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Is Smart Growth Risky?
Alex Steffen, 28 Jul 10

Smart growth: did you know it "created the housing bubble"? That's the shocking inference drawn by a recent post by the normally excellent reporter Jonathan Hiskes over at Grist.

The post cites a recent study, "Residential Land Use Regulation and the US Housing Price Cycle Between 2000 and 2009," but Hiskes' article and its headline (which may not have been written by him) say something the research doesn't appear to bear -- that "smart growth" caused the housing boom and bust:

Did land-use regulation contribute to the housing bubble? The idea is no comfort to Smart Growth fans, but it's the conclusion of new research from a pair of economists... [who] found that any limits on where homes can be built -- be they lakes and mountains or urban growth boundaries such as Portland's -- corresponded to both higher price gains and steeper price drops for residential property.

As I understand it, the study actually used the Wharton Residential Land Use Regulation Index (WRLURI), which measures *all* regulations, so includes things like gated communities and large lot restrictions which are actually anti-smart growth. In fact, the paper doesn't even use the term smart growth.

The study not only specifically doesn't say that smart growth policies have more impact than other regulations, it doesn't even conclude that the bust is necessarily bigger in regulated areas.

"Stringent land use regulation and restrictive geography reduce the supply elasticity in housing markets. In a housing boom with rising demand, the lower elasticity forces house prices to increase by more. In the subsequent bust, however, the drop in the price may or may not be bigger in the more constrained areas." [emphasis added]

In the meantime, the idea that smart growth played a role in the housing bust almost certainly made it on to some anti-smart growth talking points list. The American debate over sprawl is as full of nonsense studies justifying suburban development and deregulation (the sprawl lobby and climate deniers share some commonalities), and smart growth has already been blamed for causing the housing meltdown in far-right circles.

There's nothing wrong with questioning a proposed solution. Often widely-accepted solutions deserve critical attention, but in highly politicized debates like this one, contrarian claims demand extra scrutiny and careful reporting. The implication that smart growth caused the housing bust just doesn't hold up.

(All that said, if you're interested in U.S. environmental issues and you're not regularly reading Jonathan and David Roberts over at Grist, you're missing out.)

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Comments

Alex -- Thanks for the response. I posted this reply over on the original post:

You’re right that Huang and Tang’s research didn’t look at Smart Growth regs apart from any other land-use restrictions -- urban growth boundaries, density caps, minimum lot sizes, gated “communities,” and others. I focused on the implications for Smart Growth because I’m most interested in hearing that model defended (gated communities are on the wane regardless …). But the post doesn’t make any claims about Smart Growth “causing” anything. If Wendell Cox and the sprawl lobby want to blame it for the housing bubble, that’s their business.

As for the headline (I wrote it) … it probably goes too far in tying the research to a topic Grist readers find interesting. Linkbaitgenerator.com suggested “7 ways Smart Growth gives you cancer – and what you can do about it,” but that really goes too far. We have standards here.


Posted by: Jon Hiskes on 28 Jul 10

The paper cited below would (based on the summaries online) seem to argue the other way, that smart growth (which would be more "location efficient" in terms of not needing to drive as much) should make default less likely. Basically, the idea is that transportation costs can actually dwarf mortgage costs and that people who have to drive a long ways to work are therefore under more financial stress and more likely to default.

The paper: Stephanie Yates Rauterkus, Grant Thall, and Eric Hangen (2009). "Location Efficiency and Mortgage Default."

See a summary/policy paper from NRDC at http://www.nrdc.org/energy/files/LocationEfficiency4pgr.pdf


Posted by: Asa Hopkins on 4 Aug 10

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