Housing Funds: A study finds U.S. investments encourage low density development
Hartford Courant Editorial
March 11, 2013
When this page began looking at the adverse effects of sprawl development several years ago and encouraging smart growth as an antidote, our editorialists were accused of "telling people where to live."
Balderdash. It wasn't Mother Courant who was telling people where to live, it was Uncle Sam.
"One of most persistent canards about American communities is the idea that they've been built entirely by demand," Emily Badger recently wrote in The Atlantic Cities. Not so: "The built environment we've created in American cities, suburbs and rural towns owes much more to the federal government than it does the free market."
The federal government has been influencing the built environment since the Depression, when it involved itself in a major way in the housing market. This involvement included, shamefully, redlining urban neighborhoods for home loans as well as building public housing projects and, later, constructing the interstate highway system.
RENTERS LOSE OUT
And Washington is still at it, although more subtly, heavily influencing what is built and where. That's the conclusion of a recent study by the nonprofit coalition Smart Growth America.
The group looked at 50 federal real estate programs representing an annual expenditure of $450 billion in direct expenditures, tax credits and loan commitments (and that does not include the outstanding loans and loan guarantees of Fannie Mae and Freddie Mac, which exceed $5.5 trillion).
Instead of furthering sound public policy, much of this massive investment is promoting sprawl. For example:
Federal financial policies overwhelmingly favor homeowners over renters, and single-family over multifamily homes, the study finds. Small multifamily homes, with more than five but fewer than 50 units, are in great demand but very difficult to finance and do not receive focused federal subsidy. In other words, federal incentives tell developers to build single-family homes in the suburbs.
And no surprise, the system favors the wealthy. Take, for example, the home mortgage interest deduction, which costs $80 billion annually. This chestnut is supposed to encourage homeownership. But it applies to owners who itemize deductions, and to owners of second homes, so it is not encouraging ownership as much as rewarding it. There's no comparable benefit to renters, who make up 35 percent of the nation's households.
A system in which renters and lower-income homeowners indirectly subsidize owners of second homes is a system in need of repair.
Also, a number of programs establish "use limits" to the kinds of buildings that can receive low-cost loans — you only get the loan if you limit the amount of commercial space in a mixed-use building, for example. This is a barrier to market change.
Finally, federal policies are "failing to adequately support existing neighborhoods." Reusing existing neighborhoods is essential to creating more compact, less automobile-dependent communities.
We Can't Continue This
These policies have been going on for years, and their effects can be seen throughout much of Connecticut, where decaying cities split by massive highways give way to miles and miles of single-family suburban subdivisions and strip malls.
For any number of good reasons, we cannot live like this for too much longer. The half-century-old interstate highway system that enabled suburban sprawl is decaying and in need of reconstruction. We can't afford to rebuild the whole thing. Plus, much as we all like to drive, the burning of fossil fuels has to be reined in, before sea-level rise creates shoreline in, say, Rocky Hill.
On the plus side, some towns that built mostly large-lot, single-family homes now have young people and aging boomers who want to stay in town but have few other housing choices. Officials are quietly looking at programs that will help them build smaller, denser, more affordable housing that is less reliant on driving.
The key on both the state and federal level is to decide what we want and align the need with the incentives.
Reprinted with permission of the Hartford Courant.
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