Statewide Growth Management and Housing Affordability in Florida
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Number 53 • October, 2007 Statewide Growth Management and Housing Affordability in Florida Leonard C. Gilroy, AICP, Director of Government Performance, Reason Foundation, Samuel R. Staley, Ph.D., Director, Urban Growth and Land Use, Reason Foundation Sara Stedron, Research Associate, Wright State University Adjunct Scholars, The James Madison Institute Executive Summary Florida is recognized as a national leader in the “Smart households can afford the “median” home based on income and Growth” movement. The state has given housing goals a housing price — has eroded sharply, particularly since 2005, special prominence in regional and urban planning, explicitly falling well below the national level by 2007. While affordability requiring its cities to plan for a diverse range of housing needs nationwide was just over 10 percent lower in 2007 than in 1991, and types. affordability in Florida has plummeted by more than 50 percent However, a growing body of research strongly suggests over the same time period and has eroded by nearly 60 percent that some of the goals of Smart Growth’s advocates may be since its peak at 80.7 in 1994. inconsistent with the realities of housing development. To the Despite these trends, few analysts have examined Florida’s extent that more compact, higher density urban development is statewide growth management law and its impact on housing encouraged through growth-management laws such as Florida’s, markets and prices. This is surprising because a large body of higher housing prices could result. research has shown that local and statewide regulations on In fact, despite statewide planning goals and programs de- development significantly impact housing production and costs. signed to promote affordable housing, housing costs have been Among the handful of studies that have examined Florida’s increasing in Florida faster than the national average. According housing market, one conducted by Reason Foundation in 2001 to the National Association of Realtors, home prices in Florida found that Florida’s Growth Management Act (GMA) may exceeded the national average for the first time in 2005. have contributed as much as 20 percent to rising housing costs Housing price increases have outpaced income growth. between 1994 and 2000. Indeed, since 1994, housing price inflation has outstripped This report updates and extends that previous study by income growth by a factor of two to one. Not surprisingly, analyzing housing price data from 1990 to 2006. A statistical housing affordability has suffered. analysis of housing trends in the 56 of Florida’s 67 counties Housing affordability in Florida tracked the national average found that as much as 16 percent of housing price inflation for much of the 1990s but declined significantly after 2000. can be attributed to planning under the state’s GMA, a result Florida’s housing opportunity index – a measure of how many consistent with previous analysis and research. THE JAMES MADISON INSTITUTE Celebrating 20 Years as Florida’s Premier Free-Market Think Tank The James Madison Institute is a non-partisan policy center dedicated to the free-market principles of limited government, individual liberty, and personal responsibility. President and Chief Executive Officer: J. Robert McClure III BOARD OF DIRECTORS Chairman: L. Charles Hilton Jr., Panama City Vice Chairman: J. Stanley Marshall, Tallahassee MEMBERS OF THE BOARD OF DIRECTORS: Allan Bense, Panama City; Norman Braman, Miami; Tommy Bronson, Brooksville; Jacob F. Bryan, Jacksonville; Rebecca Dunn, St. Petersburg; K. Earl Durden, Panama City Beach; Robert R. Feagin III, Tallahassee; George W. Gibbs III, Jacksonville; John Hrabusa, Lakeland; John F. Kirtley, Tampa; J. Robert McClure III, Tallahassee; Bill McCollum, Tallahassee; Susan Story, Pensacola; Jeffrey V. Swain, Tallahassee THE JAMES MADISON INSTITUTE STAFF Tanja Clendinen, Communications Director; Keri Gordon, Administrative Assistant to the President; Becky Liner, Membership Director; Thomas Perrin, Public Affairs Director; Robert F. Sanchez, Policy Director TO CON TAC T US: By Mail: By Phone: 2017 Delta Boulevard, Suite 102 In the Tallahassee Area: 850-386-3131 Tallahassee, FL 32303 Toll-Free From Anywhere: 866-340-3131 Our Website: Via e-mail: www.jamesmadison.org [email protected] About JMI’s Research: Our Pledge to You Research topics are selected by JMI’s Committee on Public Policy, with input when appropriate from members of our Research Advisory Council. Published research focuses on topics relevant to Florida and the Institute’s mission of promoting free-market principles and robust debate concerning Florida’s current problems and future challenges. The findings and conclusions in JMI’s publications are those of the authors and do not necessarily reflect the views of JMI’s members, staff, or directors. JMI does not conduct sponsored research at the behest of donors, nor do the providers of research grants exercise control over the methodology, findings or conclusions of the research. When a peer review of an author’s methodology or conclusions is appropriate, a draft version of the publication may be submitted to a member or members of the Research Advisory Council. THE RESEARCH ADVISORY COUNCIL OF THE JAMES MADISON INSTITUTE Dr. Susan Aud, Research Associate, Milton and Rose Friedman Foundation; Dr. Michael Bond, Professor of Economics, Cleveland State University; Dr. Thomas V. DiBacco, Professor Emeritus of History, American University; Dr. James Gwartney, Professor of Economics, Florida State University; Wynton Hall, Professor of Speech Communication, Bainbridge (Ga.) College; Dr. Randall Holcombe, Professor of Economics, Florida State University; Dr. Barry Poulson, Professor of Economics, the University of Colorado; and J.B. Ruhl, J.D., Professor of Law, Florida State University College of Law 2 These results have important implications The solution to Florida’s housing affordability for the future of planning in Florida, including crisis is to reform the planning process in ways the current “Hometown Democracy” initiative. that allow the private housing industry to meet Hometown Democracy attempts to further the state’s growing housing needs. This implies restrict land and housing development by requir- adopting development regulations that embrace ing all local comprehensive plan amendments to the open-ended and dynamic nature of com- go to a community-wide referendum. The effect munity development rather than attempting will be to further slow the development approval to force housing and commercial projects into process, placing upward pressure on housing preconceived and highly prescriptive com- prices by compromising the housing industry’s munity designs. ability to meet Florida’s housing needs. Table of Contents Part 1: Introduction . 4 Part 2: Housing Affordability in Florida . 5 A. Growth Controls, Housing Costs and Affordability . 5 B. Florida Housing Affordability Trends . 6 Part 3: Overview of Growth Management in Florida: Understanding Florida’s Growth Management Act . .11 A. Florida’s Growth Management System . 12 B. Florida’s Department of Community Affairs . 14 C. Growth Management and Housing Affordability in Florida . 15 Part 4: Analysis of the Growth Management Act’s Impacts on Housing Prices and Affordability in Florida . 16 Part 5: Potential Impacts of the Hometown Democracy Amendment on Housing Affordability in Florida . .20 A. Ballot-Box Zoning in Action . 21 B. Hometown Democracy and Housing Affordability . 23 Part 6: Conclusion . .25 Addendum: About the Authors . 27 3 Statewide Growth Management and Housing Affordability in Florida Part 1: Introduction is a subject to which we will return later in this report in the context of the proposed Florida “Hometown Democracy” ballot measure. In recent decades, urban “sprawl” and growth While Smart Growth initiatives have management have emerged as major themes become increasingly common at the local of public policy debates at the state and local level, particularly in states such as California, level. In communities nationwide, citizens and the most comprehensive growth management elected officials are concerned about the effects programs have been implemented through of population and economic growth on their state legislatures. Hawaii and Vermont were environment and quality of life, and they are early pioneers in this regard, but Oregon continually searching for ways to mitigate the was the first geographically diverse state to problems associated with rising demands for implement a top-down, state-directed system new homes, stores, and office buildings, as well in which the core features could be adapted as the roads, parks, and urban services needed to other states. to serve them. After establishing its statewide land use New development — which usually occurs planning system in 1973, urban-growth on the urban periphery — has laid the political boundaries and comprehensive land use foundation for a growing movement to restrict plans were subsequently established in all and further control the pace and pattern of of Oregon’s cities and counties. Portland’s land development. Many growth management regional growth boundary was established in advocates argue that state and local land-use 1979, and all Oregon cities and jurisdictions planning should actively shape the built envi- had growth boundaries in place by 1986. As ronment for local citizens through zoning, urban a result, Oregon has become the nation’s growth boundaries, and various other forms model for statewide growth