An empirically false, wildly illogical objection to housing abundance
Honestly the whole "YIMBY policy causes induced demand and so would backfire" is one of the most egregious examples I've seen from the left side of the spectrum of starting with a conclusion (new housing construction is bad because of gentrification) and then backfilling a justification for it in order to feel like they know what they're talking about. Because in their worldview anything that involves private for-profit enterprises must be treated with suspicion at best and hostility at worst, so anything that whiffs of pro-market ideas must be bad. I think Noah Smith had a good post on this specific strain of left-NIMBYism, which is an interesting/weird part of the broader anti-growth coalition with right-NIMBYism and "Left"-NIMBYism of wealthy areas and suburbs of progressive cities that's basically just right-NIMBYism with a blue-colored mask.
I think a lot of this dovetails nicely with yesterday's post about how the public is largely just small-c conservative: people just tend not to like change, and will come up with reasons why ex post facto. I've certainly been guilty of this in the past myself on certain things, for what it's worth. I split my time between two large, famously progressive, and famously unaffordable West Coast metro areas that attract people largely for lifestyle reasons (my family lives in one, and I go to college in the other), and it's shocking how much of the complaints I see about new developments in the city boil down to some variation of "I liked this place more when it sucked, we should make things shittier so people stop wanting to come here", in which case...why do anything to improve the place, or any place? Shouldn't we try to find a way to make things better for everyone, or barring that, as many as possible?
Great piece. Part of the confusion in the discourse comes from two distinct problems contained within the phrase "housing shortage". The economic problem is that we need to increase the supply of homes in high-demand cities to reduce prices and rents. But the policy problem is that we need to change how our urban planning institutions are designed and function to end a systemic shortage, which is causing that economic problem.
This is why that, while it is true that building more homes in a neighbourhood *does* decrease local housing costs as the papers you linked showed, it doesn't *feel* like that to the majority of people. And that's because the systemic shortage - the rationing of development by inflexible zoning and discretionary, case-by-case permits - isn't changed if permits for one house, ten houses, or a thousand houses are handed out by local government.
"Shortage" in this housing policy problem sense is much closer to the permanent "shortage economy" of the former Eastern Bloc than the typical sense in which economists use "shortage" to mean a temporary blip of undersupply as prices and quantities adjust.
In, say, 1980s East Germany, there was a systemic shortage of cars because production was rationed by planners' control of permits. There was "induced demand" for cars, in that every car which was built was immediately sold, and there were no unsold or "vacant" cars which as an surplus put pressure on sellers to produce and sell cars quickly and cheaply to a high standard. Second hand cars traded at the same prices as brand new cars and as assets could be treated as dependable stores of wealth, as it seemed no matter how many cars were made, the shortage of cars did not end.
Building extra cars within this systemic shortage did make East Germans better off. Stopping or reducing the production of cars because the cars only go to better off/politically dependable groups would have been bad, and made everyone worse off. But the systemic shortage of cars was only ended when the institutional framework which rationed the production of cars through case-by-case permits was dismantled. East Germans were made far better off when they were able to participate in an economy where car companies could produce as many cars as they liked, and which acquired all of their inputs (steel, tyres etc) through simple purchases rather than permits. The economist János' Kornai's work on these shortage economies explains all of this in really clear language.
For housing, the policy problem is the same. Institutionally, we need far more "by-right" urban planning, where developers who propose something that complies with the rules legally must be granted permission to build, rather than jumping through dozens of hoops. These rules then need to be really generous and allow lots of things to be built, not just single family homes. This is how you permanently improve the long-term outcomes for everyone, by changing the institutional conditions to permanently increase total production, while haggling over whether to build 10 or 15 apartments on a site only makes a tiny and temporary improvement.
This is the well reasoned and detailed policy argumentation I signed up for. However good everything prior was, the tone abruptly switched here in this sentence; "For that, low-income people need more financial assistance — a more expansive welfare state — which I strongly support, along with every sensible person."
That last bit was jarring, and doesn't fit with the approach Matt usually takes - proclaiming "every sensible person agrees with me" doesn't make it so, and there really are sensible people out there who don't think expanding the welfare state is the way to go.
You're missing the emotional attachment to place, where people attach great personal value to their neighborhoods and communities and simply don't want a bunch of other people moving in who don't share their values and way of life.
To me, the answer is obvious: people are coming to your neighborhood because as a national policy, we exported the good jobs from the place they were attached to and left. It's better to have people moving to your place and destroying it than to have people fleeing your place and destroying it. And there's no third option in modern America.
What do you say to activist-types who contend “no no Matt, we’re not against more housing, we’re against more *market-rate* housing! If it’s *affordable housing,* build away!”
(NB: I don’t espouse this position myself. I’m just curious if folks have a snappy two-or-three-sentence response to it. Because I hear it. A lot.)
As I understand it, the difference between new retail, compared to other amenities that make a neighborhood more desirable, is that the new retail may itself displace the necessary amenities for the poor. If a yoga studio moves in the space where a 99 cent store was or a Whole Foods replaces a discount grocer it becomes more difficult for the poor to remain in a neighborhood. These effects don't occur when you fix potholes, remediate brownfields, or add new parks. Perhaps this suggests a shortage in retail space that high-end and discount retail can't co-exist but that's a chain of events leading to displacement even if rent remains stable.
The anecdotal examples of "an apartment building got built and rents went up"" ignore the counterfactual of what would have happened if the apartment building hadn't been built.
Preserving low quality housing in the name of neighborhood stability has always seemed to be a terrible idea. The same people who decry food deserts in poor neighborhoods gnash their teeth at a chain retail store which sells groceries coming in.
Some neighborhood activists are focused on housing affordability, but most anti-gentrification activists seem more interested in trying to preserve a particular neighborhood in what they see as a Goldilocks moment - not too rich, not too poor, not too hot, not too cold, but just the way they like it. That's nice but it ignores that the one constant in urban neighborhoods is change. Take the Mt Pleasant example in that article - the neighborhood as it is today is obviously very different than it was 20 or 40 years ago, and no matter what anyone does it will continue to change as the current residents age and are replaced. That's just the nature of a living, vibrant city; why not embrace it instead of rail against it in a futile effort to preserve a moment in time that inevitably will not last.
Why is it that while lefty people think development and infrastructure are going to increase rent and property taxes in certain neighborhoods, wealthy NIMBYs who live in these single-family zoned neighborhoods are against upzoning proposals because they think it's going to LOWER their property values. Seems like regular people just have no idea about the real-world effects of these things.
The leftist argument is not "don't improve communities because it will improve housing prices." The argument is "improve communities, but ensure that 100% of housing price gains go to current residents so no displacement occurs."
The thing is that leftist anti Yimbyism isn't about policy. Its about keeping Black and Brown people poor and in shitty neighborhoods in order to make sure we can be induced into "revolution".
I agree with 95% of this. As a recent transplant to NYC, however, I think some of the local dynamics make the case of the ultraluxury construction for (e.g.) Russian billionaires a bit problematic to defend. The 1,000 ft. "supertall" buildings in Midtown Manhattan, as I understand it, mostly have apartments that serve as second or third homes for very rich people because they are very expensive (well beyond the reach of "normal" high salary NYC professionals). It's one thing to tell people that it's great to have a lots of new neighbors and that even if the people who move into new buildings are mostly wealthy (but "working rich," not "third house rich) building more housing is overall good for keeping rents lower. It's quite another thing to build buildings full of $10-$80 million condos that aren't even expected to serve as people's primary residences (and in many cases these buildings even came with tax abatements because of some weird NY tax policies that are fortunately being phased out, so you're not even getting a ton of property tax revenue out of them).
I'd propose that YIMBY arguments support building lots of housing and defend the beneficial effects of that new housing across the market even if the new housing itself is relatively expensive. But I do think we should figure out a way to regulate unit sizes and maybe even amenities. I think this would go a lot better if NYC told developers they were welcome to build 1,000 ft. buildings in midtown but that 80% of those units had to be 2,000 sf or less (or something to that effect) and figure out a system of incentives that discourages use of the units as something other than a primary residence.
Your "infinite cycle of bad urban policy" seems not that far off from the position Jeremiah Moss of Vanishing New York has taken; for example, he's been at least somewhat pro-pandemic since the silver lining is that it's removing people he doesn't like from NYC.
The induced demand argument deserves treatment similar to the inflation skeptic argument. It's wrong in aggregate, but there is an insight to be had there. From inflation skeptics Matt gleaned the brilliant insight that the things where Baumol's cost disease bites the hardest are also the pieces that are particularly important (eg. childcare, schooling, medicine, food).
I think the insight from the induced demand case is that if I'm someone who is in the process of being priced out of a gentrifying market, it's likely that the YIMBY solution actually won't do anything for me. The issue isn't one of distance but segmentation. Here's the sketch of my argument:
1. actually affordable housing is not the result of government rules or what the housing was made as, it's the result of some *impairment* - nextdoor to a superfund site, in a "bad" neighborhood, with poor train connections, etc.
2. people who live in this neighborhood have traded off cheaper housing for that impairment, which they have selected into (it's a crappy neighborhood, but they have figured out how to do their shopping, they keep an eye out for their neighbors, etc).
3. improving the neighborhood - adding housing - especially nice housing, adding chain stores, pretty much any improvement, really - means that that tradeoff is gone.
4. I don't doubt that this is better for everyone else who moves in. But it's shitty for me. I lose my "investment", and pretty soon I lose my home. Now, I need to not only find another "affordable" place, I need to also "invest" in figuring out a new crappy neighborhood, etc.
5. The people who benefit are not here, the people who lose are here, so in effect we're going to fight to save the *impairment* of the current place! Since we're here and they aren't, we'll complain about developers, environmental impact, whatever.
In theory, since so many people are going to gain from my loss, there should be a deal to be made. What's that deal?
Just wanted to flag that at Sightline Institute we've been working for a year on a comprehensive study of the political strategies that can work for abundant housing. Matt's policy arguments are right, which doesn't make the politics any easier. What can make the politics easier?
The piece in the series on displacement/gentrification specifically is here: "Five Steps to Prevent Displacement, Why and how abundant-housing advocates should fight displacement."
Matt, if you ever wanted to extend your analysis to the West Coast I would highly encourage you to research District Square and the Crenshaw Subway Coalition in South LA as well as the role the AIDS Healthcare Foundation plays in LA where it actively seeks to expand the NIMBY coalition by rebranding NIMBYISM as a fight against gentrification. An interesting side story to this local drama is the abysmal role of the LA Times, which filters every story about South LA through a sensationalist gentrification lense.