This Topic: Affordable Housing How & Where - Technological Implicati

[Bill Frederick]

Two thoughtful, stimulating articles give some
insight into the larger forces on "affordable housing"
and where people are moving to achieve it and a more
affordable, satisfying lifestyle. They have implications
for our regulations, our GMA standards, our technological
infrastructure support, and our wise resource management,
among the top variables.

What implications do you see for our Freeland area 2025 Vision
planning for smart growth management?

Thinking "Out Loud",

Bill Frederick

1. From the Feb. 14, 2007 Seattle Times Local News Section, and
2. "The Revival of Heartland America" by Dr. Gary North

Guest columnist

"Regulation chokes housing market"

By Edwina Johnston

Special to The Times

For many years, people of all income levels were able to buy homes in the Puget Sound region because there were houses available within affordable price ranges. Today, a shocking proportion of the population is excluded from the housing market. What happened?

Since the early 1990s, the trend, nationwide (and worldwide), has been for local governments to adopt the environmental schema of the U.S.-U.N. "Agenda 21" agreement of June 1992, which espouses the concepts of "smart growth" (forcing all new growth into the cities) and "sustainability" (maximum use of urban owners' lands, with restoration and preservation of rural owners' lands). Once adopted, thetenets therein persuaded our government to gradually abandon market control for central control of land and population growth.

The results in our locale are: governments' selective interpretations of the 1990 Washington state Growth Management Act; urban growth boundaries ("UGB") that define the urban areas beyond which little growth may occur ("smart growth"); and building regulations to implement environmental "sustainability."

Unfortunately, recent government predictions and provision of available buildable land within the UGB were not sufficient for the reality of the ongoing increase in jobs and population. (It is difficult to predict future human activity.) Consequently, as demand increased, urban land was not available to satisfy it. This caused urban land to become ever-more scarce and, so, ever-more expensive.

In order to recoup the cost of the resulting expensive land, home builders had to build larger, more expensive homes, instead of smaller affordable ones. Besides that, the many stringent environmental building regulations and their time delays (time is money) affected construction and cost for both single- and multi-unit buildings. Add to all that the use of veto power when neighbors coalesce to keep high density out of their neighborhoods and you can understand why there is an affordable-housing shortage and spiraling home prices in this area.

In centrally controlled markets, builders have to work within the parameters set for them and cannot increase supply independent of government; whereas in free markets, when prices rise because of demand, builders will choose to increase supply, which will decrease prices.

Corroborating these observations is a nationwide study of two dozen cities ("The Impact of Zoning on Housing Affordability") by Edward L. Glaeser, an economist at Harvard University, and Joseph Gyourko, professor of real estate and finance at the Wharton School of the University of Pennsylvania. It concludes that where there is government regulation (limited supply and inelastic costs), persistent bubbles are created. In general, they found that, in recent times, the areas with the highest prices have the least amount of new home construction, which is the opposite of what, in Economics 101, we all learned should happen.

In their analysis of that phenomenon, the authors note that the physical cost of construction as a percentage of home prices has diminished over previous years and that it is the rising cost of land and the regulatory permitting process that have effected that.

Glaeser and Gyourko emphasize that the inelastic cost that raises price is regulation, which limits supply by determining the timing and cost of production. As population increases, builders do not have control over speeding up the permitting process and/or lowering costs (except through lower quality); consequently, supply does not keep up with demand and prices rise. This will continue as long as demand increases, regulation restricts supply of land, and regulatory permitting costs remain a significant portion of the cost of production.

Here in the Northwest, today, the result of central planning is a large bloc of deliriously happy voters whose homes have appreciated hundreds of thousands of dollars during this government-created, spiraling-home-price bonanza; however, there is also another large and fast-growing segment of voters who cannot participate. Do we want to keep doing the same thing under the banner of environmentalism and getting even worse results?

Historically, central planning failed in nations that tried it, and it is failing here. The economies and environments of those nations were destroyed because of the impossibility of foreseeing the innumerable interactions influencing them both and the unintended consequences of attempting to control them; but, when an economy is owner-centered, with government-sponsored incentives for government-perceived goals, the free market works and produces fruitful outcomes for people and the environment, too.

Therefore, in order to rescue both environment and people, let us return to the free-market policies that made this a nation of economic opportunity for all and a nation of freedom secured by strong property rights.

Edwina Johnston is a Seattle resident who has maintained 30 acres in the rural area for more than 30 years. She is a member of the Citizens Alliance for Property Rights (www.proprights.org)

Copyright © The Seattle Times Company


Gary North's REALITY CHECK
www.GaryNorth.com
www.snipurl.com/subscribenow


Issue 625 February 16, 2007

THE REVIVAL OF HEARTLAND AMERICA

The greatest real estate deal in man's recorded
history was the sell-off of the Louisiana Purchase by the
U.S. Government, beginning after the War of 1812 ended in
1815, when the Mississippi River's outlet into the Gulf
through New Orleans was assured. For about $1.25 per acre,
immigrants could buy land. They did not even have to pay
cash.

Most of this land was fertile. Transportation costs
were low and then got lower. The Mississippi River, the
great lakes, the Erie Canal, and finally the most
revolutionary invention of the nineteenth century, the
steam railroad, converted 800,000+ square miles of raw land
into high-value, mostly family-owned capital. Jefferson
thought it would take centuries to fill the American
heartland. It took less than a century.

Politically, this shift was reflected in the
substitution of Ohio for Virginia as the home state of
presidents. What had been the Old Northwest in 1787 became
the center of the country by 1887.

Nevertheless, New York City's financial dominance and
New England's educational dominance produced a coastal view
of America. The communications system, the roadways, and
the movies added California to the East Coast's cultural
dominance. Yet the accent of California remains the Ohio
accent. This is also true of the movies and television.

With the steady decline of the number of people
employed in manufacturing after 1950, the Midwest lost its
economic clout. This decline included the political clout
of the industrial trade unions. The steel belt became the
rust belt.

The heartland lost the best and the brightest to the
coasts. This was a crucial factor in the comparative
decline of the region. Brains moved east or west, where
there seemed to be greater opportunities.

Today, this process has begun to reverse. The
establishment media, being coastal, have ignored it.

Meanwhile, the South has become integrated
economically into the heartland. Air conditioning and the
low political power of trade unions in the South combined
to make the region acceptable to entrepreneurial immigrants
from above the Mason-Dixon line.

Then came national retail chains after 1970. You
cannot tell where you are on Main Street anywhere in the
country. They all look alike. America's homogenized
culture has overwhelmed every region. This has reduced the
culture shock of a move into or out of a region.

One major barrier remains: the cost of real estate.
As in 1850, heartland America has the edge: the lowest cost
prime real estate on earth.


WHERE OPPORTUNITY LIES

Prime urban real estate around the world is now beyond
the reach of the next generation of home owners.
Government subsidies to the real estate market in the form
of loan guarantees and central bank inflation have combined
to create demand for urban real estate. In the world's
largest cities, anything that we would regard as
comfortable, middle-class living can no longer be purchased
by members of the middle class who do not already own real
estate to sell to first-time buyers.

The heartland is not where most people have preferred
to live. Cold weather and a more traditional lifestyle for
eight decades failed to attract the best and the brightest.
The up-and-coming urban professionals moved to the coasts.
The coastal regions filled up with opportunity-seekers.

They bid up the price of real estate after 1960.
Today, their grandchildren are locked out of the housing
markets.

The U.S. government responded politically to that age-
old desire to "own your own home." The government
subsidized the creation of low-down payment mortgages.
This enabled home buyers after 1950 to lock in 30-year
mortgages, which they paid off. Now they are selling to
late-comers. The effect on housing prices of government-
insured lending institutions that issue mortgages is
analogous to the effect of Medicare on health care prices:
upward.

First-time buyers are becoming debtors to the tune of
$500,000 to $700,000 in places like Boston and Southern
California. They are locked into 30-year mortgages for the
rest of their lives. They will pay 40% of their after-tax
income to buy their homes.

Family by family, their children will either move out
of the region, or else find themselves strapped with
lifelong debt, forced to live as dual-income status for the
rest of their lives.

This is good news for entrepreneurs who own profit-
seeking day cares (www.demischools.org). For everyone
else, it isn't.

Whenever there is a recession, thousands of these
debt-burdened home owners will be forced to abandon their
homes. Their credit ratings will suffer. They may be in
debt for $100,000 or more after their homes are sold out
from under them in a foreclosure. Bankruptcy will become
their only option.

My son Scott recently moved to Southern California.
He and two others rent a 3-bedroom townhouse for
$2,100/month. He tells me that because of the high price
of owning a home, rentals stay on the market for only a few
hours. You need to call to rent as soon as you see an ad.

Newcomers in his age bracket -- under age 30 -- who
don't earn $60,000 a year are locked out of home ownership.
This makes the two-income family a necessity in most cases.
The single-income family is a thing of the past in the
housing bubble regions.

My daughter bought a 2100 square foot house in
Nashville for about $170,000. It has a decent sized back
yard. In a comparable neighborhood in Southern California,
that house would sell for close to $700,000.

The difference in price is not based on regional
income levels. People in Nashville don't earn a third to a
quarter of what people in Southern California do. The
difference has to do with the concentration of population.
People are paying heavily for weather and lifestyle. But
the warm weather and lifestyle are now overwhelmingly based
on massive lifetime debt.

High taxes and extensive government regulation in
California and New York and Massachusetts are steadily
reducing the level of economic opportunity. Nevada is
booming -- an escape hatch from the tightening grip of
government across the border: no income tax. New Hampshire
serves the same function for people who want to escape the
People's Republic of Massachusetts: no income tax, no sales
tax.

We know from the real estate mania on the coasts that,
with respect to property values, there is a lot of upward
potential in the heartland. People are willing to indebt
themselves in every region. No longer is the old "25% of
income" rule operational. Yet heartland real estate is
still obtainable by honoring the old rule. The difference
is the decentralization of population in the heartland.
The distribution of population is much greater. The price
of land has not been bid up to such a degree.

Now telecommunications are allowing residents of the
heartland to make incomes comparable to those on the
coasts. This is creating economic opportunities for young
families. Women can work at home. Husbands can earn
higher salaries. Entrepreneurs can hire well-educated
locals and recent immigrants from the coasts. What took
place in Austin, Texas, from 1985 to 1995 is indicative of
what can happen in a decade: from an oil economy bust to a
digital economy boom.

The upward pressure of population is relentless.
There are over 300,000,000 people in the United States.
This will go to 400,000,000 by 2050. If these newcomers
want to own their own homes, they will have to find less
expensive places to live -- in Texas rather than California
or Phoenix.


YOUNG FAMILIES WILL MOVE INLAND

Young people want to own their homes. This is not
going to change anytime soon. They will move to regions
where they can afford to buy a home. They have been doing
this since approximately 1640.

As American families grew smaller after 1957, the
links to existing regions grew weaker. For a century,
people moved to Southern California, just as they had moved
to New York City. Their children did not move away from
the parents and siblings. But now they must leave family
behind if they want to own their own homes.

The price of entry-level housing in Southern
California is now limited to Hispanics, who are willing to
put more than the immediate family into the same home and
share mortgage costs, and to highly successful two-income
families, especially Asians.

If you don't understand this, spend ten minutes on
www.Realtor.com. Look up any zip code in Southern
California. Start with Anaheim: 92802. It was mostly
orange trees in 1950. Then came Disneyland. Begin with
homes in the $400,000 range. Check the square footage.

One of the most astute commentators on this major
demographic shift is Joel Kotkin. In a recent article in
"The American Interest," titled "Little Start-Up on the
Prairie," he describes Aurora, Nebraska -- population
4,500.

With its neat town square and red-brick civic
buildings, it suggests a reflection of America's
bucolic past. Yet it may also represent an
oblique looking-glass glimpse into America's
future. In the first half of the 21st century, as
the nation grows from 300 toward 400 million
people, Aurora and other places in the American
Heartland will provide a critical outlet for the
restless energies and entrepreneurial passions of
its people.

As I read it, I thought of the article written by
America's most detail-conscious social observer, Tom Wolfe.
He wrote on the origin of Silicon Valley. The pioneer was
Robert Noyce of Intel, who grew up in Grinnell, Iowa.
Noyce brought the Protestant ethic of his youth and his
college years to Silicon Valley.

When they were in their teens, Noyce and his
brothers made their pocket money by mowing lawns,
raking leaves, and babysitting. In Grinnell that
was socially correct behavior. To have devoted
the same time to taking tennis, golf, or riding
lessons would have been regarded as a gaffe of
the genus Conspicuous Indolence. There was no
Country Club set in Grinnell or anything
approaching one.

Wolfe's main point was that in the midwest,
engineering was respected. This was not the case "Back
East," where pure science and the humanities were
fashionable. This was an aspect of European snobbery,
Wolfe said.

As a result, the way to today's Information
Superhighway, more recently known as the Digital
Revolution, was paved entirely by geniuses from
the Midwest and farther west. The inventor of the
lightbulb, which started it all, was Thomas
Edison from Port Huron, Michigan. The inventor of
the vacuum tube, which made possible the
development of the high-speed electronic
computer, was Lee De Forest from Council Bluffs,
Iowa. The three engineers at Bell Laboratories
who won Nobel Prizes for inventing the
transistor, which replaced the vacuum tube, were
John Bardeen from Madison, Wisconsin, Walter
Brattain from Seattle, Washington, and William
Shockley from Palo Alto, California. The chief of
the fabled Bell Labs in those palmy days was
Oliver Buckley from Sloane, Iowa. The two
inventors of the integrated circuit or
"microchip," the very heart of the Revolution,
were, first, Jack Kilby, from Jefferson City,
Missouri, whose chip was made of germanium, and,
six months later, Noyce, whose chip was made of
silicon and became the standard for the industry
and gave the Silicon Valley its name.

http://GaryNorth.com/snip/103.htm

Wolfe is wise enough to know that Asians are pioneers
in engineering in Silicon Valley. They are from Way Back
East, whose outlook is more Iowa than Massachusetts. But
the cultural atmosphere created by Noyce and his team made
their entry into the ranks of the creative engineers far
easier.

The brains moved to the coasts, especially California,
after World War II. This process is now reversing,
according to Kotkin.

Low electrical costs, access to Interstate 80 to
Omaha and Lincoln, and excellent high-speed
telecommunications make Aurora a desirable
location for several growing businesses. So, too,
does a reliable, literate and highly trainable
workforce. . . .

Unemployment barely exists, and the biggest
problem -- as in many other places in the
Heartland --is finding new workers.

The establishment media do not perceive what is
happening, Kotkin says. This is not surprising; the
establishment media are coastal.

Most media coverage portrays a kind of Mad Max
environment -- a desiccated, postmodern, Lost
World of emptying towns, meth labs and militant
native Americans. Typical was a 2006 New York
Times article describing North Dakota as "Not Far
From Forsaken." Its imagery was of "irresistible
decline" -- dying towns, aging populations, a
place for the curious Easterner to visit now
before it all blows away. . . .

If there is anything positive, according to such
accounts, it lies in the hope that much of the
country between the Mississippi and the Rockies
might end up as a giant enviro-playground,
subsidized by environmentalists like Ted Turner.

This image is mostly bunk, according to Kotkin.

Restoring the natural environment where possible
is no doubt a good thing, but many places in this
vast swath of the country also are rebounding in
terms of jobs, population and income -- in many
cases more so than parts of urban coastal
America. Fargo, North Dakota, for example, grew
by more than 20 percent between 1990 and 2000.
Scores of other Heartland towns and cities --
Sioux Falls, Des Moines and Bismarck among others
-- have seen similar expansions.

He calls this micropolitan growth. It is where most
of the growth is nationally. This is reasonable; anything
large reaches its limits to growth. The rate of growth
slows.

Indeed, as we look at the fastest job growth in
the country, micropolitan areas are fairly
dominant: Of the 393 fastest growing regions in
the country, fifteen of the top twenty were
micropolitan areas, while only one, the sprawling
city of Las Vegas, ranked among the fastest
job-growing metros in the country.

Beginning in the 1970s, migration reversed. This has
received little attention. This has accelerated since
1990.

A decade ago, Fargo was a classic backwater, and,
after the release of the eponymous movie,
something of a national joke. A critical shift
occurred in the late 1980s when Doug Burgum, a
local boy from nearby Arthur, moved back home
from Chicago to join a fledgling local start up
called Great Plains Software. Burgum recognized
the area's considerable engineering expertise,
both from North Dakota State University and a
large and expanding specialty farm equipment
industry, and he anticipated growth. . . .

The success of Great Plains Software sparked
other start-ups in fields ranging from
biotechnology to wireless networking to radio
frequency identification systems. Today,
extrapolating from recent National Science
Foundation data, North Dakota has one of the
highest rates of high-tech startups in the
nation, with the Fargo area as the undisputed
epicenter. The area is also luring businesses
from the coasts.

A big part of this shift has to do with lifestyle.
What I decided in 1959, when I left Manhattan Beach,
California -- what was to become the consummate epicenter
of Southern California's real estate boom -- shaking the
sand off my feet, is now becoming widespread. I wanted out
of that lifestyle.

So even in the new, hipper Fargo, the real driver
of success remains a set of values --
self-reliance, community spirit, a dedication to
family and faith -- that have long been at the
center of the Heartland ethos. After all, along
with its finer dining and hip bars, Fargo has a
microscopic crime rate compared to any major
coastal city and little in the way of an
underclass. As in Aurora, local charities thrive
and community involvement is the norm.

These characteristics are the main draw,
particularly to relocating thirty-somethings,
notes Mike Chambers, founder of the fast-growing
biotech firm Aldevron. It's an experience common
to many companies in this buckle of the Brain
Belt. "Wherever you go you find people who went
out and came back", says Howard Dahl, CEO of
Fargo-based Amity Technologies, a fast-growing
agricultural machinery firm, and former head of
the local Arts Council. "We constantly get
resumes from people at Boeing in Seattle or
somewhere else. They don't come for the mountains
or the sunshine or the culture -- they come back
because of the kind of people who are here."

This shift has religious overtones and implications.
Americans are leaving the "do your own thing" morally, in
exchange for "do more of your own thing" entrepreneurially.

Dahl, a former Lutheran seminarian, says religion
also plays a major role, but not in the loud,
assertive tones one might find in Houston or
Dallas. "Religion and family play a huge role in
everything, but it's quiet. It's people's sense
of ethics", he suggests. "It's that you care
about your community and can count on your
neighbors."

What Robert Nisbet identified as the quest for
community back in 1953 is still in process.

Such values, Aurora's Gary Allen believes, are
the real secret behind the nascent Heartland
resurgence. In a town of barely 4,500, there are
more than thirty non-profit foundations, with
assets in excess of $45 million. It is all part,
notes Gary Warren, of a community spirit
reflected in the city's extensive recreation
facilities, its well-maintained central square,
library, senior center and museum. "Community
building is a way of life here", Warren offers.
"You give to your community the way you give to
your church on Sunday. It's the essence of what
it is to live here, and it's why people decide
they want to come here."

http://www.GaryNorth.com/snip/102.htm


CONCLUSION

For young families, the heartland once again offers
opportunity. The weather will not get any better, but
technology can overcome the worst aspects of weather -- air
conditioning in the heartland South and heating oil in the
heartland North. I have preferred the South to the North.
Fuel costs may reinforce this preference over the next few
decades.

For retirees, the heartland is better. People move to
Asheville, North Carolina, not to Los Angeles, to retire.

For start-up entrepreneurs, the heartland is better.
Locate a university with a good engineering department and
move there. College Station, Texas, gets my Good
Entrepreneurship seal of approval. So does Auburn,
Alabama.

For young families that don't want to spend their
lives as mortgage serfs, the heartland is better.

The South will rise again. It just won't be the
South. The South is gone with the wind. If you think I'm
wrong, let me know the next time you see an all-white
backfield at the University of Alabama.