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Tuesday, January 15, 2008
Thomas Sowell :: Townhall.com Columnist
Green "Disparate Impact"
by Thomas Sowell
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"Open space" laws are just one of the weapons in their arsenal. Other legal impediments to building include so-called "smart growth" policies, historical preservation laws, and zoning boards and coastal commissions with arbitrary powers to limit or forbid building.

The financially ruinous powers of delay that these and other laws and institutions can impose on anyone wanting to build anything can be illustrated by a current legal case involving a developer who has for 15 years been prevented from building in the coastal California town of Half Moon Bay.

A judge recently awarded him $36 million in damages but that decision has been appealed. Anyone familiar with the 9th Circuit Court of Appeals knows that anything can happen there -- including more years of delay.

Someone once said that the ability to tax is the ability to destroy. So is the ability to delay.

When a business sets standards or policies with adverse effects that fall disproportionately on minorities, courts call that a "disparate impact" and equate it with discrimination.

But the same liberals who applaud that approach when it comes to businesses would be appalled if the same standard were applied to their own environmentalist restrictions that force vast numbers of blacks out of their own upscale liberal communities.

Nor do black "leaders" who are quick to cry "discrimination" and "racism" in other contexts. Apparently it all depends on whose ox is gored.

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About The Author
Thomas Sowell is a senior fellow at the Hoover Institute and author of The Housing Boom and Bust.
 
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Complete nonsense
Sowell is spewing complete nonsense. The build-able land scarcity in Coastal California, indeed the West Coast , is primarily because build-able land is very constricted to narrow areas between steep mountains and the water, or in narrow inland valleys. Then, in the period of 1945 through 1990 most of the build-able land near the San Francisco Bay was built out with extremely low density housing - suburbs. It is not a coincidence that housing prices started their really steep rise once the buildable land was used up.
Note I have not mentioned land restriction by environmentalists. The FACT is that the vast majority of the land put into park land is unbuildable - very steep hills or on ridge tops that are not affordable to build on.
As for the run-up in housing prices in the last decade, I have to assume Sowell has been brain dead for the last 10 years because this is a phenomenon that has affected the entire US. For example, my old house in Atlanta doubled in price in 8 years between 2000 and today. Atlanta has no land restrictions of any kind and builds new housing as fast as humanly possible. Considering that wages in Atlanta are much lower than here in the Bay Area, the housing costs are similar
The price increases NATIONWIDE in the last 10 years are due almost exclusively to 1) cheap money (extremely low interest rates), 2) "Innovative" lending tools - i.e., interest-only loans, sub-prime loans, 3) Disconnecting the original lender from owning the loan which thereby disconnects the original lender from any risk whatsoever, and 4) massive fraud brought about by #3. All these factors led to wild speculation on housing to the point some buyers were driving prices up to ridiculous levels simply for investment purposes.
Sowell is very obviously touting a biased opinion against land conservation, not telling any version of the truth based on known facts.



Please keep in mind
... that the real estate prices referenced by Sowell, which are driven by artificially restricted supply, are not the reason why people are defaulting on mortgage loans.

I don't see any of that mistaken conflation here, but I do see it in every discussion of the sagging housing market and the increase in foreclosures.

The two phenomena are related, but they are not the same phenomenon. The people defaulting on their mortgages in California are the middle class homeowners and investors, who generally default on properties valued at under $800K. Mortgages around $350-450K, for about a 2800-square foot suburban house, are probably the most commonly defaulted on.

If the middle class could afford to buy in the older cities, and have good schools and convenient methods of moving kids around for activities, homebuyers would look there. The fact that they can't -- the supply restriction Sowell refers to -- is what is driving people to the exurban developments in inland California.

The people who are defaulting on mortgages here couldn't have qualified to spend over a $1m on a house, in the older cities, even with creative financing. So when we think about an "overvalued" housing market, it's not actually the $1.2m 800-square-foot bungalow in the Bay area that is overvalued. That's not the property that can't be resold for what the owner owes on it. It's the family-size house in central Riverside County -- which cost the same as a similar house in many of the suburbs of Atlanta, Chicago, Washington DC, or Miami.
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