The recent Town Hall meeting sponsored by the Payson Kiwanis Club was very timely. Arizona Town Hall was reporting on their October meeting, at the Grand Canyon and soliciting the audience opinion as to the importance of several issues that the Town Hall group had identified.
It was an interesting presentation on a serious subject.
Simultaneously, I received a copy of a study from the CATO Institute that indicated Arizona is probably on an expensive and counterproductive path with the state's mandatory "smart-growth" plan.
The CATO study is basically empirical evidence of the cost of homes, relative to income, in states with and without mandatory planning. Some of the results are:
A. In the ten states that have mandatory planning laws, of one type or another, the median price of a home was five times the median family income. At that price, a median family devoting 31 percent of its income (the maximum allowed for FHA-insured loans) to a mortgage at 6 percent with a 10 percent down payment, could not pay off the mortgage on a median home in less than 59 years.
B. In contrast, a median home in the 22 states that have no growth-management laws or institutions cost only 2.7 times the median family income. This meant a family could pay off a home loan in just 12.5 years.
C. The magic number for median home price to median family income seems to be 3. At a ratio of 3, with a 10 percent down payment and devoting 31 percent of income to mortgage payment, the mortgage can be paid off in 15 years.
D. Arizona was well under the 3 times number before we adopted mandatory (smart-growth) planning in 1998. In face, we didn't cross the 3 times line until 2006. We are currently at 4.4.
E. CATO has calculated the penalty in house prices caused by the median price being more than 3 times the median income. For Arizona, this figure is $77,000 per house. For selected cities: Phoenix $92,133, Tucson, $53,217, Flagstaff, $109,000. God only knows what it is for Payson.
F. Population growth does not seem to be a major factor.
States with growth planning laws, Price to Income Ratio, Growth (2000-2006):
Hawaii, 8.7, 6.1 percent
California 8.3, 7.2 percent
District of Columbia 7.3, 1.8 percent
New York 4.9, 1.6 percent
Massachusetts 4.8, 1.2 percent
Rhode Island 4.7, 1.6 percent
Washington 4.6, 8.2 percent
New Jersey 4.5, 3.4 percent
Oregon 4.4, 7.8 percent
Arizona 4.4, 19.3 percent
Maryland 4.3, 5.7 percent
Conversely, Georgia grew 13.8 percent with a price-to-income ratio of 2.5 and Texas grew 12.2 percent with a price-to-income ratio of 2.0. Neither state has growth management planning.
Thus, if Arizona and Payson are serious about offering "affordable housing," the sooner we get rid of "smart growth" planning, the sooner we can get back under the three times factor.
The high ratio states: Hawaii, California, N.J., New York City area, all had growth planning before 1980.
The next tier, D.C., Massachusetts, Rhode Island, Washington, went to growth planning laws before 1990.
Apparently, the longer you plan, the higher house prices become, relative to income.