Daily Archives: January 13, 2015

Affordability Roundabout

Daniel Kay Hertz has a nice post up critiquing an article on NYC’s housing policy, definitely worth a read, and I’d like to offer a few thoughts. Understanding what’s causing unaffordability in a city is the first step to solving the problem. If you don’t know the root causes, you probably won’t come up with good solutions. If you call for increasing housing supply in coastal cities in the US, you’ll often hear inconsistent arguments in opposition, and it goes something like this:

A: Housing supply is constrained by regulation. Let’s upzone low-density areas and reduce the bureaucratic hassle of building in the city.

B: But developers only care about the rich! If we upzone and make it easier to build, we’ll just get more luxury units and displace more low income residents.

A: In other cities, like Phoenix and Houston, developers build market-rate housing that’s affordable to people with lower incomes. Are the developers in Phoenix and Houston just nicer people?

B: No! The developers there are just as bad. Phoenix and Houston are cheaper because they’re not as nice to live in as California.

A: Indeed they are not. How odd, then, that those greedy developers are building more in low-margin Phoenix and Houston than in California. Perhaps housing supply is constrained by regulation.

And around we go.

There are kernels of truth in these arguments. They’re not wrong; they’re just incomplete. Certainly, if we only upzone a small area, like Hollywood, we’re going to get luxury developments and displacement. But if we allow ADUs and dingbat-sized projects all over LA? All over the region? There’s not enough luxury demand to suck up all that construction; in fact, there’s no luxury demand at all in plenty of neighborhoods where modest new construction would pencil out.

Progressives have a healthy distrust of corporate interests, learned from centuries of corporate attempts at manipulating markets and evading regulations. So maybe sometimes we lose sight of the fact that more regulation doesn’t necessarily mean better regulation, and less regulation doesn’t necessarily mean less effective regulation. It’s not contradictory to envision a regulatory scheme that encourages a lot of private sector building but also strongly enforces fair housing laws and provides a measure of public housing or housing subsidies to ensure that society’s least fortunate have decent shelter.

On the other hand, it’s also perfectly logical to argue that, like policing or education, the private sector cannot be trusted to provide adequate housing for a large number of people. In that case, you should be arguing for a large government (or quasi-government) investment in building new housing. Few people seem to be making this argument, but it’s an argument that would at least make sense. This is, after all, pretty much what progressives argued in the 1930s and 1940s.

What’s ridiculous is the argument that we can provide housing for everyone by turning the screws on developers even tighter. Imagine if, having declared that education is a basic human right, we proposed to implement that right by allowing construction of private academies, but only if they subsidize one low-income student for every four trust-fund brats they admit. That sounds ludicrous, but it’s basically what Bill de Blasio expects you to believe will make housing accessible to everyone in New York City. This approach makes sense only if your primary goal is to turn the screws on developers. Which is fine, but in that case, we probably don’t have much to talk about.