The Opportunity to Own

The Urban League concluded one of its most successful national conferences in late July.

There were at least two significant highlights in this gathering of one of the nation's most prestigious African-American organizations. The appearance of the major Democratic presidential candidates surely grabbed the most press.

Home Ownership Is Key

But there was more. The conference adopted a policy statement, "The Opportunity Compact: Blueprint for Economic Equality," containing 10 points that are "important in achieving the American Dream." Given the central place of housing in the American Dream, it is not surprising that more than one-third of the Compact deals with home ownership--what it calls the "Opportunity to Own."

There is no doubt progress is being made. White-Non-Hispanic home ownership is now approximately 75 percent and African-American home ownership has risen in recent decades and is now near 50 percent.

However, it seems likely the gap between White and African-American home ownership will expand in the years to come, quite the opposite of the intentions of the "Opportunity Compact." Moreover, the widening gap will be a direct result of policies that are pursued by liberal interests that in the past have often been allied with major African-American organizations.

Urban Planning a Threat

The problem is restrictive urban planning policies, which go under the attractive marketing name of "smart growth." Smart growth seeks to control suburbanization (pejoratively called "urban sprawl") and has been principally pursued by more liberal elements committed to the current orthodoxy of urban planning. The problem with smart growth is that it takes away opportunity. It does so by rationing land and by other overly restrictive strategies that increase the price of housing.

There are urban growth boundaries in some metropolitan areas that limit the amount of land that can be developed, raising its price. Portland, Oregon, some California areas, and Denver have implemented such boundaries.

There are unreasonably large minimum lot sizes that make it excessively expensive to develop suburban housing. This is the favored strategy in growing suburban Washington, DC and Boston, and the explosion of housing costs there relative to incomes is the result.

Two-Tier Market Exists

Everyone knows house prices have risen in recent years. What is not so obvious, especially to national analysts, is that a two-tier housing market has developed.

On one hand there are the restrictive, largely smart-growth markets, where housing costs have nearly doubled relative to household incomes in just 10 years. On the other hand, there are the traditional, liberally regulated markets, in which housing costs have risen only 10 percent relative to incomes over the same time. This latter group includes the three fastest-growing markets with more than 5,000,000 population in the high-income world: Atlanta, Dallas-Fort Worth, and Houston.

Devastating Effect on African-Americans

If smart growth has generally negative consequences for housing affordability, its impact on African-Americans is devastating. Historically, median house prices have been approximately three times the median household income. Currently, this "median multiple" is 2.7 in Dallas-Fort Worth. The median multiple for African-American households is 3.9. That is bad enough, though not materially different than 2000.

The smart-growth markets are another thing altogether, as two examples illustrate. In the Washington, DC area, median house prices have risen so much that the overall median multiple is 5.6 and the African-American median multiple is 7.8. Things are even worse in San Diego, with an overall median multiple of 10.5 and an African-American median multiple of 13.2.

House prices have escalated so rapidly in Washington that it now takes $500,000 more to pay for the median-priced house than it did in 2000, including mortgage interest (adjusted for inflation and incomes). In San Diego, things are even worse. It now takes nearly $600,000 more to pay for the median-priced house than in 2000. This translates into 10 years of African-American median household income in Washington and more than 15 years of African-American median household income in San Diego.

As regards African-American home ownership, the message of smart growth is "go to the back of the bus."

Urban planning is severely damaging African-Americans' opportunity to own a home. Unfortunately, this was missed in the Opportunity Compact. So too will be the opportunity to own as the promise of the American Dream slips away for African-American households. People's needs should be put ahead of urban planning fantasies, and it is time for public policies to start reflecting that reality.

Wendell Cox is a senior fellow at The Heartland Institute and principal of Wendell Cox Consultancy in metropolitan St. Louis (Missouri-Illinois). He serves as a visiting professor at the Conservatoire National des Arts et Metiers in Paris and is co-author of the "Demographia International Housing Affordability Survey."