I think this a good post on the issue of affordable housing, and inclusionary zoning in particular. There are a few thoughts I’d add.
One is that the affordability of housing in the District is an issue that is largely out of the District’s hands. Matt is right that making it easy to build more supply in the city would slow price growth, other things held equal. But much about supply and demand for housing in this area isn’t determined within the District.
Housing demand in Washington is a function of number of things. One is the strength of the metropolitan economy. Housing in the Washington area is about access to the Washington area economy; you can’t work here if you can’t live here. Given this, there is an extent to which housing in the District is a substitute for housing in Arlington, and Fairfax County, and anywhere else commutable to the metropolitan area. What this means is that metropolitan housing supply is important in determining prices. The District can build itself silly, but if the rest of the metropolitan area isn’t doing enough to keep up with housing demand, then District prices will rise. And this is going to be a problem; Washington suburbs don’t build like Houston suburbs and the Washington economy is generally stronger with a tighter labor market than the Houston economy. So prices in DC are going to rise even if the city does a much better job of building.
Housing demand is also a function of what you might call policy taste. There are people who prefer the traditional, urban policy environment and who are willing to pay a premium to live in such places. To a certain extent, then, District housing is a substitute for housing in New York City, or central Chicago, or Philadelphia, or other places with similar policy sets (subject to the constraint of skill transferability, but this is probably higher than most people think — professional and creative class types can work almost anywhere). What this suggests is that the the nation as a whole isn’t doing a very good job of keeping up with this kind of demand, then prices for such places will rise even if individual locations are building quite rapidly. Chris Leinberger, among others, has suggested that there is significant unmet demand for walkable urbanism, which is a decent proxy for the whole central city package, and to a certain extent District prices are a function of this unmet demand.
The District actually would seem to have far more control over demand than supply, but good policy choices there all lead to higher prices. Lower crime, better schools, better transport, and so on, will generate rising prices. That is, the best way the city could make housing affordable would be to let itself deteriorate rapidly, but that’s obviously not what we’re shooting for.
So one thing to note is that those who’d like to see the District be both a nice place and an affordable place should focus on growth in housing supply in the metropolitan area as a whole and growth in the supply of “urban” places nationally.
A second thought is the District is not going to succeed in increasing its housing supply by the optimal amount or in lobbying other places to make optimal policy changes, and so it’s going to be hard to keep DC housing affordable. Given that, what are the implications and what are the correct policy options? One potential implication is that a growing number of people will be priced out of the city. This could be bad for a lot of reasons. A diverse set of incomes could make cities better places to be or more economically resilient, for instance. Reduced access to dynamic economies among lower-income households could reduce economic mobility or increase the cost of various social programs or both. And so on.
If we conclude that some other policy measure for making housing affordable is necessary, then what should that policy be? At the local level, I think the best things cities can do are permit the development of lower-end housing options (which meet certain standards, of course). Basement apartments, carriage houses, sublets — all of these things allow lower income people to live in economically vibrant and otherwise desirable places. It’s not ideal to live in the cramped apartment facing the blank wall of the adjacent building, and so it’s relatively cheap, and that cheapness means access and opportunity. Another good local policy is the creation of excellent transit options. If people can quickly and easily move around most of the metropolitan area without using a car, then lower income households are more likely to find affordable housing within reach of good jobs.
At the national level, policies should obviously encourage density and discourage nimbyism. Beyond that, I think a large and broad program of rental housing vouchers isn’t a bad idea. If vouchers should be extended to include households well above the poverty, in recognition of the challenge of providing workforce housing in expensive metropolitan areas, and because such an extension might reduce the stigma of taking advantage of those vouchers.
The problem with vouchers is that given inelastic supply, prices will simply rise in response. It’s crucial, then, to attack the problem from both sides, working to increase supply while providing assistance.
I think it’s unappreciated how bad current housing policies are. We basically adopt a threefold approach to the issue at present:
1) Adopt ineffective and inefficient policies at the local level — things like rent control, limited housing subsidies, and inclusionary zoning.
2) Move the poor to deteriorating neighborhoods and cities, thus making it hard for both people and cities to recover.
3) Move middle-income households to exurbs and booming, auto-dependent sunbelt cities, a practice which is hardly sustainable.
We should be doing much better. Unfortunately, the issue of affordable housing barely rates in the public mind.