Homes on the Cheap
- Posted by ryan on December 16th, 2008 filed in Cities, Economics, Environment
The rather magnificent, ongoing housing price downturn shouldn’t get anyone thinking that we don’t have a rather serious problem with affordable housing in this country. In most metropolitan areas, home prices remain above their 2000 levels. And many households that have been able to keep their housing costs under control have done so by moving to places with more flexible housing supplies — generally, the sprawling sunbelt — which is problematic in economic and environmental terms.
Ed Glaeser and Joseph Gyourko, as readers of this blog will know, have written a number of papers on the economics of metropolitan areas and housing. They have now released a short “book,” available for free online, which is currently on my desktop in PDF form, waiting to be read. The gist will be familiar to most of you. The two advocate a substantial increase in housing vouchers and federal measures to incentivize growth in housing supply in tight markets. Click here to read their own dime summary.
Here is the lay of the land, readers. Ed Glaeser is a conservative. In his opinion pieces, he is actually a strident and obnoxious conservative. And in both his opinion pieces and his academic work, he has some very blunt things to say about some programs that are held dear by progressive democrats. Sometimes he’s off base with these criticisms, but often he isn’t. At any rate, I suspect many liberal pundits will be inclined to disregard Glaeser’s work as a sneak attack on needed progressive policies, since it is widely (and not without reason) assumed that no conservative actually gives a rat’s ass about affordable housing or the environment.
I understand that outlook, and I find it unfortunate, because much of the work Glaeser has done is of the utmost importance. Progressives cannot hope to create effective housing policies, environmental policies, and metropolitan growth policies without understanding his views, grappling with them, and ultimately learning to embrace some of them. Frankly, what Ed Glaeser needs to do, if he takes his work seriously, is find himself a nice, progressive translator.
What a lot of urban liberals are going to have to understand is that much of what they know is wrong. Low densities and excessive urban green space aren’t actually all that environmentally beneficial, since they act to reduce housing supply and shift population growth to places like exurban Houston, where the living is dirty (in an emissions sense). NIMBYs who fight development around transit may have good intentions, but they may as well be spending their time lobbying for new highways and coal plants. And suburbs, with their extensive, and very restrictive rules on land use and building use and design, act as heavy anchors preventing us from making housing more affordable, economies more dynamic, and carbon intensities lower.
I don’t expect that progressives will tear up their affordable housing playbook and start evangelizing on behalf of Glaeser and Gyourko, but they need to engage with these ideas. And they need to begin thinking about how to take on one of the most dangerous lobbies in all of politics — homeowners.
December 16th, 2008 at 10:34 pm
While I appreciated the argument put forth by these two on how to improve housing costs, especially in the big cities, I’m bothered by this comment made in the NYT piece:
“In the housing context, this means prodding restrictive, high-cost areas to permit more building. New York and greater San Francisco are the two most productive areas in the country, but people have increasingly moved to lower-wage Sun Belt cities because those areas have low housing prices created by unfettered supply. It is bad economics to let local barriers drive people to less productive areas, and it is also bad environmentalism. The environmentalists who prevent building in temperate California are actually increasing carbon emissions, by driving people to build in the far more energy-intensive suburbs of Houston and Phoenix.”
While I agree that one way to encourage more individuals to stay in the big cities rather than move to the Sun Belt would be to reduce barriers to NIMBYism, arguing that somehow people in New York City and San Francisco are at fault is completely unfair. Both cities have indeed allowed increasing development in recent years. To argue that NIMBYism in those cities is (1) causing the high housing costs and (2) the mass migration to the sunbelt is unreasonable.
Perhaps a more accurate explanation for the high costs in NYC and SF are more related to the unique nature of those cities in the United States - they’re two of the only true, walkable urban environments in the country, so of course they’re expensive! And the nicest areas of urban centers throughout the country (and new urbanist developments) have retained their value better than have traditional suburban cul-de-sac homes.
A better solution to the high housing costs in walkable, livable urban environments is simply to encourage the production of more of them. We need to rebuild the damaged parts of our inner cities so that they’re more attractive to the middle class, and we need to ramp up transit and affiliated development. Those solutions would make the highly desirable environments in New York and San Francisco available throughout the nation.
December 16th, 2008 at 10:41 pm
Ryan, you’re a good writer — why litter your prose with horrid words like “incentivize”?
December 16th, 2008 at 11:57 pm
Nice post, Ryan. But I thought you were Glaeser’s progressive translator.
Yonah, I agree that we need to encourage more walkable, livable urban environments, but San Francisco has not allowed a meaningful amount of new development. Between July 2000 and July 2007, SF’s housing stock grew by an average annual rate of 4/10ths of one percent. We can’t expect it to add housing at Houston’s rate (2.5% or so), but it shouldn’t be adding housing at one-tenth the rate.
December 17th, 2008 at 1:27 am
I haven’t read the linked piece, but on the topic of “well-meaning liberal policies that cause problems”, will add that a big part of the problem here is that cheap housing is largely illegal.
I’m not just talking about density, but about the housing itself. In our efforts to make life better for everyone, we’ve outlawed homes above shops, homes in alleys, homes below a certain square footage, homes without enough fire escapes, homes without professionally-installed electricity, etc etc etc.
All those things drive up the cost of housing.
Now, y’know, maybe some of those are legitimate, but for the sake of argument it’s worth pointing out that if we allowed shantytowns to be built in this country, affordable housing (and homelessness) would not be as much of a problem.
Not that I necessarily want to live in one, but you can buy a shipping container for $1,500. Slap one of those in every backyard in America and our affordable housing problem disapears.
December 17th, 2008 at 1:28 am
Some day I will learn to spell disappear.
December 17th, 2008 at 2:47 am
I don’t think we can lay the blame completely on San Francisco proper. (Not sure if you meant SF or the Bay Area AC) Considering the land area, we have added 450 units per square mile from 99-06. I would argue that cities such as Oakland that have the capacity to add more housing are falling down on the job. Actually that was somewhat proven by the allocation numbers, with Alameda county meeting only 72% of its allocation at 45 units per square mile in that same time period.
http://www.abag.ca.gov/planning/housingneeds/pdf/resources/A_Place_to_Call_Home_2007.pdf
San Mateo, just south of San Francisco is not much better. 23 units per square mile from 99-06.
Now some of that space is green space, which makes the Bay Area the Bay Area and I would argue that that land is non negotiable. But there is plenty of space on the high traffic corridors to build. But then comes the issue of homeowners, which i think as Ryan rightly points out, is the major obstacle. The regressive progressives of Berkeley have shown their ugly faces very recently against any new density on existing transit corridors.
December 17th, 2008 at 3:01 am
This all seems so general as I sit at 10:30 at night in a planning commission hearing in a medium sized city right between san Jose and san Francisco.that hasn’t built anything in 20 years.
December 17th, 2008 at 6:16 am
From G&G’s op-ed:
Expensive localities are never going to give up their growth controls on their own, but the stimulus package provides a natural tool for promoting affordability. If some aid to expensive states is made conditional on permitting more construction, then pricey places will face incentives to permit more units and promote affordability.
Wait, what? Aid to expensive states can’t solve this problem. The states, by and large, don’t control and can’t dictate zoning in their cities. The dealing has to be between the Federal government and the cities.
Other than that, they’re right: the horse-trade needs to be one of infrastructure (mostly mass transit) aid to cities and inner ‘burbs, in return for minimal controls on height, parking, etc. near transit stops.
December 17th, 2008 at 9:09 am
We need to rebuild the damaged parts of our inner cities so that they’re more attractive to the middle class, and we need to ramp up transit and affiliated development.
The problem with this scenario, at least in the DC context, is that the “rebuilt” areas become attractive to upper- and upper-middle-class singles, not middle class families. Dynamiting housing projects effectively scatters the underclass to the suburbs. In their wake, you have extreme wealth residing next to extreme poverty, with little in between. And when they start breeding, those assets of urban living sometimes become liabilities, particularly when you don’t hang out at bars until 2am anymore. So they migrate to walkable suburbs (if they’re smart) or cheap mcmansions in Prince William County (if they have no clue).
Cities will never become “safe” enough or affordable enough for most middle class families. And in many ways, they don’t have to be. There’s enough ecosystem circulation between kids growing up in the boring ‘burbs and wanting to live in the city, and boring hiptards living downtown who get married, poop out crotchfruit, and need a school system where their kid won’t get shanked. Smart transit options are the key to keeping that ecosystem circulating. Otherwise, you get affluent walled ghettos like Chevy Chase where elderly honkies soil their britches in rage when you try and put a streetcar line next to their country club.
And there’s plenty of cheap urban housing. It’s either in neighborhoods that people don’t want to live in, for various reasons, or it’s abandoned housing that the churches/local government owns and refuses to sell, again for various reasons, usually political.
December 17th, 2008 at 11:24 am
Thanks for combatting the “it’s written by a conservative so it must be evil” knee-jerk.
December 17th, 2008 at 12:06 pm
For me, the takeaway of all this is that there is not enough supply of housing in urban, walkable neighborhoods served by transit across the country. Clearly there are more people who wish to live in this type of environment than there are housing units. While NYC and SF could be doing more to increase density, other cities, such as Dallas, Atlanta, etc., also need to meet the demand for good urban housing.
December 17th, 2008 at 2:19 pm
TOW, 450/sq mile works out to less than one household per acre. That’s not enough to do any good.
Anyway, what ought to matter is what SF can do, not whether it meets artificial benchmarks.
I’m thinking specifically of Hunters Point. That development will add 10,000 units to the SF market. That’s equal to SF’s total production during this decade. But it’s taken a decade of pleading by the developer plus a citywide referendum to get this project approved. Even then, over half the 700 acres have been reserved for commercial/open space. It ought to be a 20,000 unit project rather than a 10,000 unit project.
See also the Armory and that hospital project (you know the one I’m talking about). Either project could have added 200 units. That wouldn’t register as a blip in Houston or Austin, but 200 units would add 20-30% to one year’s production in SF.
SF can do a lot better.
December 17th, 2008 at 3:16 pm
Heh. Yeah the people who opposed the Armory project got what they deserved.
December 17th, 2008 at 3:24 pm
Man AC beat me to it but I’ll say it again anyway. I thought you were Glaeser’s progressive translator, Ryan!
December 18th, 2008 at 10:06 am
G&G’s main recommendations re the housing market in general seem about right - there are clearly some parts of the US which are too dominated by NIMBYist policy, extreme density restrictions seem particularly mad, the federal government has a role to play in leaning against this, and the mortgage interest tax relief is far too regressive. But I have to take issue with their preference for demand-side vouchers for the poor as opposed to initiatives to increase the supply of low-income units, such as inclusionary zoning. Seeing as vouchers are currently severely underfunded (only one in four eligible households receive them) and it seems to be a constant battle to keep funding even at current levels (around $15bn), there seems to be little or no chance even in an era of Democrat control of securing the >$60bn a year you would need to fully fund vouchers. Even if you could get to that level at some point, how likely is it to be sustained in the long term? And what about the work disincentives associated with such a large increase in means-tested subsidies? Lastly, if you remove limits on mobility as G&G suggest, what is to stop people moving to the higher cost areas and picking up higher subsidies?
Based on experience here in the UK I would suggest that a better way to guarantee help with housing costs in the long-term is to invest up-front (partly funded by cross-subsidy from sales) in building low-cost units as part of private sector-led mixed-tenure housing developments, say at a benchmark rate of 20% of units. This approach has its own costs - you end up with low-cost units in both very valuable and very poor areas, so it’s not strictly equitable, and it represents a tax in opportunity cost terms at least on new supply. But it’s probably better than the plausible vouchers-only scenarios of (a) a hugely expensive scheme that subsidises some poor people to live in expensive areas, at the cost of work incentives and higher rents, (b) a less expensive scheme that relegates poor people to living together in poor areas, at the cost of compounding deprivation with knock-on effects on education etc, or (c) some adverse mixture of the two.