----- Original Message -----
From: Rodney McFarland
To: dross@entercom.com
Cc: 
Sent: Saturday, September 03, 2005 12:36 PM
Subject: [Capr-discussion] FW: Zoning tax for Seattle

Mr. Ross:

I was a caller to your program on August 26, 2005. That was the day you
had Futurewise Executive Director Aaron Ostrom on the show. I was very
happy to hear that both you and Mr. Ostrom were outraged that regulatory
costs in King County could be as high as $200,000 per quarter acre. If
your shock at the number was genuine, I hope you find this material
interesting. If your shock was not genuine, but just a mechanism to
impugn me, then hit delete and have a nice day.

I have attached a copy of the paper from which I calculated the $200,000
I stated. Just to be sure that my math was correct, I asked the
professors who authored the paper to confirm the number. See the email
exchange below with Professor Gyourko confirming the $200,000. Mr.
Ostrum suggested that $20,000 would be the absolute maximum possible
regulatory cost. Note that using the highest priced land in the United
States (San Francisco) as the cost of land on the margin (which would
give the lowest regulatory cost possible), we would still have a
regulatory cost of $120,000 per quarter acre. I realize that you
requested an itemized list of costs for sample parcels but I can find no
such study. Professors Glaeser and Gyourko appear to have the best
available science on the subject. If they do not, I look forward to
reviewing whatever material you are using.

I certainly can understand that you would have limited knowledge of this
subject. It is unlikely that Mr. Ostrom, whose organization is driving
much of this regulatory cost, would be unfamiliar with the costs of that
regulation. It is disturbing that you would give him a platform from
which to distort the discussion as well as participate in denigrating
those few of us who try very hard to do our homework before opening our
mouths.

You will need to read the professor's paper to make sense of the
following calculations:
1 acre = 43,560 square feet thus 1 quarter acre = 10,890 square
feet

Table 4, Column 4 gives the land cost per square foot at the
extensive margin which includes regulatory costs - $18.91 per square
foot for the Seattle area - so:
$18.91 X 10,890 = $205,929.90 per quarter acre

From that we subtract the hedonic price of land given in Column
3 (the negative value in column 2 helps show why the Log-Log regression
is likely more accurate plus the higher number reduces the regulatory
cost) - $0.48 per square foot for Seattle:
$0.48 X 10,890 = $5,227.20 per quarter acre

Simple subtraction $205,929.90 - $5,227.20 = $200,702.70 the
regulatory burden of one quarter acre.

Note that the data used is from 1999. There has been considerable
inflation in housing costs since then - $262,676 mean house price then
(Column 5) compared to approximately $375,000 mean cost now (from August
6, 2005, article in Seattle Times business and technology section). It
seems reasonable, though I don't have a study in hand, that much of that
increase would end up reflected in the regulatory costs rather than the
hedonic value of the land or the actual construction costs. $262,676
adjusted for inflation (http://www.westegg.com/inflation/infl.cgi) would
currently be $299,587, so the current regulatory cost is more likely
$275,000.

There are approximately 5,000 to 6,000 new single family homes and the
same number of multifamily units built each year in urban King County.
According to the King County comprehensive plan there will be a maximum
of 6,000 homes built in rural King County over the next 20 years (that
is 300 per year compared to 12,000 units in the urban areas - and Mr.
Ostrom's personal boogey man is urban sprawl in rural King County?). If
we use the 6,000 single family homes in the urban area and ignore the
regulatory costs of the multifamily units, that is 1.2 billion dollars
per year of regulatory cost. Perhaps you could provide me with the
itemized list justifying that as the best use of that money! I suggest
that it is justifiable only if the intention is to drive the poor and
middle class out of the area so as to save the wonderful quality of life
we already have here for the rich and their servants.

If you made it this far, your shock was indeed genuine. I appreciate
your effort to learn more about the complex issues involved.

Sincerely,

Rodney McFarland, President
Citizens' Alliance for Property Rights


-----Original Message-----
From: Gyourko, Joe [mailto:gyourko@wharton.upenn.edu]
Sent: Saturday, September 03, 2005 9:50 AM
To: Rodney McFarland
Cc: Edward L. Glaeser
Subject: RE: Zoning tax for Seattle


Mr. Mc Farland,

You did the calculation correctly.  I would not bet anything on the
precise number, but even if you assume we grossly underestimated the
value of land on the margin and--San Francisco's $7.84 per square foot
number (from col. 2 of Table 4) is closer to the truth for Seattle--the
regulatory cost still is over $120K.  It is a large number for the
Seattle market no matter how you look at it.

As for 'being in the pay of developers', I think life is far too short
to get into those types of shouting matches so I will pass on the
opportunity to be on Mr. Ross's show.  The other side hurling such
charges will not believe you no matter what. For the record, we received
no funding from developers for that study.  The paper was produced for a
Federal Reserve Bank of New York conference on housing affordability.  I
am pretty sure we received a small honorarium from the New York Fed, but
it has been so long that I could not say for sure (or precisely how
much).

I have done other research on this issue, and the real estate center I
direct at Wharton certainly has developers who contribute to our
program.  However, they have no formal or informal control or oversight
of any faculty member's research.  Moreover, the critics generally are
wrong in presuming that large builders in particular are vehemently
opposed to restrictions on development.  The costs associated with these
restrictions generally can be borne more easily by bigger firms who can
spread them across a larger base.  Thus, they provide them a competitive
advantage relative to the many small firms in the industry--although I
doubt any large firm CEO would ever say that publicly.

I hope that helps.  Good luck with your work.

JG


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------------
Joe Gyourko
Martin Bucksbaum Professor of Real Estate & Finance
Director, Zell/Lurie Real Estate Center at Wharton
The Wharton School
3620 Locust Walk
Room 1480, Steinberg-Dietrich Hall
Philadelphia, PA  19104-6302
P:  215-898-3003;  F: 215-573-2220
email:  gyourko@wharton.upenn.edu
website: http://rider.wharton.upenn.edu/~wred/Gyourko/gyourko_home.htm

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------------

-----Original Message-----
From: Rodney McFarland
Sent: Monday, August 29, 2005 2:03 PM
To: eglaeser@harvard.edu; Gyourko, Joe
Subject: Zoning tax for Seattle

Gentlemen:

While a caller to a local talk show (Dave Ross, KIRO, Seattle) this past
Friday, I quoted $200,700 as the regulatory cost of a typical house on
one quarter acre in the Seattle area. I had arrived at that number using
table 4 in your paper "The Impact of Zoning on Housing Affordability." I
was laughed off the air and accused of gross distortion. You gentlemen
were accused of being in the pay of "developers."

Did I arrive at the correct dollar amount for one quarter acre in
Seattle? If I did, would one of you be willing to be on the Dave Ross
show to discuss your conclusions? It is unlikely Mr. Ross would actually
have you on, but I would like very much to be able to make the offer. Is
it true that some "developer" funded your study on which your paper is
based?

Thank you for your excellent work and your consideration of my request.

Rodney McFarland, President
Citizens' Alliance for Property Rights