Is “Economic development” bad for the economy?

In our free-wheeling, “democratic” nation with our belief that capitalism solves all problems, we seem to have let Adam Smith’s “invisible hand” deal us a whopper of a punch. All of a sudden, property values are dropping like a rock, causing tax revenues to drop, causing local and state governments who are mandated to have balanced budgets to go into crisis mode. The federal government has jumped in to “bail out” the major players throughout this crisis- by extending super-low-interest-rate loans, grants, and a lot of “stimulus investment” in construction and infrastructure projects.

Yet, what if they have it all wrong? That the real disaster was too much “economic development” and not enough investment in “social capital.” Had we invested more in education than the war on drugs, national health care instead of the military-industrial complex and public transit instead of more off ramps and cul de sacs where would we be today? Did oversupply of new housing, new office space and new developments lead to the disaster? And was it mostly fueled by politicians who love to have their picture taken with a shovel in hand at a groundbreaking?

A real estate lawyer in Florida, Ms. Lesley Blackner seemed to think so- and is taking on the culture of construction with an amendment to Florida’s constitution to put the brakes on builders gone wild:

the real estate crisis is not just the fault of Wall Street, Washington or misguided borrowers; it is also the back-scratching bond between elected officials and builders — a common source of frustration in weak real estate markets around the country wherever developers are still fighting to add more housing.

In Florida, at least, Ms. Blackner hopes to put an end to the chronic oversupply with a ballot initiative she has labeled “Hometown Democracy.”

Amendment 4, as it is officially called, would give Floridians a vote on changes to state-mandated plans for growth in every county and municipality. Much of the potential impact of the measure is up for debate, with important details most likely to be decided by the courts.

But if it is added to the state’s Constitution — which would require 60 percent approval on Election Day — critics and supporters envision revolutionary change.

Leaders of the Yes on 4 campaign, including Ms. Blackner, say it would end a culture of freewheeling development

via In Florida, Battle Over Growth Goes to the Voters –

When I first entered politics I had no idea who the power brokers were, or what their agendas were. One that I kept running into, which seemed odd, was the HBA- the Homebuilders Association. They were one of the primary backers of Mike Turner in his first run for office as Dayton mayor, and the money was substantial. Considering Dayton had shrunk by about a third, it would seem that the city had an oversupply of housing already, and “home building” wouldn’t be high on the list of priorities- how wrong I was.

Bankers like home builders too- because construction loans, and then the mortgages that go with them are a constant source of revenue. Heavy construction people like home builders, because we then need new roads to carry the sprawling suburbanites to and from their cul de sacs. Automakers love new homes too- because they are generally built further and further out- on pristine farmland- instead of in core cities. And because the density of new construction has been lower over the last thirty years- shopping malls and “town centers” like them as the ideas of walkable communities falls apart in our mad rush to build, build, build.

In Florida, a ridiculous  glut of new homes is now causing the real estate market to fall apart. There is such an oversupply that when the rose-colored glasses come off, the landscape is pretty grim. The state had decided that “growth” was a goal – instead of sustainability and the results have been a disaster. Whether a constitutional amendment is the right solution or not, judging by the amount of money the Homebuilders are throwing up against it (considering many of them had to ask for a bailout from the feds) one should be able to infer it’s a shot in the right direction.

While Montgomery County’s population hasn’t grown substantially in the last 40 years, our footprint has spread out at a ridiculous pace. The Miami Valley Regional Planning Commission has the numbers and show that we’re overbuilt between 20 and 45% depending on type of development- from housing to office space to retail, yet the politicians keep banging the drum for builders to build.

What would happen if government got out of the “economic development” business altogether? What if there were zero incentives for new construction, instead, only offering incentives on projects that either reuse and adapt, or increase population density? What if there was a premium impact tax on expansion? Isn’t this what Portland, Oregon, did with its development limits? But, let’s also realize that we’ve let our state and local governments’ preoccupation with “economic development” take center stage instead of focusing on delivering top-notch, low-cost public services. The Ohio taxpayer is supporting a whole legion of people who do nothing except spend our tax dollars on diluting the value of our housing stock, our existing infrastructure and add overhead that makes doing business even more expensive.

Is it time for a referendum in Ohio, or perhaps nationwide? Florida may be leading the way if Amendment 4 passes this November.

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