Agenda - 03-21-1990 - Laserfiche WebLink

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158 LAND USE AND ENVIRONMENT [14] buyers of housing to be linked with quality and prestige. Suffice it to say that cause-and-effect predictions about housing markets are about as reliable as cause-and-effect predictions about the stock market. There are a number of theories and countertheories in the economic literature purporting to explain how, in an economic model, an economist might determine who bears the economic incidence of a tax or regulation which, as discussed earlier, may depend on achieving a perfect understanding of pricing and its relationship to cost. Economists generally agree that any factor that affects costs may be passed on to the consumer; and/or the landowner, and/or the builder, and/or the suppliers of labor or materials, depending on the elasticities of supply and demand- . and the agreement stops right there. A majority of economists would probably disagree with anyone who purported to have an understanding of the housing market sufficiently exact to tell who and in what proportion the various participants in the hous- ing market might be expected to pay the costs associated with any particular inclusionary mechanism. The incidence problem is particularly frustrating in light of the fact that both set-aside proponents and opponents base their support on, or opposition to, their particular conclusions as to who ultimately pays and their views of the equities of that situation. Most economists, builders, and social planners agree, how- ever, that any regulatory system that drives up builder costs in a housing market area will certainly result in an increase in hous- ing prices for market home buyers in that area. The agreement will be less general about whether a regulatory mechanism that limits profits on a segment of the housing product will also drive up costs. These questions are relevant because in New Jersey the in- clusionary rule, which requires that housing be delivered, in some areas, for as little as $20,000 a unit, probably results in .outright builder losses equal to the amount his costs exceed the price allowed him in the specific ordinance. In Orange County, where dwelling units priced between $72,000 and $95,000 qual- ify, presumably the builder is losing only "profits." A loss of profits, however, deprives that builder of all or a portion of that reward the Orange County housing market would otherwise pay for that builder's initiative, organizational abilities, and willing- ness to risk capital.