| Monday, September 5, 2005
Is Anaheim's freedom revolution over?
It was only a matter of time, perhaps, before the most
laudable effort by a city nationwide to promote free markets
would yield to the temptations of regulation, subsidy and
central planning. While not surprised, I am disappointed.
In the past couple years, the city of Anaheim has taken a
governing approach that has been shocking not only for its
good sense, but for its rarity in a world dominated by city
councils run by wannabe dictators.
Instead of increasing its control over every development
and looking for ways to tax everything, Anaheim has loosened
zoning restrictions, cut back regulations and reduced taxes.
Everyone has benefited, not just some favored corporations.
The results can already be seen. Big companies are building
stunning new projects, and small businesses are reviving older
Unfortunately, the coalition that ushered in what I have
termed "Anaheim's Velvet Revolution," seems to have gone off
track, at least in one area. The City Council last week passed
a troubling, government-heavy approach toward housing, thanks
largely to the efforts of the council members Richard Chavez
and Lorri Galloway, both of whom work full-time for the same
The third vote in favor of the "Anaheim Affordable Housing
Strategic Plan" was Republican Mayor Curt Pringle, who may
have thrown a bone to his two more liberal colleagues as a way
to keep them on board for his broader pro-market agenda.
Councilman Harry Sidhu, who also has supported many of the
council's free-market reforms, is adamantly opposed to the
housing plan, accusing the council majority of enacting a
"socialist agenda." What's next, he asks, a plan by the
council to provide jobs for those who don't have them, or to
provide food for those who are lacking it? "Subsidy," Sidhu
says, "does not work."
The same principles that apply to other markets apply to
the housing market. Regulations, "incentives" for developers
and tax subsidies distort the market, reward bad behavior,
undermine neighborhoods and limit freedom.
A key reason for high housing prices throughout Orange
County is that governments impose enormous costs on
developers, making it unreasonably difficult for them to
respond to demand. More regulation, subsidies and government
involvement will only compound the problem. Anaheim has
generally understood that and has made it easier for
developers to build new housing units. That's good, but the
new housing plan is not.
By the way, it's unreasonable to expect that poor people
will live in brand new houses or apartments. Typically,
wealthier people buy new houses, and middle-income people move
into the houses they sell, and lower-income people move into
the houses those middle-income people sell, and on down the
line. That's how markets work, although advocates for
"affordable housing" often view it as a "right" for everyone
to live in a new place.
You get more of whatever you subsidize, so expect Anaheim
to become a magnet for low-income housing, and all the
problems that surround housing projects. You cannot build
enough subsidized houses for the people that want them
because, by definition, housing offered belowmarket
prices will lure an endless stream of takers.
In fairness, the Pringle/Chavez/Galloway plan has some
market-oriented elements, such as a rule allowing developers
to convert old motels into permanent low-income apartments.
Pringle refused to join in Chavez's and Galloway's demand for
"inclusionary zoning" - a requirement that private developers
set aside certain numbers of low-income housing in exchange
for approvals to build their project.
Anaheim has now established a goal of subsidizing the
construction of 1,200 affordable family rental units.
Developers will be given tax dollars to build such projects,
with a third of the units for "low income" people, and another
third for "very low income" people. Those definitions are
based on government salary standards.
In recent years, the velvet revolutionaries have imposed
overlay zones on existing neighborhoods, a fancy way of saying
that they are allowing landowners to do more things with their
property than they previously were allowed to do, thus
promoting new investment.
Now, the city will be creating new overlay zones, but with
a catch: You want more freedom to do what you want with your
land? Then you must agree to less freedom, also. You must also
agree to build affordable housing as part of the deal. The new
overlay zones will be designed to promote "transit-oriented
development" - i.e., apartments near bus lines - and the city
will provide regulations that encourage developers to increase
That's raw social engineering.
The city will also negotiate with the county for more
housing dollars, and will hire a "motel family/homeless
Mayor Pringle reminded me that Anaheim has permitted the
building of more market-based housing units than any other
city in the county, and that state law mandates the
construction of certain numbers of affordable housing units.
True enough, but the city seems to be going too far in the
Councilman Sidhu complains that already 48 percent of the
city's housing units are apartments, and that building
market-rate, for-sale, owner-occupied dwellings should be the
priority, rather than permanent low-income rental housing.
Harvard University Professor Howard Husock has written
extensively about the "housing ladder," and the importance of
people climbing up that ladder without government aid, lest
they tear the delicate social fabric that exists in
neighborhoods. He write that subsidized housing has
"destructive unintended consequences."
Like other welfare programs, subsidized housing rewards
people based on need, thereby taking away the incentive to
work harder and make wise life decisions that allow
self-sufficiency. It creates an entitlement and lottery
mentality, giving special privileges to those who are on
government waiting lists rather than those who are
independent-minded. And building low-income subsidized housing
in middle-class neighborhoods undermines the social fabric of
I saw the devastation when I lived in Ohio, when the
government subsidized new homes for the poor, then dropped
them in the middle of established working-class neighborhoods.
The new, welfare-dependent residents didn't have the same
social skills and concern for the neighborhood as the existing
residents, and the resentment (those who worked hard and saved
to buy or rent a house vs. recipients of government aid, who
got newer houses for far less cost) tore the city asunder.
The real solution is deregulation, and unleashing the same
kind of market forces that are working wonders throughout the
city. The Anaheim council majority is laudable in many ways,
and has understood that concept with regard to many issues.
Why has it had a sudden memory lapse?
TRAVELING TO THE BELLY OF THE BEAST:I'll be in
Sacramento next week, covering the end of the legislative
session, watching both sides gear up for the governor's
special election, and seeing what sorts of gut-and-amend bills
the Democrats are trying to sneak through without proper
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