Rising Taxes, Growth Restrictions Present Barriers to Homeownership

By Ryan Balis

Many homeowners are discovering that owning a piece of the American Dream may actually mean shouldering a larger tax burden.

Over the past three years in the Washington, D.C. area alone, average property tax bills have skyrocketed as much as 70 percent. The typical homeowner in rapidly expanding Fairfax County, VA, just outside the nation’s capital, will owe $544 more in annual property taxes in 2006 compared to one year ago.

But many of these residents — apparently considered “wealthy” enough to afford big government — cannot even afford a home of their own. In Montgomery County, Maryland, north of Washington, the median household income is $84,000 (2005), but the average single-family home sold for $660,000 in 2004. The median home price in the Washington area is $371,000, which is still more than three times the average household income.

These escalating housing costs worry the Maryland National Capital Park and Planning Commission, which predicted that only half of Montgomery Co.’s previously occupied townhouses will be affordable to median income earners in 2007.

Adding to these concerns are “smart growth” restrictions on housing development, which unnaturally restrict the supply of housing. It is a deadly spiral. The demand drives up prices on both homeownership and rentals. For owners, the benefit of the increased value of their homes is often offset by higher property taxes.

Smart growth restrictions on development pose a distinct problem for regions all across America experiencing population growth. The overall shortage of housing can create affordability and quality of life problems for families entering the housing market, particularly those with low and moderate incomes, young families and upwardly mobile minorities.

It is a problem largely overlooked nationally, not just in our nation’s capital.

According to an econometric report commissioned by The National Center for Public Policy Research, one million households purchasing homes between 1992 and 2002 would not have been able to do so had smart growth policies such as those found in Portland, Oregon — considered by many to be the “gold standard” of anti-sprawl regulations — existed nationwide at the time. Of those displaced, a disproportionate number — 260,000 of those households — would have been black.

As living costs explode across the Washington region, many middle-class and service-industry employees are resorting to extreme measures. Many essential public servants — teachers, police officers and firefighters — are seeking cheap housing further out in developing districts, forcing a long commute to work and further clogging roads.
It is not uncommon for workers in Washington, D.C. to suffer a two-hour commute each way. Some travel from as far away as West Virginia or Pennsylvania.

Others live in creative, but potentially unsafe, housing arrangements to remain close to their families or jobs.

Large numbers of people cram into homes and apartments designed for single families. Federal immigration and local law enforcement officials raided a split-level home in Loudon County, Virginia where it is believed as many as 19 immigrant Chinese restaurant workers lived. In a more extreme case, a Waldorf, Maryland woman pleaded guilty to locking her children in a commercial storage unit while she worked during the day. Felicia M. Dorsey and her four-and five-year-old daughters moved into the $65 a month space without running water after being evicted from her apartment and being unable to secure a place at a homeless shelter.

Sadly, Dorsey is not alone in seeking such makeshift residences. Sheds, cars, trailers and even the woods are sometimes the only affordable option for families who cannot afford to rent, much less own, in communities with not enough available housing.

There is mounting evidence that smart growth policies have not only resulted in higher taxes, but they also create a barrier to homeownership for thousands of American households. As housing prices and their corresponding property taxes continue to climb in growth-restricted areas, extreme dwellings may be the only alternative for those unable to afford the expensive cost of area living.

Ryan T. Balis is a Policy Analyst at The National Center for Public Policy Research in Washington, DC.