Middle-Income Housing Affordability
Presentation by Wendell Cox to the
American Dream Conference
November 7, 2015
Brisbane
MIDDLE INCOME
HOUSING
AFFORDABILITY
G-20 Priorities:
Better
Standard of Living
Alleviating Poverty
Requires
Middle-Income
Housing Affordability
Discretionary Income
DEFINES THE STANDARD OF LIVING & POVERTY
Discretionary Income
(=)
Gross Income
Minus
Taxes and Necessities
(Such as Housing, Transportation
& Clothing)
Democratization of Prosperity
ASSOCIATED WITH HOME OWNERSHIP
From Levittown NY to
Lakewood
Lakewood, California
Measuring Housing Affordability
THE DEMOGRAPHIA SURVEY
MEDIAN MULTIPLE
Median house price
divided by
Median household income
Table 1
Housing Affordability Rating Categories
Rating
Severely Unaffordable
Seriously Unaffordable
Moderately Unaffordable
Affordable
Median Multiple
5.1 & Over
4.1 to 5.0
3.1 to 4.0
3.0 & Under
9 Nations
86 Major Markets
378 Total Markets
Urban Growth Boundary & Land Values
THE THEORY
Land Value
AFTER URBAN GROWTH BOUNDARY
BEFORE URBAN
GROWTH BOUNDARY 
LOCATION OF
URBAN GROWTH
BOUNDARY
 (Land Value Gap)
Leading theorists:
Lower costs of higher
density housing would
negate land price
increases
Distance from City Centre
Figure 6
Impact of Urban Growth Boundary
PORTLAND RAW LAND VALUES: ADJACENT TO UGB
House Price to Income Ratio
INTERNATIONAL:1980s-2000s
3.0 Maximum
Affordability
Standard
All major markets were
below or near 3.0
before urban containment.
Source: Federal Reserve Bank of Australia
Land Rationing is the Issue
DESTROYS HOUSING AFFORDABILITY
... the affordability of housing
is overwhelmingly a function
of just one thing, the extent
to which governments place
artificial restrictions on the
supply of residential land.
Donald Brash, Governor,
Reserve Bank of New Zealand
1988-2002
Introduction to
4th Annual Demographia International Housing Affordability Survey
Recognition of the Problem
GOVERNMENT OF NEW ZEALAND
Land has been made
artificially scarce by regulation
that locks up land for
development. This regulation
has made land supply
unresponsive to demand.
Bill English,
Deputy Prime Minister
New Zealand
Introduction to
9th Annual Demographia International Housing Affordability Survey
Paul Cheshire
ECONOMIST
Urban containment is
Irreconcilable with
Housing affordability
All Lost Equality in Housing?
THE “DISAPPEARING” MIDDLE CLASS
Virtually all
increased inequality
is in higher
housing values
Much due to
Housing regulation
-Rognlie, MIT
Excessive Land Regulation: Lost GDP
EUROPEAN & US RESEARCH
London
Higher commercial
Development costs
-Cheshire & Hilbur
London School of Economics
20% less job growth
than expected in
metropolitan areas
with strongest
land use regulation
-Raven Saks
US Federal Reserve Board
Reduced employment
in Amsterdam/Rotterdam
$2T GDP Loss: US
-Vermuelen & Ommeren
Netherlands Bureau of Econ. Rsch.
-Hsieh & Moretti
UIC & UCB
Middle-Income Housing Affordability
MAJOR US METROPOLITAN AREAS: 1950 – 2014
10
Less Restrictive Markets
More Restrictive Markets: Outside California
California (All More Restricted Markets)
9
8
Median Multiple
7
6
Annual Data Begins at 1980
5
4
3
2
1
 Median Multiple: Median House Price divided by Median Household Income
0
1950
1960
1970
1980 1985 1990 1995 2000 2005 2010
Derived from Census Bureau, Harvard University and Demographia.
Housing Adjusted Poverty Rates: 2013
UNITED STATES, CALIFORNIA & MISSISSIPPI
25%
Mississippi has
historically
had the
worst poverty
20%
15%
23.4%
10%
15.3%
5%
0%
California
Legislative Analysts Report
California
Source: US Census Bureau
Mississippi
CALIFORNIA:
NEED TO
LIBERALIZE
REGULATIONS
Far from helping,
they are making it
particularly difficult
for Latino and
African American
households to
own a home
"Suburbs rarely cease growing
of their own accord.
The only reliable way to stop them …
is to stop them forcefully.
But the consequences of
doing that are severe."
welcome
foreigners
Progress: New Zealand & Florida
REFORM COMES FROM THE OUTSIDE, NOT PLANNING
• New Zealand
– Legislation
– Productivity Commission
• Auckland
– Affordability target
• Florida
– Repealed Smart Growth
Auckland
NEW ZEALAND
PRODUCTIVITY
COMMISSION
Proposal
Housing affordability
greenfield
land
release
Outcomes….
•decline in home ownership rates;
•increasing shares of their income to housing, with associated impacts on
wellbeing;
•a more uneven distribution of national wealth;
•ongoing overcrowding, with associated health and social costs;
•a greater risk of economic volatility and macroeconomic instability;
•barriers to labour market mobility;
•an undermining of the effectiveness of monetary policy to manage economywide inflation
•pressure on fiscal policy, through direct and indirect paths.54
For example, through social housing.
Non-Ideological Approach
The Commission does not have a
preference for whether cities grow out or
up. Our larger cities will always have an
element of both. In any event, what
matters ultimately are the preferences of
households and whether they have
available to them choice of housing
types at different price points to cater for
a range of income levels.
Councils in our largest cities should be
able to pursue the goal of a compact
urban form if that is what their
communities want.
The key test is whether they deliver
sufficient development capacity to
house a growing population while
delivering a choice of quality, affordable
dwellings of the type demanded by
purchasers.
Where large discontinuities emerge
between the price of land that can
be developed for housing and land
that cannot be developed, this is
indicative of the inadequacy of
development capacity being
supplied within the city
Impact of Urban Growth Boundary
PORTLAND RAW LAND VALUES: ADJACENT TO UGB
Productivity Commission
Recommendations
– Right to plan
– Obligation
– Plans not reflecting preferences
– Differential at UGB
– Creates national externalities
– Event based trigger: Release greenfield land
"That's denying a whole generation of New
Zealanders affordable housing options in areas
where they want to live. We are going to say
from central Government's view that
affordable housing is a matter of national
importance and we are going to require
councils, like Auckland Council, to restrict the
use of density and height controls so they can't
be used to prevent affordable housing being
built."
"It will be a reduction in the veto power of
existing residents. At the moment ... they put a
premium on the right of neighbours to object
in a community. What we are saying is we have
to take into account the whole of New Zealand
and future generations who desperately need
affordable housing."