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In traveling the nation the last two years, I’ve found almost every metropolitan area has embarked upon a growth management program that inevitably is labeled "smart growth." It appears that "smart growth" is a substitution for the term "managed growth," which has fallen into disfavor because it reeks of socialism and the Sierra Club.
The message behind smart growth is if you put a steel ring around a defined geographical area, all growth will occur there, leading to immense efficiencies in land conservation, highway construction, utility-line development and mass transit.
Further, people will be encouraged to move into higher-density homes and condominiums and forego the traditional subdivision lot of sainted memory.
Mathematically, smart growth is a definite winner, except for one thing: "The people" want no part of it, and if the trade-off is a one-hour drive to work in exchange for the suburban American dream, so be it.
Three metropolitan areas on the West Coast have launched the "steel ring" concept: San Diego, Portland and Seattle. Their entry into the managed growth arena allows academics like me to follow the trail of progress in their brave new experiment.
Portland is a poignant example. The ring placed around the current metropolitan area boundaries had no control over the territories outside it. As a result, some 60,000 persons now commute daily from Clark County, the first county outside of the ring, to Portland.
In San Diego County, we find that more than 2,000 of our families every year buy homes in Temecula and Murrieta, choosing the commute to San Diego for their livelihood.
If you have been to Seattle, the story there is even more terrifying. Seattle has only one north-south freeway and it stretches from Everett in the north to Tacoma 50 miles south. Most of the jobs are centrally located and with growth management, most new-home development is at the far north and south ends of the continuum. An aerial photograph of new development looks somewhat like a barbell with a skinny bar and the burgeoning bells at the ends.
What was purported to be smart growth has turned into dumb growth. Now whether the dumbness lies with those who opt to drive an hour to work or those who devised the growth management plan is a moot point. The reality is that 80 percent of Americans continue to crave a single-family home on a human-sized lot.
The problem with smart growth is that government bureaucrats who set the steel ring boundaries are not sufficiently skilled in the economics of supply and demand to determine how many acres really are needed to satisfy demand. In Seattle, for instance, the ring was based on a growth rate of 1.8 percent when the actual growth rate in the past decade has been 3 percent. Consequently, the metro area exhausted its supply of lots well ahead of demand, causing lot prices to accelerate dramatically.
A similar situation occurred in Portland, where lot prices have at least doubled and in some suburbs tripled in price in the past five years, causing Portland to rapidly rise from a relatively affordable market to one of the least affordable in the nation.
San Diego provides perhaps the granddaddy example of managed growth. The first effort locally was in 1974, when Mayor Pete Wilson (before he became a capitalistic conservative) contracted with an academic advisor from the East Coast to devise a growth management plan. Then, a decade later, San Diego, Carlsbad, Escondido and other local cities enacted managed growth controls.
Once again those plans proved that the housing market operates on a very fine balance between supply and demand. Any effort to upset the natural balance is destined to cause major price upheavals.
When growth management started in San Diego in the early '70s, the average price of a home both nationally and in San Diego was $26,000. Today, the U.S. average is $130,000 and San Diego $207,000. That $77,000 spread is the direct result of managed growth.
Home prices are related to affordability. A Seattle survey noted that 29 out of 30 persons who turn down job offers do so because of the high price of housing. The average price of a home in Seattle is the same as in San Diego.
Every year the Ernst & Young accounting group publishes a housing affordability study. Of the 75 metropolitan areas surveyed, it is interesting to note that San Diego ranks 10th least affordable; Portland 31st and Seattle 16th. Meanwhile, the National Association of Homebuilders ranks Portland as the nation's fourth least affordable major metro area. Equally interesting is the major change over the past few years as Portland and Seattle were very affordable as recently as a decade ago.
Perhaps most upsetting is the fact that median family incomes in San Diego County are modest ($48,500), compared to many other West Coast markets like Seattle ($55,100), San Francisco ($64,400) and San Jose ($70,200).
To make this long story short, smart growth isn’t the least bit smart. It’s a noble but ill-conceived effort of planners and well-meaning meddlers to play Greenspan. It just doesn’t work. Econ 101 triumphs again.
Alan Nevin is chief economist with Market Profiles, a consultancy providing real estate and demographic statistics, feasibility studies and litigation support to the California land use industry and legal professions.
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