What Price Diversity?

It seems that ethnic diversity is on the decline in Virginia’s inner suburbs (Alexandria and Arlington) and on the rise in Virginia’s more far-out suburbs. Some aren’t thrilled by this:

Alexandria City Council member Redella S. “Del” Pepper (D) said some of the study’s findings, such as a decline in the city’s Hispanic population, were “surprising.” Alexandria was the region’s most heterogeneous jurisdiction in 2000, with a minority population of 45.3 percent, but seven years later that share has slipped to 41.7 percent.

“This is a community that really prides itself on valuing diversity,” Pepper said. “I think [the decline] has occurred because of how expensive it is to live in Alexandria.”

Right. The key thing to note here, as Ryan Avent does, is that there’s something these jurisdictions can do about it. Right now, Arlington has a couple of high-density corridors along their Metro lines, but these are incredibly thin tendrils that give way to detached homes very quickly:

Of course there’s nothing wrong with detached homes. Indeed, those are some nice homes! But they’re also extremely expensive, since they’re located in an extremely desirable position. In a normal free market situation, the result of the appreciation in value of that land would be for more of those lots to be redeveloped as higher-density properties. That would make housing more affordable, and you would therefore get more economic and ethnic diversity. But we don’t have a free market, instead we have a market that’s highly regulated. The result:

Arlington has done better than Alexandria, thanks to its aggressive efforts to take full advantage of its Metro resources, but both provide nowhere near enough housing to meet demand. For most of the housing boom, new permits in Arlington and Alexandria fell well below those issued in outer suburbs (in 2003, Arlington and Alexandria approved 7 and 72 new units, respectively, while the outer burbs were adding between 4,000 and 6,000 each. Only in 2006, when the huge inventory additions of the housing boom began to come through the pipeline, did the two inner municipalities rival their outer suburb neighbors.

The result? Prices in the inner burbs started the bust much higher than prices in the outer burbs and they’ve fallen less. The housing bust increased the relative price of the inner suburbs.

The way for jurisdictions such as these to show that they really value diversity would be to allow for the development of more units. But of course some jurisdictions may really not value diversity. And there’s the rub. Policies that limit denser development in Arlington and Alexandria are arguably good policies for current homeowners in those areas. But they’re very bad policies for the region as a whole and for the country. They’re bad for the environment, for one thing. But they’re also quite bad for economic growth, leading resources to be allocated inefficiently, and bad for economic mobility. You want a situation in which it’s relatively easy for people of modest means to locate themselves where the economic opportunities are. But that requires a situation in which it’s possible to build relatively inexpensive, albeit cramped, dwellings in the high-value areas right nearby very expensive non-cramped dwellings. The system in which everyone’s dwellings are non-cramped but poor people need to live very far away makes it harder than it needs to be for people to move up the ladder.