The Californians Are Coming!
I got a phone call a few months back from a woman in Arizona who sought my advice. Her town was receiving an influx of new residents from out of state and it was obvious the trend was accelerating. The resulting growth and economic distortions caused by an expanding population, more traffic congestion, less open space, stresses on municipal services, and higher home prices would (all together now) “change the character of the community.” She was an earnest woman who genuinely cared for her town and was in search of tools to manage the inevitable in the best way possible. But I had to smile when she announced, “The Californians are coming!” in a thick Chicago accent. How long had she been in Arizona?
I rented a house here in California to a Canadian couple for four years. They relocated to take advantage of career opportunities in San Francisco. They owned a condo in Vancouver which they rented out while they were living here so it was a financial wash for them. When a great job presented itself in Kelowna, B.C. the couple returned to Canada.
But the timing was rough. The city of Vancouver had recently enacted a tax on foreign property investors meant to cool the overheated real estate market. One side effect was a 25% price spike in Kelowna in a single year as hot money found the next sweet spot. In Vancouver, the tax induced a brief lull in the property market for a few months, but then prices resumed their upward trajectory as pools of international funds kept searching for a safe haven. What’s an extra 15% if you’re already paying cash for a $1.2M condo? Was there anything Kelowna could have done to alter that trajectory? Friends in Australia tell me Hobart, Tasmania is seeing significant home value increases as people from Melbourne migrate to second and third tier cities in the provinces...
That got me thinking about Missoula, Montana. I took a trip there with a cousin from Southern California who was thinking of relocating. Missoula is a charming college town in the mountains with a high quality of life. Lots of people from prosperous cities on the coast have been buying property there. In some cases these are second homes. For others, cashing out a modest tract home in Seattle or Los Angeles will allow them to upgrade to a much nicer place in Missoula with money left over for early retirement. Educated tech workers are able to telecommute and earn big city salaries while living in a less expensive smaller town.
One of the side effects of this migration of money and people is a decoupling of local wages relative to property values and rents. Locals are increasingly out bid.
So what are Missoula’s options? The town could let market demand be met by covering the open land all around town with new homes and strip malls along with the associated traffic congestion. Does anyone want Missoula to end up looking like a scene from the New Jersey Turnpike?
Up-zoning the existing suburban landscape with new infill development increases supply, but the old timers decry the loss of “neighborhood character.” Compared to the historic downtown which is charming and walkable, almost all new apartment complexes are an unpleasant hybrid of suburban auto-oriented development with none of the benefits of good urbanism. Increased density all by itself is pretty crappy if your condo looks out at a parking lot, the back of a strip mall, and eight lanes of suburban traffic.
Building more traditional urbanism is both illegal and culturally unacceptable. The sort of pre-World War II Main Street above is just too hard to cultivate within a modern administrative context. It isn’t the fire marshal’s requirements, or the Americans With Disabilities Act, or minimum off street parking standards, or on-site stormwater management mandates, or the way new construction is financed, or the tax code, or zoning parameters, or NIMBYs… It’s everything.
Infill courtyard clusters like this one are much more in keeping with the older neighborhood fabric and are close enough to downtown to be walkable and bikeable, so cars are merely one of several transportation options. But the push back from neighborhood groups is quite strong.
While I was photographing these cottages one of the owners invited me in for a tour. Both she and her home were charming and gracious. But she was adamant that there was too much new construction in the area, too much density, and too many new rental units coming on line. She had even been instrumental in getting her HOA to restrict rentals within the cottage court. Full time owner occupants are the gold standard. People who can’t afford to buy are undesirable by definition — and too many new owners wouldn’t exactly be celebrated either. I call this, “I’ve got mine; you go away.”
I chatted with a man who had bought his home decades ago. Nice guy. But he bemoaned the way his back neighbor put on a second floor addition. I looked around and asked, Why? He said it blocked his view of the mountain and he didn’t like having a dozen windows overlooking his garden. I looked up at the mountain and then at his veggie beds and car port. Really? It’s that bad, huh?
I asked about his property values. They’ve been going straight up in recent years. He said he paid almost nothing for the place when he was young. Missoula property just wasn’t that pricey compared to what ordinary people were earning back then. I asked him if he would prefer infill construction or having nature and farms be covered in sprawl. “Neither.”
Restricting new construction to preserve the town in its present form in the face of increasing market demand results in soaring prices for existing building stock. Imposing rent control to protect locals comes at the expense of landlords and creates its own dysfunctional dynamics and unintended consequences. Raising the local minimum wage shifts economic burdens on to employers who respond by hiring fewer workers, investing in automation, increasing prices, and/or outsourcing to less expensive regions whenever possible.
There are no perfect options when the value of property is no longer tethered to the local labor market. Society could change every aspect of how the global and national economy is structured. That is a possibility. But it might take a while.
