The Urban League, one of the nation’s most prestigious African-American organizations, just concluded a highly successful national conference. Though the appearance of the major Democratic presidential candidates surely grabbed the most press, there was more.
The group adopted a policy statement, The Opportunity Compact: Blueprint for Economic Equality, containing 10 points that are “important in achieving the American Dream.” Given housing’s priority in the American Dream, it’s unsurprising that more than one-third of the Compact deals with home ownership–what it calls the “Opportunity to Own.”
Undoubtedly, progress is being made. 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 coming years–quite the opposite of Compact’s intentions. Moreover, the widening of that gap will be a direct result of policies that are pursued by interests that have often been allied with major African-American organizations.
The problem is restrictive urban planning policies, more attractively labeled “smart growth.” Smart growth seeks to control suburbanization (pejoratively called “urban sprawl”) and has been pursued principally by liberals committed to the current orthodoxy of urban planning. The problem with smart growth is that it takes away opportunity through land rationing and other overly restrictive strategies that increase housing prices.
Some metropolitan growth policies limit the amount of land that can be developed, raising its price–for example, those in some areas of California, as well as the cities of Portland, Oregon and Denver, Colorado.
In the District of Columbia and Boston, unreasonably large minimum lot sizes make developing suburban housing excessively expensive–a direct cause of the housing cost explosions in those cities.
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 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, lightly regulated markets, in which housing costs have risen only 10 percent relative to incomes over the same time. This includes Atlanta, Dallas-Fort Worth, and Houston–the three fastest-growing markets with populations exceeding 5 million.
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 median household incomes. 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 in 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, 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.
For African-American home owners, the message of smart growth is, “Go to the back of the bus.”
Urban planning is severely damaging African-Americans’ home ownership opportunities. Unfortunately, the Urban League’s Opportunity Compact missed that fact. The interest groups that have been so helpful in the past are now putting the American Dream out of reach. People are more important than planning, and it is time that policies reflect that reality.
Wendell Cox ([email protected]) is a senior fellow at The Heartland Institute and principal of Wendell Cox Consultancy in metropolitan St. Louis (MO-IL). 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.”