Housing affordability, urban sprawl, Wendell Cox, and me

Bryan Kavanagh finds out that powerful interests decide who gets branded a powerful interest.

This letter was published in the Australian Financial Review on 4 July 2007:

Rudd on track on affordable housing

In seeking to torpedo Kevin Rudd's proposal for an inquiry into housing affordability by calling for greater supply of land on the urban fringe, Prime Minister John Howard makes the same mistake as the Institute for Public Affairs and controversial American urban planner Wendell Cox.

In a recent study, The Tragedy of Planning: Losing the Great Australian Dream, the IPA's Alan Moran approvingly cites American cities St Louis, Atlanta, Pittsburgh, Dallas, Houston, Fort Worth, San Antonio and El Paso, for having less urban regulation on their city fringes.

On the basis that inadequate social infrastructure on the urban fringe seems often to lead to higher crime rates, I consulted the FBI list of 8197 crime-rated US cities to investigate this approving citation. Cox's home city of St Louis topped the list, having approximately four times the national crime rate. Its murder rate was actually 5.5 times the national rate. High crime rates were also experienced in Atlanta, Pittsburgh, Dallas, Houston and Fort Worth. San Antonio was above average in only four of the seven categories, Austin in only three and El Paso was below average in all categories except for rapе.

I doubt that Howard is advocating higher crime rates to make housing more affordable, but the statistics do make the case that the IPA and Cox are mistaken about creating greater urban sprawl as a means of remedying our unaffordable housing.

The real answer to greater housing affordability is as simple as it is politically unpalatable.

We need to capture a greater proportion of our publicly generated annual land values to the public purse instead of letting them be privately capitalised into higher and higher land prices.

Australia's various real estate institutes, which resist higher rates and land taxes, and presumably applaud our high levels of income tax, need to disclose on which side of the question they stand on the mindless escalation of land values.

To be even-handed, it should be said that the Australian Labor Party does not have a proud history on the matter. Our new study, Unlocking the Riches of Oz, shows that the upward escalation of Australia's land prices really set in when the Whitlam government chose in the early 1970s to fund a major part of local government, which had previously funded itself, out of federal taxation.

Bryan Kavanagh
Director, Land Values Research Group
Melbourne, Vic.

To which letter Wendell Cox weblogged The Heartland Institute as follows on 4th of July:

Housing Affordability: Avoiding the Issue in Australia

Published by wcox July 4th, 2007 in Urban Policy.

The desperation of the anti-suburban interests knows no end. Their mantra? “Say anything, just don't let people live where they like.”

First they tried to show that cities were expanding so rapidly that agricultural production was threatened. Had they looked at the data they would have known that much land has been retired not by urban expansion but rather by rapidly improving productivity. Then they moved to obesity, trying to claim that suburbanization was the cause, while ignoring the obvious answer — eating too much too often. Now, perhaps the ultimate is a claim in the 5 July 2007 Australian Financial Review by Bryan Kavanagh of the Land Values Research Group that suburbanization increases crime rates.

This is not the first time that the debate over Australia's ruined housing affordability has been based upon a profound misunderstanding of American urban geography. Like a well known bank researcher who could not tell the difference between a central city (Australian term, “local authority”) and a metropolitan area, Kavanagh claims that suburbanization has given St. Louis the highest crime rate in the nation. Sprawl, he says, is the reason.

There is no doubt that the city of St. Louis has a high crime rate (as do all of the more dense US central cities). But, in the United States, far lower crime rates are found in the sprawling suburbs that surround the central cities (in St. Louis metropolitan area, barely 12 percent of the population live in the city of St. Louis). In fact, there are few places with lower crime rates than American suburbs. If one were to engage in serious research on the matter, a clear relationship would be shown between lower crime rates and suburbanization (sprawl) in the United States.

Should we be surprised inane arguments are concocted out of thin air? No, not at all. The anti-suburban forces have embarked upon an ideological crusade. They do not care a whit about what happens when their policies drive housing prices through the roof. For them, all that matters is aesthetics. The result is that the price of housing, including interest, has been increased over the last 10 years by the equivalent of as much as 10 years household income in Australian urban areas.

Regrettably, there are powerful interests intent on ignoring this reality, while offering all manner of placebos that divert attention from the cause of the problem...

. . .

[OK — so that's Wendell. And this is me, the “powerful interest”, again.]

So there's some sort of barrier around your central cities; most US criminals live within the central city, and very few venture in from the poverty-stricken or more desperate places in the outer suburbs? Gotcha, Wendell! Gee — that must make crime-solving pretty easy in the US!

But me, a suburbs-hater? Why, I've lived in suburban Glen Waverley for the last 34 years and love its people, its places, and lorikeets which sweep through daily. I don't even mind the noise of the possums on our roof most nights.

No, Wendell, I'm not anti-suburban. What I've suggested is that if we increase public capture of publicly generated land values and decrease taxes on productivity, there will be less of what valuers (or appraisers) call “rent” to be privately capitalised into ever higher and higher land prices. You close your mind to the fact that greater emphasis on geo-spatial revenues would keep the lid on these escalating land prices — whatever the supply of land?

Also, the continuing drift to capital cities and their outer 'burbs from regional areas seems to me to be mainly because the big city is where the jobs are, because that's also where the tax advantages have been — you know, “location, location, location” and all that, Wendell? The 'burbs of the big city ain't necessarily where all people living there want to be, as you have claimed. A tax shift to land values might even arrest the drift to urban agglomeration and reinvigorate our regional cities. That's a bad thing, Wendell?!

[Reposted January 29, 2009.]