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WINNERS AND LOSERS IN GROWTH MANAGEMENT

In principle, many municipalities could slow growth with equal effectiveness by limiting either residential or commercial development. Slowing residential growth would slow commercial growth by limiting the size of the labor force and the number of customers. Similarly, limiting commercial growth would slow the growth of the housing stock because the presence of jobs is a major factor in the demand for housing.

In fact, most growth management systems emphasize limiting residential growth because such a policy tends to produce tight labor markets and high housing prices. That result is much more attractive to the population already in place than a commercial limitation policy, which would produce higher unemployment and lower housing prices. And, of course, it is the population resident at the time who establishes the growth management policy.

Assume that a growth management program has the effect of slowing residential growth relative to employment growth. Who wins, and who loses? The homeowner wins simply through the workings of the law of supply and demand. Restrict the supply of any item, and, all other things being equal, its price rises. The owner of rental property benefits in the same manner. A lesser supply of rental units in the long run means higher rents, which is capitalized as a higher value for the building in question. Of course, by the same token, the renter loses. The nonresident of the municipality, if he or she has the desire to become a resident, is also a loser, as it is now more difficult to find housing in the community. In a general sense, those who own developed property in the community benefit, and those who would like to own property lose. Those who would profit from community growth (for example, builders, construction workers, and real estate brokers) also lose. Owners of undeveloped land within the community are losers in the process, since there is a general relationship between the value of land and the intensity with which it can be developed. Restrict that intensity, and the value of land is diminished.7

Financial effects will be felt outside the municipality as well. If town X and town Y are in the same metropolitan area, they are to some extent part of the same housing market. If town X reduces its rate of housing construction, it deflects some housing demand to town Y. Thus housing prices in town Y (as well as in X) will rise, benefiting those who already own housing there and penalizing those who seek to buy there. Comparable effects may be seen for rental property.

Fiscal effects can also be demonstrated. If town X restricts residential development but accepts a new corporate headquarters, its tax rate may go down because the tax revenues from the headquarters exceed the new expenses that the headquarters will impose upon the town. Town X is capturing the tax surplus from the headquarters while shifting the population- related costs to other towns. Town Y now has to pay the cost of educating the children of people who work in town X and whose place of work contributes handsomely to town X's tax base.

 
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