Category housing

housing, NIMBYism, planning

(Not So) Infinite Demand

In a recent blog post, Julia Galef has generated a fairly comprehensive list of pro-housing arguments and counterarguments to those arguments. She gives the most detailed consideration to the “infinite demand” argument- in her words, “So even if SF adds a lot of additional housing, prices will still rise almost as quickly as they would have anyway, as long as demand to live here continues to soar. This view is mainly based on examples of other desirable cities, like New York or Singapore, which have built new housing at a faster rate than SF but nevertheless saw steep increases in price.” To which I respond: New York? Really? New York is only pro-housing when compared to San Francisco- which is a bit like saying Iran is a libertarian paradise compared to the Islamic State. In fact, New York has built housing at a glacial pace. Between 1960 and 1976, the number of new housing units completed per year ranged from just over 14,000 to over 60,000, and exceeded 20,000 in all but four years. In the almost forty years since 1976, the number of new units exceeded 20,000 in only four years (2006-10) and was above 14,000 for only ten years (1989, 2002, 2004-10, 2015). Meanwhile, demand for housing has increased: between 2006 and 2014 alone, the citywide renter population grew by 600,000. A better example of a “desirable city” would be a city where both the population and the housing supply is growing at a rapid rate- Raleigh, for example, or Las Vegas. These cities are much cheaper than New York or San Francisco.* Another example of a cheap, permissive city is Tokyo. But the post suggests Tokyo may not have grown as fast as American cities. In fact, Tokyo’s regional population grew by 17 percent since 1990- from 32.5 million […]

housing, Urban[ism] Legends

More on “Empty Houses”

I recently saw a Facebook post asserting that San Francisco has 30,000 vacant units, so therefore no market-rate housing should be built. So I looked up Census data on these allegedly empty units. It is true, according to the Census Factfinder website, that there are 30,000 or so unoccupied housing units in San Francisco. Does this mean that they are completely idle? In fact, no. More than half of these units were (as of the 2010 Census) currently for sale or for rent. 18 percent for for seasonal use (presumably, second homes). Only 5 percent are rented or sold but unoccupied. The rest are “other vacant”. whatever that means. Bottom line: half the vacancies were in the process of being sold or rented. A little under a fifth were second homes. About a third we don’t know much about.

Michael Lewyn
July 18, 2017
1 Comment

history, housing, Law, Policy, Uncategorized

The Color of Law: A Forgotten History of How Our Government Segregated America

Richard Rothstein’s “The Color of Law: A Forgotten History of How Our Government Segregated America” should be required reading for YIMBYs and urbanists of any ideological stripe. Rothstein argues that housing segregation in the US has been the intentional outcome of policy decisions made at every level of government and that the idea of segregation as phenomenon driven by spontaneous self-sorting is largely a myth. Two major themes permeate the book: (1) the ways in which government has consistently intervened in the housing and land markets and (2) how these interventions were designed to pick winners and losers. The federal policy of underwriting loans for specific kinds of development (single family detached housing) and for specific people (whites) is an example that the author explores in depth. And after reading his account, I can safely say that I have a far better understanding of how nearly a century’s worth of policy interference has distorted markets and doled out privilege and oppression in equal measure. Throughout the book, Rothstein brings in the stories of specific people and places to add depth to his account. This both keeps things interesting and serves to humanize the story in a way that many tracts on policy fail to do. When he’s describing the lives of black Americans who were forced into soul crushing commutes because they were legally prohibited from living near their jobs, or families who had their houses firebombed for daring to move into a segregated neighborhood while police stood on their front lawns and watched…you remember that policy matters because it affects real people. And that real people suffered terrible wrongs for no other reason than the accident of their birth. Again, if you care about US housing policy, you must read this book. It’s impossible to understand where we are […]

Jeff Fong
July 12, 2017

housing, Law, NIMBYism, Policy, Uncategorized, Zoning

People Over Process: Why Democracy Doesn’t Justify Exclusion

Some people accept the idea that restrictive land use policy is just as bad as all the research suggests, but persist in supporting the status quo. They argue that if a community chooses to regulate its built environment, that choice should be respected as having moral weight because it’s the outcome of a democratic process. This argument, though, is as logically confused as it is normatively problematic. And in the following few lines, I intend to demonstrate exactly why. No decision making process is value neutral. Whatever way we choose to go about collective decision making, we will always privilege certain voices over others. Institutions beget outcomes and the internal logic of our institutions will always favor some outcomes (and therefore voices) over others. The same individuals with the same preferences asked to make the same decisions through different procedures will produce wildly different outcomes. Imagine a U.S. Presidential election based on the popular vote or representation in the U.S. Senate proportional to state population and you should begin to see how the public will is as much a product of procedure as it is aggregated individual preference. Taking the Bay Area as a land use specific example, our system heavily favors the voices of incumbent homeowners to the detriment of everyone else. Land use decisions take place at the municipal level which–given the fact that we have 101 different municipalities–is a hyper local affair. When a new development is proposed, it only takes a handful of angry neighbors to impact decision making. Were land use set at a higher level of government, the typical number of people that get angry over an individual project would be far less effective at killing new housing. Fifty angry homeowners might matter to the Palo Alto City Council, but they’d be quite a […]

Jeff Fong
July 10, 2017

Economics, Gentrification, housing

Is Inclusionary Zoning Legal?

Market Urbanism may soon have a hearing in the Supreme Court. Two of my colleagues at the Mercatus Center, Sandy Ikeda, half a dozen other professors, and I argue that the Court should take up the case 616 Croft Ave., LLC, v. City of West Hollywood. The case is an opportunity for the Court to determine whether inclusionary zoning violates its standards for legal exactions from developers. Inclusionary zoning requires developers to rent or sell some units in new projects at below-market prices. The Court has established that local governments can only require benefits from developers when these benefits offset a public nuisance from the project. Inclusionary zoning fails this test. The facts of the case could have played out in many American cities. Real estate developers Shelah and Jonathan Lehrer-Graiwer purchased two single family homes that they replaced with 11 condo units. West Hollywood’s inclusionary zoning rule required them to either make 20 percent of the units in their new project available at below-market prices or to contribute $540,000 to the city’s affordable housing fund. The Pacific Legal Foundation is representing the Lehrer-Graiwers suit. They have petitioned the Supreme Court to review earlier decisions from California courts that upheld West Hollywood’s policy. West Hollywood’s inclusionary zoning policy states that its purpose is to “off-set development impacts” that new housing construction causes. This justification is based on the false assumption that new housing development raises housing prices by replacing older, cheaper housing with newer, more expensive housing. This fallacy may seem reasonable at first glance. New construction is often more expensive than the older homes it replaces. But as these once-new houses age, they become affordable to lower-income residents. New construction is the only way to increase housing supply, and new units have the potential to become market-rate affordable housing over time. Housing economists call this process “filtering.” One estimate puts the […]

housing

Empty Houses, part 2

The most interesting comment to my last post focused on one narrow issue: to what extent are vacant housing units second homes (and thus presumably less likely to be rented out) as opposed to units for rent/sale or held for other unknown reasons? Why does this matter? Because one might argue that even if overall vacancy rates are low, a high “second home rate” might be evidence that the city’s housing prices are rising because of nonresident investors. Unless I am missing something, 2015 American Community Survey data does not contain data at this level of detail. However, 2000 and 2010 Census data contains data on types of vacancies. Below are percentages of vacant units held (in the Census Bureau’s words) “for seasonal, recreational or occupational use.” 2000 2010 Expensive markets Manhattan 32.7 33.9 (3.3 pct of all housing units) San Francisco 22.4 17.9 Boston 12.6 15.2 Los Angeles 7.8 7.9 San Diego 26.8 23.5 Not-so-expensive markets Dallas 4.6 3.7 Houston 6.5 4.5 Philadelphia 2.5 3.2 Chicago 5.0 7.0 On the one hand, expensive markets tend to have more second homes (evidence of a wave of outsider capital). But if such outsider capital was a major cause of rising housing prices, one would expect the “second home percentage” to grow over the 2000s. Instead, this number has been pretty stable. Moreover, this group of vacancies is a pretty small percentage of the overall housing market- a bit over percent in Manhattan, and a little over 1 percent in New York City as a whole (since second homes are not so common in the other boroughs).

Michael Lewyn
June 12, 2017
1 Comment

housing, NIMBYism, Urban[ism] Legends

The “Empty House” Theory

One common argument against new urban housing runs as follows: “If we build new housing, it will all be bought up by rich investors who will sit on it. So new supply doesn’t restrain housing costs.” This argument (at least as I have phrased it) strikes me as absurd. Here’s why: for the argument to justify restraining supply, the argument presupposes that if you build 100 new condos/houses/apartments, every single one of them will be bought by an investor, and every single investor will irrationally choose to sit on the unit rather than renting it out. I can’t prove this is wrong, but it seems really hard to believe.* Even leaving aside the logical weirdness of the argument, it seems to have a questionable factual basis. If there was really a wave of nonresident investors in expensive cities, we might find (1) that the most expensive markets had the highest housing vacancy rates and (2) that these vacancy rates have been rising as housing costs rose. But Census data suggests otherwise. Here’s some data: (all for central cities, not metros) Expensive 2010 2015 Manhattan 12.7% 13% San Francisco 9.8 7.9 Los Angeles 6.7 6.5 San Diego 7.8 7.1 Boston 9.1 8.0 Not so Expensive 2010 2015 Dallas 12.8% 10.6% Houston 14.0 12.1 Philadelphia 14.1 13.3 Chicago 13.8 13.2 By and large, the expensive cities have lower vacancy rates- exactly what you would expect in a free market. The only exception is Manhattan. But it seems to me that if pied-a-terres led to higher rents, Manhattan’s empty-house rate would have climbed as rents did- which does not seem to have been the case. The only way to save the “empty house” theory is to suggest that expensive cities’ empty houses are different from everyone else’s – that is, they are especially […]

housing, NIMBYism

YIMBYism: Its Not Just For Conservatives

Last week, I posted about an attack on YIMBYs (activists who favor less zoning and more housing) that used the term “alt-right”; the authors of that blog post recently doubled down with a slightly more moderate op-ed that still tarred YIMBYs as “aligned with conservative right-wing libertarianism.” In fact, the Obama Administration is on the same side as YIMBYs; I recently published an article about their 2016 policy paper on urban housing. Read all about it here.

Economics, housing

What makes Philadelphia so affordable?

In 2005, Joseph Gyourko published an economic history of Philadelphia. He explored the economic and policy factors that contributed to its population and job loss during the twentieth century. Gyourko’s outlook for Philadelphia was pessimistic. He argued that the city lacked the supply of skilled labor that would allow it to adapt to the rise of the service sector. However, in the year following Gyourko’s publication, Philadelphia’s population growth rate reversed, driven by foreign immigration and college graduates choosing to stay in the city where they went to school. In spite of this growth, the city has maintained an impressive level of housing affordability. Philadelphia obviously hasn’t had the level of demand pressure other coastal cities like New York or San Francisco have seen, but since 2005, it has experienced steady population has growth from 1,400,000 to 1,550,000 people. Among potentially comparable mid Atlantic and midwest cities, only Pittsburgh has lower prices. During its decade of population growth, Philadelphia’s home prices essentially tracked the rate of inflation. Unlike newer cities that have the option of relatively cheap greenfield development, the Census designates nearly all of Philadelphia’s neighborhood as urban, the densest designation. The city’s population growth has been accommodated through infill development and the renovation of old homes rather than through greenfield development. It’s not the case that Philadelphia’s zoning regime accommodates as-of-right growth. Philadelphia developers have to deal with a complex web of outdated Euclidean zoning rules and myriad overlays. But developers have generally been able to get the variances they need to provide a supply of housing that keeps prices from rising in response to population growth. Philadelphia doesn’t have organized political opposition comparable to NIMBY activity in more expensive cities. Residents’ reaction to calls for community involvement in the development process demonstrates the city’s anti-NIMBY tendencies. In 2012 the city implemented zoning […]

Economics, history, housing, Zoning

How Governments Outlaw Affordable Housing

This post was originally published at mises.org and reposted under a creative commons license. It’s no secret that in coastal cities — plus some interior cities like Denver — rents and home prices are up significantly since 2009. In many areas, prices are above what they were at the peak of the last housing bubble. Year-over-year rent growth hits more than 10 percent in some places, while wages, needless to say, are hardly growing so fast. Lower-income workers and younger workers are the ones hit the hardest. As a result of high housing costs, many so-called millennials are electing to simply live with their parents, and one Los Angeles study concluded that 42 percent of so-called millennials are living with their parents. Numbers were similar among metros in the northeast United States, as well. Why Housing Costs Are So High? It’s impossible to say that any one reason is responsible for most or all of the relentless rising in home prices and rents in many areas. Certainly, a major factor behind growth in home prices is asset price inflation fueled by inflationary monetary policy. As the money supply increases, certain assets will see increased demand among those who benefit from money-supply growth. These inflationary policies reward those who already own assets (i.e., current homeowners) at the expense of first-time homebuyers and renters who are locked out of homeownership by home price inflation. Not surprisingly, we’ve seen the homeownership rate fall to 50-year lows in recent years. But there is also a much more basic reason for rising housing prices: there’s not enough supply where it’s needed most. Much of the time, high housing costs come down to a very simple equation: rising demand coupled with stagnant supply leads to higher prices. In other words, if the population (and household formation) is […]

Ryan McMaken
May 17, 2017

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