Local Growth Politics and The Real Estate Meltdown

In my previous posts, here and here, I discussed the nature of local growth politics in southern California and elsewhere.  The central dynamic of local growth politics nationwide is the conflict between developers and homeowners about whether, where, and what form new development should take.  This dynamic presupposes that growth is something perpetual and that the critical issue is how to "manage" growth in the same way we would use dams and levees to manage a raging river.  The history of Los Angeles and other sunbelt cities certainly gives us much reason to believe that growth is indeed inexorable unless some force of nature (such as extremely arid or mountainous terrain), some accident of history (such as the huge landholdings of the Irvine company), or some political movement (such as the environmental and slow-growth movements of the 1970s and 80s), applies the brakes.  And according to the "growth machine" school, even these latter forces can only re-direct or temporarily slow growth.

The events of the last few years, however, have cast doubt on whether growth is in fact perpetual and inexorable, as we are now seeing ghost-town residential subdivisions appearing on the fringes of many once booming cities and established neighborhoods becoming gap-tooted with boarded up, foreclosed homes.  It was no force of nature, political movement, or accident of history that caused this downturn, however, but rather the very idea that growth was going to continue perpetually.  As property values were increasing up to 30% a year, interest rates were low and mortgages were easy to get even for the worst credit risks, real estate began to be seen as a fool-proof and inflation-proof investment, with no thought that there would eventually be a market correction.  Unbounded optimism about growth drove real estate values higher until the now-infamous "bubble" burst.  Today we look back on this bygone era as some sort of extended Ponzi scheme, and those who peddled the benefits of growth as glorified scam-artists.  Many are calling for more stringent regulation of the mortgage-backed securities market, prosecution of predatory lenders, or the deconstruction of the long-cherished ideal of homeownership.

As part of the postmortem on the real estate crisis, we should question what the future of growth politics holds.  Will NIMBY homeowners become more favorably disposed to development as growth-driven revenue slows to a trickle?  With property values collapsing, will homeowners begin to challenge the suite of public policies (highway subsidies, mortgage interest deductions, Euclidean zoning, etc.) that have long reified the idea of homeownership?  Will developers see the need to build high-density transit-oriented development rather than undertaking speculative homebuilding in the exurbs?  Will they work with community groups to avoid costly delays as their profit margins get thinner?

We can only speculate as to the answer to these questions, but my research leads to the preliminary conclusion that no, the dynamics of growth politics have not substantially changed.  To the contrary, anecdotal evidence suggests that the real estate slowdown may deepen the existing animosity between developers and homeowners.  On one hand, the real estate downturn has resulted in increased cynicism about the traditionally pro-growth policies of local governments.  In Florida, a grassroots movement called “Hometown Democracy” is pushing a ballot measure for November 2010 that would require voter referenda on all amendments to a general plan.  In its campaign literature, Hometown Democracy argues that land use control needs to be taken out of the hands of local officials, whose habit of “rubberstamping speculative plan changes” caused Florida’s “destructive boom-bust cycle.”  On the other hand, influential students of urban development like the New Urbanist scholar Andres Duany have pinned the blame for  the real estate crisis squarely on NIMBY homeowners, who supposedly perpetuated sprawl to safeguard their own lifestyle.  In short, the anecdotal evidence indicates that the polarized discourse of growth politics is unlikely to subside any time soon.

I invite you to share your own thoughts about how, if at all, the real estate crisis may alter the dynamics of local growth politics or other aspects of land use law or policy. 

Ken Stahl