As we documented in our report, Planning Penalties In North Carolina: Why Other N.C. Cities Should not Follow Asheville and Wilmington, excessive land-use restrictions, including many that are touted as "smart growth," drive up housing prices, increase the cost of living, and drive out the poor and minorities.  (See my analysis of the impact of Davidson's smart growth policies on the poor and minorities here.)

The latest research by Mark Schill and Joel Kotkin, reported here, shows that when cities are ranked according to average annual wage adjusted for the cost of living, many hip, smart growth cities drop out of sight. 

Lacking zoning and other restrictive land-use policies, Houston rises to the top.  Why?  Houston's cost of living is low primarily due to low home prices. Houston's ratio of median home price to median annual household income is 2.9, very low compared to many high wage cities such as San Francisco where home prices are 6.7 times the median household income. Why are Houston's home prices low?  The city lacks zoning and allows home supply to keep up with demand.  In other words, by letting the market in home building work, Houston allows entrepreneurs to build homes at competitive market prices.

Does that mean Houston is an "unplanned," anything goes city?  On the contrary, planning in Houston occurs through private contracts at the neighborhood level via restrictive covenants.  Instead of "one size fits all" land-use regulations imposed by planners and politicians, homebuyers select the level of regulation they want from numerous Houston neighborhoods.  

Where do N.C. cities rank?  The Schill/Kotkin research is based on the 51 largest metropolitan statistical areas (MSA), so only the Charlotte and Raleigh MSAs are ranked.  Charlotte ranks 6th and Raleigh 20th. 

Back in 2006, when we wrote Planning Penalties, most N.C. cities had home prices 2 to 2.5 times the median income for the area.   Asheville and Wilmington, where there were more restrictive land-use controls, were more expensive, with home prices about three times the median household income.  These ratios were not as bad as Boulder, Colorado at 4.1, Boston at 5.5, or Los Angeles and San Diego at over 8.

But the numbers are not as important as the direction.  Since then, Raleigh, Charlotte, and other N.C. cities have ignored Houston's example and rushed to follow Asheville and Wilmington by increasing their land-use controls.  Raleigh, for example, is implementing a new comprehensive plan that contains lots of smart growth controls.  (See our report, A Planners' Glossary.)

In other words, NC cities are going in the wrong direction.  N.C. cities that want to attract businesses and jobs need to follow the example of Houston and decrease their land-use controls, making housing more affordable and lowering the cost of living.  As the negative example of Davidson shows, the added bonus is that fewer land-use controls makes a city more economically and racially diverse.

Isn't that what the liberals on the Raleigh and Charlotte city councils claim they want?

What do Schill and Kotkin recommend?

Maintaining affordability and a wide range of high-paying jobs may not be as glamorous a metric for success as the number of hip web startups or the concentration of educated people. But over time it is likely to be about as good a guide to future prospects as we have.

Schill/Kotkin Ranking of Top 10 Metro Areas
(Ranked by average annual wage adjusted for cost of living)

1. Houston-Sugar Land-Baytown, TX
2. San Jose-Sunnyvale-Santa Clara, CA
3. Detroit-Warren-Livonia, MI
4. Memphis, TN-MS-AR
5. Dallas-Fort Worth-Arlington, TX
6. Charlotte-Gastonia-Rock Hill, NC-SC
7. Cincinnati-Middletown, OH-KY-IN
8. Austin-Round Rock-San Marcos, TX
9. Seattle-Tacoma-Bellevue, WA
10. Columbus, OH

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