Smart growth on steroids, or the radical densification policy of California, was the subject of my recent commentary in The Wall Street Journal — “California Declares War on Suburbia” (http://online.wsj.com/article/SB10001424052702303302504577323353434618474.html?mod=rss_com_mostcommentart). Regional transportation plans in the San Francisco Bay Area, the Los Angeles area and the San Diego area seek to force the vast majority of new residents in future decades into multi-family housing. Under the state’s greenhouse gas emissions reduction law (Assembly Bill 32) and its companion urban planning law (Senate Bill 375), it will be nearly impossible to build new detached housing. This is despite the fact that 80 percent additions to the housing stock in California’s major metropolitan areas was detached between 2000 and 2010.
It was bad enough when misnamed “smart-growth” policies simply sought to ban building beyond the urban fringe (where the city meets the country). The result was as predictable as the effects of an OPEC oil embargo. When developable land is embargoed, its price goes up. How much it goes up is anyone’s guess, because prices cannot be accurately predicted in a manipulated market. In the case of oil, it can be expected that speculators will enter the market seeking a quick profit. It is no different in residential land (and housing), where the was much more speculative activity in the bubble states of California, Florida, Arizona and Nevada (so designated by New York Federal Reserve Bank reserve), and of course there were substantial house price increases.
The amazing thing about this is that underlying housing demand was low in the worst of the bubble states, California. During the bubble, more than 1,000,000 residents moved to other states (California kept growing because of immigration and the excess of births over deaths). By comparison, in Atlanta, Dallas-Fort Worth and Houston (and for that matter Indianapolis, Columbus and Kansas City), there was net immigration, yet housing prices stayed within historic norms. By the time the peak hit, prices in California metropolitan areas were from double to nearly quadruple historic norms.
Now, however, the urban planners want to limit construction to areas that are close to rapid transit stops, and at densities five or more times consumer preferences. Rather than quarter or fifth of an acre lots, planners intend that nearly all new housing will be at 20, 30 or even 40 to the acre. Naively, they assume that this will encourage people to use transit more. Yet, even their own plans don’t show any such impact. In San Diego, the share of travel on transit would rise from less than 2 percent now to less than 4 percent in 2050, despite spending more than half of the highway and transit money on transit. Thus, spending up to 25 times transit’s share of the market returns only the most modest transit ridership increases.
The higher densities are likely to lead to more intense traffic congestion, consistent with the association between high densities and intense traffic congestion around the world. The irony is that the higher the share of travel on transit, the worse the traffic congestion. This is because transit ridership is high only where there is high density, but the transit use does not reduce demand enough to compensate for the larger density of cars.
Urban areas are justified by economics. People have moved to them to have better lives. Raising the price of housing (unnecessarily) and slowing down commuting (because transit is much slower) could work against urban areas that implement such policies and drive people elsewhere. This is evident, already, in the San Francisco Bay area, Los Angeles and San Diego, where growth has slowed to a trickle — places where the net-outmigration is greater even than that of former migration laggards Pittsburgh and St. Louis.
Also see: California Declares War on Suburbia II: The Cost of Radical Densification