Economics 101 clashes with UDO policies

Published 12:00 am Tuesday, January 11, 2005

During the first City Council meeting of the New Year, Councilman Dickens made some truly instructive and astounding comments about the Unified Development Ordinance and its impact on affordable housing and assessments in our community.

He stated that comments made in this column and by others, that associating increasing home assessments with the UDO was wrong.

He also stated that the growth control measures he has blindly championed, and as found within the set of misguided ordinances we call the UDO, has had little if any impact on the cost of homes in Suffolk.


Email newsletter signup

To say the least any informed observer would disagree with such a simple explanation.

The facts point directly to the opposite view from that stated by the councilman.

It is true that other communities in the area have also seen significant increases in home assessments.

However, anyone who believes that there has been no connection between home assessment increases in Suffolk and the UDO that skews the market by limiting supply and increases the cost of homes, is just whistling at logic.

As any undergraduate student taking Economics 101 can tell our local councilman, when the government contrives methods to intervene in the real estate market to limit supply and to add cost to construct a home, the market price or assessed value of such real estate is artificially driven up in price. For our council to believe otherwise is both astounding and most likely designed to serve another purpose than the truth.

As an active pilot and the local aviation vendor at our local area airports, I do get to see things from a little different perspective as I fly over our community almost every day.

I also have some insight into the real estate market, due to my work as a commercial real estate development analyst and investor.

As noted by Councilman Dickens and the other apologists for the UDO, there seems to be a desire to ignore or wish away the effect that the market suffers by such poorly crafted ordinances, delivering unintended consequences and higher prices. While the political response from our councilman may be to ignore the actual costs to the market that the UDO causes by way of increased assessments, economic reality exhibits a different perspective, which he most likely just wants to ignore.

If anyone really believes that the UDO and other contrived increases in fees, costs and artificial limits placed on the real estate market goes unfelt, has not paid a tax assessment lately, or is just looking to spend your money for you.

Such attempts to confuse the issue by trying to state that such costs and limits have no effect in the Suffolk real estate market that directly drives up the price of homes, is either deluded or holds a political agenda.

If the local government artificially limits the supply of homes or adds costs to new construction or existing homes, which sets the price and compatibles used by the assessor to establish our new assessed values each year, it does artificially raise our assessments and the accruing taxes.

While this may not be the only force driving prices, to state that it has no effect is either naive or dishonest, or both.

It was refreshing to hear from Councilwoman Johnson and others on council, stating that they did not agree with such thoughts and that they also wanted to look into methods to reduce the impact such assessments have.

One method mentioned to effect some rational and reasonable change is to reduce the &uot;mil-rate.&uot;

Another is to extend the period that real estate assessments are done; from every year to possibly every three years.

The first would directly offset any increase, and the latter would slow or defer increases.

Councilman Dickens knows that the UDO has been one of the primary forces that has driven up home assessments spectacularly in Suffolk.

While much of the UDO is appropriate public policy, it has caused home prices to rise due to limiting home supply, which drives up assessments.

If Councilman Dickens really does not wishes to play games with these issues, he should sponsor legislative initiatives that offset assessment increases with reductions in the tax rate to reduce the real estate taxes paid, as we see in neighboring communities.

He has not done so because the miracle of this political slight of hand creates an artificial mechanism that puts more money into the coffers of City Hall that he and others can spend.

With Councilman Dickens imminent appointment to be president of the &uot;Hampton Road Partnership&uot; – a regional economic development group in favor of significant growth control legislation by stripping private land rights, he will most likely use the bully pulpit to spread further fairytales. The UDO and other legislation to restrict private property development rights, has not had a benign impact on assessments and taxes as stated by Councilman Dickens. We can only hope that now that he will be moving on, a more pragmatic view of assessment growth will occur and some small tax reduction will give back a little of our taxes.

Such tax policy would be a good first step toward fairness and recognition of the real economic impact such policy has had.

As a good faith gesture, I am willing to send Councilman Dickens my copy of Economics 101, which I studied diligently several years ago in college, to insure he will be better informed of fundamental economic process in his new job.

Roger Leonard is a Suffolk businessman and regular News-Herald columnist. He can be reached at