Each year for nearly 20 years now, the National Association of Home Builders and the Wells Fargo Bank have boiled down national real estate data into an easy-to-digest housing affordability index. Local housing markets are judged “affordable” according to how many families earning the national median income of $64,400 can buy an average-priced house. By that measure, houses were cheaper in Springfield in the fall of 2010 than they were in all but 29 of the U.S. cities surveyed.
Like most such indexes, this one is only a crude measure of housing affordability. (Don’t ask.) Still, houses are undeniably cheap compared to many other parts of the country. Indeed, they are cheaper than in many other parts of Illinois. The median house price in the capital in 2010 was a bit more than $100,000, while one in Naperville cost $330,000, and one along Illinois’ Riviera — the Lake Michigan shore north of Chicago — will set you back about twice that, give or take the cost of a sauna.
The wag in me is tempted to say that low housing prices are a product of supply and demand. Since the supply of charm in Springfield is limited, demand for houses here is low. (Scenery? There are geezers around who believe that there has been nothing much to look at since Cindy Klose left WCIA for Headline News.) The fact is, however, that low local house prices reflect high supply.
Cheap housing is a centerpiece of Springfield’s economic development strategy. New house construction generates its own demand, up to a point. Building, selling, financing and furnishing a house means more jobs, which attract more people to Springfield, which creates demand for more houses. Lower housing costs also mean that even low-paid local workers can still live in a house, and well-paid local workers can live in a big house. That’s a recruiting plus for local employers. On its website, software firm LRS, states, “LRS headquarters remain in our hometown of Springfield — a community with an upbeat atmosphere, affordable housing and a low cost of living.”
Harvard economics professor Edward L. Glaeser recently speculated why so many people moved to California, Florida, Georgia and Texas in the 2000s – they are the four states that added the most people in that decade — and to Arizona and Nevada, which had the fastest rates of population growth. Climate is the popular explanation, and like most popular explanations for complex phenomena, this one is wrong. Sure, it’s warm in Texas — too warm; during some months, Houston will leave you pining for a balmy central Illinois August. Glaeser also ruled out economic productivity and state unionization laws as factors. The one thing that high-growth regions do have in common is housing that is inexpensive both in absolute terms and relative to those areas’ incomes.
While cheap housing would appear to be a key to prosperity on this evidence, an economic development strategy building cheap houses and selling them to ourselves is as flimsy as a two-by-six rafter. In Nevada, even people of modest means were able to engage in real estate speculation like their betters, and the state (especially Las Vegas) boomed in the 2000s, but people are now leaving as fast their U-Hauls can carry them, and many of them are leaving their houses behind like so much broken lawn furniture.
There are costs to building houses that the buyer doesn’t pay. A house of a given size was cheaper to build in places like Nevada compared to, say, Massachusetts, thanks to lax regulations concerning land use, building and energy use, developer exactions, and environmental mitigation. For example, the poshest houses in New Springfield are identical to their kin in Lake County on Chicago’s North Shore. What’s different is the setting. The Springfield houses are going up on the kind of terrain that would be bought and set aside as a forest preserve or park in Lake County, pushing up the price of like lots nearby.
To the extent that real estate taxes are based on the market value of houses, low prices mean a low tax haul for local governments, which almost virtually guarantees minimal public services for all the buyer’s non-house-buying neighbors. Making new houses cheap to buy also removes the incentive to fix up and reuse old ones – a significant factor in the wholesale abandonment of Old Springfield.
Yes, building on existing lots means clearing the land, sometimes decontaminating it, often building upwards to achieve the square footage the market demands. Tougher energy efficiency building codes would help forestall the construction of new generating capacity at the city’s power plant, but are also likely to drive new residential development outside the city borders so that people will drive even farther to Springfield jobs.
So, everything good has a price. The important question about housing is not, “How much does it cost,” but “Who does it cost?” An economic development policy that focuses too much on the former is not a good deal.
Contact James Krohe Jr. at firstname.lastname@example.org.