Consequences of Urban Containment Policy: Higher Relative Housing Costs for Low Income Households

by Wendell Cox NCPA September 19, 2013

Urban containment (smart growth or growth management) advocates have often expressed the hope that the house price increasing effects of stringent land use regulation would be neutralized by more affordable housing costs in the cores of metropolitan areas, where more dense housing would be permitted. A principle source of this view is an analysis of early 1990s Portland (Oregon) house prices by Justin Phillips and Eban Goodstein, who said that such an effect “should” occur.

It did not. In 15 years since the period covered by this research, Portland house prices have risen with a vengeance (see The Evolving Urban Form: Portland), with the median multiple rising more than 40 percent, from 3.0 in 1995 to 4.3 in 2012. Obviously, with such an increase, the price increasing impacts of Portland’s urban growth boundary have not been negated.

Further, housing costs rose in Portland’s densifying areas at virtually the same rate as in the rest of the metropolitan area over the period from 1999 to 2009. Census and American Community Survey data indicates that densifying zip code areas (housing unit density increases of 5 percent or more) experienced median multiple increases of 37 percent, compared to 36 percent for the balance of the metropolitan area (Note). Rents in the densifying areas rose 9 percent, compared to 8 percent in the rest of the area.

The impact on Portland’s low income population, however, was less than equitable. The cost of owned housing rose 75 percent more in areas of higher poverty (areas with poverty rates 50 percent or more than the average rate) than in the balance of the metropolitan area. The median multiple (value) rose 61 percent in the high poverty areas and only 35 percent elsewhere.

The difference was even starker in rentals, a market in which low income households are concentrated. Income adjusted median gross rents in the high poverty areas rose more than 2.5 times the increase in the rest of the metropolitan area. In the high poverty areas, the increase was 21 percent and only 8 percent elsewhere.

The housing cost increases in the higher poverty areas appears to be at least partially the result of gentrification and Portland’s efforts to improve neighborhoods through urban renewal. In assessing the results of the 2010 census, The Oregonian noted that the core city of Portland had become less diverse and that many African-American households were driven out of their neighborhoods by “gentrification.”

This greater housing cost burden on lower income households could not be more opposite than the noble intentions expressed in much of the urban containment and smart growth literature. Results are more important than intentions.

Portland is not alone. Nelson, et al, were uncritical of Portland a decade ago (before the evidence of house price increases was so clear), but did not mince words in characterizing the already evident higher prices from stringent land use policies in California, saying: “This is arguably what happened in parts of California where growth boundaries were drawn so tightly without accommodating other housing needs that housing supply fell relative to demand.”

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This article is adapted from The Consequences of Urban Containment published in newgeography.com

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