Policy Documents

Land Use Policy: Pulling Up the Ladder of Opportunity

Wendell Cox –
April 1, 2005

African-American home ownership in the United States has reached record levels. The Census Bureau reports that in 2004, the African-American home ownership rate reached 49.1 percent, up strongly from 42.3 percent 10 years ago.

This is very good news. Home ownership is the ladder to the economic mainstream for middle-income Americans. Approximately one-half of the net worth of middle-income households is in home equity. It may be tough to pay a mortgage, but it is a lot better than paying rent, because every payment increases the net worth of the household. Home equity can create all sorts of opportunities. Money can be made available to start a business, or to send the kids to college. It is much more than a higher figure on a balance sheet.

But there is also bad news. The same Census report indicates non-Hispanic White home ownership is more than 50 percent higher than the African-American rate, at 76 percent. No one should be content until the gap is closed and 76 percent or more of African-American households have become members of what President George W. Bush has called the “ownership” society. Nor should anyone be content until Hispanics reach the same rate.

But the home ownership gap is not the worst news.

Opportunity Slipping Away

The really bad news is that, at least in some areas, the prospects for an ownership society are slipping away. Land use policies, going under the name “smart growth,” promise to reduce home ownership rates over time.

In places like Portland, Denver, and throughout the state of California, scarcity is being created by urban planners seeking to combat “urban sprawl.” Often, these strategies involve establishing urban growth boundaries, which corral all new development and make inexpensive housing on the fringe of an urban area a thing of the past.

Scarcity, of course, raises prices. Portland’s urban growth boundary led to the greatest loss in housing affordability of any major metropolitan area during the 1990s. Housing affordability has fallen so far in Southern California that, if the current ratios of house price to household income (that is, median house price divided by median household income) are sustained, the long-run prospect is for home ownership rates of less than 20 percent. And one thing is certain: If overall home ownership rates decline, African-American home ownership rates will decline every bit as much.

It was not long ago that overall American home ownership rates were less than present African-American home ownership rates. Before World War II, in 1940, the national home ownership rate was approximately 40 percent. What happened after that is one of the great successes of economic history, and it could not have happened if planners had implemented Portland, Denver, San Jose, or San Diego-style urban growth boundaries in 1945. The inexpensive land on the fringe of urban areas would have been off-limits to development, and the nation would be much poorer today.

No Need for Land Use Controls

The travesty is that “smart growth” policies have virtually no justification:

  • The United States is not running out of land. Today, less than 3 percent of the nation’s land is urban.
  • There is no shortage of agricultural land. Improved productivity has resulted in the removal of land equal to the size of Texas and Oklahoma since 1950, which means that the human footprint--the urban land plus the agricultural land--is smaller today than it was then.
  • Faulty research claims the cost of government is higher in the suburbs, but research I conducted with Joshua Utt demonstrates that actual local government spending per capita is lowest in the newest suburbs, which also receive the least state and federal aid per capita. Not since Copernicus was censured for claiming the Earth revolves around the sun has the Establishment gotten it so wrong.

Better Off without Smart Growth

Where smart growth policies are not in effect, African-American home ownership rates are increasing. For example, 40 percent of the residents added to the suburbs of Atlanta were African-Americans between 1990 and 2000. In Atlanta--the fastest-growing urban area with more than 3,000,000 residents in the high-income world-- the lack of smart growth has allowed housing affordability to remain better than average. The same is true in the third and fourth fastest-growing urban areas, Dallas-Fort Worth and Houston.

The spread of affordability-killing smart-growth policies must be stopped, and eventually rolled back. The economic progress of African-Americans in the U.S. should be accelerated, and there is no better way to do that than by making the housing market more affordable.

Wendell Cox (cox@heartland.org) is a senior fellow of The Heartland Institute; a consultant to public and private public policy, planning and transportation organizations; and a visiting professor at a French national university.