• Legro’s Real Story Legro’s Real Story By R.S. Weir Contrary to Mr. LeGro’s fantasy, my family’s land ownership has nothing to do with the letters I write which invariably include reference to property rights and their critical importance to
• Legro’s Real Story
Legro’s Real Story
By R.S. Weir
Contrary to Mr. LeGro’s fantasy, my family’s land ownership has nothing to do with the letters I write which invariably include reference to property rights and their critical importance to a free society. That is not to say that protection of our property rights is not one of my foremost concerns n acting otherwise would be irresponsible and foolish, just as it is so for others to ignore theirs. However, there is no moral or ethical burden on me to disclose any of what is private and coincidently none of LeGro’s business n or, anyone else’s for that matter. I know that for some, arguments based on sound, consistent principles seem foreign and tough to grasp since they are used to thinking in situational, relativist mode.
That said I would like Mr. LeGro to know that my family has been instrumental in maintaining open-space lands on the Westside for over 140 years. He should also know that our agricultural businesses provide 317 jobs and supply 354 houses in which 839 people live at monthly rents ranging from $0.00 to $ 131.00 per unit. Retired employees occupy 190 of the housing units; a benefit they will receive for the remainder of their lives.
If we wanted to add to the stock of mid and low-price rentals, it would be a losing proposition given the cost of government red tape and interference. Hence, it is not an option worth contemplating now. I am positive many other large and small landowners have come to the same conclusion otherwise we would see a flood of small lots on the market which would drive prices down.
LeGro concludes that the lack of affordable housing has nothing to do with land use laws and everything to do with the laws of supply and demand. Well, he got part of it right. The laws of supply and demand are indeed in full effect. Nevertheless, what he misses is the key connection between supply, zoning, other land use regulations and tax policy. I don’t know where he got the idea that regulations, zoning and taxes are cost free but they are not.
The supply (marginal production cost) curve is essentially a function that shows the quantity of a good or service that producers supply at various pricesóit is a direct reflection of the costs of production for that good (including housing & improved land) or service. The interaction of the supply curve and the demand curve for housing, for instance, will determine its market price. Mr. LeGro surely knows that these two functions act in the opposite direction: that is, the higher the price they can get the more suppliers will offer, but buyers will purchase less, demand reflecting an inverse relationship to price. The market reaches a stable condition (equilibrium) when the two functions intersect and determine a market price where the quantity offered and purchased are equal n P1;Q1 on the graph.
The imposition of zoning and land regulation restrictions affects the cost of supplying subdivided land by actually shifting its production cost (supply) curve in the wrong direction n up and to the left the same way a tax does n and this drives up the price of land and subsequently housing costs. You can see on the graph that not only is the price driven upwards but there is also less improved land supplied as well n P2;Q2. Less at a higher price, this is just the opposite of what we want to happen. Sadly, this reflects the current state of affairs for Kauai’s housing market n with thanks to government interference.
A general increase in incomes exacerbates the problem because it shifts the demand curve in the opposite direction upwards and to the right n a situation also happening on Kaua‘i as the economy slowly improves. You can see this if you draw another demand curve.
I refer LeGro and any others (the council maybe?) interested to a nationwide study by economists Edward Glaeser of Harvard University and Joseph Gyourko of the University of Pennsylvania titled: Zoning’s Steep Price published in Regulation, Fall of 2002.
They conclude, “If policy advocates are interested in reducing housing costs they would do well to start with zoning reform. Building small numbers of subsidized housing units is likely to have a trivial impact on average housing prices given any reasonable demand elasticity (Mr. LeGro, elasticity refers to how sensitive the quantity demanded is to changes in price n i.e. is the demand curve steep or flat), even if well targeted toward deserving poor households. However, reducing the implied zoning tax on new construction could well have a massive impact on housing prices. Perhaps Mr. LeGro considers all this laughable, but I hope he forgives those deprived of home ownership, or shelter, because of bad policy if they do not get his humor or join him in the laughter.
R.S. Weir is a resident of Kapa‘a
