents enacted density restrictions and strict commercial zoning codes to stop "overdevelopment" (whatever that is).

These ordinances worked: They made the value of Longboat Key real estate skyrocket and helped residents create an exclusive island paradise. That's the good part.

But one of the unintended consequences of this is that much of the limited commercial development on Longboat is now shutting down or deteriorating. The Holiday Inn & Suites is being razed to make way for luxury condominiums. The value of the land had become so great that it was worth more as a residential project than as a commercial venture.

At the same time, many commercial buildings that still exist are showing their age because owners are reluctant to reinvest in them. To upgrade their buildings, owners would have to comply with a long list of restrictive ordinances that, in most cases, would reduce an owner's usable square footage and cost him money he otherwise would not have to pay to comply with all of the town codes.

Longboat's commercial property owners have figured that these costs would be greater than what they would be able to recover in a reasonable amount of time. They would not be able to afford to make their mortgage payments, cover the cost of reinvestment and make an attractive profit.

Realizing this, many commercial property owners now want the right to convert their properties to residential use. But the town won't let them.

Today, the town fathers are afraid Longboat will lose all of its commercial enterprises. The Town Commission wants to continue to force commercial property owners to remain commercial even though it makes more economic sense to convert to residential.

Meantime, the cost of housing on Longboat Key continues to zoom upward - to the point that the value of the properties are making property owners' taxes so high that people who thought they were wealthy are now realizing they are not as wealthy as thought. Even to them Longboat Key is becoming unaffordable.

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What is the answer to all of this?

Start with the inevitable and unavoidable: If you choose to live in Florida, where the weather is desirable and the physical amenities (i.e. the water and beaches) are attractive, you must resign yourself to the irrefutable, undeniable fact that Florida will continue to attract more and more people.

That means traffic is going to increase. More stores are going to be built. More houses and apartments will be built. More streets and schools will be needed. And if you built or bought a home near a main street, accept this: It's going to become more congested and noisier.

Second, try to accept that population growth is good for our quality of life.

This sounds counterintuitive, but let us help you believe that: In 1681, Sir William Petty, a colleague of Sir Isaac Newton, wrote a famous paper called "The Growth, Increase and Multiplication of Mankind." He explained how greater density of population resulted in more and better choices and products for everyone. Said Petty:

"In the making of a watch, if one man shall make the wheels, another the spring, another shall engrave the dial plate, then the watch will be better and cheaper than if the same work were put on any one man."

Or how about this conclusion reached by Adam Smith, the father of capitalism: "The most decisive of the prosperity of any country is the increase of the number of inhabitants."

In recent years, in interviews with longtime Sarasota and Bradenton residents, we've asked them to compare the quality of life today vs. that of, say, 25, 30, 40 years ago. To a person, each one has said the quality of life is better today. Why? Here's their common answer: More choices.

Third: The next step that should be empbraced is quit electing social engineers and redistributionists. Quit electing people who believe in government intervention.

Stop government intervention.

Government intervention begets more intervention. It also takes away your freedom. Here is another rule of Milton Friedman and all free-market economists: What you give to one, you take away from another.

Finally, if we are serious about making housing more affordable, the answer lies in simple economics: The one sure way to reduce the price or cost of any good or service is to increase its supply.

Tear down height limits, eliminate density restrictions and stop dictating architectural design. All of these policies restrict supply.

What's more, quit the fallacious doomsday preaching that we must limit or stop development to be able to protect the environment and preserve our quality of life. Here is a fact: No other system in the world has proven to be as environmentally conscious, economically efficient and socially compassionate as the unfettered free market system. It is smarter, much smarter, than any politician, any government policy maker or any blue-ribbon committee.

We should let the market work its wonders, and then we will have affordable housing.

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