Growth Management Decreases Housing Affordability
2004-10
In 1990 the State Legislature approved a new plan to manage urban growth in Washington state. The Growth Management Act (GMA) placed new restrictions on urban, suburban and rural growth with the intent of limiting the expansion of urban development in rural and agricultural areas. Under the leadership of then Governor Booth Gardner, the Legislature adopted a scaled-down version of Initiative 547 in 1991, which was defeated the previous year by a vote of nearly 3 to 1.
In the late 1980s and early 1990s strict growth management regulations were seen as the only way to slow the urbanization of rural areas and prevent environmental damage to the air, water and other natural resources. According to proponents, the most valuable characteristics of our state were being threatened by increasing development. Forests and farmlands were being paved to make way for roads and housing, and air and water quality were suffering from increased runoff and pollution. Today, while state mandated growth management remains hotly contested, the practical implementation of GMA presents unique challenges.
While effectively slowing urban growth, the Growth Management Act has caused considerable increases in housing costs and added to the regulatory burden for developers and other businesses. Central to the conflict over GMA are the 14 often contradictory goals established by the GMA. For example, state and local government are required to protect private property rights, but also directly regulate property uses. The Act also requires increasing housing affordability, but strictly limits the amount of land available for development.
Evaluating the effects of GMA on housing affordability is important. When housing prices increase, young families find it harder to buy a home, and workers are forced farther away from the urban core to find a house they can afford. As a result, some growth management policies may actually have the perverse effect of accelerating urban sprawl by shifting growth to areas with fewer growth restrictions.
This Policy Note provides a brief overview of a recent study, “Smart Growth and Housing Affordability: Evidence from Washington State,” by Samuel Staley and Leonard Gilroy of the Reason Public Policy Institute. The report, published by Washington Policy Center, shows that growth management planning reduced housing affordability for Washington families by an average of 26 percent. To explain why, it is important to understand how the GMA works.
The GMA is a unique state regulation because it places much of the responsibility for implementation in the hands of local government. Under the Act the state establishes growth management standards, and then local governments develop growth plans based on those standards. Local governments are not given complete control, however. State appointed regional Growth Management Hearings Boards have oversight responsibility for local growth plans and are responsible for ensuring the state’s objectives are met.
There are two primary components of growth management under GMA. The first is the Comprehensive Plan. This is an all-inclusive 20-year overview of the planned growth for a county or local community. It stipulates the location of all planned growth and infrastructure improvements necessary to meet those growth needs. The second major component is the Critical Areas Ordinance (CAO). Local governments must adopt a CAO to protect ecological resources that are considered critical to the proper function of the environment - areas like wetlands, salmon-bearing streams and old growth forests.
Every county must adopt a CAO, but not all are required to adopt a Comprehensive Plan. Under the Act, large urban counties and smaller counties with less than 20 percent growth over the 10 years prior to implementation are not required to plan. Smaller counties are not prohibited from planning and can opt-in if they choose to. Under those guidelines, 18 of Washington’s 39 counties are required to plan, 11 counties chose to plan and 10 counties do not plan under GMA.
Of the counties that today plan under GMA, each is required to establish an Urban Growth Area (UGA), or a demarcation line prohibiting most development outside the boundaries established by local planners. Except under certain circumstances, the housing needs of a community must be met primarily by building inside the UGA.
It is this strict urban growth boundary that seems to drive up the cost of housing for some counties in Washington. Specifically, in counties with fast growth patterns, limiting the supply of buildable land (and thus available housing) increases the cost of housing. It is not the only cause of housing price increases, but it does contribute heavily to reductions in affordability.
Nowhere is this more apparent than in King County, where housing prices have increased substantially in the last 10 years, rising much faster than the average income for local workers. In 1990 a median priced house sold for $140,000. By 2000, the price was up to $245,000, an increase of 75 percent. During the same period median household income increased from $36,200 to $55,200, an increase of only 52 percent. By this measure, housing prices increased almost 50 percent faster than income, reducing the ability of average income families to buy a home.
Other counties, like Clark and Lewis, saw similar reductions in housing price affordability. According to the analysis by Staley and Gilroy, on average 26 percent of housing price increases can be attributed to planning under GMA. Combining income and housing price statistics shows that, with all other variables held constant, GMA planning reduced housing affordability by up to 6 percent statewide. The areas that were hit the hardest are high-growth areas where demand for housing is the highest and available buildable land is the scarcest.
The contradiction between the goals of growth management and the reality of its implementation will be difficult to reconcile. Increasing housing affordability is key to maintaining a high quality of life for all Washington residents. In future publications we will explore other problems with the Growth Management Act and propose market-based alternatives to the traditional regulatory approach to managing growth.