Housing and the American Dream

Housing represents more than just shelter against the elements. In America, it represents an important lifestyle choice and source of wealth. Do you prefer to live in a high-density urban core? A moderate density inner-city neighborhood? A low-density suburb? An ultra-low-density portion of the urban fringe? Or in practically zero-density rural areas?

Density, of course, represents more than just people per square mile. Higher density areas tend to have a wider variety of goods and services available, which is why their proponents consider them more exciting. Lower density areas tend to be less regulated, which gives their proponents a feeling of greater freedom, albeit with the risk that a next-door neighbor may build something you don’t like.

Naturally, density is not the only or even the first criteria people use when choosing housing. School quality, crime rates, proximity to jobs, and access to recreation facilities or open space all influence housing values. Yet all of these things can be influenced to some degree by density.

Despite the stereotypes embraced in such terms as ticky tacky or cookie-cutter development, what is amazing about America is the extremely wide variety of housing and lifestyle choices that are available. Yet it is exactly this choice that is under fire from so-called smart-growth advocates, who seem to believe that the only legitimate choices are urban and rural — and rural is only legitimate for people with rural occupations.

For example, a document titled New Urbanism Basics (16-kb rtf) insists that “all development should be in the form of compact, walkable neighborhoods.” This document was written by the Congress for the New Urbanism, which to its credit has removed it from its web page. But it is still found on the web pages of many other New Urbanist groups. (Though some define it slightly differently, New Urbanism is in general an older term for smart growth.)

Another document called the Charter of the New Urbanism (16-kb rtf), which is still on the Congress for the New Urbanism’s web site, is similarly coercive. Among other things, it says that metropolitan areas should promote infill rather than allow development on the urban fringe. One way of interpreting this is that people shouldn’t be allowed to live on five-acre lots.

In addition to providing lifestyle choices, American housing plays an important role in building wealth. This is because homes can be used as collateral to obtain loans that can then be used to finance educations, start businesses, and do other things that boost the homeowners’ income.

According to economist Hernando DeSoto, “The single most important source of funds for new businesses in the United States is a mortgage on the entrepreneur’s house.” More than two out of three American familes own their own homes, and DeSoto says this high rate of homeownership helps explain why the U.S. is the world’s wealthiest nation. As discussed in greater detail in the section on housing affordability, anything that increases the cost of homeownership therefore limits people’s ability to generate wealth and poses a particularly severe hardship on low-income people who do not yet own their own homes.

As noted in the land-use portion of this guide, zoning was originally conceived as a way of maintaining the property values in a given neighborhood, not a way of increasing overall housing costs throughout a region. The alternative to zoning, protective covenants, can maintain neighborhood values without having any impact on regional housing costs.

How do areas that already have zoning convert to covenants? A paper (104-kb pdf) by Dr. Robert Nelson, of the University of Maryland, suggests that state legislatures could allow neighborhoods to petition to take over zoning from cities and counties. Provided they meet certain criteria, such as boundaries of a regular shape and majority (or supermajority) support from people in the neighborhood, the neighborhoods would then be allowed to determine their own fates using whatever democratic processes they choose. This is already the practice in Houston, which has no zoning, and where people in neighborhoods that lack covenants can petition to create a homeowner association and write their own covenants.