Tuesday, June 15, 2010

The Petition that Will Kill Jobs

The debate over the RENEW Houston petition drive is heating up. And some rational arguments are beginning to surface. Tory Gattis, for example, writes:
The biggest issue seems to be the open-ended developer impact fees.  These have been a major problem in other cities.  The argument seems reasonable - "make developers pay their fair share" - but that's not how they really work out in practice.  Politicians find it easy to tax new development because that doesn't upset most voters (some of the anti-growthers even promote it).  By raising the cost of new housing (often by many tens of thousands of dollars), it has an insidious secondary effect of raising the market price of all existing housing. 
While Gattis is undecided on the petition, his argument reveals how short-term thinking leads to long-term destruction. Current home owners of course, would generally love to shift their tax burden to others. Impact fees on developers would do this, providing home owners with tax relief today.

As Gattis notes, this drives up the cost of new housing, and ultimately, all housing. Home owners generally love this as well--at least when they go to sell their current home. But the cost of new housing quickly erodes much of their windfall. Worse yet, higher housing costs kill jobs and raises the cost of doing business. This ripples through the economy as individuals have less money to spend on everything else, killing more jobs and increasing the cost of living in general.

By the time these long-term consequences show up, few will make the connection to the impact fees forced on developers years before. And we will hear another chorus of voices demanding that government do something to fix the problems it created.


Mo said...

it seems that politicians are simply pandering to the majority of voters in this case and who seem not to understand the consequences of their actions.

Brian Phillips said...

You are right, but when has that ever stopped them?

Mo said...

yeah pass it now, feel good idea kinda like "soak the rich". then think later or even better don't think and blame those rich pricks

Brian Phillips said...

In this particular case "the rich" are developers. And when the developers pass on their additional costs to consumers, the developers will get blamed.

What is particularly disgusting is that this is very basic economics. The consequences are easy to predict, both in theory and in reference to countless examples.

But, as you say, it feels good today and why should we bother to worry about tomorrow.