I should make clear here at the beginning that I have long been a supporter of affordable housing and of programs that encourage affordable housing. That said, in my more than four decades in this industry, I have been troubled to see some of the most fervent advocates of “affordable housing” care so little about the affordability of housing in general. This issue has bothered me precisely because this type of advocate doesn’t even acknowledge the inconsistency in their position.
What I don’t get is the advocate or public official who single-mindedly pushes programs to increase affordability for the poor without any consideration of the impact on the cost everyone else has to pay for housing. As one example of this, let me address inclusionary zoning laws. These are laws whereby a local community requires that a builder set aside some percentage of new housing being developed for people of lower income at reduced sales prices or rents. Most often inclusionary zoning laws work by passing on the cost of the amount of subsidy provided to those receiving the benefit of a discounted sales price or lower rent by raising the cost to those not receiving the “subsidy”.
Now I absolutely believe that there are times when this is not only wise and just, it is necessary to make up for what would otherwise be the complete absence of housing available to lower paid members of the workforce. I just wish that the proponents of these programs realized that those paying market prices are providing the subsidy.
To make my point however, let me not dwell on inclusionary zoning. Let me instead point out that every time a public official adds a fee to a building permit, he or she is increasing the cost of housing and decreasing its affordability. This is a fact, not an opinion. An impact fee, whether to pay for schools or to protect the environment, is a tax and decreases housing affordability. And that may be okay. I’m not suggesting it isn’t. In fact, if I were a public official, for the right environmental or economic issue I might very well be willing to add impact fees. I just hope I wouldn’t be a hypocrite about it by pretending that the cost was being borne by the builders and land owners.
Those who disagree with me challenge my logic. They argue that the “market” determines price, not public actions. And I would agree with this if it were not for two factors these folks ignore.
First, in a community where public action affects the cost of every housing unit built, every provider of housing will be able to pass that cost along to the customer, and obviously prices will go up. Secondly, where the public action only affects the cost of the new homes and apartments being built, and where this cost increase cannot be passed on in the form of higher sales prices or rents, it will have the effect of limiting the return to the builder to the point that new starts will decrease and additions to supply will dwindle. This ultimately contributes to a shortage of housing and, when supply doesn’t increase to meet demand, we know that prices will ultimately increase for everyone.
So again, I’m not a builder who opposes all forms of taxes and impact fees or zoning changes that increase the cost of housing. I am one, however, who has little use for advocates who pretend they can do anything they want in the form of new programs and fees without making housing less affordable for everyone else. Honestly, there is no free lunch.