Policymaking and Real Estate
By: J. David Chapman/December 29, 2022
In 2022, Edmond’s Ward 2 councilman, Josh Moore, and I made approximately 20 presentations on the state of housing in Edmond. It’s difficult to spend four years in a policymaking role in a municipality where the average new home sells for more than $400,000 and not worry about housing affordability.
Housing costs are rising faster than incomes, putting greater financial stress on families. Policymakers have three tools available to lessen this stress. We have the ability to reform land-use regulation, allowing smaller, more compact housing; increase taxation on expensive, underutilized raw land; and expand housing subsidies to low-income households.
Easing the land-use regulation on building heights and minimum lot sizes would encourage town houses, duplexes and apartments. The quickest, most direct way to affect the price of housing is to allow multiple homes to be built on a single lot, thereby spreading the cost of the land per residence.
Increasing density would certainly help the affordability issue; however, the transition to a more affordable market would happen faster, and more equitably, if higher taxes were put on raw land, motivating the landowner to sell or develop the land. Holding costs are real to developers and investors and, if the costs are significant enough, the developer would be more motivated to develop the land, making the property more productive to the community. This is particularly attractive where the local government has made investments that increase land values such as public transit, rail quiet zones, utility improvements, streetscapes and roads. Our infrastructure is ready, and projects need to follow to gain a return on investment for the community.
Building more housing will, over time, bring down housing costs, but expanding the supply of market-rate housing is not enough to help the poorest families. In the U.S., we have 14 million workers who, according to government recommendations, should be spending only $500 per month on housing costs. That is less than the operating costs for the minimum quality apartments in the U.S. For low-income families, the only way to bridge that gap is to continue and/or increase subsidies.
Sounds straightforward; however, mayors and city councils face stiff opposition from their constituents when proposing zoning reform and increasing taxes. It frequently falls under the categorization of “it’s complicated.”
J. David Chapman is a professor of finance and real estate at the University of Central Oklahoma(jchapman7@uco.edu).
