MeansStringhamdraft

MeansStringhamdraft - Affordable Housing Mandates: An...

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Affordable Housing Mandates: An Empirical Look at Housing Production and Prices. Tom Means San Jose State University Edward Stringham San Jose State University Please do not quote. Comments can be sent to Tom Means, Department of Economics San Jose State University San Jose CA 95192-0114 or tmeans@email.sjsu.edu The authors thank Jennifer Miller for her research assistance.
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I. Introduction. California cities have some of the highest housing prices in the country. As prices continue to increase many cities look for ways to provide housing for low-income groups. One approach is to resort to mandated housing policies. These policies fall under the umbrella of affordable housing strategies and are generally found in the state mandated housing element plans that each city must produce. Mandated housing policies also go by other names: Inclusionary Zoning (IZ), Affordable Housing Mandates (AHM), and Below Market Rate (BMR) housing. To be clear, an affordable housing strategy is code for subsidized housing and is not an attempt at making housing more affordable. The AHM requires developers to set aside a percentage of units, which are delivered to the city and sold at below market rates (BMR). Over 100 cities in California have passed mandated housing policies but there has been little research on the market implications of these policies
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and certainly no empirical research to test the impact of these polices on the housing market. We plan test some simple models to see if we can determine their impact. II. Research Literature Overview. There is a growing consensus that California housing prices have increased dramatically and resulted in extremely large gains relative to other parts of the country. Quigley and Raphael (2004) provide a nice summary of these gains and their impact on affordability for low-income households. In a related paper (Quigley and Raphael (2005)) provide empirical results to show that growth controls restrict output and increase prices for houses. Both papers point out to the lack of accountability for local officials, the conflict between state and local jurisdictions, and the lack of state interest in increasing the supply of housing. For example, California municipalities are required by the state to formulate a housing element to meet state mandated quotas, (generated
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from econometric models), but there is no penalty for failing to meet these quotas. Similarly, the authors point out the incentive for locally elected officials to favor commercial over residential development. Both types of development generate government revenues, but homeowners tend to demand more public services, which requires more public spending. Finally, the authors point out that the increased regulatory environment induces a substitution towards more expensive housing products over lower or moderately priced products. Other research provides support that some California cities
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MeansStringhamdraft - Affordable Housing Mandates: An...

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