The effects of a five, ten or twenty year "New Development" ban?

Lets say tomorrow the US Government passes a law that, in its gist says:
All “undeveloped” land, that is land which doesn’t currently have a city, house, subdivision… may not have one built. There would be exceptions, but not “so we can build a new subdivision,” “So I can put a new house on my land,” because it’s reasonable to assume that some new construction will be done.

Any land sufficiently close to a city can be, under certain circumstances, redistricted into a developable status.

This would go on for five or ten years, and maybe indefinitely. This wouldn’t ban new construction, you can knock down three city blocks and put up the biggest skyscraper ever. You can rebuild your house, you can move to a new city, or buy a parcel of land in the country and put a home on it.
Would housing prices go back up? Would we see cities like detroit, where cost is lower, have resurgence in population because of cheaper land development costs?

The last thing we need is the Federal government trying to influence land prices through nationwide restrictions on use of property. Why should the Federal government get into the business of picking and choosing winners and losers?

People that have invested in long term speculative real estate deals, in various locales would see the values of their property diminish overnight. Your proposal would have very little to do with the cost of housing, but more impact the value of land. Which, does flow through into the cost of housing.

Housing prices in many of the markets was way overvalued prior to the 2008 crash. So why would we want to try and inflate them again?

Well, there are significant legal problems. First, the federal government does not have the power to restrict land use or ownership rights. States have the power, but are limited by the Supreme Court decision in Lucas v. South Carolina Coastal Council, 505 U.S. 1003 (1992). There, the Supreme Court said that because property ownership in 1792 generally included the right to build a house on your property, states could not take away that right without paying fair compensation.

As to Todderbob’s proposal, I’m not sure what it actually is, since he says “you can buy a parcel of land in the country and put a home on it.” States such as Oregon that have tried to put in place Urban Growth Boundaries have seen an explosion of hobby farms as a way to get around the restrictions. Studies on home prices are not entirely conclusive, but it does appear that UGBs push housing prices somewhat higher than they would otherwise be.

The US population continues to grow at a robust rate, and the growth of households is even higher. But the growth is not evenly distributed across the country. It’s no comfort to say that houses are cheap in Detroit when the jobs are in Ft. Worth.

First, there would be a Depression.

What you’ve just done is take trillions of dollars of land ownership value and defined it down to almost nothing. That defaults all the loans and credit based on that land. Which cascades across all credit markets and puts the banking system out of business. The housing bubble was a tiny pinprick compared to this.

After that is just fantasy. Rebuilding the destroyed economy would certainly not proceed the way anyone expected.

Sounds like a theoretical question for Great Debates. Moved from General Questions.

samclem, Moderator

Semi-hijack, but can someone tell me why housing prices are a big deal? I mean, if people lived in the houses they bought, wouldn’t that simply solve the problem of people trying to flip houses and land for profit?

My reaction to the entire housing bubble bursting was simply “poor saps, but next time don’t buy a house you don’t want to live in!”. It wouldn’t harm me if my house price dropped to $1. I like it here and I’m not planning on moving. And for other people, if they want to move, cheap houses should be a godsend. Nobody says they wish prices were higher on consumer goods so their personal hoard would be worth more. What am I missing?

You borrow $400,000 to buy a $500,000 house. The price of the house drops to oh let’s say $200,000, but the bank still wants the rest of the $400,000 repaid. Then you get an offer for an awesome job/promotion/whatever halfway across the country. Have fun!

I’ve heard that but it still doesn’t make sense. Your original commitment was to the $500000 house. If that’s how much you planned to pay, the house dropping in value doesn’t make any difference, does it? It’s like buying something from a store then finding out the next week they have it on sale. What happens to the price after you buy it might be annoying, but it doesn’t affect the original sale. It would be nice to move to the place with the job promotion, but assuming you don’t, you still have a job currently that pays enough for you to support your family in a $500000 home. Just don’t move and you won’t be bankrupt and have to sell off your house for less than you bought it for.

I get that a lot of people see their house as a pile of cash they can sell as soon as they can get more for it than what they paid, but if less people moved and just stayed where they’re at, then bankruptcy wouldn’t be an issue, right? I’m still missing something, aren’t I?

Ahem. ::raises her hand::

I purchased a house in 2005. Got divorced in 2008. Neither party could afford the house solo, so it had to be sold. House values had brought it down to 65% (!) of the amount it was originally purchased for–which was, at the time, a pretty good deal. Staying wasn’t exactly an option, even though the house wasn’t purchased with the intent of moving anytime soon.

Divorce isn’t the only reason that someone might have to move. Job transfers can do it. Family obligations can do it. Not everyone who got burned by the housing bubble was looking to use the home as in investment.

The loss of value will not be a huge problem for some people, but the reality is that most people don’t live in a bubble. Your neighbor’s bad decision has an effect on you. If enough people make bad decisions, it has a cascading effect. Some of those effects include higher property taxes (or condo fees) due a reduction in total taxable assets, higher unemployment, a reduction of city services, etc. When people makes the decision, they do so based on a number of things that may change due to one of the reasons listed above. So you premise that one’s costs won’t change isn’t always valid. More importantly, you own wages may shrink as a result of a housing bubble. Say, you own a small business in an area with a lot of foreclosures. What do you think your odds are of making the same money you did before the recession? Pretty slim.

Plus, being tied to an overvalued asset is a bad situation all around. Owning an asset you can’t sell is like having a ball and chain around your ankle; it isn’t too bad if you don’t have to go anywhere, but most people need that freedom.

The side of the coin you never hear about: keeping housing values high hurts lower-income people who currently cannot afford home, but could if values dropped.

Housing in Detroit is already cheap; but except for retirees, nobody moves somewhere because the houses are cheap, they move there because there are jobs there. Corner lots in Uzbekistan go cheap for a reason.

All you’d succeed in doing is making the places that are growing economically much more costly to live in (hurting poorer people and slowing said growth), and helping politically-connected developers make a killing as they snagged those exceptions you’re allowing.

I’m not sure this is true, though the devil is in the details. The OP allows for development near existing urban centers, and land that is distant from urban centers derives its value from its utility as farmland, pastureland, or forest land. Probably some land that is presumed developable now would lose value, but similarly land that is developed or developable would gain. I’m not saying it’s a good idea to throw a wrench like this into a functioning market, but I think you’re overstating the effects.

Did you actually read the OP as advocacy? I thought it was clear it was a thought experiment.

I didn’t ask what we needed, I asked what the effect would be.

I’m not for “Big Government” or “Small Government,” I’m for effective government. Sometimes, when exploring what is or is not effective, one must entertain ideas which at first can be emotionally unsettling, however if it turns out that the idea is a good one (it is effective, has positive results and is reasonably implementable and is an economic place to put your money – 1 million spent saving 10 lives is less of a good idea than 100,000 saving 100), despite your initial discomfort with it, it makes sense to implement it.

It would lower the value of speculative investments, but that’s one of the reasons they’re speculative investments, and not bonds. That’s not a reasonable reason not to issue a 5 year hiatus on development – in and of itself.

Yes, Housing prices were over valued, my goal isn’t to return them to their previously inflated prices.

My goal is to normalize prices. There isn’t a housing shortage in the United States, nor is their a shortage of developed and/or developing land. We’re not forcing prices up everywhere, only in areas where the developed land doesn’t meet demand, in that case homes can be bulldozed and apartment buildings can be built, or more homes can be built on the same land, or any number of options to normalize pricing.

Assume the legal problems are set aside, for the sake of this thought experiment. This is only about the economic effects.

(If it helps, we’ll say that this is justified under “General Welfare” in the Constitution, how’s that?)

Housing is cheap in Detroit because their are no jobs in detroit, or because there’s ghetto (Basically, there’s not enough demand).

However, if there was sufficient reason for companies to move there (lower cost of living) with a reasonable guarantee that the area (or some areas) won’t be shitty then some demand should come back to companies looking for new places. And some companies would have to look for new places because of an increase in housing costs should correlate to an increase in pay necessary to hire someone locally.

I know houses in Detroit are already cheap – and ghetto. The goal here would be to normalize housing prices, to some extent between cities but as much as that within cities.

Thank you, Do Not Taunt. I definitely don’t think we should throw a wrench in a market that currently works, but as a thought experiment I don’t think it’s unreasonable or unentertainable.

My logic here is basically:

Normalize the cost of housing via tying it closer to the cost of land, and in so doing put an economic incentive on living in a smaller, more reasonable home that fits your needs – part of this plan would likely push new Suburban Development onto a back burner, while opening up a new market for suburban re-development.

Decrease the rates of abandoned homes, by increasing the intrinsic value of land which can have homes built on it, you turn what appears (despite reality) to be an unlimited resource into an obviously finite (if very large) resource. Homes, especially swaths of homes like those in detroit, would have an increase in intrinsic value – property value in ghettos would (at least it seems to me) go up significantly, whether low income homes use this as Equity or sell their homes (and presumably move into moderately less expensive apartments/etc) isn’t necessarily relevant.

Environmental effects – by increasing the cost of living in a standing home (which is one thing this would do) there would be a net positive environmental effect in the same way that a tax on gas decreases gas emissions.
As for developers exploiting loopholes: Presumably a system would be put in place to prevent anyone but individuals from building homes, restricts on transferring/selling within a certain period of building the home or heavy fines for people who intentionally violate the law seem reasonable.

You want the short version? All those wonderful reasons you claim will make things wonderful will completely backfire, everyone would become vastly poorer, we’d fall into a decade-long depression at least, and the financial system would cryumble, possibly destroying democracy itself in a significant fraction of the planet.

I expect economic turmoil, at the very least. But why would it be as far spread as you claim?

What about having the intrinsic right to build sprawling suburban developments (which is really what would be mainly targeted by this) is key to the continued survival of democracy?

One man’s sprawl is another man’s opportunity for home ownership. It’s not clear why it would be a good thing for Americans to pay higher prices for housing.

In the US, differences in home prices within the same metro area are very little related to things like the cost of the land or the convenience of the transportation. Instead, the number of top school districts is limited, and so rich people bid up the cost of living near other rich people in good school districts.

  1. You’d destroy a huge portion of the value people have stored in their homes. Whether you like it or not, people tend to invest in their homes and usually hope to sell eventually; the home is usually a substantial chunk of their total net worth.

  2. You will annihilate that for most of the country, because however you thik you can write legislation, it’s obvious you’re thinking sloppily and ignorantly. You have no idea what to write and moreover it’s going to be impossible to write this thing “fairly”. You’ll create millions of unintended side effects. And this is a side issue in such a big deal here.

  3. Millions will be forced out of their homes because they simply can’t afford to keep them. You ignore that right now, people are often walking away from their homes and simply ignoring the money; they feel they’ve been cheated, and that’s at least half their own stupidity. But what you describe would not be foolishness but enemy action: your action.

  4. Can you say, “Bank Failures?” A-yup, you’ve just killed a huge chunk of the bajkns throughout the United States, because people are going broke. The housing industry? Dead. Real estate? Dead. Everything which depends on them? Dead. And you won’t much, if any, get development in the cities, either. People moved out of them because they couldn’t afford enough space, or because they couldn’t get safe neighborhoods at all. Space is already extremely expensive there, even in relatively small cities.* People might love to live in New York, but they can’t. People might love to lvie in San Francisco, but they can’t. And I point out that it was generations of bright, cheerful, energetic, idealistic liberals who made it that way. The middle class keeps leaving cities because they’ve been pushed out.

*There’s no way I can afford an apartment in Knoxville. I could barely afford a crappy apartment well outside of town.

Moreover, what you fail to see is that this caluclus works for companies, too. businesses do not mvoe out of Detroit because Detroit somehow became unclean. They left because business conditions no longer supported their interests. That won’t change suddenly just ebcause you artifically make land dirt-cheap. Land is a once-off cost.

  1. Anyway, once you’ve destroyed housing and real estate and the banks, everything which depends on them goes? Commercial paper? Gone. The FDIC will crash - it can’t handle that much stress. You’ll be facing the choice of massive amounts of fiat money (hello, hyperinflation!) or simply wiping out a substantial portion of the savings of the United States.

Either way is not good.

So now nobody can get loans, including businesses which depend on loans to survive (more than you think - it’s a major strategic concern). No investment, no expansion, and mass layoffs for those business which don’t go out of business entirely.

  1. Wave bye-bye to international trade. It’s completely dependant on the banking system to function. And now it’s gone.

And your much-beloved social programs? Gone. T-Bills will be worthless and no one will buy anymore. Our debt will soar in cost to service. No more money and no more generous entitlement spending. You won’t have a choice, either: there simply won’t be enough to spend no matter what nonsense budget you pass.

  1. But actually, I expect armed revolution halfway through to restore a sane and sensible government. Of course, that might create a legacy of stable military dictatorship if we’re lucky. If not, it will be constant anarchy.

So at the end of it you’ll shove Americans into poor living space at huge cost and destroy the national economy. But after all, Americans will all now be forced in to terrible housing conditions. Abject poverty, global depression, and damaged public health, increasing crime, and possible civil war are all small prices to pay to assauge the insane liberal hatred of rim cities, right? I mjean, it’s not wild land has actually been increasing or anything, and the nsane dislike for sprawl is more a matter of people moving from one place to another or nuffin’.

Todderbob, as best I can understand your goal, it seems to me there’s a far simpler, and less authoritarian way to go about it: within incorporated cities, assess property taxes on land value only, excluding the value of buildings. Such a break inside cities relative to outside them encourages in-fill development rather than sprawl. In a choice between two land uses, it encourages the denser one. And finally it does not penalize people for improving their properties as the current system backwardly does. Yet it doesn’t take anything from current landowners.

Of course such a measure, were it the only change, would soon bankrupt city governments, so you’d have to make up for that somehow. My choice (which I think is good idea for other reasons as well) is to split income taxability between jurisdictions of residence and jurisdictions of employment/investment (no change if you live and work in the same jurisdiction).

I’m going to request you tone down your partisan bullshit and try to take a step away from the keyboard. Please step forward now, and look at this issue without your ridiculous politically tinted glasses on.

Keep calling me liberal, and I’m going to have to trot out my NRA membership and the thousand and six threads I’ve posted about smaller, more effective government, and less taxes. Also, I’ll have to point out that this is Great Debates, and that there’s a small chance that you should try to include verifiable content in your post – as such, Cite please? To anything, even everything, but most especially the bits about abject poverty, global depression, damaged health (this one, I’m really not getting), etc. The civil war is prefaced with a “possible” so I’ll assume that’s just your own conservative mad max fantas… oh wait, now I’m pretending to be politically biased, and I can’t do it with a straight face, sorry.

As for my much-beloved social programs? Most of them are bloated messes, and need to reformed and reimplemented (if at all). Things like Milk Subsidies should stay, and Corn Subsidies should go – although you don’t care what my actual political opinions are, do you (nor would my political opinions on that matter, since I wouldn’t want to go about reform in such a drastic way)? You just want to keep berating me for an idea which I’m not advocating. So keep going, you’re making yourself look so clever!

I still want to know why economic turmoil is supposed to be enough to “end” democracy. The Roman Empire, Feudalism, Monarchies, Dictatorships, Fascism, two world wars, multiple atomic “incidents”, depressions ranging in severity from minor to massive and over two thousand years haven’t killed democracy as a social policy. Chances are that the United States going under for a few decades or even permanently isn’t going to kill the ideas that have been spreading in its people, or the people around the world for the last two thousand years.

Also note – my post had very little to do with “wild land,” as you seem to think. The environmental effects were minor, the realistic consumptive effects are more what I was concerned with.

If you can’t afford an apartment in Knoxville, TN, your ass needs a better job, pull yourself up by your bootstraps and get going.

Thanks, Spark. I actually thought about that, and the result being bankrupt city governments, and I couldn’t think of any way around it. That was (one of) the first thoughts that crossed my mind.

The only other way I thought of City Governments recouping their costs would be through federal subsidies, unfortunately those would have to come from somewhere else. Basically you’d have to tax “sprawl” in order to give the money to cities,

LOL! And smiling bandit with the crazed rant! :stuck_out_tongue:

Thanks, I needed the laugh!