The Cost of Complexity

By Neil Williamson

The creation of laws and ordinances has often been compared with sausage making. In reality it is nowhere near as organized or efficient as your typical pork packaging plant.In addition, the process rarely includes a clear understanding of the further implications of regulation on the end user. Just last week, an Albemarle County Supervisor asked me if I thought the proposed cost of a rural residence erosion and sediment control (ENS) permit was too high at $230. I explained the real cost impact is the designing of the ENS plan which would far outweigh the cost of the permit.

Last week, I heard from an Albemarle County rural landowner who is working to build a house in time to have her children start in a new school this fall. As she is one of the first landowners to go through the new regulatory labyrinth she is encountering significant unforeseen delays to starting construction. This is placing her children’s academic placement in question (as she currently lives in another school district).

A couple weeks ago, I was at a meeting with a Supervisor from one of the outlying counties and we were discussing the size of the Albemarle County Community Development staff. This Supervisor was amazed at the significant number of people dedicated to this task and wondered aloud why it took so much staff. The answer is the high level of detail required in applications and the amazing complexity of overlapping ordinances.

By creating an incredibly complex regulatory environment, government must grow to properly implement the goals and intentions of their ordinances. Such government expansion requires funding from one of two sources, user fees or taxes. In either case, it is the citizenry who end up paying more to live in this highly regulated environment.

In a February 2008 paper on housing prices, University of Washington Professor Theo S. Eicher used regression analysis to study housing prices and their relationship to regulatory environment in five major cities in Washington State (Everett, Kent, Seattle, Tacoma and Vancouver). His findings, reprinted below, are not surprising but are eye opening.

“Aside from demand factors, housing prices are found to be associated with cost-increasing land use regulations (approval delays) and statewide growth management. For example, after accounting for inflation, regulations are associated with a $200,000 (80 percent) increase in Seattle’s housing prices since 1989, while housing demand raised prices by $50,000. This constitutes about 44 percent of the cost of a home in 2006. Cities with less stringent land use regulations had significantly lower price increases due to regulation.” Emphasis added – NW

If we accept the conclusion that an onerous regulatory environment increases the cost of housing, is this perhaps the true goal of such regulations? Each time housing affordability comes up in meetings when regulations are being considered, such concerns are quickly dismissed because the homes that are being built are not designed to be affordable.

If we fail to recognize the impacts of regulation on affordability across all price points, we will end up with government induced housing inflation pushing the working class even further out creating increasing demands on our transportation infrastructure and leaving only the very high end and the very low end in our urban core. Complexity breeds bigger government and bigger government breeds increased complexity. It is in everyone’s best interest to strive for clarity of intent and implementation at the front end of the sausage factory.

 
 

6 comments

  1. Good post! You raise excellent questions regarding cause and effect on the cause-affect of regulation on housing affordability. In Seattle, citizens and neighborhoods are involved, and that’s required.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s