Tuesday, June 16, 2009

Houston: The City I Love, Part 2

Property Rights and Economic Prosperity

More than any major city in America, Houston respects the property rights of its citizens. On three separate occasions Houstonians have rejected zoning—the most egregious violation of property rights prevalent in America.

The right to property means the right of use and disposal of material values. Ownership means the right to use one’s property as one judges best, in the pursuit of one’s own values. It means that one may use his property without interference from others, so long as he respects their mutual rights.

Zoning removes this right and subjects land-use to the control of government officials. Zoning requires the property owner to seek permission to use his property.

Land-use regulations have a significant impact on the affordability of housing. As I wrote in the Spring issue of The Objective Standard:

There is a direct correlation between freedom in land-use and economic prosperity. For example, University of Washington professor Theo Eicher found that Seattle and Washington State’s land-use regulations have increased the cost of a $450,000 median home in the city of Seattle by $200,000, even taking into account inflation and demand. That is a 44 percent increase. That $200,000 results in the typical Seattle homeowner paying an additional $1,100 a month in principal, interest, property taxes, and other charges that would not exist were it not for these rights-violating land-use regulations. The steep cost of zoning has made home ownership virtually impossible for a large percentage of Seattle’s residents.

A report issued by the Federal Reserve Bank of Dallas acknowledged that Houston’s low housing prices are largely the result of its relative respect for property rights:

Houston and other metros such as Dallas and Atlanta that have relatively more permissive development policies have lower housing prices than more restrictive places do.

At $155,800, Houston’s median house price is the third lowest among the 12 largest U.S. metropolitan areas and is less than half the average for these cities. Houston’s median price is lower than even the national average, which includes inexpensive rural areas.

By comparison, the median house price in metropolitan San Francisco, where zoning laws and building codes are very strict, is $825,400.

In other words, where land-use controls and other regulations on building are most restrictive, housing is more expensive, and often outrageously so. The consequences of these controls are not limited to home ownership—they impact the cost of doing business, and indeed the cost of living.

The absence of restrictive land-use controls in Houston allows developers to use land for its most efficient purpose. They can respond to the demands of the market, rather than the dictates of politicians and bureaucrats. They are free to act according to their own judgment, rather than pander to the whims of government officials.

Land-use regulations do not occur in a vacuum—they are usually accompanied with other controls on businesses and individuals. The mentality that embraces controls on land-use also embraces controls on other activities. Those who think it proper to dictate how their neighbors use their property do not limit themselves to land-use—virtually all activities are fair game. And with these controls come inefficiencies and additional costs. The end result is a higher cost of doing business, higher housing costs, and less economic activity—that is, job loss.

It is not a mere coincidence that those states with the most severe controls on economic activity are also the ones experiencing the most severe hardships during this recession. Just as freedom leads to economic prosperity, controls lead to economic stagnation and decline.

Those who want Houston to be like other cities—whether it is light rail, or more parks, or more land-use controls—cannot have it both ways. They cannot emulate the stagnant and decaying cities of the Rust Belt by enacting more controls and expect to escape similar consequences. They cannot expect us to embark on massive government projects and avoid the inevitable taxation that must result. They cannot expect us to enact the causes of economic collapse and yet avoid that outcome.

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