On September 9, 2016 the Initiative on Business and Public Policy and the Hutchins Center on Fiscal and Monetary Policy at Brookings hosted a forum on the policy implications of the growth slowdown.
Tag: NIMBYism
Must-Read: Barry Ritholtz: How High Are Real House Prices?
Must-Read: : How High Are Real House Prices?
Must-Read: Nicholas Warino: The Bay Area Housing Crisis Is Caused by and Can Be Solved by Local Government
Must-Read: : The Bay Area Housing Crisis Is Caused by and Can Be Solved by Local Government: “Professor Walker… presents some reasonable ideas and even some good policy solutions…
…(rent control, eviction controls, low-income public assistance, etc.) As far as I can tell, he’s on left, so I bet we’d agree on many issues. That said, Professor Walker’s analysis of the housing crisis is not good…. I’ll quote them directly and respond.
But while it’s true that we need to expand the region’s housing supply, building more housing cannot solve the problem as long as demand is out of control, as it is today. There is simply no way housing could have been built quickly enough to avoid the price spike of the current boom.
This is a common argument: building more housing will help, but we nevertheless ‘can’t build our way out of the problem.’ This is wrong in two ways: 1) The only way for demand to be ‘out of control’ is for demand to consistently outpace supply. So it’s logically true that ‘building more housing cannot solve the problem as long as demand is out of control’ because within that sentence is the assertion that demand will always be greater than supply. In other words, this paragraph is true in the same way ‘you cannot fix The Problem as long as The Problem still exists.’ True but meaningless.
2)…. The housing crisis problem is not a binary problem, where it either exists or doesn’t. The problem with out-of-balance supply-and-demand is a continuous pressure on the housing market…. Every single additional unit added to the housing market turns the valve and releases some pressure, leading to lower prices than would be the case if that unit had never been built.
Three basic forces are driving the Bay Area’s housing prices upward: growth, affluence, and inequality. Three other things make matters worse: finance, business cycles, and geography.
Other basic forces…. People, money, consciousness, the Sun, the lack of worldwide plagues, and the Big Bang…. ‘Growth’ and ‘affluence,’ which is to say people earning more money, which is to say ‘demand,’ is a part of the problem. Hence supply-and-demand. And yes, finance contributes to the problem, in the sense ‘finance’ means the flow of money throughout our economy and the Bay Area housing market is part of our economy. Geography? You bet… but luckily we’ve invented ways to build up, not just out…. But both building up and building out require a focus on BUILDING.
All of these operate on the demand side of the equation, and demand is the key to the runaway housing market.
There is always ‘demand’ in an economy, unless everyone is dead. The relevance of demand is how it relates to supply. Even if the total amount of demand for housing in the Bay Area is accelerating, it would not be a problem if the supply of housing was also accelerating…. Reminder: demand in an economy simply means the amount of money in the economy that wants to be spent on a good or service. Generally, one of the primary goals of a society is to increase how much money people have, so they have more money to demand things and pay other people who will have more money to demand other things. And so on. This is how societies–if they ALSO focus on the equally critical goals of equity, justice, and fairness–lift people out of poverty, increase happiness, increase the tax base for new public goods and services, and increase the amount of money that can be used for innovation and progress. When the demand in an economy increases, like you’re seeing in the Bay Area housing market, the healthy response from the market is to increase supply…
Must-read: Peter Ganong and Daniel Shoag: “Why Has Regional Income Convergence in the U.S. Declined?”
Must-Read: : Why Has Regional Income Convergence in the U.S. Declined?: “The past thirty years have seen a dramatic decline in the rate of income convergence…
across states and in population flows to wealthy places. These changes coincide with (1) an increase in housing prices in productive areas, (2) a divergence in the skill-specific returns to living in those places, and (3) a redirection of unskilled migration away from productive places. We develop a model in which rising housing prices in wealthy areas deter unskilled migration and slow income convergence. Using a new panel measure of housing supply regulations, we demonstrate the importance of this channel in the data. Income convergence continues in less-regulated places, while it has mostly stopped in places with more regulation.
Must-read: Derek Thompson: “How American Cities Can Make America Great Again”
Must-Read: : How American Cities Can Make America Great Again: “Even if the federal government were a monarchy…
…some of the most significant policy decisions happen at the local and state level, where federal power holds little sway. The president cannot force richer cities to raise their minimum wages above the national minimum, nor can the executive branch alone force states to spend more money on poor neighborhoods’ public schools. But perhaps the best example is America’s housing policy. As much as tax policy or defense spending can shape the economic fortunes of families and generations, people are not just products of the District’s mandates. They are also products of local geography—which is determined city by city, and block by block….
Several major cities have missed out almost entirely from the recovery. In Detroit, Memphis, and Toledo, the number of businesses declined between 2010 and 2013. In Cleveland and Cincinnati, total employment shrunk as well. In other cities… the recovery has been so frothy that the housing market is back to its pre-crash highs…. Austin, Buffalo, Denver, Honolulu, Nashville, Pittsburgh, [and] San Francisco. In three other metros, prices are within 5 percent of their all-time highs: Durham-Chapel Hill, Houston, [and] San Jose…. The return of record-high home prices in metros rich with new college grads is both an achievement and a warning. It’s an achievement, because there is a strong relationship between long-term growth and cities that assemble smart people…. But it’s a warning, too, because long-term growth requires that those people can afford to stay in the city….
There are some good reasons why expensive cities tend to be on the water. It’s hard to builds apartments on the ocean. But restrictive housing policies—for example, height restrictions and rules prohibiting the construction of new homes or multifamily housing— are a man-made tax on agglomeration, pricing smart people out of places they want to live and the places where they could best work. This, in turn, deprives some cities of the very job multiplier that Moretti hailed…. This isn’t a concern on the level of a city, but of the nation as a whole…
Must-read: Miles Kimball: “Density is Destiny”
Must-Read: : Density is Destiny: “Every time the population of a city doubles…
…every individual measure of human interaction there also increases by 15% to 20%. Not so long ago, futurists predicted that the ease of electronic connectivity would make big cities obsolete. Instead, Harvard University economist Edward Glaeser and others now say that improvements in information technology strengthen cities that are centers of innovation by speeding the flow of ideas. Urban density facilitates contact between smart people and fosters innovation, increasing urban incomes as new businesses take hold, they say…. To my taste, to have high density be delightful, there are five key desiderata: 1. plenty of floor space in the home. 2. no stairs within an individual family’s home…. 3. plenty of windows looking out. 4. excellent soundproofing. 5. plenty of green space nearby All of these are compatible with very high density, given good design….
Even as things are now, I think Manhattan is very pleasant. With residential buildings like the ones I am describing, almost any city could have high density and be even more pleasant than Manhattan is now–except for one thing: as long as each family gets plenty of floor space, no stairs to climb, plenty of windows, excellent soundproofing, and plenty of green space, when it comes to cities, bigger is better. And New York City has a head start.
Must-read: Matthew Yglesias: “Seattle Shows San Francisco and New York How to Fix the Housing Crisis”
Must-Read: : Seattle Shows San Francisco and New York How to Fix the Housing Crisis: “As California’s Legislative Analysis Office wrote…
…Washington state centraliz[es] more planning functions at the state level…. Skeptics often note that new construction tends to target the high end of the market…. And that’s true here. Stiles reports that the weakness in the market is at the high end, “where 5.4 percent of the units are vacant,” while cheaper rentals feature a lower vacancy rate. But these markets are all logically linked. As proprietors of luxury buildings begin to lower rents in response to high vacancy rates, some people currently in mid-market housing will take advantage of the opportunity to upgrade. That puts downward price pressure on the middle of the market and draws more people further up the chain. None of this exactly makes Seattle a cheap place to live–land is still more expensive there than it is in Atlanta, and multi-family apartment buildings are often more expensive to build than sprawling single-family homes. But a high level of construction ensures that the homeland of Microsoft and Amazon remains substantially cheaper than the Bay Area homeland of Apple and Google.
Must-Read: Jason Furman: on Residential Housing Supply, NIMBYism, and Economic Growth
Must-Read: Jason Furman on residential housing supply, NIMBYism, and economic growth:
Low housing supply can limit workers’ ability to relocate to growing cities, lowering long-run growth & productivity pic.twitter.com/P1mw3rDlsL
— Jason Furman (@CEAChair) November 20, 2015
: Why White House Economists Worry About Land-Use Regulations: “White House economic advisers have produced a steady diet of white papers this year…
…Their latest target: land-use restrictions. Housing is growing less affordable because there’s more demand for rental and, increasingly, owner-occupied housing, but little new supply…. [Some] cities make things worse with zoning and other land-use restrictions that discourage production, said Jason Furman…. Peter Ganong and Daniel Shoag… examines the slowdown in income convergence… more common in states during the 1960s and 1970s regardless of constraints on housing supply. By the 1990s, states with more constrained housing supplies saw far less income convergence than those with less constrained housing supplies…. Only high-income workers can afford to relocate to those high-productivity cities that have tighter land-use regulations…
Must-Read: Matthew Yglesias: The valid point that people raise about new construction…
: “The valid point that people raise about new construction is this: Rich people like fancy houses…
…Rich people also like upscale neighborhood retail. So you can get an upward spiral in which fancy houses lure rich residents who lure fancy retail which lures more rich residents. There’s truth to this, but the thing you have to recognize is that a ban on building fancy new buildings is not the same as a ban on fancy houses…. People buy-up the existing housing stock and start renovating it. They create bigger units, and reduce the population density per square foot. They install granite countertops. And they unleash the upward spiral that people are worried about. What is maybe true is that if you banned not just new construction, but new renovations then you could maybe prevent richer people from moving into a neighborhood and raising prices. Or you could just ban new people from moving-in altogether. Or maybe you could allow new residents, but only if they fit the demographic profile of existing residents. I don’t want to claim that preventing the character of a neighborhood from changing is totally impossible. But to actually achieve it requires a much more robust policy response than stopping people from putting up new buildings…. Within the realm of plausible ideas that people actually consider, the best way to respond to a surge of demand for living in a neighborhood is to identify a handful of genuinely crucial historic buildings to preserve and then let people build as much new housing as is economically feasible. The neighborhood’s character will change as a result, but trying to prevent all change is silly policy objective whereas ‘maximizing the number of people who can live where they want to live’ is a pretty reasonable one.