Fiscal policy – the practice of government boosting the economy through creating more money – has been widely discredited as a strategy to reverse the economic downturn. I tend to agree with Paul Krugman, who feels that both Democrats and Republicans are repeating mistakes made in the 1930’s — extending the great depression by focusing on cutting budgets and fretting about debt. Slashing budgets and killing stimulus are moves antithetical to what we badly need: more jobs.
At least at the local level hope is still alive for fiscal policy in the form of innovative land use policy. Cities can’t print money, but they can ease limits on land use that currently increase costs and limit new development. This regulatory easing can support sustainable growth and job creation.
The principle is pretty straightforward: There are some natural limits to the way we use land. The most obvious are health and safety, engineering, and design. Even if a developer wanted to and money was limitless, it would be really tough to construct a 6,000-foot-tall building shaped like a cowboy hat . Some things just go beyond the limits of physics.
There are economic limits to land use as well. Even if the gigantic cowboy hat might someday be physically possible, someone has to be willing to buy, rent, or lease the space at a rate that will generate enough money to pay for it. The law of supply and demand limits land use — even without any zoning — because new developments have to meet a need for which people are willing to pay. Furthermore, the amount they are willing to pay must offset or exceed the costs of building a project in the first place. A project has to pay for itself, whether it’s a cowboy hat or an apartment building. This simple rule easily gets lost in land use debates.
When it comes to land use, local city councils can’t suspend the laws of economics any more than they can suspend the laws of physics. In recent discussions about Transit Oriented Development (TOD) in Roosevelt and zoning in Pioneer Square, opponents of density have acted as if the Seattle City Council might suddenly lose its mind and increase zoning from the square's current squat 40-foot buildings to mile-high sky scrapers. Local land use politics being what they are, that’s not going to happen. But even if it did, the developers would only build what they thought they could sell. It’s highly doubtful that such Brobdingnagian boosts to development capacity would be fully utilized. There simply isn’t any way to pay for it.
But what the Seattle City Council can do is allow developers to act in the interest of profit. Private profit isn’t a bad thing, but our process often behaves as if it is. Listening to local elected officials talk with derision about “private property interests” ruining our city would be laughable if it wasn’t such a serious and almost deliberate misreading of basic economics. When private interests are profitable, jobs are created. That’s equally true for small companies stamping out widgets or developers who create housing. When developers create successful and profitable projects, people are put to work, new tax revenue is generated, and our plans to sustainably support growth can succeed.
So should we abolish zoning, liquidate single family neighborhoods, and bulldoze our historic neighborhoods to allow a wild west willy nilly development pattern? Not exactly. Two proposals now before the City Council would use the city’s zoning authority as fiscal policy through what I would call regulatory (instead of quantitative) easing.
The first proposal is a regulatory reform package a group of developers, environmentalists, and neighborhood advocates (myself included) have proposed to the City Council and Mayor. This modest set of proposals would encourage new entrepreneurial endeavors by allowing home businesses in garages, retail business on the ground floor of residential buildings, and by speeding up the creation of more new housing units. As Chuck Wolfe pointed out in his article last week, “this SEPA aspect of the proposal could result in 40 new construction projects with 100 to 250 units each year.”
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