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Regional growth-management planning makeshousing unaffordable and contributes to a busi-ness-unfriendly environment that slows economicgrowth. The high housing prices caused by growth-management planning were an essential element of the housing bubble that has recently shaken oureconomy: for the most part, this bubble was limit-ed to urban regions with growth-managementplanning.In 2006, the price of a median home in the 10states that have passed laws requiring local gov-ernments to do growth-management planningwas five times the median family income in thosestates. At that price, a median family devoting 31percent of its income (the maximum allowed forFHA-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 than59 years. In contrast, a median home in the 22states that have no growth-management laws orinstitutions cost only 2.7 times the median fam-ily income. This meant a family could pay off a home in just 12.5 years.Growth-management tools such as urban-growth boundaries, adequate-public-facilities ordi-nances, and growth limits all drive up the cost of housing by artificially restricting the amount of land available or the number of permits grantedfor home construction. On average, homebuyers in2006 had to pay $130,000 more for every homesold in states with mandatory growth-manage-ment planning than they would have had to pay if home price-to-income ratios were less than 3. Thisis, in effect, a 
 planning tax
that increases the costs of retail, commercial, and industrial developments aswell as housing.The key to keeping housing affordable is thepresence of large amounts of relatively unregulat-ed vacant land that can be developed for housingand other purposes. The availability of such low-cost land encourages cities to keep housingaffordable within their boundaries. But whenstate or other planning institutions allow cities togain control over the rate of development or ruralareas, they lose this incentive, and housing quick-ly becomes unaffordable. States with growth-management laws should repeal them, and otherstates should avoid passing them.
The Planning Tax
The Case against  Regional Growth-Management Planning 
by Randal O’Toole
_____________________________________________________________________________________________________
 Randal O’Toole is a senior fellow with the Cato Institute and author of the new book
The Best-Laid Plans: How Government Planning Harms Your Quality of Life, Your Pocketbook, and Your Future
.
Executive Summary 
No. 606December 6, 2007
� 
 
Introduction
More than two out of three Americans livein an urbanized area, which the Census Bureaudefines as “a densely settled area that has a cen-sus population of at least 50,000.”
1
Urbanizedareas are identified by the name of the mostprominent city or cities in the area, such as St.Louis or Minneapolis–St. Paul. But, in fact,most urban areas are made up of dozens, andsometimes hundreds, of municipal units of government, including cities, towns, villages,counties, and special districts of various kinds.What is the best way to govern these urban-ized areas? Should cities and other municipalgovernments be allowed to compete with oneanother for residents, businesses, and fundingfrom state and federal governments? Orshould planning and certain other regionalfunctions be given to a regional governmentthat oversees each urban area?Many planners and some economists haveargued that regional governments are bettersuited than local governments to solvingproblems such as housing. Urban planners say that regional governments can make cities andtheir suburbs more livable and affordable forboth businesses and residents. Planners specif-ically oppose
leap-frog development 
, in which a developer builds housing or other develop-ment on land that is physically separated fromexisting urbanized land. More recently, plan-ners have tried to discourage all greenfielddevelopment, even if it is physically next toexisting urbanized land, preferring instead
in- fill 
development, or development of vacantparcels within an urban area.One of the major claims for infill develop-ment is that it is less expensive than develop-ment on the urban fringe. A 2002 report fromthe Rutgers University Center for Urban Policy Research titled
The Costs of Sprawl—2000
esti-mated that low-density suburban developmentat the urban fringe imposes about $11,000more in urban-service costs on communitiesthan more compact development.
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To avoid such costs, planners favor a formof planning known as
 growth-managementplan-ning 
, which uses urban-growth or urban-serviceboundaries, rules requiring adequate financingfor urban services before the issuance of build-ing permits, and similar tools to direct growthto certain areas and away from areas designat-ed as preserves or reserves.Economists have focused on specific urbanproblems. Harvard economist Edward Glaesersees regional governments as a solution tohousing affordability problems. “Land useregulations seem to drive housing supply anddetermine which regions are growing,” Glaeserobserves. “A more regional approach to hous-ing supply 
might 
reduce the tendency of many localities to block new construction” (empha-sis added).
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Despite these claims and speculations, therehas been little research showing whetherregional governments can actually make urbanareas more attractive and more affordable. AsUC Berkeley political scientist Margaret Weirobserves, the literature on regional govern-ments “does not connect regional processeswith regional outcomes, [so] we do not know enough about what makes regions successful.”
4
 Another argument for planning is thatthere are certain problems that are regional,and only a regional government staffed by regional planners can solve those problems.This argument has been strongly promoted by former Albuquerque mayor David Rusk.
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Infact, most of the supposedly regional prob-lems—including housing, open space, solidwaste, infrastructure, and transportation—caneasily be handled at the local level. The few problems that are difficult to solve locally arenot made any easier by magnifying thoseproblems to a regional scale. As Jane Jacobswryly observed, a region is “an area safely larg-er than the last one to whose problems wefound no solution.”
6
 A close look at the data for America’surbanized areas reveals that regional growth-management planning generally does not pro-duce the benefits claimed for it. States andregions with strong regional governmentstend to have the least affordable housing andare often growing more slowly than regionswith weak regional governments. This sug-
2
 Jane Jacobswryly observedthat a region is“an area safely larger than thelast one to whoseproblems wefound nosolution.”
 
gests that state and local officials should dis-mantle or avoid regional governments, and inparticular regional growth-management plan-ning.
A History of RegionalGovernment
Regional government was a moot pointduring most of the 19th century, when urban Americans nearly all lived in cities and thosecities readily annexed new developments thattook place on their fringes. But in 1873,Brookline, Massachusetts, became the firstsuburb to reject a major city’s offer to beannexed.
7
This started a trend that soon led toa clear split between the center cities and theirsuburbs.By the mid-20th century, many suburban-ites viewed the cities as cesspools of corrup-tion, and they didn’t want to see their taxesgoing into the pockets of aldermen or theircontractor friends. Most states did not allow cities to annex without the permission of thepeople being annexed, and that permissionwas often difficult to obtain.Central city officials, meanwhile, complain-ed that the average income of the people whomoved to the suburbs was higher than the peo-ple left behind, which tended to mean lower taxrevenues for the cities. The cities came to view suburbanites as parasites, enjoying the eco-nomic and cultural benefits of the cities with-out paying their full share of the costs.Urban planners who advocated regionalgovernment were not primarily concernedwith municipal finance. They spoke insteadof “rapid and often chaotic growth,” whichthey contrasted with their “visions of pro-moting orderly urban regions with plannedcommunities and efficient infrastructure sys-tems.”
8
“Central cities and suburbs are inter-dependent and cannot survive in the presentgovernmental and physical chaos,” arguedone planning professor.
9
The repeated use of  vague terms like “chaos” and “order” sug-gests that planners were trying to make theirideas attractive to a broad range of peoplewithout explicitly stating just what theirideas really were.Planners, however, had few tools that they could use to promote their idea of orderly growth, whatever that was. The first zoningcodes, passed by New York City in 1919 andother cities soon after, focused on maintain-ing the existing character and quality of neighborhoods of single-family homes.When a real estate developer in Euclid, Ohio,challenged one of these zoning codes, it wasoverturned by lower courts as an unconstitu-tional taking of property without compensa-tion. When the case reached the SupremeCourt, the court rejected arguments by thecity of Euclid that the code was needed topreserve the character of the neighborhood.However, the court agreed with the argumentof an intervener that the code was a constitu-tional exercise of police powers to preventnuisances.
10
If zoning could be used only to preventnuisances, then regional planners wouldhave little ability to control growth. It mightbe easy to show that pollution-emitting fac-tory in the middle of a residential neighbor-hood would be a nuisance, but it would bemuch harder to show that someone develop-ing vacant land on the edge of a city was cre-ating a nuisance.Cities could exercise some control over de- velopment by limiting the expansion of urbanservices such as sewer and water. However,they could not prevent developers from pro- viding their own sewer, water, and other ser- vices by creating special service districts orincorporating their own cities. As long as de- velopers had such freedom, regional plannerswere helpless to direct or control new develop-ment.One response was the idea of city-city or city-county consolidations. Such consolidationswould give the central city greater control overwhat happened in areas that were previously outside of its jurisdiction. Before World War II,several cities were able to persuade some or allof their suburbs to consolidate, including New  York City (1898), Denver (1902), and Honolulu(1907). But suburbs of Oakland, St. Louis,
3
Cities view suburbanites asparasites,enjoying theeconomic andcultural benefitsof the citieswithout payingtheir full shareof the costs.
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