The Grand Illusion
I live in Utah, and I’d never exactly thought of the state as an expensive place to live, but changes creep up on you. When we moved to Cedar City, not quite thirty years ago, the cost of living was statistically about 94% of the national average. Today, depending on which index you use, we’re between 99% and 103% of the national average, and I suspect that those numbers are low. My property taxes, while not insignificant and low by the standards of some states, have doubled over the last eight years. The price of natural gas has tripled since last year.
But where Utah has really taken a hit is in the increase in housing prices. Depending on which figures or indices you look at, Utah is on average between the fourth and tenth most expensive state for housing, and housing prices have roughly doubled over the past fifteen years. Housing prices in Cedar City have more than doubled.
Four factors, I suspect, lie behind the rapid and substantial price increases. First, Utah has the highest birth rate in the nation, and has had for decades. Second, immigrants are pouring into the state, especially into Cedar City, which has one of the fastest growth rates in the nation, and the majority of those immigrants, at least here in town, are from California. Third, the local university has expanded from 3,500 students to over 15,000. And fourth, despite new housing developments everywhere, the amount of new housing hasn’t matched the demand.
There’s another factor, as well – that too many of the developers and builders are concentrating on higher-end housing, and that’s reflected in the fact that Cedar City now has a small but growing number of homeless people, while high-priced houses up for re-sale take a long time to sell, because the majority of newcomers insist on building new houses, most likely with the gains from selling houses in California and elsewhere.
But then, what’s happening here is also occurring in far too many other areas as well.
This is also happening here in eastern Ontario… our wonderful (not) provincial government is trying to increase housing with one of its measures to change the rules around farmland protection… we have already lost a significant % of farmland and if this practice continues, apparently we could lose 25% of our good farmland over 25 years. I know we need housing but.. we need food, too.
The economics of construction especially housing is odd when viewed from the outside. The goal is to maximize the profit of the builder/contractor and no one else. Higher-end housing brings more profit than lower-end housing while generally requiring the same amount of effort. A lot of effort is spent in getting permits and arranging for the arrival of materials. These are the same whether it is an expensive house or an inexpensive one. The markup on high-end materials is higher let alone just the increase in a normal markup.
Most contractors place a high value in the time their crews are actually accomplishing something which is why they move the crew whenever there is a delay. Instead of waiting an hour for a part to arrive, the crew will move to the next project and work there. They will continue the cycle until they get back to the first project and have whatever it was obtained or resolved. It makes sense with their largest variable cost being labor.
There are ways around this. I lived in Dale City in Northern Virginia for several years. The builder built a very large sub-division made up of regular size sub-divisions. There were only a handful of different models so that the crews learned how to build fast and inexpensively. He also would buy close out lots from manufacturers to reduce costs which worked because he was building 100 or more houses at a time. One of the local hardware stores capitalized on this by buying specific replacement parts for those closeout items. The first question you were asked when entering the hardware store was what letter do you live in? The name of each street in the regular sized sub-division began with the same letter. It started with A and was in the T’s when we moved away. Then they would show you the replacement part for that section.
Your area might benefit from some different land-use and zoning regulation, to keep a greenbelt around the city green, and increase some gentle density within the present built-up limits.
That would be much better for the city’s finances as well as not letting all the best farmland be l9st to tge usual growth Ponzi scheme practices in American cities and suburbs.
You might find this 9-videos Strongtowns series useful as an introduction, if you are interested in better ways to handle this.
https://youtube.com/playlist?list=PLJp5q-R0lZ0_FCUbeVWK6OGLN69ehUTVa
You’re absolutely spot on. The problem is that the entire politico-economic structure here can best be described as “growth at any cost.” The legislature is in the process of turning what was a smallish and special liberal arts university into a generic watered-down diploma factory to accommodate population growth. The city council effectively opposes sensible zoning, so that developments are being extended into the foothills and into areas that were once lake bottoms. While not a great danger most of the time, those areas are so flat and the soil so impermeable that there will be flood damage from the infrequent heavy rains, something that has already happened twice in the past ten years.
But growth is good! [No matter what the long-term costs are.]
I thought the statement was Greed is Good 😉
Self-interest is a motivator that for most is far greater than any greater good (doesn’t mean people don’t care, self-interest up to a point is a survival attribute), and vastly increases productivity compared to Soviet-level “they pretend to pay us, and we pretend to work” collectivism. In that sense, greed _can_ be good.
But it can also be short-sighted, like an obsession with quarterly profits to the extent of failing to invest for future profits; or with unsustainable growth that sacrifices some of the attributes that brought people in the first place. One does have to have profitable quarters (not all are in some seasonal businesses, and it is called Black Friday because that’s when some retailers know they’ll be making a profit for the year).
But IMO there are just too many people. We did fine at 250 millionn or so (200 million might be a bit low, given challenges). Present levels, esp. with too many that are NOT productive, make well-planned growth more difficult. Not a quick fix, but restore discipline to schools so more will become productive. That includes requiring parents to uphold reasonable discipline – perhaps offering them parenting courses too.
Demographics change for all nations. One would think that those who want to control their group, city, state or nation would realize this. They can then pay attention to long term actions of government for the governed. I guess that the competition for government service is so intense because one can do deals if one has power and the media to publish that fact.