Anti-growth sentiments exacerbated by nine years of prosperity have attained such strength that citizens in two states, Arizona and Colorado, are being asked to vote on ballot initiatives that appear aimed at slowing the overall population growth rates in their states.
Approval would greatly affect future markets for commercial real property there. Can voters in a region actually curtail its future growth rate by such measures? That is the subject of this column.
Background factors It has long been my belief that individual local governments cannot influence the overall growth rates of their regions by passing local growth-control laws. Regional growth rates are determined by broad forces beyond the control of any one or even several local governments.
These forces include the region's location in the nation, its climate, its topography, the demographic nature of its population, its physical size, its natural resources, and past investments made in it by specific industries and governmental agencies, as well as the national economic climate. Therefore, when any one locality passes laws limiting future growth within its own boundaries, it will not affect the future growth rate of the overall region. Rather, it merely moves the region's future growth to other localities therein, or to outlying unincorporated areas. Thus, local growth limits actually tend to aggravate sprawl.
However, this argument depends upon the availability of some places within the region willing to accommodate more growth. If every square foot of land within a region lies within some incorporated locality, and if every locality adopts stringent growth control limits, that could prevent additional growth from occurring anywhere within the region, at least legally.
Up until now, that combination of stringent conditions has never existed in American metropolitan areas, though it almost prevails in parts of California. Even if many communities adopt draconian limits on their own future growth, there have always been other communities in the region willing to accept growth, or unincorporated areas where no growth limits existed.
The new anti-growth strategy Opponents of future growth have apparently recognized this situation and developed a strategy to alter it. That strategy is to require every sizable community within an entire state to adopt targeted growth limits that are difficult to change, thereby eliminating a region's "escape valve" containing some communities that are willing to accept growth, or at least unable to stop it.
This is the approach embodied in state ballot initiatives this year in both Colorado and Arizona. In both states, growth opponents have proposed initiatives that require every locality to: (1) designate certain limited areas for future growth; (2) have those designations approved by local voters; and (3) receive future voter approval for any significant changes in the initially approved growth areas.
In neither initiative is there any formal agency constituted to reconcile conflicts among the plans adopted by individual localities, or to insure that the overall growth needs of the entire region will be met. These initiatives have the strong political appeal of leaving control over growth entirely in the hands of local governments, rather than creating any region-wide agencies to coordinate local government plans or to insure that regional needs are served.
A basic flaw in this strategy This new anti-growth strategy is built upon the fact that local governments are almost always motivated to maximize the economic and other welfare of their own current residents only, without regard to consequences for the region as a whole. That is because local voters control the election of local officials, who therefore must please those voters to remain in office. But local citizens, most of whom are homeowners, are almost exclusively interested in their own welfare, especially the market values of their homes, not in the needs of the entire region. Voters want to prevent any local developments that they believe might reduce the market values of their homes, so they oppose construction of multifamily or affordable housing, or region-serving facilities like airports or rehabilitation centers for drug addicts or ex-convicts, or new highways passing near their communities. They also want to preserve open space and reduce congestion of local facilities by limiting densities within their localities.
Experience shows that it is virtually impossible to get a local electorate to approve significant increases in residential density within its boundaries. This built-in conservatism is what anti-growth advocates are counting on to prevent future approvals of any increase in permissible growth within each region in the states concerned. Of course, this strategy ignores the need to consider the welfare of the region as a whole, and especially of its lower-income residents.
Undesirable consequences of this strategy If these statewide initiatives pass, several socially undesirable consequences will arise. First, even if local communities adopt initial growth boundaries that contain enough vacant land to accommodate 10 years' worth of future growth (as in the Arizona initiative), that vacant land will eventually fill up with new development, especially in historically fast-growth states like Arizona and Colorado. Then additional future growth can only occur legally if citizens in each community adopt plan amendments permitting larger growth areas or higher residential densities.
But such amendments are unlikely to pass because citizens of each locality will still choose limits for themselves and expect other localities to accept the inconveniences of future growth. Therefore, no communities are likely to accept such growth. In short, no one will be motivated to permit more growth of the type that has helped make these regions so prosperous.
The second consequence is that land and housing prices will be pushed upwards as all the land now available for growth gradually becomes absorbed without much more such land being designated. Demands from people seeking to enter the region will continue because of the region's desirable traits, but there will be fewer new housing units to accommodate them. This will increase competition for existing housing, driving up prices and rents.
That is precisely what has happened in California, where growth limits are so widespread housing prices are 75% above the national average, although incomes are only 4% above the national average. Of course, rising home values will benefit existing homeowners, the very same voters who will be preventing expansion of existing growth limits. So their desires to block more growth will be reinforced by their economic gains from higher home prices. But this situation will harm all renters, over one-third of the population and most of the low-income population, all newcomers seeking to enter the area, and all households within the area trying to buy a home for the first time.
A third undesirable consequence will be the expansion of overcrowded slums in the Phoenix and Denver regions. High housing prices do not deter low-income immigrants from entering a region if jobs are available there, because they are willing to double-up and triple-up in already overcrowded units, which are still better than their former homes in Latin America or Asia. If too little new housing is built, these immigrants will simply continue to overcrowd existing housing, even though doing so is illegal. Already widespread in Southern California, such slums are now growing in Northern California, too.
Finally, these consequences may eventually slow down the growth of the entire region, which is the goal of the anti-growth forces sponsoring these ballot initiatives. But slower growth also means fewer future new jobs, especially in the construction industry, which has long employed a larger-than-average share of all workers in fast-growth regions like Phoenix and Denver. Those jobs support many ancillary jobs, which will simply not materialize. And high housing prices will eventually deter major industrial and service firms from expanding their activities in these regions. That will restrict future markets for commercial and industrial real properties of all types.
Conclusions Anti-growth forces have developed an ingenious strategy for possibly slowing the future growth of fast-growing regions, such as Phoenix and Denver. In the guise of preserving local control over future growth, these forces plan to take advantage of the parochial perspective of local governments that focuses only on the well-being of their own residents, and therefore seeks to push the problems of growth onto other localities.
If every locality throughout a state adopts that strategy, there will be no place for future growth to go, at least legally. Whether this strategy can eventually overcome the basic attractions of fast-growing regions, which have drawn so many newcomers, has yet to be proven.
The experience of California in the 1990s, when 2 million, mostly poor, net immigrants from abroad replaced 2 million, mostly middle-class, net out-migrants to the rest of the U.S., might suggest that this strategy could slow future growth to only natural increases. But slowing growth because middle-class households leave while poor ones keep entering is probably not what is really desired by anti-growth advocates, or anyone else. Moreover, California's growth slowdown in the 1990s resulted mainly from a severe recession early in the decade.
Now that prosperity has returned to California, net out-migration to the rest of the nation has stopped, while net immigration from abroad continues. So the consequences of California's anti-growth policies are now mainly soaring housing prices, extremely long commutes for many middle-income and poor households, low homeownership ratios, and burgeoning slums occupied by the poor.
If the California model is the future that the citizens of Arizona and Colorado desire, then they should vote for these anti-growth initiatives. If not, they should defeat these initiatives and stop trying to grapple with what are truly regional problems through purely local actions.