Sunday, April 13, 2008

New Housing Guidelines

In response to Eagle Countys high housing prices, new housing guidelines have been introduced that will require developers to set aside a percentage of the units of each new development for affordable housing. The inclusionary zoning component of these guidelines will effectively drive up the housing prices in Eagle County.
Inclusionary zoning can actually drive prices higher by discouraging builders from building new homes and forcing them to charge higher prices from most of the ones they do build. In a recent publication, Housing Supply and Affordability: Do Affordable Mandates Work? Two California economists estimate that inclusionary zoning in the San Francisco Bay Area has increased the average cost of new homes by $22,000 to $44,000.
Here is an example of how inclusionary zoning works. The inclusionary zoning requirement mandates that developers sell 30 percent of new homes for less than market value. To make up the difference, the developer will increase the price of the other 70 percent of houses in the development. The higher price affects the price and the assessed value of all nearby homes, resulting in increased property taxes to the existing homeowners. The property tax increase is in turn passed on to the renters who are trying to save for a down payment and they have to wait longer to get into the housing market.
Unnecessary building and zoning regulations often add to the cost of housing by preventing the use of innovative building and land development techniques. Cost-effective regulations should streamline the land-use regulatory process so as to minimize the time required to get permits to build new housing. One of the effects of many of these rules is to delay the amount of time it takes to get a permit to subdivide or build. This increases the risk faced by the homebuilder and the cost of borrowing money for the project. That cost is also added on to the price of the house.
The proposed Housing Guidelines are overly complicated and impractical. The cost of these guidelines will not be passed on to the developer, but they will be passed on to all of us through increased property taxes and rents as our assessments continue to climb. Anything that drives up the cost of new homes also leads to an increase in the price of existing homes. While some counties require inclusionary housing, many others offer expedited permits, reduced fees, zoning variances or other incentives for developers who voluntarily build affordable housing.
The increased density that is encouraged in these guidelines will have other negative side effects. The increased density will cause more crowding in our schools, increased traffic congestion, and a further burden to our public safety officers and overcrowded Justice Center. Some areas of our community, in particular neighborhoods in Edwards, are already outgrowing their infrastructure and it is unfair to force increased density upon these communities. The other negative effect is that one of our major industries, construction, will slow down and people may lose their jobs. Many of us are affected directly and indirectly by new home construction. Plumbers, framers, electricians and many others along with their families will be affected if the construction business slows down. We should all be very concerned about the path that the current commissioners have chosen.
A true affordable housing program for Eagle County will require drastic action. It will require less government intrusion and more creative thinking. Home builders, businesses and local officials should work together to overcome cost-adding regulations that will drive up the cost of living for all of us. Eagle County should be a partner with the community to encourage common sense free enterprise solutions that include infrastructure development that compliments increased density.