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Growth management regulatory systems and the effects of affordable housing

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Title:
Growth management regulatory systems and the effects of affordable housing
Creator:
Shepard, Ted
Place of Publication:
Denver, CO
Publisher:
University of Colorado Denver
Publication Date:
Language:
English
Physical Description:
xii, 268 leaves : forms ; 29 cm.

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Department of Urban and Regional Planning

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Source Institution:
University of Colorado Denver
Holding Location:
Auraria Library
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All applicable rights reserved by the source institution and holding location.
Resource Identifier:
23102780 ( OCLC )

Full Text
GROWTH MANAGEMENT REGULATORY SYSTEMS AND
THE EFFECTS ON AFFORDABLE HOUSING
by
Ted Shepard
B.A., Colorado State University, 1975
A thesis submitted to the
Faculty of the School of Architecture
and Planning, University of Colorado Denver,
in partial fulfillment of the requirements for
the degree of Master of Urban and
Regional Planning
1990


11
This thesis for the Master of Urban and
Regional Planning degree by
Ted Shepard
has been approved for the
School of
Architecture and Planning
by


iii
Shepard, Ted (M.U.R.P., School of Architecture and Planning)
Growth Management Regulatory Systems and the Effects on Affordable
Housing
Thesis directed by Professor Bernard E. Jones
Growth management at the local level represents a multi-faceted
regulatory tool by which to control a community's quality of life.
As communities are challenged by the issues associated with growth
and development, growth management systems inevitably become part of
the debate among local decision makers. Growth management
techniques, to varying degrees and through a variety of mechanisms,
affect the local supply of housing.
A theoretical framework for the thesis is found in the recent
works of Garrett (1987) and Fischel (1985) who describe that
effective public regulation in the land development process as a
dynamic combination between traditional planning and zoning
techniques and the use of zoning as a collective, public good that
takes on a specific value in the free market system. Based on this
theoretical reference, the thesis operates under the assumption that
there is a delicate balance between public regulation and the free
market that must be scrutinized and evaluated for impacts on the goal
of efficient and equitable land use allocation.
Site specific case studies and empirical analyses reveal a
link between public regulatory controls and housing prices. Examples
in the literature document both direct and indirect effects of growth
management techniques on affordable housing.


IV
To gauge the effects of growth management on opportunities for
affordable housing, five communities along Colorado's front range
were selected for analysis. These sample communities were analyzed
and compared for a variety of regulatory controls. These regulatory
instruments included among others, planning, zoning, and subdivision
regulations, annexation policies, and fees and exaction schedules.
These various attributes became the independent variables of the
research. Organized into a community analysis typology, the sample
communities were ranked in terms of offering opportunities for
affordable housing.
While the community analysis typology analyzed the attributes of
each community's regulatory system, key market indicators were
examined to gauge the state of the local housing market. These key
market indicators became the dependent variable of the research. The
analysis was designed to examine the local market for evidence of
affordable housing. By comparing the community analysis typology
with market indicators, regulatory systems could be evaluated for
relative performance in providing affordable housing.
A survey of developers within the sample communities revealed a
degree of dissatisfaction with local regulatory systems combined with
a strong sense that local governments could do more to promote
affordable housing. Using both qualitative and quantitative
techniques, it was discovered that respondents are wary that there is
a trend towards increased government regulation in the local housing
market.
S'


V
The research demonstrates that certain local growth management
techniques have direct and indirect effects on housing markets. In
particular, the relationship between one of the independent
variables, supply of developable land, and one of the dependent
variables, average selling price per detached unit, was found to be
perfectly and positively correlated. Unless mitigated, these growth
management instruments inhibit opportunities to provide affordable
housing. Given that there is an increasing gap between incomes and
housing costs, and the tendency of local governments to add to the
regulatory apparatus, the issue of growth management and affordable
housing remains a vital public concern.
The form and content of this abstract are approved. I recommend
its publication.
Signed
Bernard E. Jones


VI
TABLE OF CONTENTS
Chapter Page
I. Introduction ........................................... 1
II. Methodology ............................................... 7
III. Introduction to the Literature Review Section ........... 14
IV. The Sample Communities Historic Introduction .... 74
V. Community Analysis Typology .............................. 98
VI. Market Indicators ....................................... 189
VII. Comparison of the Community Analysis Typology and
the Market Indicators ................................ 210
VIII. Survey Results............................................231
IX. Conclusions...............................................248
Bibliography ................................................... 253
Appendix........................................................258


vii
LIST OF TABLES
Number Page
1. First Time Home Buyer Affordability ..................... 4
2. Impact of Governmental Invervention in Colorado ... 25
3. Costs for a "Typical House"............................. 27
4. Cost Comparisons Petaluma, Santa Rosa, Rohnert Park 29
5. Building Permits 1974-1979 31
6. Unused Building Permits 1974-1978 ...................... 32
7. San Jose Subdivisions................................... 34
8. Comparison of Cost Components Related and Not Related
to Public Policy in San Jose Builder A............... 35
9. Comparison of Cost Components Related and Not Related
to Public Policy in San Jose -Builder B................ 36
10. Construction Costs Per Lot in Jacksonville...............38
11. Jacksonville Housing Costs 1971-1976 ................... 40
12. 685 Acre Development City of Oakland...................45
13. Significant Problems in Doing Business ................. 47
14. Florida Nice But Not Necessary Code Requirements ... 51
15. California: Cost of E.I.R. Compliance .................. 54
16. San Francisco Bay Area Development Fees..................57
17. Arvada Summary...........................................76
18. Aurora Summary...........................................80
19. Boulder Summary..........................................85
20. Fort Collins Summary.....................................90
21. Westminister Summary ................................... 94


viii
22. Sample Communities Demographic Summary ............. 95
23. Breakdown of Vacant, Residentially-zoned Land -
Arvada................................................100
24. Proposed Land Use in Arvada's Growth Limit Area ... 101
25. Breakdown of Vacant Residentially-zoned Land -
Aurora................................................102
26. Breakdown of Vacant Residentially-zoned Land -
Boulder.................................................103
27. Breakdown of Vacant Residentially-zoned Land -
Boulder Growth Area.....................................104
28. Summary of Available Developable Land in Boulder 104
29. Breakdown of Vacant Residentially-zoned Land -
Fort Collins............................................106
30. Breakdown of Residentially-zoned Land -
Westminster.............................................107
31. Comparison of Total Vacant Land at Affordable
Densities as a Percentage of Total Vacant Land .... 108
32. Comparison of Total Vacant Land Zoned Residential
as a Percentage of Total Land Area......................109
33. Comparison of Total Vacant Land Zoned Residential
at Affordable Densities ............................... 109
34. Rank of Sample Communities Based on Supply of
Developable Land........................................110
35. Land Summary............................................Ill
36. Annexation Activity Arvada ......................... 112
37. Anexation Activity Aurora ........................... 114
38. Annexation Activity Boulder ........................ 115
39. Annexation Activity Fort Collins.....................116
40. Annexation Activity Westminster .................... 117
41. Annexation Summary ................................... 119
42. Ranking by Raw Acres Annexed...........................120
43. Ranking by Average Rate of Land Increase........120
44. Ranking by Percentage Land Gain Over Base Year .... 121


ix
45. Land Growth Rate and Population Growth Rate
Coefficient.............................................121
46. Ranking on Annexation Activity ........................ 122
47. Comparison of Plan Review and Processing Time .... 124
48. Arvada Parking Requirements ........................... 125
49. Aurora Parking Requirements ........................... 127
50. Fort Collins Parking Requirements ..................... 129
51. Fort Collins Parking....................................130
52. Westminster Parking Allowance ......................... 131
53. Arvada Zoning Ordinance: Bulk Requirement ........... 137
54. Aurora Zoning Ordinance: Bulk Requirement ........... 138
55. Boulder Zoning Ordinance: Bulk Requirement ............ 138
56. Westminster Zoning Ordinance: Bulk Requirement 139
57. Arvada: Fees and Exactions............................143
58. Aurora: Fees and Exactions............................144
59. Boulder: Fees and Exactions.............................145
60. Fort Collins: Fees and Exactions........................147
61. Westminster: Fees and Exactions ........................148
62. Typical Per Unit Cost of the Planning and
Approval Fees...........................................149
63. Design Criteria for Streets, Sidewalks, Curbs,
and Gutters Arvada....................................151
64. Arvada Street Reduction ............................... 152
65. Design Specifications for Streets, Sidewalks,
Curbs, and Gutters in Aurora............................154
66. Design Criteria for Streets, Sidewalks, Curbs,
and Gutters in Boulder..................................155
67. Residential Streets Parking in Boulder ................ 155
68. Design Guidelines for Streets, Sidewalks, Curbs,
and Gutters in Fort Collins.............................157


X
69. Design Specifications for Streets, Sidewalks,
Curbs, and Gutters in Westminister .................... 159
70. Summary Table of Street R.O.W. Width Pavement
and Pavement Over Base..................................161
71. Ranking Summary of Attributes of the Community
Analysis Typology ..................................... 182
72. Aurora: Base Prices per Dwelling Unit...................190
73. Arvada: Base Prices per Dwelling Unit...................191
74. Boulder: Base Prices per Dwelling Unit..................191
75. Fort Collins: Base Prices per Dwelling Unit.............192
76. Westminster: Base Prices per Dwelling Unit..............192
77. Comparison Analysis ................................... 193
78. Range of Unit Price Survey..............................193
79. Ranking by Category and Combined Average .............. 194
80. Arvada: Building Permit Activity and the Percentage
of New Permits Compared to the Base Year of 1980 196
81. Aurora: Building Permit Activity and the Percentage
of New Permits Compared to the Base Year of 1980 . 197
82. Boulder: Building Permit Activity and the Percentage
of New Permits Compared to the Base Year of 1980 198
83. Fort Collins: Building Permit Activity and the
Percentage of New Permits Compared to the Base
Year of 1980 .......................................... 200
84. Westminster: Building Permit Activity and the
Percentage of New Permits Compared to the Base
Year of 1980 .......................................... 201
85. Summary Comparison of the Vitality Index ............. 202
86. Arvada Affordability Index ............................ 204
87. Aurora Affordability Index ............................ 204
88. Boulder Affordability Index ........................... 205
89. Fort Collins Affordability Index ...................... 205
90. Westminster Affordability Index ....................... 209
91. Summary Comparison Table of the Affordability Index 209


XI
92. Summary Table of the Three Market Indicators .... 208
93. Cumulative Ranking Summary of the Three Market
Indicators..............................................208
94. Ranking Summary of Attributes of the Community
Analysis Typology (Chapter V) and Cumulative
Ranking Summary of the Three Market Indicators
(Chapter VI)............................................211
95. Summary of the Spearman Rank Correlation Analysis
Between the Independent Variables and Average
Price Per Detached Unit...............................213
96. Summary of the Spearman Rank Correlation Analysis
Between the Independent Variables and Average
Price Per Attached Unit...............................214
97. Summary of the Spearman Rank Correlation Analysis
Between the Independent Variables and the Change
in Housing Supply (Vitality Index) ................... 216
98. Summary of the Spearman Rank Correlation Analysis
Between the Independent Variables and Affordability
Index Per Detached Unit...............................217
99. Summary of the Spearman Rank Correlation Analysis
Between the Independent Variables and Affordability
Index Per Attached Unit................................219
100. Smmary Relationship Analysis by RS Value .............. 220
101. Frequency Ranking of the Six Attributes................221
102. Correlations of Rankings of Both Independent and
Dependent Variables Arvada ......................... 224
103. Correlations of Rankings of Both Independent and
Dependent Variables Aurora ......................... 225
104. Correlations of Rankings of Both Independent and
Dependent Variables Boulder ........................ 226
105. Correlations of Rankings of Both Independent and
Dependent Variables Fort Collins ................... 228
106. Correlations of Rankings of Both Independent and
Dependent Variables Westminster .................... 229
107. Ranking of Six Categories in Terms of Difficulty 234
108. Perceived Additional Percentage Effect on
Final Selling Price Due to Forms of
Governmental Regulation ............................... 236


Xll
109. Government Imposed Conditions After Plan Sub-
mitted ...........................................................239
110. Survey Responses Based on O'Mara's Attitudinal
Scale..................................................241
111. Reasons for Denial of Development Plans ............... 245
112. Mean Percentage Breakdown of Production Factors for
Years 978 and 1984 ................................. 247


CHAPTER I
INTRODUCTION
The relationship between government policies and the housing
market is a dynamic interaction played by many actors at various
levels. On the demand side are consumers who desire the proper mix of
housing type, price, and financial package. On the supply side are
builders and developers who seek to maximize their profits through
prudent investment of resources. A third actor is the financial
community which provides the capital that fuels the market activity.
Surrounding these three are a myriad of government regulators
representing the public interest at the federal, state, and local
level. This market is diverse, decentralized, and subject to local
peculiarities and imperfections.
The justification for public planning and government intervention
in the housing market and land development process has long been
established. Planning has been acknowledged as a legitimate public
policy function. Public planning minimizes negative externalities and
motivates cooperation among the various actors so that self-interest
leads to the collective interest. "Where externalities and market
imperfections are determined to be of such magnitude that the cost of
intervening in the market system are outweighed by the benefits of
improvement in efficiency or equity, intervention is justified."1
However, where planning can be shown not to reduce market failure, nor
promote social equity, the public intrusion must be examined and


0
evaluated.
It is with this justification for public policy that this research
seeks to evaluate the role of municipal governments' regulatory
measures on the land development process as measured by the condition
of the local housing market. The issue is that planning and zoning
regulations and land development ordinances have an effect on the
supply and price of housing units. These various ordinances can be
termed growth management policies for their effect is to determine the
ultimate pattern of growth. Growth management, through public
intervention into the marketplace, has an effect not only on the
pattern and shape of growth, but also on eventual affordability of
housing. This thesis will attempt to explain how municipal growth
management techniques affect housing affordability. The significance
of this research is found in the present condition of both today's
housing market and the prevailing trend of growth management found in
many front range communities, and across the entire nation.
Affordability is the number one issue in today's hosing market.
In 1985, 22.3 million, or 28% of all U.S. households were paying more
than 30% of their incomes for housing, and 9.3 million, or 11% were
paying more than 50%."* "Shelter affordability is the most widespread
housing problem among all households. It afflicts 3.6 times as many
households as physical inadequacy (defined as units needing major
repairs or rehabilitation) and 7.5 times as many as overcrowding
(defined as more than two persons per bedroom)."
Through increased costs and inflation, the price of new and
existing homes has steadily risen. This escalation has outpaced
incomes creating an "affordability gap." "Between 1980 and 187,
according to a study by Harvard University's Joint Center for Housing


3
Studies, The State of the Nation's Housing Report, the home ownership
rate fell from 43.3% to 35.9% among those in the 25-29 age group, and
from 61.1% to 53.2% for those in the 30-34 age group. In 1988,
according to the Current Population Survey, the home ownership rate
among those in the 25-34 age group dropped to 45% from 47%."'
In 1984, the National Association of Realtors began tracking a
measurement known as the "affordability index." This index is a ratio
between the median family income and the income needed to qualify to
buy a medium-priced, existing, single family home. When the ratio
equals 100 or higher, conditions are considered favorable for
prospective buyers. Similarly, when the index is less than 100,
prospective buyers are at a disadvantage. Table One illustrates the
results of the affordability index, at the national level, adjusted for
the first-time buyer. The index assumes a 10% down payment for the
first-time buyer versus a 20% down payment for the composite index.
The effective interest rate is derived from the effective rate on loans
closed on existing homes as tabulated by the Office of Thrift
Supervision. The qualifying income is based on current lending
requirements of the Federal National Mortgage Association.*
As can be seen by Table 1, the affordability index for the first-
time home buyer ranged from a low of 64.9 to a high of 79.0. It is
significant to note that at no time since 1984 did the affordability
index equal or exceed an index of 100. This means that for the last
six consecutive years the median family income of the first-time buyer
was insufficient to purchase the median starter home.


4
Table 1. First-Time Home Buyer Affordability
Starter Effective Prime First First-
time
Home Af ford-Year ability Index Interest Price Time Median Rate Qualifying Income Buyer Income
1984 $61,599 12.49% $18,735 $28,851 64.9
1985 64,200 11.74 19,484 28,507 68.3
1986 68,300 10.25 20,400 26,990 75.6
1987 72,700 9.28 20,916 26,513 78.9
1988 75,900 9.31 21,898 27,714 79.0
1989 79, 100 10. 11 22,878 30,824 74.2
Source: The National Association of Realtors*
The uncertain role of massive federal deficits and the future
extent of government borrowing in the capital markets forebodes
periodic fluctuations and unpredictability for the future availability
of mortgage credit. In addition, the Reagan Administration policy
towards housing assistance was to remove the federal government from
its traditional level of involvement. "The budget of the Department of
Housing and Urban Development was cut from $36 billion in 1980 to $14
billion in 1987.'
The size of the baby boom population cohort, decreasing household
size, and the general rise in household formation places strong
pressure on the demand side of the housing market.' The American
Population has always been well housed and will continue to expect a
choice of adequate housing. The pursuit of the American Dream, the
notion of establishing equity, and the opportunity for upward mobility
are all fundamental tenets in our basic social fabric. As we enter the
mid-eighties and early nineties, the demand side of the housing market
is strong and based on traditional socio-economic motivations.
At the same time, there is a prevailing philosophy among many


5
communities that preservation of the status quo should be given a
priority over community growth. This philosophy ius manifested in a
vast array of ordinances and regulations which are designed to protect
the values of the ordinances and regulations which are designed to
protect the values of the community as perceived by its citizens. For
example, according to the California Association of Realtors, 17
initiatives to tighten growth controls at the local level appears on
November 1987 ballots, and 15 passed.
As land development and residential construction become more
complex, there is a trend among local governments toward replanning,
rezoning and more restrictive regulation. These shifts in land use
controls have created an uncertain regulatory climate which lengthen
and complicate the development approval process. Preservation of the
status-quo, the notion of growth paying its own way, and increased
regulation of development are the precepts which characterize the
current condition of municipal growth management.
The trend towards increased public regulation over the
environment, architecture, and resource conservation, and other
concerns are as valid objectives as the pursuit of affordable housing.
As policy makers struggle to balance the competing interests of growth
management and housing affordability, analysis of unintended effects as
well as intended effects should be scrutinized. In any public planning
issue, it is important to ask what are causes and what are the effects,
what are the means and what are the ends, who are the winners and who
are the losers? The trade-offs and externalities of growth management
vis-a-vis housing affordability is the focus of this research.


Chapter One End Notes
1. Terry Moore, "Why Allow Planners to do what they do, a
Justification from Economic Theory," Journal of the American
Institute of Planners. Vol. 44, No. 4, 1978.
2. Anthony Downs, "Low Income Housing Problem Is Too Big to Ignore,"
National Real Estate Investor. Vol. 31, No. 6, 1989, p. 30.
3. Ibid.
4. Stacy A. Waldron, "Shrinking Prosperity Makes Home Ownership a
Stretch," Real Estate Today. Vol. 22, No. 7, 1989, p. 32.
5. Ravi Kamath. "The N.A.R.'s Housing Affordability Index. Real
Estate Review. Vol. 17, No. 4, 1988.
6. "Housing Affordability," Home Sales. Vol. 4, No. 3, 1990, p. 12.
7. Waldron, p. 32.
8. U.S. Department of Commerce, Bureau of the Census, Census of the
Population 1980. Colorado, (Washington, D.C.Government Printing
Office).
9. "California Voters Lead Nation in Growth Management and
Conservation Ballots," Successful Communities: The Newsletter of
Growth Management. No. 1, 1988, p. 1.


CHAPTER II
METHODOLOGY
The methods for obtaining data for this research numbered
three. The first component was a review and evaluation of the current
literature on the effects of growth management policies. The second
area was an examination and evaluation of a sample of five front
range communities for growth management techniques and the condition
of housing affordability. The third component was a questionnaire
distributed to a random sample of active builders and land developers
in each of the sample communities.
The research was an exercise in the deductive process of
reasoning moving from the general theory to specific findings. The
general principle is that there are determinant factors which make up
the component structure of the final costs of supplying housing units
in today's market. This component structure consists of the cost of
land, labor, capital, expertise, materials, and entrepreneurial
ability. In addition, another component of the cost structure is the
expense of meeting the growth management requirements of a particular
municipality. The specific expectation that can be derived from this
general theory is that growth management techniques add to the cost
of housing within a particular municipality thus affecting the number
of consumers able to afford such housing.
The research was designed to test this hypothesis using a
sample of selected jurisdictions. The object was to check this
hypothesis against real world experiences to gain an understanding of


8
the hypothesized causal relationship, if any, between growth
management mechanisms and the subsequent cost of housing. The key
measurement will not only be the final selling price of individual
housing units but the ability of local residents to purchase such
housing based on income levels. The intent is to describe conditions
and relationships between growth management techniques as the
independent variable, or a cause, and subsequent housing costs and
affordability as the dependent variable, or the effect.
Growth management techniques are to be defined as those
planning and zoning ordinances, land use and development regulations,
building codes, and design and engineering specifications and other
policy instruments which determine the extent and rate of residential
urban development allowable within a given municipal jurisdiction.
Although many of these are implicit forms of growth management, their
effect is sufficient to consider these measures as examples of de-
facto growth management. Housing costs will be defined as the final
selling price of single-family detached houses, townhomes, and
condominium units. Monthly rent will be used to indicate the final
costs of rental units. These housing values may be expressed
throughout the research as medians, and or averages. Housing
affordability will be defined as the ability of the housing consumer
to purchase housing units based on a sufficient percentage of gross
monthly income to pay for monthly housing costs at a given mortgage
rate. Monthly housing costs are defined to include the principle and
interest of a mortgage loan excluding taxes and insurance, or the
gross monthly rent of a rental unit.
The units of analysis consist of five home-rule chartered
municipal corporations each of which is governed by an elected body


9
and staffed by an appointed manager with an accompanying bureaucracy.
With state enabling legislation and adopted ordinances, these
municipalities exercise jurisdictional control over the land
development process through a combination of review procedures, fee
structures, and land use regulations.
Analysis of the independent variables included an examination
of the various policy instruments employed by the sample communities
in the land regulation process. These instruments included planning
and zoning regulations, annexation ordinances, subdivision
regulations, growth controls, fees and exactions, P.U.D. (planned
unit development) requirements, height restrictions, and selections
from the local building code. These attributes will be explored in
depth at which time more precise definitions will be offered.
The research of the dependent variables include an examination
of the local housing market within each sample community. These
markets have been analyzed for type of activity, volume of
construction, median sales prices, absorption rates, and
characteristics of new projects. The independent and dependent
variables are summarized in Figure 1.
The research has set up a typology which illustrates the
conditions of local land development regulations and the
corresponding housing market conditions. This typology is an attempt
to explain how local policy instruments influence the final housing
products within each sample community.
This research observes the first rule of causality that the
cause must precede the effect in time. For this reason, land
development regulations and growth management policies which were not
in place as of January 1, 1984 were invalid and not to be considered.


Given the lag time between the development approval process and the
absorption of new housing units, regulations posted after January 1,
1984 are determined to be too recent to influence the local housing
market conditions.
Variables
Independent Variables Dependent Variables
1. Supply of Developable Land
2. Anexation Activity
3. Review ad Processing Time
4. Parking
5. Landscaping and Open Space
6. Coverage, Frontage, Setbacks
7. Fees and Exactions
8. Street, Sidewalks, Curbs, Gutt
9. Direct Growth Management Polic
1. Average Price Detached Unit
2. Average Price Attached Unit
3. Annual Change in Housing
Supply
4. Income/Average Housing
Detached Unit Cost
5. Income/Average Housing Cost
ers Attached Unit
ies
The second rule of causality, that the two variables
empirically relate, is also observed. Government fees and exactions
directly translate into increased front end costs and overhead.
Administrative review time translates into increased financial
carrying costs. P.U.D. requirements, subdivision regulations, and
offsite improvements translate into the final number of allowable
units per project and, therefore, final selling price.
In establishing causality, therefore, the third rule must be
observed. The relationship between growth management policies and
housing affordability must not be explained away as being due to the
influence of some third intervening variable that causes both
variables to fluctuate. Care was taken in the selection of the
sample cities to insure that no powerful intervening variable would
exert undue influence upon the observed relationship. However,
intervening variables do exist and to suggest otherwise would be
careless. Locational attributes within each sample community include


11
neighborhood composition, local school qualities, accessibility,
property taxes, amenities, and the level of public services.
It may not be possible to interpret the nature of the
relationship between growth management policies and housing
affordability as truly necessary. For if growth management controls
are truly necessary, then removing them must thereby prevent the
effects of increased housing costs from occurring. This would be
difficult to establish given the nature of the housing market.
However, if growth management controls are considered sufficient,
then inserting them must guarantee the effect of increased housing
costs. It is anticipated that the research will show the
relationship between growth management policies and housing costs to
be a sufficient causal relationship. The typology and the
affordability index is an informative and illustrative model in
explaining how land development regulations and growth management
policies affect the cost of housing in the five sample communities.
The five sample communities are Arvada, Aurora, Boulder, Ft.
Collins, and Westminster. These cities represent a variety of front
range communities yet are comparable for several reasons. These
communities are all growing in population and employment
opportunities. They all have the council-manger form of government
and are "home-rule" cities. Each community has ample physical
opportunity to accommodate new growth through existing vacant land or
annexation. Each community has experienced growth pressures and
therefore has a unique approach to land development regulation. The
sample represents a front range geographic diversity yet the research
has generated comparable data from which to draw valid conclusions.


12
The selection process was designed to eliminate those
communities which are not economically diverse enough to attract
affordable housing. For this reason, exclusive bedroom communities,
characterized by predominant residential land use and large lot
residences were considered unsuitable for study. The City of Denver
was excluded because of its inability to annex and the intense
pressure on vacant land prices for office, commercial, or mid-to
high-rise residential buildings. Communities which are landlocked
and unable to grow and provide services were eliminated as well as
mountain communities due to accessibility and environmental
constraints. The sample was chosen on the ability of each community
to demonstrate that both sides of the issue of growth versus
affordable housing are represented. Five communities were considered
to be adequate number to provide an in depth analysis of how front
range communities pursue public policy objectives.
In addition to establishing a typology of community
characteristics, a questionnaire was distributed to a random sample
of private builders and developers in each of the sample communities.
The objective of this survey instrument was to measure and gauge the
effects of growth management policies on the cost of providing
housing units. The questions were designed to elicit as full a
picture as possible. The result was generation of primary field data
which contribute to the understanding of the issue. The quantitative
responses lend well to strict analysis while the qualitative
questions are useful in expanding on the local conditions. The
survey instrument appears in the appendix.
The research relies on an examination and analysis of social
artifacts and empirical approximations of the concepts of growth


13
management and housing costs. The intent is to discover
associations, relationships, and understanding of a debate between
two competing yet equally valid objectives. It is hoped that further
insight will be gained to assist public planners and policy makers in
balancing the philosophical differences which presently exist on this
issue.
The analysis of five sample communities will offer an
historical perspective toward growth and development along Colorado's
front range. The research will examine the directly visible and
objectively identifiable characteristics of municipal regulatory
techniques. These forms of communication include planning and zoning
ordinances, building codes, design and engineering specifications,
and inclusionary housing policies. Realizing a certain tolerance for
ambiguity, this thesis seeks, above all, the goal of understanding
the issue of responsible government regulation with sensitivity to
housing costs.


CHAPTER III
INTRODUCTION TO THE LITERATURE REVIEW SECTION
The primary purpose of reviewing the current literature is to
establish a level of consistency with the results of existing,
documented research. The examination and evaluation of published
data will illustrate the external validity of the issue of public
regulation and housing costs with well-confirmed propositions. This
review of the literature is an important use of secondary data which
contributes to the clarification of the immediate issue.
The literature review varies among geographic, site specific
case studies, and broad theoretical concepts. The time frame is from
the mid nineteen seventies to the mid nineteen eighties and thus
certain trends become evident. The findings reveal varying degrees
of strength on the relationship between growth management policies
and housing affordability. Thee are a variety of disciplines and
methodologies represented including land use analysis, economic
analysis, and examples of urban economics.
The literature review will demonstrate external consistency and
highlight a variety of research designs used to explain the
relationship between public controls and housing costs. The studies
are relevant, informative, and affirm the significance of this issue
in the field of public planning and the role of public policy.


15
Theoretical Framework
A theoretical framework for the research begins with the work
of Martin A. Garrett, Jr. In his Land Use Regulation, the Impacts of
Alternative Land Use Rights. (1987), Garrett describes his theory for
optimal land use allocation. Garrett's theory blends a combination
of public regulation with the normal behavior of the market system.
The purpose is to provide an economic and legal rationale for land
use regulation in a market economy.
Since the Standard State Zoning Enabling Act of 1921, and
affirmed by Supreme Court in Village of Euclid versus Ambler Realty
Company in 1926, the practice of zoning has been dominated by the
rights of private property regulated primarily by nuisance law. It
is also significant to note that most communities adopted zoning
regulations prior to adopting a comprehensive plan. Thus, in
institutional history, zoning preceded planning. With the dominance
of private property rights and without the benefits of comprehensive
planning, zoning became ill-equipped to deal with the traditional
capitalistic motivations to derive maximum return from land
ownership. Consequently, many communities reacted by enacting
additional layers of zoning regulation in order to be protected from
the negative spillover effects of market driven growth.
Zoning, as traditionally practiced, tends to reward local
residents and existing land uses at the expense of future residents
and potential land uses. In many cases zoning has been used to
protect upper income groups by excluding certain members of society.
Zoning tends to be inflexible and difficult to apply to all parcels
within a given community. Finally, zoning does not allocate land
usage in a fair or equitable manner.


16
Given these shortcomings, Garrett suggests a model of optimal
land use regulation that is realistic in a capitalistic society and
conforms to existing administrative and legal institutions.
According to Garrett, land use allocation is considered optimal as
long as land use changes generate benefits to society that exceed
losses to individuals that do not reflect a pure taking without due
compensation.1
A fundamental premise in Garrett's model of optimal land use is
that a community should undertake and ratify a thorough comprehensive
plan. Undeveloped tracts of land should be designated commercial,
industrial, and residential. The aggregate size of each land use
designation should be large enough to ensure a competitive land
market within each use throughout the planning period. A planning
period should conform to the full implementation of the
infrastructure planned for that period. Such a comprehensive plan
should be relatively rigid in that only evolutionary changes occur.
The comprehensive plan should encourage competition in the supply of
land within specified uses but restricts competition among
alternative land uses.
It is important, in Garrett's model, that the comprehensive
plan be strictly enforced. Strict enforcement addresses the
underlying distrust in the market mechanism for the allocation of
land. Adherence to a well-designed plan can significantly reduce the
negative spillover effects among the major categories of land use.!
In contrast with the strict adherence to the plan, zoning
within each use classification should be flexible. While the
regulation of land among competing uses can help produce a more
optimal allocation of land, land uses within each classification


17
should be determined by the market. That is, within the constraints
of public health, safety, welfare, and the availability of
infrastructure, the type, form, and density of development should be
determined through the mechanism of the free market.5 Undeveloped
parcels of land should not be rezoned for particular types of
development such as large lot single family, prior to a perceived
demand.
With the fundamental tools of strict comprehensive planning and
flexible zoning, Garrett's model of optimal land use allocation
requires a contract between residents in time period one and
landlord-developers in time period two. It is assumed that for
optimal land use to occur, a binding agreement, or contract, must be
formed between the residents of a community and the landlord-
developer between two time periods. That is those who purchase land
in tine period one must have a contract that gives them some
assurance of what the community will be like in time period two.
Similarly, optimal allocation of land use also requires that the
landlord-developer form a contract with residents between time period
one and time period two. Without a contract, residents can change
the rules of the game in time period two, thereby reducing the
returns to the landlord-developer.
There are two factors that prohibit forming this contract.
First, landlord-developers do not own all the land in a community and
cannot contract for land that is not theirs. Second, new landlord-
developers can enter the community in time period two. Because there
is competition among landlord-developers and there are many
residents, the contract must take the form of a public good. This
requires regulation by a third party, the public sector. Public


18
regulation is required because of the inability of residents and
landlord-developers to reach a solution through the private market.
The contract is dynamic in that it is influenced by the
comprehensive plan and the citizen input process. The comprehensive
plan designates in time period one the geographic areas for each
major category of land use in time period two. Land use regulation
that forces compliance with a comprehensive plan segregates non-
compatible land uses, thus reducing negative spillover effects.
The citizen input process gives residents a voice in
determining the character of the community's future. Residents in
time period one want assurance that as development occurs it will not
change the integrity of their neighborhood or community. The
opportunity for citizen input reduces the element of surprise and
lends predictability to the process as the community moves from time
period one into time period two.
Through strict adherence to a comprehensive plan, with flexible
zoning within designated land use classifications, and with a
contract between existing residents and landlord-developers between
present and future time periods, a community establishes a framework
to allocate land in an optimal manner. With citizen participation,
piecemeal zoning changes over time become fair and predictable.
Combined with the normal behavior of the free market, Garrett's model
offers a theory of efficient land use allocation.
The theoretical framework for the research also draws upon the
work of William Fischel. In The Economics of Zoning Laws. A Property
Rights Approach to American Land Use Controls. Fischel argues that
zoning and other local land use controls are most usefully viewed as
collective property rights controlled and exchanged by rational


19
economic agents. Zoning is not an effort by disinterested planners
to internalize externalities, nor is zoning a set of irrational rules
that impose arbitrary constraints on the land market. Rather, zoning
may be thought of as a collective property right or possession of an
entitlement. Like the "bundle of sticks" of property law, zoning law
can also be thought of as dividing up "entitlements" between the
collective public and private landowners.4
In Fischel's model, a local municipality creates an original
endowment of entitlements via the zoning, subdivision, and other
regulatory codes. These entitlements are typically initially
assigned to the community. In order to proceed with land
development, a landowner-developer must transact with the community
in order to escape some of the restrictions. Transactions between
the landowner-developer and the community must take place to arrive
at an agreement. The process of self-interested exchange can be
depended upon to yield a unique and economically efficient allocation
of resources.5
The property rights approach to zoning is important in that it
suggests an approach in dealing with locally controversial land use
issues.
"If the defect in zoning is seen to be a incomplete
assignment of entitlements, the property rights approach
leads one to ask how entitlements ought to be assigned.
If the defect is high transaction costs the approach
leads one to ask how to reduce such costs. If the defect
is one of fairness, it leads one to ask how entitlements
should be distributed or protected so as to promote
fairness."5
According to Fischel, local governments establish regulatory
mechanisms or entitlements, which are assigned by either legislative


20
or judicial authority. These entitlements are defined, measurable,
and exchangeable. Once a community has established its regulatory
climate, it can set the terms for the exchange of entitlements and
landowner-developers must satisfy whatever conditions the community
wishes to impose.
Fischel warns of the inefficiencies created when a local
regulatory system is found to be weighted heavily in favor of
promoting and preserving the low-density, single-family, suburban
land use pattern. Transaction of entitlements become costly for the
landowner-developer as entitlements are moved farther away from the
theoretically efficient point. Under this scenario, the benefits go
to the insiders, the current resident voters. The costs are imposed
upon landowner-developers, usually the only representative of the
potential consumers.
The property rights approach to zoning holds regulatory systems
to the efficiency standard. According to Fischel, zoning is too
restrictive if, with a given endowment of entitlements, there are
potential net welfare gains from some reduction in zoning
restrictions.7
Both Garrett and Fischel offer theories on how best to allocate
and regulate land use. Both models seek efficiency and fairness.
Garrett provides a model that creates a balance between public
regulation and the free market. Fischel emphasizes the advantages of
the free market but only after an initial establishment and exchange
of zoning entitlements. Both models provide a theoretical framework
for the thesis in that they seek to explain the delicate, dynamic mix
between public sector regulation and the forces of the free market
system


21
Cost of Environmental Legislation
One of the pilot studies which laid important empirical
groundwork on the issue of government regulation and housing costs
was conducted in 1977 by Franklin J. James and Thomas Muller. In
their landmark "Environmental Impact Evaluation, Land Use Planning,
and the Housing Consumer", James and Muller examined the costs
associated with the compliance of newly enacted environmental
legislation.' The authors chose Florida and California as examples
where the differences between the environmental ethic and the land
development process were most severe.
In 1972, the State of Florida passed the Environmental Land and
Water Management Act. This legislation provided for state and
regional review of developments which were deemed to have a "regional
impact" or were located in an "area of critical concern." The Act
required that developments of regional impact be examined for a
variety of issues. The specific impacts which were required to be
considered ranged far beyond narrowly defined environmental issues
and included such economic effects as tax revenues, demand on public
services, hosing costs and availability and longas well as short
term employment opportunities. The authors selected Broward County
as an example of a growing jurisdiction on the Southern Florida area.
In 1970, California passed the California Environment Quality
Act, which, among other components, required an environmental impact
review of housing and land development projects. The City of San
Diego was selected by James and Muller for examination because of the
substantial representation on both sides of the regulation versus
development issue, and also because of growth similarities with
Broward County, Florida.


22
The general findings from both examples were that environmental
impact review (E.I.R.) showed promise of enabling communities to
better protect themselves from adverse side effects of new
development. At the same time, the E.I.R. process added to what
appeared to be a modest increment to the overall cost of new
housing. However, the authors stated that because the E.I.R. has
expanded local government planning options, one of the side effects
is the enhanced ability of localities to exclude moderate income
families from new housing.1'
From interviews with developers and their consultants, the
authors were able to define a specific financial burden due to
compliance with the E.I.R. In San Diego, compliance with E.I.R. cost
between $4,000 and $120,000 per project.11 In Florida, which
required more comprehensive evaluation, the cost of preparing for
E.I.R. for large projects was found to be between $50,000 and
$200,000 per project.11
A further breakdown revealed that, on the average, developments
being reviewed in Florida were comprised of approximately 5,000
housing units and the cost of the E.I.R. amounted to $30 per unit.
At the same time, developments in San Diego averaged between 100 and
300 units and the cost of the E.I.R. came to $20 per unit.11
Delay was found to be a significant factor in the E.I.R.
process. The average net process time in San Diego was about two
months. However, in Broward County, the E.I.R. process preceded the
actual project approval stage of local jurisdictions. As a result,
the entire E.I.R. interval in Florida represented a net increment to
delay of development. The authors concluded that in Broward County,


23
the minimum approval time was three months, while one out of five
projects was delayed beyond four months.1*
Besides noting the cost of preparing the environmental impact
statement, and the cost of delay, James and Muller identified the
carrying cost of compliance with the E.I.R. process. These carrying
costs took the form of:
1. interest costs of the investments in land
2. property taxes on land
3. general overhead and expenses of the developer.
The authors concluded that overall, it appeared that the direct, out-
of-pocket costs to developers came to $160 per housing unit in
Broward County, and $77 per housing unit in San Diego.15
The cost of mitigating the adverse impacts of the development
proposal was also considered. In Broward County, it was discovered
that 75% of the awarded development approvals were conditional upon
specified changes in the project.11 Typically, for Broward County,
these conditions took the form of land exactions and construction of
public facilities.11
James and Muller concluded that Environmental Impact Review had
significant benefits and that the costs were generally moderate.
However, the costs and benefits were not evenly spread, creating a
social inequity issue. The benefits of E.I.R. were found to fall
primarily on existing residents of growing communities, while the
costs were borne by new home builders and buyers.1' Also, the costs
of E.I.R. measured in terms of increased housing costs or diminished
housing availability were likely to bear down most heavily on
moderate income families.


24
Although the research by James and Miller focused on E.I.R.
compliance, their methodology has been adapted to measuring other
forms of government regulation which affect the land development and
housing industries. One example is a study which examined the
influence of regulation over private development in Colorado.
The study, An Analysis of The Impact of State and Local
Government Intervention on The Home Building Process in Colorado -
1970-1975 by James R. Lincoln, Dean C. Coddington, and John
Penberthy, was prepared by a Denver-based market research firm
Bickert, Browne, Coddington and Associates, Inc. The major thrust of
this study was to identify the impacts of government intervention on
housing costs. Two counties and four cities throughout Colorado were
surveyed for development fees and administrative efficiency in
regulating housing construction. A base year of 1970 was chosen and
compared with data from 1974 through 1975.
The findings of this study indicate that between 1970 and 1975,
state and local government intervention into the home building
process in Colorado added $1,500 to $2,000 to the cost of the typical
new house built in 1975 versus a similar house built in 1970.M The
majority of this increase was found to be in the form of site
development expenses. These expenses were:
1. Water and sewer tap fees
2. Dedication of land and cash payment for schools and parks
3. Permit fees
4. Increased requirements for street upgrade and pavement,
underground storm sewers, various other off-site
improvements


25
In general, site development costs in Colorado have increased between
$1,750 and $3,300 per lot, adjusted for inflation, over the past five
years.
Table 2. Impact of Governmental Intervention in Colorado
Case 1970-71 1975 Change
Arapahoe County $3,424 $5,725 $3,301
Arvada 2,983 5,928 2.945
Aurora 1,850 3,600 1,750
Fort Collins 2,372 4,386 2,014
Mesa County 2,225 5,365 3,140
Lakewood 1,690 3,444 1,754
Pueblo 1,164 3,622 2,458
Source: An Analysis of the impact of State and Local Government
Intervention on the Home Building Process in Colorado
1970-75. By Lincoln, Coddington, and Penberthy.
Besides site development costs, the study found that increased
local government intervention caused delay and uncertainty and thus
increased developer risk. Obtaining a permit to develop a
subdivision and build houses increased in complexity between 1970 and
1975. The authors concluded that, at minimum, the process took four
months longer to obtain necessary approvals in 1975 than it did in
1970.11
The primary sources of delay were found to be due to a higher
level of complexity in the following areas:
1. The approval process for annexation, zoning approval,
subdivision and platting.
2. Special district formation or annexation for water,
sewer, recreation, schools, and fire protection.
3. Mortgage insurance approval, (FHA, VA).
4. Environmental impact statements for large subdivisions.


26
5. Inspection of plans and the construction process.
6. Financing, including loans for land, development, and
construction.n
The impact of delay on builders was evident in the areas of
added costs and increased risks. The need for greater capital outlay
at the beginning of a project, and the delay in obtaining approvals,
were significant factors in the cost of doing business between 1970
and 1975.
This study also described a comparative hypothetical example of
what the site development costs and construction costs would be for a
"typical" house between 1970 and 1975. This representative house was
assumed to have 1,050 square feet, on a 8,160 foot lot, and to be
part of a 142 acre, 500 unit total development. The housing was
located in an unincorporated area near a large city along the front
range.
Site developments costs were examined in 14 categories and the
study concluded that costs increased 84% from $3,450 in 1970 to
$6,350 in 1975." Of the 14 categories, water and sewer tap fees
rose from $400 to $1,300 accounting for one-fourth of the total
increase.* Underground storm drainage, not required in 1970, added
$150 to the price of the 1975 lot.15
Construction costs, analyzed by 22 items increased from $14,200
in 1970 to $22,510 in 1975 for a rise of $8,310.!
As can be seen by Table 3, total costs for the "typical" house
rose by $12,090 representing a 66% increase between 1970 and 1975.
Of this total increase, state and local government intervention
accounted for $1,500-$2,000.


Table 3. Costs for a "Typical" House
$ %
1970 1975 Increase Increase
Site development S 3,450 $ 6,350 $ 2,900 84%
Site carrying costs 600 1,540 880 133%
House construction 13,189 19,754 6,565 50%
Construction finance 1.011 2.756 1.745 173%
$18,310 $30,400 $12,090 66%
Source: Lincoln, Coddington, Penberthy
This study, although somewhat dated and, in part hypothetical,
points out the implications of increased reliance on up front
development fees, lengthy administrative review, and the complexity
of government intervention. The major implication on the housing
consumer is affordability and choice. Each financial increment added
to the housing cost structure has the effect of eliminating persons
and families whose incomes prevent qualification for purchase. The
concern of home builders is the increased financial risk. "During
the period from 1970 to 1975, the amount invested and at risk at the
start of a project has increased from a highly leveraged but minimal
amount to a substantial part of the total project costs.The
risk of failure increased between 1970 and 1975 as site acquisition
and development were made more difficult.
The Lincoln, Coddington, and Penberthy research illustrates how
public concern for growth management raised the costs and lengthened
the time associated with land development and housing construction
between 1970 and 1975. The focus will now shift to other regions to
examine the pervasiveness of this trend.


28
Petaluma, California
In 1972, facing encroaching urbanism from the San Francisco
metropolitan area, the City of Petaluma, California adopted a
restrictive growth control program. The control mechanism was to
limit the average to 600 building permits per year by means of an
annual allocation of subdivision units. The allocation system was
designed to control the number of new units per year, as well as the
location, type, quality, and price of those units. In terms of
growth control legislation, the Petaluma plan represented a classic
example of a comprehensive ordinance which intended to preserve the
quality of the community and insure the adequacy of city services.
In 1979, a team of researchers from the University of
California, Davis studied Petaluma's growth control plan and compared
housing prices with two neighboring communities. In a report titled,
The Effect of Growth Management on New Housing Prices: Petaluma.
California, the authors compared price changes of new single family
houses in Petaluma between 1969 and 1976 to those of Santa Rosa and
Rohnert Park.
The study was based on the hypothesis that restricting the
supply of new houses in a city will increase the price of new houses.
The authors contended that any growth control scheme, whether
moratoria, quota, or development charges, will reduce overall housing
supply and raise housing prices. In addition in growth-controlled
markets, the more inelastic the demand, the greater will be the
increase in house value for existing homeowners.1


Petaluma Santa Rosa Comparisons
Petaluma Price Increases
29
The research found that from 1970 to 1975, small houses
increased in price by between $3,837 and $5,535 more in Petaluma than
in Santa Rosa. These differences represented a 17.7% to 24.5%
increase of the pre-growth control average price in Petaluma. The
differences were found to be of the same magnitude for medium and
large houses, ranging from $3,484 to $5,182 for medium houses or
14.2% to 20.3%. For large houses, the price differences were $3
to $5,350 or 13. 3% to 18.8% .3! Please refer to Table 4 for a
summary of these results.
Table 4. Cost Comparisons - Petaluma, Santa Rosa, Rohnert Park
Pet. versus Pet versus
Santa Rosa Rohnert Park
Constant
Characteristics Lot Area 1970 $
Smal 1 Small + 3837 + 428
Small Medium +4,686 +1,511
Small Large +5,535 +2,594
Medium Small +3,484 -2,086
Medium Medium +4,333 -1,003
Medium Large +5,182 80
Large Small +3,652 -4,601
Large Medium +4,501 -3,518
Large Large +5,350 -2,435
Source: The Effect of Growth Management on New Housing Prices:
Petaluma, California. By Schwartz, Hansen, Green, Moss,
and Belzer.
Petaluma Rohnert Park Comparisons
The Petaluma Rohnert Park comparisons for actual houses were
quite different than the Santa Rosa results. Petaluma price
increases were significantly larger only for small houses on medium


30
and large lots. In Petaluma for the small house on a medium lot, the
price increase was $1,511. For the small house, on a large lot, the
price increase was $2,594.
For medium sized houses, Rohnert Park increases were
significantly larger than Petaluma. For a medium house, small lot,
Rohnert Park houses increased $2,086. For a medium house, medium
lot, Rohnert Park houses increased $1,003.
For large houses, Rohnert Park increases were between $2,435
and $4,601 larger than the price increases for similar houses in
Petaluma. These results were summarized in Table 3.
This comparison of price changes among the three neighboring
communities supported the contention that growth management causes
significantly higher housing prices. The authors concluded that:
When other factors are controlled for by comparing
standard houses, price increases that could be attributed
to growth management were significantly larger in
Petaluma than in Santa Rosa by between 6.9% and 8.1% of
the before-control value of the house. The differences
with respect to Rohnert Park are smaller but this result
is very likely caused by the strong interdependence in
the housing markets of the two towns.
One of the considerations in explaining the price differences
among the three communities was the size of the floor area by square
foot of the sample house. According to the study, average floor area
in Petaluma increased from 1,600 square feet before growth control to
about 1,900 square feet after growth control. Two reasons were
offered to explain this trend. First, the evaluation system under
which allocated permits were granted provided strong incentives for
adding quality and amenities to housing units. Second, due to the
building permit quota system, builders sought to obtain the maximum
profit from each house. The authors concluded, therefore, that the


31
evidence strongly suggests that the Petaluma housing allocation
process promoted the construction of larger houses.J
The effect of higher housing costs in Petaluma is that
increased income is required to purchase a house. If similar housing
is available nearby, then the economic impact is lessened. However,
if alternative markets are not provided, and the growth-controlled
community is the buyer's first choice, then there is clearly a lack
of housing choice. If growth control becomes contagious within the
region, then the opportunity of home ownership may disappear for low
and moderate income families.
A further insight into the comparison between Petaluma and
Santa Rosa is illustrated by the number of single-family and multi-
family building permits taken out for the year 1974 through October
of 1979. The data in Table 5 were derived from a separate study
conducted by Professional Builder.
Table 5. Building Permits 1974-1979
Single-Family Permits Multi-Family Permits
Year Petaluma Santa Rosa Petaluma Santa Rosa
1974 204 788 148 782
1975 192 758 11 216
1976 89 1,089 16 298
1977 414 1,113 62 352
1978 188 890 20 281
1979* 216 757 19 148
*Through October
Source: Professional Builder Affordable Housing Ideas. 1982.
Table 5 shows that Petaluma lags behind Santa Rosa in building
permit activity despite Petaluma's annual ceiling of 600 units. In
fact, a surprising percentage of Petaluma's quota goes unused. Table


32
6 highlights the total number of unused building permits for the
years 1374 through 1978.
The conclusion to be drawn is that builders refuse to operate
in a growth-restricted atmosphere. Since 1974, Petaluma's quota of
600 total building permit has never been met. According to local
officials, the problem is so severe that Petaluma cannot provide
enough housing to meet its own internal migration needs.5'
Table 6. Unused Building Permits 1974-1978
Annual Actual Percentage of
Year Allotment Permits Quota (600)
1974 600 352 58.7%
1975 600 202 33.7%
1976 600 105 17.5%
1977 600 476 79.3%
1978 600 208 34.7%
Source: Professional Builder, Affordable Housing Ideas. 1982.
The study by the University of California, Davis group was more
empirical than the Colorado study by Lincoln, Coddington, and
Penberthy, and Professional Builders. The California-Davis group
chose a comparative design based on two control cities using
covariant analysis for statistical control, whereas Lincoln,
Coddington, and Penberthy used the case study approach. Both of
these studies rested on the assumption that varying factors, such as
housing demand, varied in the same manner among all the cities
examined. Despite the methodological difference, both research
designs affirmed the positive existence of a cause and effect
relationship between growth policies and housing prices. The
strength of the relationship is open to interpretation but the
Petaluma study appears to establish a stronger link between the cause
and effect variables.


33
The case study method was also used to analyze San Jose,
California and Jacksonville, Florida for government regulatory
effects on housing costs. In a jointly authored study by the Urban
land Institute and Gruen, Gruen and Associates ( 1977"), the
researchers measured the effect of regulatory change on housing
prices between 1967 and 1976. San Jose was selected because it
enacted strict regulations on the location of growth and Jacksonville
was chosen due to strong environmental and subdivision ordinances.
The methodology employed in the San Jose study included an
examination of the records of two builders so that the changes in the
cost of producing houses before and after growth management could be
traced. Two single-family houses, whose dimensions and
characteristics remained stable throughout the test period, were the
units of analysis. The proportion of the total increase in price
that was accounted for by the various cost components were
identified. All cost and revenue figures were obtained directly from
the two builders at three time intervals. The data from 1967
represented pre-growth management, while data from 1972 and 1976 were
post-growth control.
As Table 7 illustrates, the land costs per acre for both
developers steadily increased over the study period. Table 7
summarizes the size of each San Jose subdivision studied and the cost
per acre:


34
Table 7. San Jose Subdivisions
Land # of units in Land Cost
Builder Purchased development Acres Per Unit
1967 44 9.88 $14,300
A 1967 31 6.56 17.900
1972 26 5.40 20,000
1967 137 28.50 $10,700
B 1971 90 18.02 15,300
1975 62 12.90 30,800
Source: Effects of Regulation on Housing Costs: Two Case Studies
by the Urban Land Institute and Gruen, Gruen and
Associates.
As can be seen from the Tales 8 and 9, one of the directly
observable impacts of San Jose's growth management plan was the
restriction on the amount of raw vacant land available for
development. Builder A was able to weather the sudden supply
restriction in fairly good shape with only a 29.6% increase in the
price of raw land during the study period for a 4.7% increase in
sales price. Not so fortunate was Builder B who reported a 168.9%
increase in raw land price for 13.9% increase in final sales price.
One of the public policy related cost components which took a
dramatic rise is the category for taxes and fees. For Builder A,
taxes and fees imposed by the City of San Jose rose 364.9% between
1967 and 1976 contributing to a 2.7% increase in the sales price.
For Builder B, city taxes and fees rose 498.7% adding 5.8% to the
final selling price. According to the study, the major components of
this category were school dedications, construction taxes, permit
fees and tap fees.1


Table 8: Comparison of Cost Components Related and Not Related to Public Policy in San Jose.
Changes in Costs
as a Percent of
Builder A 1967 1972 1976 Percent Change Change in Sales Time
Sales Price $24,950 $31,250 $44,950 80.2%
Public Price Related Costs:
Raw land 3,205 3,784 4,151 +29.5% 4.7
Land Holding Costs 65 212 881 1,255.4 4.1
Land Construction 168 40 115 - 31.5 -0.3
and Holding Cost
Taxes and fees 148 343 688 364.9 2.7
Profit and marketing 1.793 4.447 5.937 231.1 20.7
Total Public Policy 5,379 8.826 11,772 118.9 32.0
Related Costs
Non Public Policy
Related Costs:
Materials 11,534 14,784 19,179 66.3 38.2
Labor 1,259 1,714 2,120 68.4 4.3
Indirect Costs 218 49 266 22.0 0.2
Site Improvements 3,426 1,717 3,361 5 7.3 9.8
Closing 1,645 519 929 104.3 8.6
Noncomparables 179 836 4.2
Land and Construction 853 394 1,099 28.8 1.2
Interest
Total Non Public Policy Related Costs Total Percent 68.00 100.00%
Source: Effects of Regulation on Housing Costs: Two Case Studies. By the Urban Land and
Institute And Gruen, Gruen and Associates. 1977.


Table 9: Comparison of Cost Components Related and Not Related to Public Policy in San Jose
Builder B 1968 1972 1976 Percent Change Changes in Costs as a Percent of Change in Sales Time
Sales Price Public Price Related Costs: $22,250 $27,950 $49,250 121.3
Raw land 2,221 3,073 5,973 186.9 13.9
Land Holding Costs 210 336 801 281.4 2.2
Construction Holding Cost 125 350 980 684.0 3.2
Taxes and Marketing 314 274 1 ,880 498.7 5.8
Profit and Marketing 3.123 4.521 8.066 1.583 18.3
Total Public Policy Related Costs 5,993 8,554 17,700 195.3 43.4
Non Public Policy
Related Costs:
Materials 10,975
Labor 1,760
Indirect Costs 150
Site Improvements 2,007
Closing 880
Other 285
Noncornpar ables
Land and Construction
Interest
12,391 18,033 64.3 26.1
1 ,876 3,169 80.1 5.2
950 1,355 287.1 3.7
2,814 5,679 183.0 13.6
1,110 1,862 111.6 3.6
255 525 84.2 0.9
927 3.4
56.5
99.9%
Effects of Regulation on Housing Costs: Two Case Studies. By the Urban Land
Institute And Gruen, Gruen and Associates. 1977.
Total Non Public Policy
Related Costs
Total Percent _____
Source:


37
In summary, between 1967 and 1976, the price of a standard unit
constructed by Builder A increased 80.2%. Almost one-third, 32%, of
this 80.2% reflected an increase in the cost of housing production
components resulting from the implementation of San Jose's growth
management policies.
In summary, between 1968 and 1976, the price of Builder B's
standard unit rose 121.3%; 43.4% of this increase was somewhat
related to growth management policies.
The case study of San Jose found that government regulations
affected both the hard and soft costs of residential building. Hard
costs such as land purchase and improvement, and building
construction increased as a result of tight restrictions on where
development could occur. In addition, San Jose's growth policies
affected soft costs by increasing development fees, requiring more
complex submittals, a lengthened processing time, and increased
carrying costs. Finally, the effect on housing affordability in the
San Jose market was found to be acute because of steady demand. "The
strong inelastic demand for single-family housing by consumers who
were willing to pay more rather than take less, permitted the higher
land costs to be passed on to the consumers."
The regulating climate in Jacksonville, Florida changed
dramatically between 1971 and 1976 as the city and the county
consolidated their administration. This government consolidation led
to revisions in the subdivision regulations and a stricter
application of water service standards. Specifically, road widths
were increased, pipe diameters were enlarged, fire hydrant spacing
made more frequent,


38
and underground storm drainage became required. The following Table
10 illustrates the inflation-adjusted increase per unit in water
supply and road construction costs in a typical subdivision between
1971 and 1976.
Table 10. Construction Costs Per Lot in Jacksonville.
1971
1976
Increase
Water Supply
Roads
$ 170
925
$ 450
1,475
$280
550
Total $1,095 $1,925 $830
The total increase in costs per unit came to $830.
Source: Based on lot development cost data supplied by Bessent,
Hammock, and %Ruckman, Inc., Jacksonville, for nine
single-family subdivision projects.
Between 1970 and 1976 two changes in the building code imposed
significant additional cost on Jacksonville builders. First, the
code required that a fire detection smoke alarm be installed in every
dwelling unit. Second, a backflow prevention device was required to
be attached to the hot water heating system for future solar
modification potential. The city engineer in charge of administering
the building code estimated the costs of meeting the new requirements
at $150 per dwelling.0
Water quality concerns and sewage plant capacity motivated the
City of Jacksonville to embark on an ambitious sewage treatment plant
and sewer line construction program. Sewage treatment standards at
existing plants were upgraded to meet rising environmental concerns
and new plants were added to the system. The result was an increase
in the sewer connection fee for residential construction. The
increase in sewer connection fees for most new housing has been


39
roughly $200-$300 per unit, or $ 145S220 in real costs after
adjustment for general price inflation."
The effect of this intensification in Jacksonville's regulatory
climate is illustrated in Table 11. A typical three-bedroom, 1,500
square foot house sold for roughly $26,500 in 1971; a comparable
house sold for $36,225 in 1976, an increase of about 36.7% while
general consumer prices increased by 36.8% over the same period."
Table 11 illustrates that the major relative increases were for
land at 87.5 and site improvement costs at 70.6%. The most
significant absolute increase was in the cost of the building itself
at $6,000.
One interesting revelation in the Jacksonville study is that
while raw land and site improvement costs were dramatically rising
between 1971-1976, only modest changes were reported in overhead,
interest and profit costs on land development at 23.7% increase. The
same modest increase is also true with reported increase between 1971
and 1976 in overhead, interest, selling and profit for house
construction at 17.7%. In fact, the proportion of these costs
relative to the final selling price dropped between 1971 and 1976.
Overhead, interest, and profit on site development dropped from 8.8%
in 1976. Likewise on building construction, these same costs
decreased from 20.8% in 1971 to 17.9% in 1976."
The Jacksonville housing market, at the time of this study,
resisted higher prices forcing builders to reduce profit margins.
Unlike San Jose, builders in Jacksonville were not able to pass along
the consequences of increased regulatory control. The study also
points out that builders were also unsuccessful in attempting to pay
less for raw land. The data indicate the general trend in real land


Table 11: Jacksonville Housing Costs 1971-1976
Change Item % Sel Cost ! of 1 ing % of Price Cost % of Selling Price Amount / /o To t. a 1
Raw Land 800 3.0% 1,500 4.1 % 700 87.5% 7.2
Site Improvement Costs 2,125 8.0 3,625 10.0 1,500 70.6 15.4
Overhead, Interest, and Profit 2,325 8.8 2,875 8.0 550 23.7 5.7
Total Lot Cost 5,250 19.8 8,000 8.0 2,750 52.4 2S. 3%
House Construction 15,750 59.4% 21,750 60.0% 6,000 38.1% 61.7%
Overhead, Interest, Selling & Profit 5,500 20.8 6,475 17.9 975 17.1 10.0
Selling Price 26,500 100.0 36,225 100.0 9,725 36.7 100.0
Source: Research Division, Urban Land Institute.


41
prices over the study period was upward, causing builders to absorb
the land price increase. One possible conclusion to be drawn here is
that land markets generally appear to resist downward shifts in
prices, and that reduced demand does not necessarily lead to reduced
prices.
The research on San Jose and Jacksonville indicates that the
relationship between government regulations and new housing prices
depends to a large extent on the price elasticity of demand, and the
degree to which regulations affect the supply of land and rate of
construction. Where regulations restrict the supply of developable
land, and the price is inelastic, prices can be expected to increase
without regard to development cost increases. This was the case
in San Jose, California. Where regulations do not necessarily
restrict the supply of developable land, but increase development
costs in a community where price is relatively elastic, the initial
effect is to reduce builder profit." This was the case in
Jacksonville, Florida. In both cases, the relationship between
regulatory ordinances and housing prices was not a simple one, and
the price elasticity of demand played a key role in determining
housing price changes.
An important lesson in the San Jose and Jacksonville studies
reveals that balancing land supply with housing demand is extremely
difficult. Public planners and policy makers who implement growth
management tools can learn from these two examples about the rippling
effects of intervention into the land markets.
Taking the work of James and Muller into greater depth, James
C. Nicholas further examined the regulatory costs associated with the
Florida Environmental land and Water Management Act. In studying the


42
."Developments of Regional Impacts, or D.R.I.," Nicholas attempted to
estimate the extent to which the D.R.I. ordinance would increase the
cost of housing to the developer and the consumer.1 In State
Regulation/Housing Costs. Nicholas evaluated the costs per unit due
to the regulatory nature embodied in the D.R.I. review process.
The central finding was that the largest component of the cost
to the developer, in complying with the D.R.I. process, was delay.
Delay not only increased interest costs but also contributed to
withholding finished units from the marketplace. By the time these
costs reach the consumer, the effect of the withholding appears to be
greater than the direct costs.5" The D.R.I. review process was
considered to be a bulky administrative procedure which contributed
to regulatory inefficiency.
The study also found that the D.R.I. process added uncertainty
to development timing. Unexpected delay translated into increased
risks, carrying costs for land, labor, material and overhead. The
perception of risk had an effect on choosing safe housing styles and
searching out fringe areas with relaxed development standards. This
lack of innovation and leapfrog development was considered the
antithesis of positive public planning.
This Florida research revealed that regulation associated with
the D.R.I. process resulted in a $4,698 higher price when contrasted
with the sales price of non-D.R.I. units.51 The D.R.I. itself,
however, accounted for only $576 for 12% of the total.52 Therefore,
other factors were found to account for the remainder of the cost.
The study concluded that local and regional jurisdictions attain
their reglatory objectives by tapping into the D.R.I. review process
and imposing regulations which go above and beyond the original


43
intent. This "piggyback" process thus accounted for the major
component of the cost increase of the units subject to D.R.I. review.
The authors called for a streamlined consolidation of review
agencies to remove delay, uncertainty and duplication. Better
coordination between local, regional, and state jurisdictions would
contribute to administrative efficiency and assist in lowering those
housing price increases which are attributed to government reglation.
In the late seventies, the environmental movement and housing
advocates were drawing sharp battle lines in Northern California.
Concern for natural environments such as the San Francisco Bay, the
Pacific Coastline and the bountiful vineyards spilled over into
intense regulatory control over housing development. Bernard
Frieden, in his Environmental Protection Hustle, eloquently described
and evaluated this debate from the housing advocacy point of view.
The growth management issues in Northern California at this
time were acute. As previously described, Petaluma, in 1973,
installed a ceiling on building permits to six hundred per year.
Also mentioned was San Jose which in 1970 instituted a growth control
policy directing the amount and location of growth. A 1975
California survey of local planning activity identified over 30
communities in the Bay Area attempting to control residential
growth. For example, Livermore, California passed a growth
moratorium initiative, raised development fees, and limited the
expansion of utility systems. The development of vacant infill sites
within the urbanized areas took on monumental opposition as the issue
of environmental preservation surrounded local land use decisions.


44
Frieden discovered that environmental opposition to housing
development in Northern California in the later seventies burdened
the supplies of housing resulting in higher prices for consumers.
According to Frieden:
Contrary to popular belief, when housing proposals
generate stiff opposition, developers do not usually
persist with their original plans and simply raise prices
enough to cover the cost of delays, legal proceedings, or
other regulatory expenses. Instead, they compromise with
their critics by cutting the number of moderate cost
houses in their plans and substituting a smaller number
of houses that only high income families can afford.5*
Frieden's contention, therefore, is that growth control, as a result
of environmental zealousness, leads to intense developer hardship
resulting in higher housing costs.
The author backs up this premise with case history
documentation of development resistance in various Northern
California jurisdictions. One particular case provides an
illustration of highly politicized environmental reaction to a
housing development proposal.
In 1972, a developer began the approval process for a 685 acre
development within the City of Oakland. The proposal called for a
residential community of 2183 units, a total population of 5,400
persons, and 70% or 480 acres of open space. The residential units
were to include 1,080 single-family rowhouses averaging $33,500,
1,080 apartments averaging $23,750, and 23 single-family rowhouses
averaging $40,000. The project met the requirement of the City's
masterplan and the Council granted approval after less than one year
of review.
Intense opposition materialized and a flurry of lawsuit delayed
the project. At issue were provisions in the California


45
Environmental Quality Act requiring a conservation element in the
submittal-approval process, and the issue of impacts on the local
school district.
Finally, in February of 1976, a new plan was agreed to by all
concerned parties. The original proposal of 2,183 units at a price
around $33,500 was reduced to 150-200 units in the $40,000-560,000
range. In addition, the new plan called for 100 lots for estate
homes with the individual lot cost of $35,000-575,000.
Table 12. 685 Acre Development -
Proposed Development Plan
1972
Total Units: 2,183
Total Population: 5,400
1.080 S.F. Rowhouse
0 $33,500 avg.
$60,000
1.080 Apartments
0 $23,750 avg.
23 S.F. Rowhouses
0 $40,000
Source: Environmental Protection
City of Oakland
After Litigation
1976
Total Units 150-200
S.F. Units 0 $40,000-
100 lots only for estate
homes 0 #35,000-$75,000
lustle by Bernard J. Frieden
Table 12 illustrates that the effect on the housing consumer
was a reduction in the number of available units with a dramatic
increase in price. Also, the original 480 acres of proposed common
open space now became part of the large residential private homesites
for a reduced number of persons. The loss of a City Park, and the
elimination of moderate-cost housing directly affected potential
homebuyers who were neither involved nor represented in the
55
process.


46
In case after case, Frieden highlights the effectiveness of the
no-growth coalition in halting or revising development plans. As the
environmentalists stretched their mandate to oppose housing, they
attracted fiscal conservatives, neighborhood preservationists and
suburban exclusionists. The author comments on the social
implications of such a coalition:
One problem of the alliance between environmentalists and
anti-tax increase advocates is that it lends legitimacy
of an environmental crusade in the public interest to
what is otherwise a selfish, provincial concern with the
local rate.51
Stated in somewhat different terms, Bosselman warns that
". the wolf of exclusionary zoning hides under the environmental
sheepskin worn by the no growth movement."5' By the same logic, the
opposition to homebuilding can be equated with the opposition to
someone else's opportunity to buy a moderate cost house.
One conclusion that can be drawn from Freieden's California
experience is that projects that generated conflict, controversy, or
litigation eventually produced housing at prices the average family
could not afford. Other effects were delays in construction,
reduction of densities, restriction of housing choice, and a tendency
on the part of developers to seek the path of least resistance.
Also, local development controls increase land prices by limiting the
total supply of land available for development. The author concedes
that it is difficult to measure the direct effect of no-growth
politics on the cost of new homes.
However, based on information from Northern California in the
seventies, it is highly suggestive that local growth policies are
important contributors to the housing affordability issue especially
for families and individuals with average incomes.


47
Rather than examine an isolated geographic sample, Stephen R.
Seidel (1976) took a more thematic approach pulling examples from a
nationwide survey to document his findings on growth management
issues. In his comprehensive Housing Costs and Government
Regulation: Confronting the Regulatory Maze. Seidel evaluates
various public policies and ordinances which influence housing costs.
The focus of the research is on non-inflationary cost increases which
impact the housing industry and ultimately, the consumer.
Through the Center for Urban Policy Research and the national
Association of Home Builders, Seidel, in 1976, surveyed the National
residential construction trade to gain a broad overview of the
industry's experience with government regulation. According to
Seidel "... The initial finding was that, contrary to previous
surveys in past years, government regulations were considered to be
the primary problem in doing business."1
Table 13. Significant Problems in Doing Business
Problems in Doing Business Most SecondThird
Lack of Suitable Land 14.6% 18.0% 18.0%
Materials Shortages/Costs 10.7 17.9 27.9
Labor Shortages/Costs 6.2 14.5 20.4
Unavailability of Financing 22.5 20.8 16.4
Government Imposed Regulations 38.0 25.1 15.7
Other 7.9 3.7 1,6
Total 100.0 100.0 100.0
Source: Survey of the Home Builder Industry, Center for Urban
Policy Research, Summer 1976.
Table 13 reveals that government imposed regulations were cited
by 38% of the respondents as their most significant problem in doing


48
business in 1975.5> The second most cited problem, in 1975 was the
unavailability of financing.
Another variable addressed in Seidel's research was a
comparison of the time involved in the development process between
1970 and 1975. The survey results revealed that in 1970, the average
number of months was 5.0 compared to 13.3 months in 1975.1(1 In
comparing this time in the development process, the survey
differentiated between firms primarily involved in land development
and firms in the building sector. The results revealed that in the
five year period between 1970 and 1975, the length of the development
stage increased significantly more than the building phase of
construction.
Finally, the survey asked respondents what specific government
regulation was considered to contain the most unnecessary cost.
Subdivision controls were overwhelmingly cited as the regulation most
responsible for unnecessarily increasing the costs of housing. "Over
72% of the respondents estimated that unnecessary aspects of this
area of regulation were responsible for more than 5% of the total
price of the unit."*2 The second most burdensome regulation was
zoning where 36.3% believed that costs were unnecessarily increased
by more than 5%.J
These survey findings set the tone for Seidel's research on the
"regulatory maze" which confronts land developers and builders. In
addition to the home building industry survey, the author drew on a
questionnaire of eight municipalities which evaluated the various
codes and ordinances which affected the private building sector. The
results of this municipal questionnaire, along with the works of
previously published data, constitute the bulk of Seidel's research.


49
Seidel's findings were at the national scale and thus provided a
macro perspective on the issue. Although this overview may lack
specificity for the Colorado front range, the data contribute to a
generic understanding of government regulations and housing costs.
"Growth Shall Pay Its Own Way"
One of the key issues involving government intervention into
private markets is the appropriate balance of assigning public costs
onto the private sector. As the negative externalities of private
development rise, localgovernments are motivated to shift public
costs over to the internal function of the private balance sheet.
This policy is popularly referred to as "growth shall pay its own
way." "As municipalities, through the use of cost-revenue analysis,
become increasingly aware of the cost to the community of new
residential development, they will attempt to shift more of this
burden to the new residents.""
Critics, however, contend that cost-revenue studies are overly
parochial on the question of whether growth will be beneficial.
According to this view, ", ..a city's financial balance sheet is
hardly an adequate measure of the social benefits and the costs of
new development, and may simply reflect the inadequacy of a city's
revenue generating mechanisms."" Another danger in over-reliance
on the fiscal generosity of new growth is that new residents could
bear the costs of new services and facilities which benefit the
community as a whole. This would be an unfair subsidy to existing
resident.
In the cost reallocation scenario, the precise distribution of
the fiscal burden between the public and private sectors is difficult


50
to define. Despite this inherent constraint, many communities have
elected to abandon the traditional financial technique of averaging
new development costs over the community at large out of general tax
or user charge revenues. Rather, the temptation now is to implement
a marginal cost approach which emphasizes the incremental cost of the
last unit of service. The effect, according to Seidel, is to smooth
the future at the expense of the present.
In light of today's affordability challenges, cost-revenue
analysis and cost shifting on to the developer can be particularly
detrimental to a project's economic viability. In addition to fiscal
related cost allocations, quality related factors also must be
considered. The issue of limits and safety must be reasonably
satisfied to balance public welfare and housing opportunity. The
combined effects of marginal cost analysis, cost-revenue analysis, or
over-specification of quality standards are crucial issues in the
debate over the cost impacts of government regulations.
Seidel examines specific areas of government regulation and
identifies the central issues which affect housing costs. Although
discussion of these issues does not necessarily lead to prescriptive
solutions, the intent is to expose both the intended and unintended
impacts of government regulatory policies.
It has long been recognized that local building codes have an
effect on housing costs. Government enforced building codes
guarantee the consumer that at least a minimum level of quality has
been built into the structure. On the other hand, this public
intrusion ignores consumer preferences and requires homebuyers to
invest present dollars to ensure future soundness.'7 The issue for
policy makers is what type of balance best achieves the tradeoff


between promoting public goals and promoting economic efficiency.
Advocates of housing affordability, such as Seidel, argue that the
local building codes be evaluated for the cost implications of the
specifications.
Florida: Nice But Not Necessary
The Florida Home Builders Association examined local ordinances
throughout the state and added up the total dollars saved if
unnecessary and excessive provisions were eliminated from the buildng
code.*' In their report, Nice But Not Necessary, 42 code provisions
were found to be excessive or unnecessary resulting in a possible
several thousand dollar reduction in the average price per home.11
The conclusion was that little in the way of safety would be lost. A
partial example of the Florida results is highlighted in Table 14.
Table 14. Florida Nice But Not Necessary Code Requirements
Savings/
______Item_______________Why Necessary___________________Unit
Ground fault Only necessary on outside or $60$135
interrupters near ground level outlets
Smoke detectors Lack of efficiency; $35-5100
should be up to buyer
Fire rating wall Should be up to buyer $50
and door between
garage and living
area
Placement of con- May be outweighed by risk of $25$35
trols on rear of reaching over stove top
stove
Copper wiring Aluminum wiring is adequate when $100
properly installed
The Florida Home Builders Association, "Facts" vol. IV,
No. 7. November 1975.
Source:


52
Again, the emphasis is on building code revision and or innovation to
reflect market mechanisms without hindering the public goal of safety
in housing.
The area of subdivision regulations has proven to be fertile
ground for those advocating regulatory reform. The problems of
administrative delay, excessive site design, exclusionary lot sizes,
oversized infrastructure, and large land dedications have been
traditional points of contention between communities and developers.
"The central problem of land-use regulation today is how to achieve
the ambitious objectives of these regulations without in the process,
sacrificing other essential public objectives.
The level of mandated public improvements must be scrutinized
for burdensome effects on the goal of housing affordability.
According to Seidel, "... the guiding principle is that only those
improvements whose benefits outweigh their costs should be
required."71 Specifically, advocates for affordable housing call
for cost reductions through elimination of totally unnecessary
requirements, reduction of excessive improvement standards, and
reduction of administrative costs and delays.71 The complexity of
subdivision regulations and the accompanying cost allocations to the
private sector are a major theme in the debate between housing
affordability and government control.
Two other areas of government regulation over the housing
industry are zoning ordinances and specific growth controls and
environmental regulations. Here again, the issue remains one of
finding the equilibrium point at which public controls derive the
most benefit. The scope of zoning regulations and the sophistication
of growth management techniques have evolved beyond the primary goal


53
of protecting health, safety, and the public welfare. The question
of how much environmental protection is desirable and who should pay
for it remains controversial. These forms of development regulation
have substantial economic implications which must be addressed by
public planners and policy makers.
The vast array of government regulations which affect housing
costs are seldom under the control of one elected official, governing
body, or agency. Seidel has illustrated the comprehensiveness of the
issue, and has demonstrated that responsibility lies not at any one
particular doorstep but across the entire public sector spectrum.
California: Environmental Impact Review
The environmental issues of California in the late seventies
and early eighties led to increased governmental involvement into the
housing industry. Accepting the premise that environmental review
was a permanent regulatory exercise, Case and Gale examined the
requirement of complying with the Environmental Impact Review Process
as mandated by the California Environmental Quality Act. In
preparation for the review of the California Environmental Quality
Act in 1980, the authors gathered anecdotal and statistical evidence
of the effects of compliance on housing costs.
Generally, the findings revealed that the process for an
Environmental Impact Review was inconsistent and vague. Also,
builders expressed frustration with the discrepancy among neighboring
jurisdictions.
Specifically, the research found that the Environmental Impact
Review Process contributed to builder costs through the direct outlay
for preparation and presentation of the report. These costs included


54
the generation of evidence and the processing of documents to the
appropriate governmental entity. Although the cost of preparation
varied greatly depending on environmental sensitivity, the authors'
research indicated that a range between $9,000 and $15,000 per
project was the cost of compliance with the E.I.R.'3 Also, the
authors report a study conducted by Small and Knust that the average
cost, in real dollars, of a private E.I.R., was reported as $12,420
for 1979 which was an increase from $6,655 in 1974.7* Thus the
direct cost of compliance with the E.I.R. process in California was
found to be a significant portion of a builder's cost structure. A
summary of these cost estimates are summarized in Table 15.
Table 15. California: Cost of E.I.R. Compliance
Cost Range
Study__________________Area_______________Year of E.I.R.
Case and Gale Statewide 1979 $9,000-$15,000
James and Mueller San Diego 1977 $4,000-$10,000
Small and Knust Statewide 1979 $12,420
Source: Environmental Impact Review and Housing, by Fred E. Case
and Jeffrey Gale.
Another prominent cost of E.I.R. compliance was the cost
associated with the mitigation of adverse impacts. Case and Gale
found the most cited example of mitigation was the reduction of
proposed density.7 Other frequently mentioned areas requiring
mitigation measures were traffic congestion, air pollution, aesthetic
degradation, wildlife habitat degradation, water runoff or pollution,
and noise.7


55
Other costs associated with the E.I.R. process were found to be
the duplication of review, delay of project completion, and the
susceptibility of project veto at various review stages. Although
these costs are less significant than direct costs or mitigation
measures, they must, nonetheless, be factored into the cost structure
and thus final selling price or profit.
Case and Gale pointed out that not all residential projects
need comply with the E.I.R. process. When required, however, the
E.I.R. process has proven to be a slow and cumbersome review. The
conclusion to be drawn is that in order to minimize cost impacts, the
E.I.R. process must function efficiently in a streamlined manner yet
retain its positive objectives.
San Francisco Bay Area
One of the present-day combat zones on the issue of housing
costs and government regulation is the San Francisco Bay Area. With
considerable demand pressure from growing employment, the San
Francisco metropolitan area is at the forefront of land use and
growth management techniques. When the demand for housing meets the
short supply of developable land in a growing urban market, the
ramifications of the regulatory climate take on added significance.
The Bay Area land market is characterized by a vast amount of
undevelopable land due to rugged terrain or environmental
sensitivity. A 1975 inventory of land use by the Association of Bay
Area Governments recorded that of the region's 4.5 million acres,
only 350,000 acres, approximately 8%, were vacant and developable.
The Bay Area is further characterized by the fiscal realities
of Proposition 13. Where municipalities once encouraged growth,


56
single-family development is now viewed as having a negative fiscal
impact on the public balance sheet. Consequently, more and more
communities are attempting to shift costly growth on to other
communities via growth and development controls. The result is that
local governments perceive a financial incentive to restrict
residential construction in favor of prosperous rate-paying land uses
such as office buildings, commercial centers, and industrial plants.
With restrictive development controls, and an imbalance between job
creation and residential development, the San Francisco Bay area
epitomizes the growth control versus housing cost issue.
One of the major components of growth management is the fee
structure charged in development within particular jurisdictions. In
1979, and again in 1981, the Association of Bay Area Governments
(A.B.A.G.) surveyed every locality within its region to determine
the charges for development related services. The survey provided a
sense of the pattern of development fees charged by local
jurisdictions and how these fees have changed between 1979 and 1981.
Using a hypothetical single-family detached unit and a seven-
unit multi-family dwelling, A.B.A.G. studied four components of the
development fee structure. The fees examined were planning
processing fees, building department fees, growth impact fees, and
utility connection fees.
As can be seen by Table 16, fees in all four categories for
both housing types increased. The surveys revealed that from 1979 to
1981 median total development fees rose 32% for the single-family
home, and 28% for the multi-family dwelling.7' For the single-
family home, the most dramatic increase was in the area of building
department fees which rose 37%, while, in terms of absolute values,


57
plan processing fees represented the largest category with an average
of $4,033 in 1981. For the seven unit multi-family building, utility
connection charges represented not only the sharpest increase at 40%
but also the largest category in terms of absolute values at $6,835
for 1981.M
Table 16. San Francisco Bay Area Development Fees
______Single Family______________________Multi Family________
Median Total Percent Percent
Fee 1979 1981 Change 1979 1981 Change
Planning Processing $3,226 $4,033 20% $ 300 $ 375 25%
Building Dept. 447 640 37% 1,215 1 ,597 30%
Growth Impact 764 1,032 26% 3,046 3 ,670 17%
Utility Connection 1,111 1,565 29% 4,885 6 ,835 40%
Median Total Increase 5,548 7,270 32% 9,446 12 ,477 28%
Source: Association of Bay Area Governments, "Development Fees in
the San Francisco Bay Area, January 1982.
The A.B.A.G. surveys indicate the trend of rising development
fees. Because of the strong demand for housing in the Bay Area,
these increases can be passed on to consumers. Although a direct
relationship to housing costs was not within the scope of the
A.B.A.G. report, it is interesting to note that in 1979, the San
Francisco Bay Area had the highest housing prices of any metropolis
in the U.S. The median sales price of a new home in the Bay Area in
1979 was $114,000." Judging by the results of the two A.B.A.G.


58
surveys, it is apparent that local development fees have not
contributed to alleviating the high cost of housing in the Bay Area.
Continuing with the San Francisco example, David Dowall and
John Landis, in 1981, employed empirical modeling to determine the
extent to which local land use policies affected the prices of new
and existing single-family housing units in the San Francisco Bay
Area. Using multiple regression techniques, and controlling for
independent variables, the model developed coefficient values for a
series of land-use related dependent variables for a sample of Bay
Area Communities. The data were taken from the years 1977 through
1979. The research tested for the inflationary cost effects
attributable to developable land supply constraints, low density
zoning, and excessive fees and charges. It was assumed that all
communities in the San Francisco Bay area were part of one large
metropolitan housing market for the sake of simplification. The
authors recognized, however, that the Bay Area is composed of
numerous housing submarkets, differentiated by dimensions of space,
quality of life, and access to services.11 Despite the inability of
the model to account for submarket characteristics, the author
contended that the analysis was a valid research technique with which
to evaluate public policy and housing costs.
The model indicated that new house prices were higher in
communities with low density development policies, and limited
supplies of developable land.'1 The results also showed that the
coefficients for size and income revealed that new housing prices are
higher for larger houses in high income areas. Specifically, the
model suggested that, with other things being equal, new house prices


59
in a community will be nearly $1,300 higher for each one unit
reduction in the density of residential development.14
The research also examined such policy areas as large lot
zoning and exclusionary land use controls. It was found that for
each one acre reduction of remaining developable land, new housing
prices will increase $3.80 per unit.15 Also, each additional square
foot per unit will add $70.00 to the price of the new units."
Thus it was concluded that of all direct land use regulations
examined, density appeared to exert the most substantial inflationary
effect.17 Density was followed in importance by the availability of
land and the community fee structure." The research confirmed the
expectation that density levels were a critical factor in determining
developer profits and consequently, housing prices. Since density
control, land availability, and fees directly affected the price of
new housing, the authors suggested that local governments evaluate
public planning policies for inflationary effects. Given the
competitive behavior among the Bay area communities, individual
restrictive land use policies were found to have significance beyond
the immediate jurisdiction.
This insight into the San Francisco metropolitan area
illustrates the condition of a broad housing market characterized by
a myriad of individual growth restrictive communities. In the recent
past communities which opted to control growth were, like Petaluma,
Boulder and Ramapo, isolated examples within their respective
metropolitan areas. The Bay Area seems to reflect a maturing of the
growth management concept to a larger geographical context
exacerbating the issue of providing affordable housing.


60
Fees and Exactions
In order for development fees to work efficiently and
equitably, exactions and dedications must not be perceived as either
pro-public or pro-development. In their research on recreational
impact fees, Downing and Frank described "pro-public" fees and
exactions as "those which required only a modest connection between
the public needs induced by new development and the required private
dedication.'"
At the other extreme was the viewpoint that local governments could
require dedication of land only for those facilities demonstrated to
be both "specifically and uniquely attributable" to the needs of the
development under review." The middle ground was enunciated by the
New Hampshire Supreme Court in 1977 which declared:
. the subdivider can be compelled only to bear that
portion of the cost which bears a rational nexus to the
needs created by, and (special) benefits conferred upon,
the subdivision."
According to Downing and Frank, this standard protects the developer
from being required to pay more than a proportionate share of needed
facilities."
This "rational nexus" test asks that the fees and exactions
reflect the public costs, and that the collected fees be spent to
benefit the specific development. Abuse of the collection or
disbursement system could lead to inequities creating unfair hardship
for either the public or private sector.
Often, the criteria for exactions are vague and undefined.
Rather than challenge a local fee structure on the basis of fairness,
the development community will save the litigation expense and agree
to the charges. Also, state enabling acts do not offer precise


61
guidelines about what can be exacted, or how the exaction is
determined.
The authors conclude that an appropriate fee structure is
necessary to meet the challenges of judicial scrutiny and public
versus private equity. Fee formulas must be theoretically sound, and
collected fees properly earmarked for their intended purpose.
Survey of Ordinance Revision
Thus far, the review of the literature has illustrated that the
seventies have been characterized by the condition of increasing
regulation and rising housing costs. To discover the current status
of the regulatory climate in the land development process, Sanders
and Mosena, with support from the American Planning Association,
conducted a nationwide survey in 1981 of 171 communities that have
revised their land related ordinances within the last five years.
The objective was to observe which communities have recognized their
development standards to be excessive, adding unnecessarily to
housing costs, and have undertaken regulatory reform. The survey
results noted that while some communities relaxed their standards,
others made their regulations more strict. In most cases, however
communities reporting more stringent standards indicated their
existing requirements were not up to national norms. The focus of
the research concentrated on those areas in which the regulations
were relaxed in response to rising development costs.
Of the 171 total sampled communities that had changed the
standards contained in their zoning ordinance, the largest number,
127, changed their density standards. Of these communities, 62%
relaxed their requirements while 38% made their regulations more


62
restrictive.1 The most common density related standards which were
made less restrictive included the lowering of minimum lot size, and
a reduction in sideyard and setback specifications. The next most
commonly revised standard was a reduction in frontage or lot width
requirement. Finally, increased allowable lot coverage was cited
as an example of relaxed density regulations.
Standards related to parking requirements were reported to be a
prime area for regulatory relaxation. While the survey did not
reveal the number of respondent communities which actually
implemented parking reform, the results illustrated how relaxation
could benefit developers without sacrifice to health, safety, and
welfare. The results listed such reforms as:
1. Reduction in the number of spaces
2. Reduction in the size of stalls for compact cars only
3. Tying the number of parking spaces to the number of
bedrooms rather than to units per structure
4. Reduction of number of spaces for efficiency units and
one bedroom apartments.1
The concept is to make more efficient use of the lot area devoted to
parking needs allowing a larger area for open space, amenities or
dwelling units.
The survey revealed that 53% of the sample respondents revised
their street standards to be less restrictive, while 46% relaxed
their sidewalk standards.1'1 Reduction in street pavement width
was the primary revision in street related standards. Of the
communities reporting a reduction in street pavement width, the
average decrease was seven feet.1 For the same communities, the
average street pavement width after revisions were made was 22


63
feet.1'1 This 22 foot width is similar to the standards for local
residential street pavement widths endorsed by both the Institute of
Traffic Engineers and the American Society of Civil Engineers.1,4
Sidewalk standards, according to the survey, have been relaxed
to be required only on one side of the street and reduced in
width.15 The conclusion is that reduced street and sidewalk
requirements result in lower development costs and an increased
opportunity to provide affordable housing.
Sanders and Mosena have attempted to highlight areas where
regulatory relaxation has already occurred with no threat to public
health, safety and welfare. Such reforms show a willingness to adapt
to evolving economic and demographic conditions. The results are
inconclusive as to whether these revisions constitute a trend of any
significant magnitude. However, the research does provide an example
of a shift away from the environmentally-based, no-growth policies of
an earlier era, to a more sympathetic recognition of housing
affordability in the current era.
Innovative Regulatory Reform
While the Sanders and Mosena study showed a cautious
inclination toward regulatory reform, it is safe to assume that
radical revisions in the land development process are not sweeping
across the regulatory landscape. There are, however, a variety of
innovative techniques which crop up now and again which remind us
that regulatory reform is an ongoing and subtle process.
Streamlining the review process, broadening the "use by right" zoning
classification, and implementing inclusionary ordinances are three
primary areas where public planners have attempted to mitigate the
costly spiral of rising development costs.


64
It has been established that lengthy and complex review
procedures contribute to project delay thus increasing land carrying
costs, interest charges, and consultants' fees. If market conditions
are not particularly strong, delays may mean fewer sales and a
decline in construction activity. Thus simplifying, streamlining, or
coordinating the development approval process has a direct effect on
a project's viability.
Several communities have made noteworthy attempts to increase
administrative efficiency by a variety of techniques. In Fort Worth,
Texas applications for building permits are now handled by telephone
and charge card.1'1 The procedure, from phone-in to approval or
denial, usually takes no more than six days. While professionals in
the office are still available for consultation, 99% of the
applicants choose to apply by phone.1'7
Salem, Oregon implemented Project Permit Streamline to
establish a permit information center, increase coordination among
organizations, and to standardize, consolidate, or eliminate permits
and licenses.1" The result was to reduce the application
procedure from the separate jurisdictions of eleven city agencies to
one Permit Application Center. Duplicate licenses, multiple reviews,
and overlapping fees were reduced or eliminated. This "one-stop-
shopping" and increased efficiency not only improved the development
approval process but also raised revenues for the city through
increased development activity.1"
Another innovative technique is to relieve the Planning
Commission of mundane or routine rezoning matters. Tucson, Arizona
has created a hearing examiner post to issue all rezoning and
subdivision permits. This system allows the Planning Commission,


65
which previously had the responsibility of issuing permits, to spend
more time on policy matters.11' Similarly, Phoenix, Arizona has
delegated approval authority for certain types of property
development to department and division heads. This delegation has
eliminated the need to obtain waivers, variances, rezoning, use
permits and other special permits.111
The objective of these various streamlining procedures is to
reduce the burden of administrative delay on the land development
process. Reduction of delay has a direct positive effect on
development costs and thus increases the opportunity to provide
affordable housing. The intent is not to diminish the democratic
function of the Planning Review Body and The Citizen Input Process,
but to delegate non-controversial items to the administration level.
One example of a public planning technique which reduces
development costs is to broaden the definition of housing types
allowable under the traditional zoning classifications. Although
such housing types as zero lot line, mixed use, and cluster
development have been generally accepted they are more often allowed
as a special exception or conditional use rather than a use by right.
In an effort to encourage alternative forms of development,
Jackson, Mississippi, in 1974, incorporated a "town-house and zero
lot line residential district" into its zoning ordinance.111 The
concept was to provide single-family private homes at a higher
density than would be possible otherwise.
Whether allowing imaginative and flexible housing types under a
separate residential zone or a P.U.D. ordinance, the object is to
promote diversity under the existing zoning regulations. "It makes
no sense to have provisions on the books that can allow affordable


66
housing if no one can build under them."111 Non-traditional
development, if allowed, can promote affordable housing within a
community.
There are a variety of methods used by local government to
encourage construction of low and moderate income housing. These
methods have been conveniently termed as inclusionary zoning
regulations for their efforts to promote, rather than exclude, a
variety of housing types. Because of the magnitude of the mandate,
most inclusionary legislation is under the auspices of federal and
state jurisdictions. There are, however, a variety of techniques
which an individual community, under its state enabling legislation,
may enact to stimulate a diversity in housing choice.
Among them many strategies devised to promote low and moderate
income housing construction are acquisition and disposition of land,
land banking, cost writedowns, financial assistance, housing referral
and counseling, programs to combat discrimination, non-profit housing
sponsors, and participation in H.U.D. initiatives.11* Basically,
inclusionary regulations either require developers to provide low and
moderate-income housing under mandatory regulations, or encourage
them to do so under voluntary regulations.
Virtually all municipal governments include some form of
housing function. The emphasis, in this case is to highlight those
techniques which are connected to the land development process.
One method employed as an inclusionary zoning technique is to
provide density bonuses for projects which guarantee a certain
percentage of units to be reserved for low and moderate-income
persons. Or, a developer may be given the option of forgoing low and
moderate income inclusion for a cash-in-lieu payment to the local


67
housing authority. A developer may fulfill an inclusionary zoning
requirement either on the specific project site or on another site if
acceptable under the ordinance.
A local government may promote inclusionary zoning by lessening
the approval time for eligible projects. Such a "fast-track"
procedure could be combined with selective reduced development
standards which do not affect the essential public requirements.
If a development met or exceeded certain inclusionary
objectives, a local government could reward the project with state or
federal housing subsidies. Revenue bonds for low interest mortgages
could be issued and the proceeds awarded to qualifying projects.
In most cases, inclusionary regulations which combine mandatory
ordinances with voluntary incentives seem to achieve the best result.
On the other hand, voluntary programs with no incentive yield the
poorest results.11* The extent to which a community promotes
inclusionary zoning regulations may be a barometer of its commitment
to providing affordable housing.
Conclusion
This review of the literature has established a conceptual
foundation with which to explore the issue of public regulation and
housing costs. In addition to describing a theoretical framework on
the issue, the review also supplied a variety of methodological
techniques employed to analyze the relationship between the
variables.
Beginning with James and Muller, the discussion demonstrated
the empirical linkage between public regulatory controls and housing
prices. Moving through the litany of site-specific case analyses.


68
the literature highlighted the effects of local land use and zoning
regulations on the private development industry. Other findings
discussed the impacts of fees, delays uncertainty and other
administrative steps of the project approval process. A discussion
of marginal cost fiscal regulation and the concept that growth pays
its own way revealed the dangerous side effects for housing
affordability.
The literature showed that a trend away from the extreme
environmental influence on the land development process may be waning
in recognition of the affordability challenge. Contributing to this
trend may be the broad, laissez-faire philosophy towards markets as
demonstrated by the Reagan Administration. As highlighted by Sanders
and Mosena, the gap between incomes and housing costs is not lost on
a variety of communities as planning and zoning regulations undergo
revision.
The discussion of the current literature has provided a measure
of external consistency for the central issue of this research. The
findings support the contention that various forms of public
regulation causes a degree of hardship on the goal of housing
affordability. Furthermore, the literature reviewed offers a
comprehensive insight into the significance of this issue, and
provides a backdrop for specific analysis of local conditions along
Colorado's front range.


ENDNOTES CHAPTER III
1. Martin A Garrett, Jr,, Land Use Regulation, The Impacts of
Alternative Land Use Rights. (New York: Praeger, 1987), p. 54.
2. Ibid., p. 55 .
3. Ibid,, p. 55.
4. William A. Fischel, The Economics of Zoning Laws, A Property
Rights Approach to American Land Use Controls. (Baltimore: The
Johns Hopkins University Press, 1985), p. 90.
5. Ibid., p. 91.
6. Ibid., p. 117.
7. Ibid., p. 146.
8. Franklin J. James, and Thomas Muller, "Environmental Impact
Evaluation, Land Use Planning, and the Housing Consummer,"
Journal of the American Real Estate and Urban Economics
Association. Fall 1977, p. 283.
9. Ibid., p. 279
10. Ibid.
11. Ibid., p. 284
12. Ibid.
13. Ibid.
14. Ibid., p. 285
15. Ibid., p. 286
16. Ibid., p. 291
17. Ibid.
18. Ibid., p. 298


70
19. James R. Lincoln, Dean C. Coddington, and John R. Penberthy, An
Analysis of the Impact of State and Local Government Intervention
on the Home Building Process in Colorado 1970-1975 (Denver:
Bickert, Browne, Coddington and Associates, Inc., 1976), p. iv.
20. Ibid., p. 1.
21. Ibid.
22. Ibid., p. iv.
23. Ibid., p. 5.
24. Ibid., p. 9.
25. Ibid.
26. Ibid.
27. Ibid., p. 12.
28. Ibid., p. 14.
29. Ibid., p. 18.
30. Seymour I. Schwartz, David E. Hansen, Richard Green, William G.
Moss, and Richard Belzer, The Effect of Growth Management on New
Housing Prices: Petaluma. California (Davis: Institute of
Government Affairs, Institute of Ecology, 1977, p. 5.
31. Ibid., p. 12.
32. Ibid.
33. Ibid., p. 54.
34. Ibid., p. 55.
35. Ibid.
36. The Research Division of the Urban Land Institute and Gruen Gruen
and Associates, Effects of Regulation on Housing Costs: Two Case
Studies (Washington, D.C.: The Urban land Institute, 1977), p.7.
37. Ibid., p. 8.
38. Ibid., p. 14.
39. Ibid., p. 17.
40. Ibid., p. 8.
41. Ibid.
42.
Ibid.


71
43. Ibid., p. 28.
44. Ibid.
45. Ibid., p. 29.
46. Ibid., p. 30.
47. Ibid.
48. Ibid.
49. Ibid., p. 9.
50. Ibid.
51. James C. Nicholas, State Regulation and Housing Prices (New
Brunswick: Rutgers: The State University of New Jersey, Center
for Urban Policy Research, 1982).
52. Ibid., p. 47.
53. Ibid., p. xii.
54. Ibid., p. 83.
55. Ibid.
56. Ibid.
57 Bernard J. Frieden, The Environmental Protection Hustle
(Cambridge: The M.I.T. Press, 1979), p. 52.
58. Ibid. , p. 59.
59. Ibid., p. 130.
60. Ibid., p. 57.
61. Ibid., p. 130.
62. Stephen R. Seidel, Housing Costs and Government Regulatins:
Confronting the Regulatory Maze (New Brunswick: Rutgers: The
State University of New Jersey, Center for Urban Policy Research,
1978), p. 38.
63. Ibid., p. 27.
64. Ibid., p. 34.
65. Ibid.
66. Ibid., p. 37.
67.
Ibid.


72
68. Ibid., p. 47.
69. Schwartz, et al., p. 10.
70. Seidel, p. 48.
71 Ibid., p. 74.
72. Ibid., p. 89.
73 Ibid.
74. Ibid., p. 128.
75. Ibid.
76. Fred E. Case, and Jeffrey Gale, Environmental Impact Review and
Housing (New York: Praeger Publishers, 1982), p. 117.
77. Ibid.
78. Ibid., p. 129.
79. Small and Knust, California Local Government and the C.E.Q.A.,
1979 (San Diego: Small and Knust, Inc., 1980).
80. Case and Gale, p. 133.
81. Ibid.
82. Association of Bay area Governments, Development Fees in the San
Francisco Bav Area (Berkeley: Association of Bay Area
Governments, 1982), p. 2.
83. Ibid., p . 1.
84. Ibid., p. 5.
85. Ibid., p. 11.
86. David Dowall and John Landis, Land Use ControlIs and Housing
Costs: An Examination of San Francisco Bav Area Communities
(Berkeley: University of California, Institute of Business and
Economic Research, Center for Real Estate and Urban Economics,
1981), p. 2.
87. Ibid.
88. Ibid., p. 1.
89. Ibid., p. 15.
90. Ibid., p. 17.
91. Ibid., p. 16.


73
92. Ibid.
93. Ibid.
94. Ibid.
95. Ibid.
96. Ibid., p. 17.
97. Ibid.
98. Paul Downing and James Frank, "Recreational Impact Fees,"
Planners Advisory Service Memo. 83-9 (1983), p. 3.
99. Ibid.
100. Ibid.
101. Ibid.
102. Welford Sanders and David Mosena, "Changing Development Standards
for Affordable Housing," Planners Advisory Service Report. 371
(1982), p. 1
103. Ibid.
104. Ibid., p. 2.
105. Ibid., p. 3.
106. Ibid., p. 29.
107. Ibid., p. 6
108. Ibid.
109. Ibid.
110. Ibid., p. 8.
111. Ibid., p. 30
112. Ibid., p. 8.
113. Ibid.
114. Ibid.
115.
Ibid.


CHAPTER IV
THE SAMPLE COMMUNITIES HISTORICAL INTRODUCTION
Arvada
The original townsite of Arvada was carved out of the homestead
of Benjamin Franklin Wadsworth in 1870. The plat consisted of nine
blocks and was located along the track of what was then the Colorado
and Central Railroad. The establishment and platting of Arvada was
motivated by a desire to take advantage of the regular train service
between Denver and Golden. The Colorado and Central Railroad would
not throw off the mail sack at the young settlement until a post
office was named, established, and registered in Washington, D.C.1
In 1870, B. F. Wadsworth was named post master and a post office was
established in his home. Mrs. Wadsworth, taking full advantage of
her new position as post mistress, named the town for her brother-in-
law, Hiram Arvada Haskins. A settlement of farmers, miners, and
merchants, Arvada voted to incorporate in 1904.
The town grew slowly but steadily in a north and west direction
with most growth occurring during the post World War II housing boom.
By 1960, the population stood at 19,242 persons. With improvements
to Interstate Seventy and the Valley Highway, Arvada offered
excellent access to downtown Denver while maintaining a suburban
setting.
The population grew to 46,814 persons by 1970, a 143.3%
increase. Arvada again experienced rapid growth in the seventies


75
spurred, in part, by what some observers regard to be a reaction to
court-ordered busing within the Denver Public School System.!
The 1980 population was 64,576 representing a growth rate of
80.7% for the decade. The challenges facing Arvada city planners in
the nineties will be the lack of a substantive tax base, annexing and
zoning land, and proximity to Rocky Flats weapons production
facility.
According to the 1984 Land Use, Zoning, and Population Summary,
Arvada's land area comprised 12,847 acres or 19.39 square miles.3
The Bureau of the Census, in the Metropolitan Housing Characteristics
1980. reported that there were a total of 26,387 households in
Arvada. These households were divided between 19,103 owner-occupied
units, or 72.4%, and 7,284 rental units, or 27.6%. The median value
of the owner-occupied units in 1980 was $73,500 with the average age
of the owner reported to be 41.7 years.
The owner-occupied housing mix is further broken down to reveal
that 15,820, or 82.8% of the households consisted of married couple
families. The remainder was divided between female householders with
2,085, or 10.9%, and male householders with 1,198, or 6.2%.' This
demographic profile is summarized in Table 17.


76
Table 17. Arvada Summary. Population 1950 2,359 1960 19,242 1970 46,814 1980 84,576 Housing Type and Mix 1980 % Change 175% 143% 80.7% % of Total
Owner-Occupied 19,103 72.4%
Rental 7,284 27.6%
Median Value of 0-0 Unit 1980: $73,500
Median Age of Owner: 41.7
Owner-Occupied Households % of Total
Married Couple with Family 15,820 82.8%
Female Householder 2,085 10.9%
Male Householder 1,198 6.2%
Source: Census of the Population of Colorado 1980, and
Metropolitan Housing Characteristics Denver-Boulder
S.M.S.A. 1980; U.S. Bureau of the Census.
Aurora
The four square miles bounded by Twenty-sixth Avenue on the
north, Peoria Street on the east, Sixth Avenue on the south, and
Yosemite Street on the west was identified as the Aurora Subdivision
by the Colfax Trust Company in 1890. However, in 1891, this area
incorporated as the Town of Fletcher, in honor of a local
businessman.
Not wishing to preserve for posterity the honor of Mr.
Fletcher, the name was changed back to Aurora in 1907, in honor of
the less controversial, mythological Goddess of the Dawn.
The Homestead Act of 1862 figured prominently in the growth and
development of Aurora. Under provisions of the Act:
Anyone of twenty-one years of age who was the head of a
family could obtain title to 160 acres of public land if
he lived on the land for five years and improved it.5


77
Furthermore, the Desert Land Act of 1877 provided that an additional
section of land (640 acres) could be claimed if a homesteader could
bring irrigation within three years.' In addition, the Union
Pacific Railroad was granted every other section in the Aurora
vicinity to encourage settlement and agriculture along its routes.
This tradition of government largess in the land business set the
pattern of influencing Aurora's growth well into the following
century.
With acquisitions from Union Pacific, the growth of
agricultural activity, the need for irrigation became paramount. The
High Line Canal project was sponsored by the federal government in
1878 "... to reclaim, through irrigation, millions of acres of the
Great American Desert."7 The canal enabled agriculture to take firm
root and the area soon became known for its fine dairy farms.
In 1918, the Town of Aurora had 750 people, four square miles,
and a bonded indebtedness of $430,000 due to the financial liability
of the failed East Denver Water Company. Facing certain bankruptcy,
the town received the charity of the affluent Phipps family in the
form of the Agnes Phipps Sanitarium. This facility was immediately
donated to the U.S. Army which established a Recuperation Camp for
veterans suffering from tuberculosis. As progress was made in the
treatment of this disease, interest in expanding this camp developed
among officials back in Washington, D.C. Denver politicians, local
boosters, and veterans groups raised funds and lobbied to attract
what eventually became the Fitzsimons Army Medical Hospital.
In 1934, the Army Air Corps Technical Training Command outgrew
its original base in Illinois and established Lowry Field in Aurora.
In 1941, Buckley Field became the base for the Aircraft Armament


78
School which utilized one hundred square miles of the nearby "Great
American Desert" as a bombing range. The mobilizations of World War
Two and the Korean War, and president Eisenhower's "Summer
Whitehouse" at Fitzsimons, combined to promote the growth of these
three major federal installations.
In the fifties and sixties, Aurora was primarily a residential
community. Fiscal integrity was maintained by providing few public
services. However, by 1970, with a population of nearly 75,000
persons, Aurora faced ever increasing service demands. The seventies
were characterized by successful attempts to diversify the economic
and revenue base. The result was that Aurora became one of the
region's fastest growing cities.
Since 1973, Aurora has established a "Blue Line" policy to
limit the formation of special districts and the uncontrolled advance
of urban sprawl. Refined and updated in 1978 and 1982, the Blue Line
has succeeded in encouraging infill development, enhanced the ability
to plan service delivery, and helped coordinate long term capital
facilities planning.
In the eighties, Aurora struggled with the establishment of a
distinct, identifiable downtown. Through condemnation, urban
renewal, and tax increment financing, Aurora has attempted to
stimulate its City Center project to provide a downtown focus.
Implementation of City Center has been extremely slow due to a
variety of reasons.
Several factors strongly indicate that Aurora must continually
plan for growth in the nineties and beyond. The aggressive purchase
of western slope water rights has resulted in the recent federal
approval to construct, with Colorado Springs, the Homestake Two


79
reservoir. While this project's feasibility is subject to the
outcome of litigation in Federal District Court, Aurora has purchased
vast quantities of water rights in the lower Arkansas River Valley.
Planning is underway for the final alignment of proposed Highway E470
which would link Douglas County and Adams County along Aurora's
eastern flank. The Lowry Landfill site is now closed and subject to
massive clean up efforts. A proposed facility, Senac Lake and
Recreation Area, will become the prime open space amenity in eastern
Aurora. These projects will become the growth engines challenging
local planners to provide responsible quality development.
The population of Aurora in 1980 was 158,588 persons compared
to 74,974 persons in 1970.' This increase represents a growth rate
of 111.5% for the decade. The City Planning Department estimated
that as of April 1984, Aurora's population stands at 203,300 persons,
an increase of almost 50,000 over the 1980 level representing a 28%
increase in four years.
According to the Land Use Survey Report of January 1984, Aurora
consisted of 39,056 acres or 60.64 square miles.10 There were a
total of 49,285 households. Households were divided between 30,796
owner-occupied units, or 62.5%, and 18,498 rental units, or 37.5%.
The median value of the owner-occupied units is $69,900 with the
median age of the owner at 38.6.
The owner-occupied housing is further categorized as consisting
of 24,314 married couple families or 78.9% of the total. The balance
was divided between female householders with 3,818, or 12.39%, and
male householders with 2,664 or 8.7%. The demographic profile for
Aurora is summarized in Table 18.


80
Table 18. Aurora Summary. Population 1970 74,974 1980 158,588 Housing Type and Mix 1980 % Change 111.5% % of Total
Owner-Occupied 30,796 62.5%
Rental 18,489 37.5%
Total 49,285
Median Value of 0-0 Unit 1980: $69,500
Median Age of Owner: 38.6
Owner-Occupied Households % of Total
Married Couple with Family 24,314 78.9%
Female Householder 3,818 12.39
Male Householder 2,664 8.7%
Source: Census of the Population of Colorado 1980, and
Metropolitan Housing Characteristics Denver-Boulder
S.M.S.A. 1980; U.S. Bureau of the Census.
Boulder
The Panic of 1857, with its ensuing economic hardship, and the
discovery of gold in Cherry Creek in 1858, combined to inspire the
western migration into the Colorado Territory. One particular group
of settlers, the Nebraska City Party, arrived at the abandoned Fort
St. Vrain in 1858. The party forded the South Platte River and chose
the confluence of Boulder and Sunshine creeks as their camp. The
settlement of eleven cabins was named Boulder City for the numerous
large stones or boulders in the vicinity, and "City" was added to the
name in hopes of what the settlement would become.1*
The discovery of gold twelve miles west of Boulder at Gold Hill
encouraged further settlement, and, in 1859, the Boulder City Town
Company was established. More of a real estate venture than a
municipality, the Town Company divided up 1,280 acres along Boulder
Creek into 4,044 lots. Exhibiting an early tradition of city


81
planning, these lots were 50 feet wide, 140 feet deep, and bounded by
streets 80 feet wide and alleys twenty feet wide.15 Houses were to
be oriented north and south and adhere to a strict building code.
The lots were offered for a one thousand dollars each and the market
responded by ignoring Boulder and settling into the thriving mining
camp of Gold Hill.
For three years Boulder stagnated with its expensive lots while
the mining camps boomed. When Gold Hill went bust in 1862, the
miners moved down to Boulder and established businesses and farms.
The town incorporated in 1871 and with a population of 343, set about
the business of supplying the new silver camps at Caribou and
Nederland.1'
Two railroads, the Colorado Central and the Denver-Boulder
Valley arrived in 1873 providing an important supply line. Colorado
University opened the doors of Old Main in 1878 and Boulder
reincorporated with enlarged boundaries that same year.
By 1890, the silver mines went bust but nearby coal mines
depended on Boulder's services. At the turn of the century, the
population stood at 6,150 and yet another mineral boom fed the growth
cycle.15 The mineral which carried Boulder into the twenties was
oil. Refineries were built and by 1902, 92 oil companies were
operating in the area of the present day Diagonal Highway.1'
The tradition of city planning carried on with the creation of
the Boulder City Improvement Association in 1908. One of the first
functions of this group was to hire well-known Frederick Law Olmsted
Jr. to study the physical appearance of Boulder. With a Harvard
degree in the new field of Landscape Architecture, Mr. Olmsted
recommended the Boulder Creek floodway become a park, and that the


82
Town shun tourism and dirty industry.!? The advice was followed and
the policy of attracting only clean industries began.
When the Boulder-Denver Turnpike was completed in 1952, it was
hailed as the "magic carpet of progress". Bolder was now within
commuting distance of Denver and clean industry began to arrive. The
first major employer to locate in Boulder was the Central Radio
Propagation laboratory of the U.S. Bureau of Standards. This federal
facility was later renamed the Boulder Laboratories of the National
Bureau of Standards and became a forerunner of what is now popularly
referred to as "high-tech" industry. Other attractive industries
which followed were Beech Aircraft Engineering 1955; Ball Brothers
Aerospace, 1957; National Center for Atmospheric Research, 1960; and
International Business Machines, 1965.
With a firm economic base in desirable industries, and a major
university, Boulder turned its attention to planning and growth
issues. PLAN-Boulder, a citizens organization, was formed in 1959
and succeeded in establishing the "Blue Line Limitation". This
initiative prohibited the sale of City water to potential users west
of a line along the base of the foothills. In 1967, the "Open Space
Initiative" authorized a $.04 sales tax for acquisition of a city
greenbelt.
The 1960 population of 37,718 grew to 66,870 in 1970 for an
increase of 77.3%. This growth rate inspired the "Hold Down Growth
Initiative" of 1971. Under the terms of this initiative, City
Council analyzed the optimum population and growth rate and was
required to ". take all steps necessary to hold the rate of
growth substantially below that experienced in the late sixties."1


83
Also in 1971, voters initiated the "Height Limitation Ordinance"
which set a 55 foot limit on the height of all buildings.
In 1972, the City Council established the "Interim Growth
Policies" which discouraged new primary employment centers from
locating in the Boulder Valley, and required new development to pay
its fair share of costs for public facilities and services. At this
point, Boulder public policy shifted away from the "magic carpet of
progress" concept to a policy of official discouragement of economic
expansion.
In 1976, the voters of Boulder initiated the landmark "Growth
Limitation Ordinance". Known as the "Danish Plan" for Paul Danish,
its leading proponent on the City Council, this ordinance limited the
city to 450 residential building permits per year and required that
at least 175 of these be issued for the core area.11 This ordinance
drew national attention and placed Boulder, along with Petaluma,
California and Ramapo, New York at the forefront of communities
implementing radical growth management techniques.
The original Danish Plan contained a "sunset clause" after five
years, so, in 1981, the debate raged anew. The outcome was Danish II
which established two percent growth, and a building permit
allocation system based on a merit point score. As requests for
permits quickly outnumbered allocations, this new system became
burdened with paperwork demands, duplicative review, unpredictable
outcomes, and bureaucratic delays.
Extreme dissatisfaction among the development and financial
communities led to yet another growth limitation ordinance. Adopted
by City Council in February of 1985, the 'Revised Ordinance" accepted
the two percent growth ceiling but abolished the merit allocation


84
system in favor of a share-and-share-alike system where each request
received an equal pro-rated share. The three growth Limitation
Ordinances, which have governed the building and development
industries in Boulder since 1976, have inspired widespread community
participation in the planning process. This process has evolved
upward from the depths of highly emotional and adversarial
politicking to a level of mutual respect and a spirit of compromise
among all the interested groups. Despite the participatory and
democratic process in forming the latest growth control ordinance,
the promotion of affordable housing has suffered. Planning in the
nineties now hinges on the potential reconciliation between two
percent growth and the concern of creating an exclusive community.
Boulder's land area consists of 12,800 acres or twenty square
miles.11 The population in 1980 was 76,685 an increase of 14.7%n
from the 1970 population of 66,870. According to the Metropolitan
Housing Characteristics of the Census Bureau 1980. there were a total
of 25,369 households in Boulder. These households were divided
between 10,263 owner-occupied units, 40.4%, and 15,106 rental units
or 59.5%. The median value of the owner-occupied unit was found to
be $86,800 with the average age of the owner at 46.5 years.
The owner-occupied housing mix is further broken down into
7,356 married couples families, or 71.6%. The remainder consists of
female householder with 1,970, or 19%, and male householder with 937
or 9%.!J The demographic profile for Boulder is summarized in Table
19.


85
Table 19. Boulder Summary.
Population % Change
1870 343
1890 3,069 794.75%
1900 6,150 100.39%
1910 10,000 62.60%
1960 37,718 277.18%
1970 66,870 77.29%
1980 76,685 14.67%
Housing Type and Mix 1980 % of Total
Owner-Occupied 10,263 40.45%
Rental 15,106 59.5%
Total 25,369
Median Value of 0-0 Unit 1980: $86,800
Median Age of Owner: 46.5
Owner-Occupied Households % of Total
Married Couple with Family 7,356 71.6%
Female Householder 1,970 19%
Male Householder 937 9%
Source: Census of the Population of Colorado 1980, and
Metropolitan Housing Characteristics Denver-Boulder
S.M.S.A. 1980; U.S. Bureau of the Census.
Fort Collins
When the French-Canadian fur trappers of Northern Colorado
popularized a crossing of the Cache La Poudre River, it was only
natural that other activity would follow. This crossing soon boasted
a trading post and served as a home station for the Overland Stage
Company. Following a minor incident with the local Indians in 1864,
Commander William 0. Collins of Fort Laramie dispatched a contingent
of troops and Camp Collins was established. The first spring brought
severe flooding and camp was moved five miles downstream to higher
ground. With renewed respect for the power of the river, the
facilities were upgraded and Fort Collins was dedicated.M


86
With a dying fur trade and an army installation, many former
trappers settled into the Cache La Poudre Valley. Commerce and
agriculture responded to the needs of the soldiers and the settlement
grew. The Army discovered a notable lack of need for protection, so,
after only two and one half years, the fort was abandoned in 1867.
In 1869, a group of colonists from Mercer, Pennsylvania arrived
and tapped the Poudre River with irrigation ditches that are still in
use today. Known as the "Mercer Colony", this group provided a
social and domestic cohesion which resulted in eventual incorporation
in 1872.25 The early 1870s also saw Fort Collins become the county
seat of Larimer County and the future home of the territory's land
grant agricultural college.
Incorporation required the surveying and platting of a townsite
for the drawing of lots. The first streets ran parallel and
perpendicular to the Poudre River which flowed in a southeast
direction. The new streets, however, were laid out on a north-south
axis in conformance with the section, range, and township system
popularized by the U.S. Geological Survey. Thus the town now had two
contrasting grids forming the "Triangle District". An element of
nineteenth century city planning was included and one diagonal street
was laid out following an old trail to the mountains. The Colorado
and Central Railroad, arriving in 1877, followed the courses of the
Poudre River which reinforced the contrast between the two grid
systems. Like many communities springing up in the American West,
the physical shape of Fort Collins was influenced by natural features
and the geometric discipline of the surveying and engineering
professions.


87
For the first half of the twentieth century, Fort Collins grew
slowly, characterized by the amiable relationship between the
agriculturists and the academicians. Success in sugar beet
cultivation and processing, lucrative red sandstone mining, and the
creation of Rocky Mountain National Park and the Roosevelt National
Forest contributed to the economic well being of the community.
By 1960, the population stood at 25,027 persons representing a
growth rate of 67.5% over the 1950 figure of 14,937.!? The sixties
saw a major expansion of what was now called Colorado State
University with a massive construction program and increased
enrollments. City planning reflected the chamber of commerce point
of view as indicated by an advisory committee to City Council
referred to as "Plan for Progress."
As mentioned in the literature review section and the historic
introduction to Boulder, the early seventies were characterized by a
groundswell of grass roots support for the management of community
growth. Where growth was once considered progress, it was now
equated with environmental degradation and an assault on the quality
of life. With a 1970 population of 43,337 persons resulting in a ten
year growth rate of 73.2%, the growth management movement began to
influence the political agenda on a variety of issues. The City
Council responded to this concern and funded a broad based citizen's
task force to conduct hearings and make recommendations on the future
extent and quality of growth. Referred to as "Designing Tomorrow
Today", this committee made a strong effort to balance competing
objectives during an emotional and divisive time. The task force was
unable to satisfy the divergent constituent groups and a citizen's
initiative placed a growth limitation ordinance on the ballot in


88
1977. Calling for an annual limitation on the issuance of building
permits, the initiative failed to pass by an approximate two to one
margin.
The intensity of the growth limitation initiative was not lost
on the community leadership. In an attempt to reconcile the
adversarial factions, the City Planning Department assembled a task
force to implement quality and orderly growth. The result was a
"Land Use Policy Plan" and "Open Space Plan" which were to guide
planning decisions. To meet the objectives of these policy
guidelines, the City revamped the traditional Euclidean zoning
ordinance and created the "Land Development Guidance System". The
"Guidance System" eliminated density, use, lot area, and other bulk
requirements associated with conventional zoning and subdivisions
regulations. The new regulations leave specific use largely up to
the marketplace with external features of a project controlled by
performance criteria based on a point system.2' The result is
greater citizen participation but on a less adversarial level than
under the previous development review procedure.
The late seventies saw a historic cooperative agreement between
the City of Fort Collins and Larimer County with the establishment of
the "Urban Growth Area". This intergovernmental cooperation is
intended to prevent leapfrog development and the costly extensions of
city services. Defined by a "Blue Line", the agreement allows for
orderly annexation into the city of eligible parcels while
discouraging the urbanization of the rural areas.
The early eighties brought a building recession unprecedented
in recent history. As a result, the "Guidance System" was refined
and economic development planning gained importance. The City landed