Introduction

"Smart Growth" has become a widespread slogan for how to cope with more population and development in growing regions all across the country. It is ostensibly supported by such diverse groups as the Sierra Club, the National Association of Homebuilders, the Urban Land Institute, and the Environmental Defense Fund. "Affordable Housing" is another slogan with a lot less universal support, though many Smart Growth advocates claim it is a part of their strategy. However, I believe there is an inherent conflict between these two basic ideas. It arises because the Smart Growth movement contains a hidden axiom that is basically inconsistent with provision of more affordable housing.

This conflict is rarely acknowledged. Fortunately, it does not pose insoluble obstacles to reconciling these two ideas. This article explores the tension between them and how it might be resolved in practice. Because common definitions for the terms "Smart Growth" and "affordable housing" have not been widely agreed upon, it is necessary to begin by trying to define them clearly.

What Is "Smart Growth?"

"Smart Growth" consists of a set of related policies that different groups are advocating as responses to the problems they perceive from suburban sprawl. My approach to this complex issue was set forth in detail in the APA magazine Planning for April, 2001; so I will discuss it here only briefly.

There are three major "Smart Growth" advocacy positions. The slow- or contained-growth view is espoused by environmentalists and other citizens who want to stop or slow the further spreading out of urban settlements. The pro-growth view is espoused by the development industry and other real estate interests who want to be sure that future growth is properly accommodated. The inner-city view is espoused by big-city mayors and community groups in large cities who want inner-city neighborhoods redeveloped. Advocates of these three positions have developed overall strategies that contain various combinations of 14 different policy elements related to future growth. Each policy element could take on any one of several alternative values.

For example, one policy element consists of urban growth boundaries to limit the outward expansion of future growth. Contained growth advocates support such boundaries at either the local or the regional level. Pro-growth advocates usually oppose such boundaries because they limit the amount of land available for future housing and other development. Many inner-city advocates support UGBs because such boundaries may increase demands for inner-city housing. Few Smart Growth advocates support some version of all 14 elements, but someone supports every one that I have identified. All three groups agree on 4, disagree strongly on 3, and disagree in part on 7. So "Smart Growth" does not mean the same thing to everyone.

However, most "Smart Growth" strategies advocate more compact forms of growth, with or without explicit boundaries, more emphasis upon public transit for ground transportation, less absorption of outlying open space, some redevelopment of inner-city areas, and greater varieties of mixed uses and urban design. This article will assume that set of policies is what is meant by "Smart Growth."

What Are "Housing Affordability Problems?"

Most people - even housing experts - do not know what "affordable housing" really means. The housing affordability problem arises because millions of American households cannot afford to buy or rent shelter that meets prevailing middle-class standards of "decent quality" without spending more than 30 percent of their incomes for housing. This situation arises because those households have low incomes, and because the cost of "decent" shelter - especially new units - is too high because of the high building standards we require.

There are two basic ways to "solve" this problem. One is to raise the incomes of low-income households, or provide them with subsidies. The other is to reduce the cost of "decent" units in various ways, which include reducing the minimum quality standards we demand, improving the terms of ownership, and reducing various regulatory barriers that raise housing costs, especially in our suburbs. But housing affordability problems actually have five quite different manifestations.

The first is the simple "gap" between the incomes of the very poor and minimum costs of reasonably adequate shelter. Our economy needs many low-wage workers who do not earn enough to close this "gap," but who need to live somewhere. This aspect is found in all metropolitan areas.

The second manifestation is the absence of affordable housing in new-growth areas, especially affluent suburbs. Yet that is where most new jobs are being created; hence low-wage workers need to live in or near such areas. But those areas tend to adopt building codes that prevent construction of low-cost housing. This causes many poor people - especially minorities - to become concentrated in older inner-city neighborhoods, with highly undesirable consequences. This aspect of housing affordability is closely related to "Smart Growth" strategies, as will be discussed.

The third manifestation is regional. Housing costs vary immensely among specific metropolitan areas. Home prices are over six times as high in the most costly - the Bay Area - than in the least costly - Ocala, Florida. Incomes variations among metro areas are much less extreme - only about 2.5 to What causes such regional housing variations? Regressions show that the most powerful factor underlying high prices in 2000 was high prices in 1990. In short, high prices in a region persist, once they have become established there. When that factor is removed from the analysis, the most significant positive factors are increases in regional jobs and income, warm winter climate, the percentage of apartments in the central city, and the percentage of old housing therein. The presence of central city decline is a strong negative factor. These factors do not have much relationship to Smart Growth strategies. But they mean housing affordability problems also affect middle-income people in high-cost regions.

The fourth aspect of housing affordability problems concerns revitalization of older in-city neighborhoods through the process of gentrification, which causes housing prices to rise. This may cause poorer residents to be displaced or to experience hardships due to rising rents but static incomes. However, this problem is inherent in any up-grading of older areas; Smart Growth is not the cause.

The last manifestation arises from the immigration of very poor people from abroad, who arrive in this nation with almost no money, often illegally. At first, they cannot afford "decent" accommodations and do not qualify for subsidies. Hence they must live overcrowded in older quarters until they amass enough money to move into "decent" shelter. Their occupancy of slum dwellings is usually temporary, but when they move out, others move in. To accommodate this constant flow, which we cannot stop, the nation needs a sizable supply of extremely low-cost, substandard housing that becomes overcrowded without being dangerous. In short, we rely on slum housing to accommodate this ever-changing group of very poor people, and some poor households who have permanently low incomes.

The issue to be addressed address is: Do Smart Growth strategies contain elements that make them unlikely to address or deal with the housing affordability problems described above? The answer is "Yes," for reasons that will be discussed.

Structural Conditions Underlying the Conflict Between Smart Growth and Housing Affordability

Explaining this conclusion requires describing two sets of forces that have influenced housing markets, especially in the 1990s. They are structural conditions and dynamic forces.

-The Homevoter Syndrome. The first structural condition has been best described by William Fischel in his new book, The Homevoter Hypothesis (Cambridge: Harvard University Press, 2001). He correctly claims that homeowners dominate most suburban governments, and they want those governments to adopt whatever policies will raise the market values of their homes, which are their primary financial assets. Homeowners dominate such governments because they are a big majority, they have stronger incentives than renters to care about housing policy because of their home investments, and they are less transient and so more committed to their localities.

Most homeowners believe allowing low-cost housing in their neighborhoods - especially multi-family housing - will reduce the values of their homes and permit lower-class people to arrive and use their schools. So they oppose such housing.

-More widespread citizen participation in land-use decisions. A second structural condition is a greater increase in citizen participation in land-use decisions in recent years. Housing development was once politically dominated by homebuilders, but their influence has been overshadowed. Local citizens have become more informed and better organized to fight neighborhood changes. And many planning laws require more citizen participation. Also, new environmental laws require countless studies before developments can be approved. Each step is an opportunity for a lawsuit.

-The homeownership bias of federal housing policies. A third structural condition is the homeownership bias in federal housing policy. Owners receive large-scale tax benefits that encourage investment in bigger dwellings. Low-income renters comprise the vast majority of people with serious housing problems, but the value of the subsides they receive is small compared to benefits enjoyed by homeowners - especially wealthy homeowners. This bias strengthens the political clout that homevoters exercise over local governments.

In theory, this bias is justified by contentions that homeowners are better citizens, though the actual empirical evidence for that conclusion is slight. The claim that homeownership helps build household wealth is more sound. But there can be no doubt that those who need outside help most are poor renters.

-Total control over land-use decisions by fragmented local governments. The fourth structural condition is the fragmented control over land-use decisions built into local governments in many American metropolitan areas. This results in parochial attitudes by local officials, who adopt policies designed to benefit only their voting constituents and push off costs onto other jurisdictions. In most states, nobody at any level of government has the interests of each whole metropolitan region at heart.

Dynamic forces Underlying the Conflict Between Smart Growth and Housing Affordability

In addition to the above structural conditions, several dynamic forces within the nation's housing markets have helped produce a rising tide of resistance towards affordable housing, expressed in higher regulatory barriers adopted by local governments.

-Inescapable regional population growth. This is the most important dynamic factor generating hostility towards more affordable housing. Many U.S. metropolitan areas have grown rapidly, and are going to continue to grow rapidly, whether their residents want to or not. The causes are both natural increase and immigration from the rest of the nation and from abroad. During the 1990s, our compound annual growth rate was about 1.24 percent per year for the whole nation, one of the fastest such rates among all developed nations. We cannot stop immigration from abroad except by brutal border policies that we are not willing to adopt. So we are surely going to grow, especially in certain attractive regions.

No specific region can control its own growth rate. That rate is determined by its basic traits, such as location, climate, topography, demography, and past investments in businesses and institutions. The most attractive big regions grow much faster than the nation. In the 1990s, five regions grew at rates above three percent per year, with Las Vegas and Phoenix topping the list. Nine more grew from two to three percent per year.

Because rapid growth generates several highly visible problems, such as air pollution and traffic congestion, many people would like to slow or stop it. But attempts by local governments to limit their own growth through local ordinances just push the region's growth to other parts of the region - usually farther out, aggravating sprawl. But because local governments are parochial, they care only about their own growth rates, which they can influence. They ignore the effects that their local policies have upon growth in other nearby communities, or regional problems.

-Problems that accompany fast growth, especially rising traffic congestion. Such problems constitute the second most important dynamic factor affecting people's attitudes towards accepting more affordable housing. Millions of citizens become irritated with these problems and want to slow growth and development to ameliorate them. However, traffic congestion would get worse even with no population growth, since Americans keep driving more vehicles farther per capita each year.

In reality, there is no cure for rising traffic congestion - it is an inescapable trait in all modern metropolitan areas throughout the world - especially those with rising populations and wealth. Congestion is the balancing mechanism people use so they can pursue other goals, such as broad choices of where to live and work. Population growth will make it get worse everywhere, motivating even more people to think - wrongly - that local policies could halt congestion. Such policies cannot stop regional growth, which is the cause of most growth-related problems.

No doubt, growth does produce more problems, which might be mitigated if it stopped. But we cannot stop it. Also, growth produces many important benefits, such as more young workers to support our aging population and fuel rising output.

-The Smart Growth movement. This movement contains three axioms hostile to affordable housing: two explicit and one implicit. The first is encouraging strong citizen participation in land-use decisions. I am certainly not opposed to citizen participation, but intensifying it undoubtedly increases the tendency of homevoters to block creation of affordable housing in their communities. The second axiom is almost universal support among Smart Growth advocates for continued fragmented local government control over land-use policies. This gives local governments the power to exclude more affordable housing from their territories if they want to do so. These two outcomes generate the third axiom: an unstated principle that local government should never adopt policies that might inhibit increases in home values. That is why local governments block affordable housing - to keep home values rising.

The resulting resistance to more affordable housing is disguised as fiscal responsibility under the theory of fiscal zoning. It claims that no new land uses should be permitted if they add more to local spending than to local tax revenues. Multi-family housing is therefore considered a fiscal loser by almost every community, although it generates fewer children per unit than most single-family housing - except the costliest dwellings. In fact, fiscal zoning denies shelter for all low-wage workers, even though local and regional economies need such workers to function. For this reason, universal use of fiscal zoning is a disaster for any region as a whole. Every region needs low-wage workers to operate major parts of its economy, but few communities are willing to permit construction of additional dwellings that such workers can afford to occupy.

This hidden conspiracy to avoid jeopardizing rising home values is tacitly supported by homebuilders and the mortgage finance industry. They have trillions of dollars in existing home loans at stake. No policies that might greatly raise overall housing supplies in relation to demand - and therefore stop or slow rising home prices - can be tolerated. Yet any general increase in housing affordability requires at least some declining housing prices. That is what "greater affordability" means.

The Results of All These Factors Opposed to Making Housing More Affordable.

The result of all these factors is that we are increasingly refusing to create additional housing affordable to the lower strata of our income groups. Yet we are significantly reducing existing supplies of low-cost dwellings through demolitions, renovations, and higher rents. But in most regions, we constantly receive more people in those groups who need to live somewhere. As a result, in many regions, there are far fewer housing units affordable to low-income households than there are such households who need those units.

Therefore, we must resort to more overcrowding in older neighborhoods to house our poorest households - i.e., slum housing. In reality, since pre-Colonial days, America has always depended upon over-crowded and often deteriorated slums to accommodate its poorest urban dwellers - and we still do. But we do not like to admit it, or to confront the practices we must adopt as a result. An example is differentially-enforced housing codes. Almost every large city must more loosely enforce its codes in poor areas than in affluent areas so as to avoid throwing thousands of poor families out onto the streets.

Faster population growth, including many poor immigrants from abroad, plus rising hostility to all housing production in certain regions - especially California - has accelerated our reliance upon overcrowded slum housing and far outlying sprawl to provide shelter. This is worsening the quality of life even for many middle-class households.

Some Smart Growth advocates strongly support affordable housing in spite of the conflict described above. They espouse a diversity of housing types, including more low-cost units for low-wage households in many different parts of a region. But that attitude is exceptional. The strongest advocates of Smart Growth are so focused on protecting open space and stopping sprawl they give little emphasis to providing housing for low-income households. One reason for such neglect is that doing so would be very expensive in subsidies if the nation maintained existing high quality standards for new units.

What Can Be Done to Overcome This Conflict Between Smart Growth and Affordable Housing?

-Reducing homeowners' fears of economic loss. The most direct approach is trying to assuage homeowners' fears that accepting affordable housing within their communities would reduce the values of their homes. The belief that values would decline can be addressed by studying the impacts of lower-cost housing on nearby home values and publicizing the results, which in most past studies do not show adverse effects. But homeowners are hard to convince - especially because many oppose having lower-income neighbors for sociological and ethnic reasons, not just economic ones.

A more novel approach would be issuing home-value insurance that guarantees that the market values of homes near affordable units will not decline, or will rise at some minimal rate, when the existing homeowners involved sell their homes. Such insurance can be paid for by the developers of the affordable housing, or by the community as a whole. But this approach has not been widely tested in practice, so it is not clear how well it would work or how acceptable it would be to local homeowners.

-Building smaller, less costly dwellings. A second approach is making it legal to build smaller, less costly housing units. The easiest way to do this is by removing widespread existing zoning obstacles to manufactured housing, which is far less expensive than new traditional units. In the past 50 years, over 12 million manufactured housing units have been shipped - one out of every 7.2 new housing units built in the U.S. A single-wide manufactured home contains only 360 square feet. So small housing units are neither new nor unAmerican!

A related tactic is legalizing accessory housing apartments added to relatively large single-family units, as a matter of right to the owners of such large units. This could produce thousands - even millions - of new low-rent units at no public cost to any governments. But up to now, local governments have fought this tactic almost everywhere - and successfully.

A third tactic is legalizing very small new conventionally-built homes. Hundreds of thousands of tiny housing units were built in the 1950s in both large cities and small towns, and are still occupied. In fact, some new ones are even being built now because they make homeownership affordable to low-income households. These units often contain under 500 square feet, but have the basic amenities that a family needs. They are better than crowding four families into a 1,000 square-foot unit, which is the only alternative available to thousands of low-income households.

-Adopting inclusionary zoning regulations. A third approach is adopting inclusionary zoning laws that require developers of any new units to create from 10 to 15 percent affordable units in exchange for gaining higher density for their market-rate units. This could substantially add to the affordable housing supply, especially in fast-growing regions. Regulations must require that such units be kept affordable for at least a certain minimum number of years in order to expand the supply significantly.

-Gaining political support for more affordable housing. A fourth approach is political. America will react to shortages of affordable housing only when such shortages start to injure two groups with real political clout. One is employers who cannot find low-wage workers nearby; the other is middle-class households, especially public workers, who cannot afford decent housing without overly long commutes. Until these groups start suffering, remedies are unlikely, thanks to the dominance of local policies by anti-affordability homeowners, and the greater political strength in our national electorate of suburban homeowners plus financial institutions.

-Persuading Smart Growth advocates to be more sensitive to the need for affordable housing. Supporters of more affordable housing should try to convince all promoters of Smart Growth that it is in the interest of the latter to strongly advocate more new affordable housing for low-wage households in suburban areas, since the labor provided by such households is necessary to run the economies of those communities. To be acceptable, all Smart Growth strategies should include strong affordable housing elements - and not just pious words with no tough policies.

-Changing the locus of where housing location decisions are made. In the long run, the nation will be unable to build or otherwise create sufficient affordable housing - especially in the suburbs where it is most needed - as long as full control over where all housing is located is left entirely up to local governments. At the very least, state governments need to create some type of region-oriented authority that has a role in assigning affordable housing "targets" to each locality. And each state government needs to fund incentives for localities to pursue those "targets" by tying infrastructure finance aid to doing so. Or the federal government could create a requirement for a Metropolitan Housing Planning Organization in each region, analogous to the Metropolitan Planning Organizations it now demands in return for transportation funding. In fact, there are many ways in which state and federal governments could motivate each region to engage in at least some region-oriented planning concerning where to build more affordable housing to meet the entire region's needs.

Until those things happen, the desire of local homeowners to protect their home values through exclusionary zoning will perpetuate the existing conflict between Smart Growth and housing affordability. That will be true regardless of what Smart Growth advocates claim is their desire to create affordable housing. Therefore, working toward establishing effective regional arrangements of that type is a vital and profound challenge to all land-use planners, especially those who declare they are believers in Smart Growth.

One of the lessons Americans should have learned from September 11 should be refocusing the priorities that govern our daily lives to do those things that are really important. One of them is surely proving decent shelter for the low-income households whose contributions to all our lives are crucial both personally and socially, as well as economically.