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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?

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The glorification of past demonstrably worse conditions is particularly virulent form of hipsterism. It always reminds me of Burt Lancaster's line in Atlantic City.

"Yes, it used to be beautiful - what with the rackets, whoring, guns. Sometimes, sometimes, things would happen. I'd have to kill a few people....I'd feel bad for a while, but then I'd jump into the ocean, swim way out. Come back in feelin' nice and clean, start all over again....The Atlantic Ocean was somethin' then. Yes, you should have seen the Atlantic Ocean in those days."

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"I liked this sh*thole before it was cool."

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We have a "Keep [our city] Janky" movement that wants to live in the mid-eighties version of the city. It is a version of "I liked this place more when it sucked, we should make things shittier so people stop wanting to come here," except dumber.

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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.

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Producing high-density apartments in the Bayfront area of Menlo Park has not "reduced" nearby housing prices which have skyrocketed. It allows expansion of in-migration of highly paid Facebook workers, some of whom become local demand for scarce single family homes thereby driving up home prices.

It also makes it too costly for small time developers to buy, wait, and aggregate parcels for higher density products in single family neighborhoods, and it populates neighborhoods with income earners who remodel and maintain their homes because they intend to live there, not because they have big dreams about getting rich from building, gasp, wait for it, --a duplex.

BTW, California *did* eliminate single family zoning. In a year, there have been no takers in Menlo Park and Palo Alto had its first, an ADU. The statewide results have been underwhelming to say the least. SB9 supporters are now apologists.

Your diagnostic that supply constraints are all regulatory, and that otherwise supply could keep pace with the demand produced by local office development is fatuous and not based on local market realities.

Since Menlo Park is the most expensive office market in the US, every tall housing structure you hope might be built, could instead be built as an equally tall office building producing higher rents for the developer and more housing demand rather than housing supply.

And is this is exactly what is happening. The Bayfront side is not the expensive side. VCs' have decided to move downtown, and VC's don't particularly want to live or work in high density.

The fact that in some markets office (i.e demand) crowds-out supply has never dawned on YIMBY accidental theorists who seem at wits end to explain the mis-match between supply and demand. Must be those evil NIMBY's. Couldn't possibly be market failures caused by developers seeking highest rents building offices rather than houses.

For the record, you are confusing "by right" with "ministerial". No-one in California forces developers of "conforming" development to "jump through hoops" at least for "planning" approvals. It is for projects that DON'T comply with the zoning ("rules') that must jump through hoops to gain planning approvals. Developers are happy to do that. They are happy to do that because they will make much, much, more money. Particularly office developers.

And don't confuse "planning" approvals with "building" approvals. Cities don't make up building codes, the State does. Earthquake-proof, fire proof, water-efficient. Clean, Green. etc.

The State Fire bureaucracy reviewed my granny unit plan and required us to install sprinklers, fire retardent siding and roofing to the tune of tens of thousands. Should we do away with fire-roofing, and earthquake proofing, and water efficient, and heat insulation?

The only thing that protects housing zoning is REGULATION. State law requires that when parcels are rezoned from housing to non-housing that cities must make up for the loss by upzoning somewhere else. You get it right? Office markets would otherwise destroy housing opportunities were those not protected by ....... regulation.

The whoa-is-me story is what they tell 25 year olds who will NEVER be able to afford to live here and who believe them under the false hope they will. The comp packages for engineers with 3 years experience here is usually around $500k. Can you compete with that? They're the ones who get the new apartments.

"By right" planning allows developers to externalize infrastructure and impact costs to the surrounding community. This allows developers and future residents to cost shift onto current residents. There's not an economist in the world, including Nathan Glaeser, who argues for policies that promote cost-shifting or who mistakenly believe that "free" markets are "unregulated" markets. "Free" markets are those that are regulated to eliminate market failures. That doesn't mean government is good at it, that just means "free" markets are not unregulated.

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This is a very long comment to write out in response to another comment from over three years ago.

ADUs have been pretty successful statewide in California, now comprising about 1/5-1/4 of the total housing supply. That some municipalities continue to resist them is an indication that planning/zoning reform has to go further still.

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I honestly didn't see that the post was made three years ago, but the points are more not less validated. Thank you for reading it. My point was not about ADU's it was about the recent failure of SB9.

I have no dog in the ADU fight ( I built one), but I think you changed the subject. I'm a bit skeptical that ADU's are 1/5 of total housing supply. Maybe you can cite a source for that?

Three years later is good, because the Minnesota FED has recently created an online dashboard to monitor duplex and triplex production there. The results are pretty underwhelming. If you then look at the Case Shiller prices for houses in Minneapolis they are monotone increasing without deviation since the time of the duplex law more than three years ago.

Clearly, whatever production the Minneapolis SB9 has produced hasn't since had any impact on the policy goal which is to reduce prices.

ADU's only complicate the single family space since they make acquiring that space for future upzoning more fragmented and more problematic and more expensive.

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My point is that ADUs had de facto already abolished SFZ. They provide ~1/5 new houses in CA according to the the California Dept of Housing's own data, which is roughly the increase in total housebuilding since the law was reformed to allow them by-right: https://www.centreforcities.org/blog/what-the-varied-approach-of-us-states-tells-us-about-planning-reform/

Minneapolis has also seen higher housebuilding compared to peer Midwestern cities, and rents have fallen further and faster in the city than in those peer cities: https://www.ft.com/content/86836af4-6b52-49e8-a8f0-8aec6181dbc5

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Thank you for the FT link. It has very interesting references that I will read. The centreforce link doesn't quite prove what you say above it, but I agree that ADU;'s are on the rise. I have one. They present some difficulties for housing advocates, but that is a topic for another day.

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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.

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"there really are sensible people out there who don't think expanding the welfare state is the way to go"

Who?

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I'm sure I could be more exhaustive, but from economics you could say: Tyler Cowen, Alex Tabborok, Russ Roberts to do three quick ones. Arnold Kling to be heterodox about it.

In politics: Ben Sasse as a quick one.

An unnecessarily "triggering" suggestion might be Charles Murray.

In pundit world, I'll suggest Ross Douthat.

Maybe we disagree on the definition of "sensible"? I'm taking it to mean: arguing based on reasonable, rational argument that could be "possessing of some prudence" even if wrong in the end, as well as "not performative".

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Fairly sure Douthat at least supports welfare state expansion. Sasse is a politician, not an intellectual, and he has incentives to tack right on policy to protect himself in a primary.

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Ok. Even if I grant that, are we still at "nobody"?

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I agree. The question isn't "sensibility", it's morality. Opposing an expansive welfare state is immoral and makes you a bad person; it seems a little far afield from the question of basic sensibleness.

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I don't think sensible or moral or bad is the right way of thinking about it. Maybe not-misled person or something, but I do not think it is fair or okay to state that those that disagree are stupid or bad people.

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You could oppose it because you mistakenly believe a welfare state will make poor people worse-off.

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I mean, there's extending a presumption of good faith, and then there's actually believing that someone is a wallet inspector. "Giving people money makes them less poor" is an extremely obvious phenomenon, well-backed-up by empirical research and real-world examples. You have to be working pretty hard to make the mistake of thinking it's going to hurt the poor; far more likely, you believe that taxing the rich to give to the poor is morally unjust (a belief which is not unknown, but which is for good reason frowned upon by most people).

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I've definitely heard a lot of people make the argument in good faith that if you just give people money, they won't feel like they contribute to society and they'll just spiral into depression and drug abuse. I think they even have a point, though I also think they miss how much being poor sucks.

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This would be solved by letting people opt out of receiving the welfare payments if they wanted to. But this solution isn't good enough for the Paul Ryans of the world, because their view of people on welfare is judgemental and entirely shot through with paternalism.

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I think it's correct though that if you feel like your life lacks purpose and meaning, you kind of need a kick in the pants to get you to do something about it. I just disagree with them that making you starve to force you into taking a shitty job is the kind of kick in the pants that will lead to anything good for you.

Paul Ryan seems to have a simpler view that if we give people welfare, they won't work and we won't have enough money to give them welfare. Which is wrong, but a different kind of wrong I think.

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"Opposing an expansive welfare state is immoral and makes you a bad person"

You don't think the form that a welfare state takes is relevant? It's pretty extreme, I think, to claim that any expansion to any welfare state is the only moral position.

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"Expansive" is doing a lot of work here - what does that mean, exactly? I support a very "deep" welfare state, with lots of income redistribution via some combination of UBI and EITC, but I'm not on board with a "broad" welfare state where we have 20 different tax credits, exemptions, and special programs for every nook and cranny of the economy...

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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.

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> 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.

Isn't that exactly the argument given by right wingers with regard to immigration? I think the right answer is the same in both cases: you're not entitled to keep people out just because you don't want things to change.

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Yes, this is the argument given by right wingers with regard to immigration. This is the horseshoe in action.

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I don't think it's an argument specific to the far left or far right. I've seen plenty of moderate democrats and moderate republicans make that kind of argument.

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Moderates ain't what they used to be. You will hear this type of argument more and more as long as polarization continues unabated. Especially now that people explicitly don't want to live near people in the other party.

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I think it's less polarization than middle-class liberals not wanting multi-family units in their neighborhood which might be affordable to the "wrong" people.

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I never cease to be stunned at how people think they are entitled to control things like "who are the other people allowed to move nearby?" But then you hear NIMBY types vocalize things like this at community meetings, left or right, and you are just dumbfounded.

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neighborhoods change. That's life. The emotional attachment piece is just not relevant to actual policy

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Why? Are emotions not real? Do people not act upon their emotions?

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This is definitely the most important argument against development that I know of. And it's more than just the "emotional" attachment to place - there is a lot of value in having an established community, with existing social and economic connections, and social capital. Moving people out of the place usually means disassociating the community (unless everyone moves to the same neighborhood), which means losing much of this social capital. Unfortunately, this social capital isn't priced on the market, so we can't tell if there are some circumstances where this loss outweighs the gain to the community of the new construction.

That's why I think it's important for neighborhoods with lots of new construction to have methods available for subsidizing existing residents to stay in the neighborhood, perhaps by giving existing residents some sort of priority on a number of the new housing units, or at least some sort of financial compensation to make up for the loss of social capital.

But the problem is worse in cases where individual houses are bought up and flipped, rather than cases where individual houses are bought up, torn down, and replaced by big apartments and condos. In the latter case, a lot more social value is created, and there is more room for existing communities to fit into the new neighborhood, while in the former case the community is just being displaced one-for-one by a new community.

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So I was the hipster Matt references on two occasions. I lived in Atlanta south of Ponce De Leon in 2005 and bought in the West Loop in Chicago in 2009. Simply because I valued cost savings over the crime risk. When I moved in, both areas were open drug havens and then become two of the hottest markets nationally. I think the West Loop actually led nationally from 2013-2016.

In Atlanta, they actually change the name of the N-S road from Monroe to Boulevard at the Ponce intersection to make a distinction on drug and prostitution arrest location since Monroe extends north into the nicer areas.

In Chicago, there was a heroin tent community across from my building. For three years we walked our dog with bear spray clipped in a carabiner until it was razed.

I guess all these word to say ... my experience would lead me to discount your community dislocation risk from development and maybe this is just narrowly applicable to areas with high crime rates. I didn't see a community when I moved in. The crime that came in 1990s had long since dislocated it.

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I don't think the point I'm making is sufficient to reject YIMBY arguments (I'm usually on the YIMBY side of these discussions myself). And I suspect there are many cases in which this isn't an issue (the sort of case I'm most convinced of is when a former commercial or industrial zone gets residential conversions, but your case may be a good example too).

I'm just trying to find the strongest version of the argument on the other side, to see when there's something to it, and when not.

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If you read my framing and concluded: yes, people deserve to be insulated from newcomers with different values, to protect their way of life, I'd love to know how you'd pass your "social capital" tax onto immigrants coming to America.

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Notice that I'm saying that if existing residents are able to stay and keep their community relations with each other, there is no loss here. It's only when existing residents are displaced that there's any issue. I think there are some cases when neighborhood change involves people with money displacing communities of people with less money, but I suspect there are a lot few of them than many anti-gentrification activists think. And I think it's very rare when the supposedly displaced community is richer and more privileged than the immigrant community, as in the national example you discuss.

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I think there is a more powerful factor. People value their perceived relative place in society. If you have a decent working class job paying $25/hr and live in an area where most people are struggling to make ends meet on $13.50/hr, you think you're doing well in life. But, if a new condo building goes up and it's full of 25 year old software developers making $75/hr, that dramatically reduces your perceived place in society.

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I've seen research showing that poor people move a lot anyways, due to housing instability and therefore gentrification doesn't actually displace many people, but more deter other poor people from moving in.

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My aging Trump-supporting conservative parents live in the “old growth” suburban neighborhood I grew up in. What used to be nearly exclusively a white-working class neighborhood is now consists mostly of Latino contractors entering the middle class. There’s nothing about the “way of life” argument they wouldn’t immediately recognize and agree with.

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My framing was no accident. Being selfish and shitty in housing policy is a bipartisan affair. Best not to sweep it under the rug.

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I think part of this is exactly on the nose... People are concentrating in larger urban areas because the economy has changed. If there's a way to build more service-economy jobs in rural areas, I haven't seen it yet ... And place matters to people! The implication that with different tariffs etc we could bring back manufacturing communities, though, I think ignores the realities of modern manufacturing which include 1) robots and 2) lack of expertise, since so many (especially high tech) things have been manufactured abroad for 2 generations.

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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.)

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I would say: Why?

If you want to advocate for more affordable housing projects, that's great. I think cities should absolutely invest more $$$ into their affordable housing trust funds. But blocking market-rate development doesn't magically generate cash for affordable housing. On the contrary, market-rate development creates tax revenue and tax revenue creates affordable housing.

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I live in Berkeley. I think the answer to "why", among the best activists, is that there's no political will to build affordable housing unless it rides the coattails of market-rate housing, and thus the incentive is to fight like hell to get every market-rate project to include as many concessions to affordability as possible. And yes, some people def. take that too far and end up preventing new construction altogether, which is bad.

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The Bay Area doesn't just need more affordable housing, it needs more luxury housing! You've got too many rich people living in middle-class housing, which bids up the price of middle-class housing to rich-person levels, and on down.

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Yes. Blocking MR housing doesn't create BMR cash. MR and BMR housing call for distinct strategies. No MR housing doesn't create net revenue.

Because Prop 13 fixes tax rates,. If you read through Financial Impact Analyses for (Bay Area) housing projects you'll see that housing projects are net revenue losers for cities. This because you are doing localized, one-sided analysis. Yes taxes are revenues, but there are city, fire service costs and infrastructure costs associated with new residents and new development. For housing those usually exceed new property tax revenues.

BTW, I see no evidence that housing-as-net-money-loser impacts decision making. I'm just saying.

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My wife has a 15+ year career in affordable housing development.

The same things that block market-rate housing development absolutely block affordable housing development. My wife spends years navigating permitting, entitlements, community meetings, etc before she can build a single modest-sized housing development. She is currently dealing with extremely high costs related to relocation payouts because the site she's trying to develop has existing unsafe, not-to-code, frankly dangerous units but there are tons of protections for the people currently living there, such that it's really not clear that she can afford to redevelop the site. And anything that allows community input is a higher burden for affordable housing, because communities don't generally like affordable housing.

Now, we could imagine a world in which these obstacles were cleared out of the way for affordable housing, but not market-rate housing. And then we could imagine a world in which we massively increased funding to affordable housing, because right now even if they had all that stuff out of the way, they wouldn't be building very large amounts of affordable housing that met demand. But in practice, I mean, I just don't think that's politically plausible. However many people you get on board with your plan on the left, you lose at least that many people on the right who might be on board for reducing the costs and complexity for all development, but aren't on board for making it only possible to build affordable housing, forever, *and* taking on big new expenditures. This is already a marginal political cause. The political reality is that saying, "We want to develop affordable housing but not market rate housing" is equivalent to saying, "we don't want to develop new housing."

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I hear the same thing, often "luxury" is their word of choice to shut down discussion.

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All new housing is "luxury" in the way that all strip clubs are "classy".

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If you want to undercut their argument here is a potential strategy.

Come in with a definition of affordable, mid market, and luxury housing based on 30% of local monthly salary rates.

Push for by right development for any construction that creates housing below a certain pyrchase or rental price.

This would likely include homeowners doing small conversion for ADUs, garage apts, and upgrades to duplexes/triplexes.

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I think it depends if you're trying to dunk on these activist-types or if you're trying to hear their arguments and work with them. And it also depends if these activist-types are open to listening to you and if they genuinely want more affordable housing or if they're just trying to block any new development.

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Ha! Yes, in real life, listening > dunking. I'm more wondering if team slow boring has a conceptually simple counterargument to the activists' (equally simple) point.

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Yeah I guess in my humble opinion, I think the effectiveness of a counterargument is going to depend on what the activist sees as the problem and what kind of evidence they're going to be persuaded by. There are probably a lot of "correct" counterarguments to their simple point, but that doesn't mean they're going to be convinced by that counterargument.

One correct counterargument is that increasing the supply of market rate housing is going to decrease the cost of housing in the middle and top of the market (a good thing!) and maybe this decreases competition for lower cost units, but not sure if they would be convinced by that. Also, if they're actually concerned about low-income people being displaced then why not upzone all the wealthy areas?

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UPZONE THE WEALTHY AREAS! That should be the primary slogan.

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That's right! Eat the Rich!

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What does that even mean. I'm a dumb on this one, thanks for explaining.

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So how about an example of how each of those conversations would play out? :)

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I think the mutual dunking conversation is much easier to predict ("Empirical evidence shows expanding housing supply decreases median rent, DUH"; "OK corporate, developer shill!"), but obviously the more generous conversation will depend on the individuals and the circumstance. If both sides are actually willing to listen and engage (again, not always the case), then I think it's helpful to lay out what each person thinks is the problem we're trying to solve, what they think is the cause of that problem, and then what their solution would look like. Maybe you have no common cause with this person, or maybe you disagree about the trajectory of a particular development but could work together on other issues you might agree on like increasing local funding for affordable housing or public housing.

I think a lot of this comes down to a decision about how we want to do politics and applies for more situations than just the local housing debate. Does it make more sense to fight someone or try to persuade them? In my opinion, that will depend on whether they're trying to engage in good faith and if you can actually find some mutually shared values. And if you're trying to persuade them then you have to listen to them and understand what they actually care about.

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It can be hard to tell the latter type of activist from the former. Some people are playing a game to win concessions, and others just don't want more housing. So many people in Berkeley (my home of 11 years) just hate anything taller than 1 story, and then come up with every rationalization imaginable.

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When they start to advocate to stop transactions in "second hand luxury market rate single family homes", I will believe they are arguing in good faith.

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Theoretically, we could build our way into affordability if our politics allowed it. If, say, the government: A) allocated an extra $400 billion/year (about 2% of GDP ) for land acquisition and house construction along with passage of a muscular eminent domain regime; B) implemented a formula overweighting the new supply into our priciest metros; and, C) got the courts to allow it; D) we'd probably have a much better affordability situation within a few years. At 300k per unit, that works out to 1.3 million units per year.

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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.

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I’m skeptical about the Whole Foods being more expensive than the local corner store it displaces. (IME, “discount grocer” begs the question)

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Newly constructed retail space has to find tenants who pay high rents, to amortize the new construction, or remain empty. Old retail space can respond more to the market because the construction cost is already amortized. You can put amenities for poor people in there. You can also put non-chain enterprises such as interesting neighborhood restaurants in there, that couldn't pay for brand-new space. If you have enough of such space, the requirements of the poor and the well-off can coexist. If not, the poor's needs go to the wall.

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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.

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It's very similar to the "Obamacare made health insurance prices go up" argument.

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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.

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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.

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I lived in the West Loop in Chicago during a period when it was the #1 market in the United States. Property taxes doubled over ~ 7 years due to aggregate property value increases. But I can think of three buildings where property values were flat, because the original owners paid a premium for new construction when they moved in, but then were now selling against newer construction with better amenities. All those owners got smashed in the middle where new construction created a headwind on their potential appreciation. They fought the hardest at community meetings.

Here's an example, look at the property tax detail:

https://www.zillow.com/homedetails/11-N-Green-St-UNIT-2D-Chicago-IL-60607/3861781_zpid/

There was a 43% jump from 2017 to 2018 alone but it's on the market and price is dropping.

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I got distracted by the interior brick walls and high ceilings. :-)

Are you saying that the owners got hit with high property tax but didn't see property value appreciation? How'd they end up with a high assessment but middling market value?

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Yeah man ... it's a cool building. Original 1900s double wall brick construction. Huge original beams. Converted in the 90s so there's some weirdness (e.g., frosted blocks, curved walls).

But yes, this owner (not me) is getting smoked. They bought in 2017 for $780k. The property tax increases have lagged the market so that jump was a surprise. Then across the street they opened a monster square block development that blocks this buildings light. I bet this owner sells for $750k. There's a few other buildings where the same thing is happening to owners. They're at every community meeting. And pissed. And frankly, rightly so. In my view, the alderman should be offering tax freezes for these owners impacted.

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Hmmm - would it not also fix the problem to have the tax rate just follow the market with no lag? Then if the market hoses him, he gets a rebate?

I guess the problems are that (1) the owner thought he was getting the grandfathered tax rate, so that sucks and (2) if tax rates fluctuate with the market, everyone will be crank all the time.

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Lefty people are afraid property values will increase and wealthy NIMBYs are afraid they won’t have a place to park.

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Both effects can be true at the same time. The situations are not comparable

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How can property values increase and decrease at the same time?

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Two totally different situations in totally different places. In a homeowner neighborhood, one of the amenities is screening out people who can't afford to live by the norms. When multifamily comes in, that amenity is lost, and financial value can decline as a result. If you're lucky enough to be able to sell your house to a developer, you'll make a lot of money, but your neighbors may lose money, at least relatively. In the other case, the poor and non-poor inhabitants won't realize anything from the increase in land value due to development. The landlord will take it all, and will raise rents to reflect the new demand from people with money. Decrease in the first case, increase in the second.

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I am talking about the same neighborhood just from two different perspectives.

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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."

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author

I totally understand this. Leftists have a view as to how things should work.

Separately from that utopian vision, one question is "should cities rezone for more housing?" And the answer is "yes."

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So much of the trouble is that cities don't exist in a vacuum. They function in the context of suburbs with the political power to block construction and expanded transit.

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How do the suburbs prevent a central city from deciding to upzone? The role of suburbs in blocking transit I get, since transit is usually regional and so the suburbs collectively have veto power. (As a native of Metro Detroit I have half a dozen stories about this exact dynamic.) But given that suburbanites don't have a vote in city elections, I don't see how they might block a central city from upzoning if you had a majority in the city council for doing so. And honestly, I'm not sure if they care that much.

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Not sure if this answers it but in Cleveland metro the county managed to get their executive council much more power than the mayor about ten years ago. I don't know the details as I wasn't here then but the city was corrupt af. So this Cuyahoga county board, which includes many suburbs, has a lot more power on some issues than the city proper. That's just one example sorry it's vague. I can get more deets if you want.

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Yeah, my point wasn't so clear, I see now. It's not so much that cities can't upzone on their own, but that this action alone won't solve the problem. San Francisco, for example, is a small part of its regional housing market, and it's already full of housing. It can't just add a ton more. But many suburbs here have plenty of space to add transit-oriented housing. I think center city politicians have little appetite to commit to controversial density measures when it's clear that the city will still be expensive and have tons of homeless people anyway.

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So at best it's a utopia-type argument where they're leaning fully into the perfect being the enemy of the good.

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Not really? They support policies that improve communities, but then also support policies that ensure those benefits flow to current residents. They place a high value on the well-being of current low-income residents, so some policies that seem overall beneficial (i.e. building market-rate housing) don't receive their support, but it's a coherent position and not a utopian one.

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Of course it's a given on this theory that the needs and wants of existing residents are more important than those of potential residents. Because this isn't at all obvious to me, the theory isn't very convincing.

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I'm not trying to convince anyone of this position; just pointing out why Matt's slippery slope argument about opposition to all neighborhood quality improvements doesn't work. These are not my policies either.

That said, when thinking about existing residents vs new residents, I do think it is relevant whether the existing residents are poorer and worse-off than the potential new residents. Presumably we should be skeptical of policies that have the effect of redistributing resources from poorer people to richer people, and if we want such policies for other reasons (as here with the need for greater housing supply overall) we should think carefully about how to minimize or counterbalance those effects in the short term.

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founding

The answer here is, upzonr the wealthy neighborhoods the most

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"Presumably we should be skeptical of policies that have the effect of redistributing resources from poorer people to richer people"

What resource is being redistributed? The landlord owns the apartment.

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In this case the resource is living in the neighborhood. The case against gentrification goes like this: after housing prices rise, the previous inhabitants are forced to move to less-desirable neighborhoods, often with less access to transit, etc. So the original residents get hit twice: once in being forced to move, losing their community, etc; and a second time because their new place is less good than their old place.

If you prefer, we can rephrase as "we should be skeptical of policies that have the effect of harming poorer people in order to benefit richer people."

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"They support policies that improve communities, but then also support policies that ensure those benefits flow to current residents."

So, 'keep the poor in the ghetto, but make it a slightly nicer ghetto.'

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I know that is the cynical take, but I can't shake the impression that that's exactly what it is - don't make the neighborhood any better, because that would disrupt the current housing of the residents. Part of this is I've seen too many movies where a plot point is a stubborn renter refusing to allow a developer to improve the collapsing building they live in because "I live here."

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Why are the rights of future residents on A street, discounted in favor of current residents on B street? Seems discriminatory to me.

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I agree. I've always found it ludicrous how much of "anti-gentrification" stuff seems to assume that the preferences of person A should have primacy over the preferences of seemingly-identical person B because person B happened to be born one town over. But. Let me try to steelman the case for this.

Basically, I think this assumes that there are difficult-to-quantify negative externalities to shaking up people's housing situation. That what seems on paper from a high level view as being, "Hey, look, person A has to move from neighborhood X to neighborhood Y, sure, but both neighborhood X and neighborhood Y are improving, and person B who moves into neighborhood X is pretty indistinguishable from person A" ignores a bunch of negative effects. Some of them might be:

* Person A has an emotional connection to neighborhood X.

* Person A has a support network of friends, family, and neighbors in neighborhood X.

* Person A has arranged a bunch of details in his life around neighborhood X, such as work, childcare, decisions about transportation, that all get disrupted if he's priced out of that neighborhood.

* Person A is a poor person and just generally has little ability to survive financial shocks, even if they might result in longer-term financial benefits.

So, to help get into an empathetic mindset here, I consider my own situation. Now, I'm wealthy. But I also live in a very high cost of living area (inner suburbs of San Francisco), such that despite a very high income I often feel like, "holy shit where is all my money going." So I've thought about moving. Maybe just to some farther suburb, but hey, maybe to Portland or, hell, how about Colorado?

But:

* My parents and my mother-in-law live here. There's huge value to my kids in living near their grandparents.

* My kids also go to school here in places that we're very happy with. Are there equivalently good schools in place X? Well... maybe! But how do I know? What if I burn three years of my kids' educations trying to get back to a place they're happy with?

* Will my income substantially reduce if I move to one of these places? How much of the cost of living benefit will that claw back? Or if I move to an outer suburb, I can keep my same job but will the commute substantially reduce my quality of life?

* And hey, I've spent 20 years building up a network of friends here. This is intangible, but jesus it sounds completely exhausting and honestly daunting to start over from zero.

And these are problems for someone who has more resources than like 99% of the nation. If we take someone who makes 1/10th what I do, how much worse do they have it?

So... on balance, I'm not convinced by that argument. But I do think it has some merit.

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founding

But according to the logic you mentioned above, a situation in which infrastructure and amenities improve a neighborhood, but only 90% of the housing price gains go to current residents, is a bad one that is to-be-avoided. That sounds perverse to me, because it sounds like opposition to a situation that financially improves the lot of current low-income residence.

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As I noted in another comment, the "100%" was me being unfair to people who hold this position. I'm sure they'd be willing to discuss 90% or whatever.

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founding

Except that they think blocking me development achieves reducing displacement, when all the evidence is to the contrary! People think condos going up in very tight markets is what leads to displacement, but it's actually the very tight market! Want an example? Check out the original NIMBY neighborhood, the West Village. How many of the original residents can afford to live there today?

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Owners capture price gains. Not all residents are owners. Residents who rent do not capture price gains. I am unsure how a leftist would argue for renters to pay higher rents but also capture the gains from those rents.

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This the purpose (or a purpose) of rent control.

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I think I am confused.

I rent. My rent goes up and I pay more money to my landlord. Landlord makes profit.

I rent. Rent control stops prices from going up. Landlord makes no additional profit.

I suppose you could argue that this constitutes money in my pocket, but I do not understand how that is equivalent to me capturing the gains from rent going up. My rent did not go up, after all.

Something is missing from this equation.

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The reason rent is going up is that the neighborhood has been improved and is now a more desirable place to live. Housing prices rise as a result. Your rent would rise too, but it doesn't because of rent control. So you, the renter, capture the benefit of improved neighborhood quality.

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>> So you, the renter, capture the benefit of improved neighborhood quality.

Okay, this is what confused me. I thought you were saying that residents captured the financial gains from rising home prices, which isn't true for renters. Instead, you are saying residents benefit from improved amenities and a leftist would argue for rent control to allow poorer residents to benefit from those amenities without paying higher rents.

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The on,y way this makes sense is if the housing is publicly owned. As a landlord myself there is no way I would want to own a building — with all the attendant headaches of maintenance, insurance, taxes and dealing with the occasional bad tenant — without profit upside. And forget about capital investment like new appliances and refinishing bathrooms.

Public housing is not necessarily terrible, but it usually is. Vienna is an exception but that was partly a historical accident after WW1.

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That's what you said in the first post - that's a different claim. You specifically said "ensure that 100% of housing price gains go to current residents so no displacement occurs"

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Sorry, my original statement was a little unclear. When I say "gains" in this context I am referring to housing price gains that stem from improvements in neighborhood quality. If you rent in a neighborhood, and the quality improves, and you enjoy the benefits of the quality but do not pay any extra in rent, you and not your landlord has captured those benefits. Does that make sense?

BTW the "100%" number was me being somewhat unfair. These aren't my policy positions. Probably most leftists would be satisfied with some number less than 100%.

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I think there's a compelling argument for rent control when coupled with property tax freezes. I live through a 7 year boom where property's ~ 2x in value. Net rent of existing builds went down relative due to competition from new supply BUT property taxes also doubled and those were passed through as rent increases.

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I originally came to the US on a student visa for a PhD. Apart from the obvious restriction (PhD salaries aren't high), what other restrictions on where I am allowed to live would this argument imply?

My understanding is that you have to pick one of 1) I won't allow this prospective student to come to the US, 2) I will allow this prospective student to enter some existing community.

Of course, I do understand that some people don't like people from elsewhere moving next to them, but overall I think that the US is a country that is friendly to immigrants.

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Gentrification as people talk about it in the US is limited to only a very small number of cities with decades of bad housing policy, so even if anti-gentrification policy were inherently anti-immigrant and there were no possible ways to do both, it still wouldn't be a particularly significant restriction.

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It is limited to a few cities, yes, but I think these cities tend to have a lot of PhDs on student visas. I'm thinking of Berkeley and Stanford here, but I think that such problems also exist in Boston (Harvard, MIT), New York (Columbia, NYU), etc.

Also, I wasn't referring in general to anti-gentrification policies, but to what I understood as a proposal to prioritize current residents over people that would like to move in.

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How do you ensure something like that, especially if let's say the majority of current residents are renting?

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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".

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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.

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Two things: 1) there are like 4 such buildings in the entire country and they're all on 57th St. It's not a very useful thing to focus on, in other words. 2) Those buildings exist as they do in the first place due to the peculiarities of NYC zoning and air rights. It's not even clear they'd ever have been built under the kind of regulatory environment YIMBYs desire.

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This is of course correct, but NIMBYs focus on them when talking about other, more normal NYC housing development because they're so visible and ultrarich-focused. I agree that they're their own thing and should be treated as such, but their visibility makes them a potent and unhelpful symbol.

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I think the question is whether those people were going to buy a residence in NYC anyways. Unless we want to ban people from buying property that isn’t going to be a primary residence, Matt’s argument suggests that the construction jobs and tax revenue from the owners (very high property tax on those units, helps schools without adding students) still make it worthwhile. Ideally they’d live in the city and shop at businesses and eat out too, but that’s a difficult thing to mandate.

Assuming they were going to buy property in NYC anyways (it would likely be even more attractive to them with less construction, keeping prices sky-high) would you prefer that those billionaires buy a rowhouse in UES or UWS and displace those high income residents to rowhouses in Brooklyn or Harlem? It seems like if there’s demand for super luxury, we should build it and get the constrictions jobs tax revenue and keep those people from displacing slightly less rich people who will then displace poorer people.

I agree that there should be some sort of incentives to the diversify the unit sizes, to make sure that the city is getting new housing for families. But I think the issue is actually that the non-billionaires row towers generally build units that are too small, aiming to fill them with high income young professionals with no kids. I’d argue we need taller buildings with more 3 bedroom+ units (but not huge square footage or hyper-luxury).

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And correct about smaller units. Building lots of fancy small housing for young tech workers has done good for that market. It would be useful for a city to try to incentivize construction of family-sized units that would relieve pressure in the 2-3 bedroom market (which is larger in NYC than it is elsewhere because there are lots of 2-3 bedroom apartments on the UWS and UES that the "working rich" already raise families in, not someone that's as common in other cities).

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I guess part of the question is why these people want buy expensive real estate in NYC and not make it their primary residence. If they're buying to park money, buy a bunch of apartments and rent them to other people. If they're buying to have a fancy crash pad, maybe NYC needs more fancy hotel suites so fancy crash pads for rich people are at least consistently occupied.

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My hypothesis (I’m very much not one of these people) is that it’s a combination of parking their money and wanting a flashy crash pad. That would explain why they don’t rent them out, but they also don’t just want to stay in hotels when they visit. Plenty of people in NYC and elsewhere have second homes in other places that they don’t rent out and only visit periodically. It’s not unusual — it just looks different here because these second homes are in skyscrapers and not on beaches.

As long as there’s enough supply for everyone else (obviously right now there isn’t, which is why these buildings feel weird), I don’t really see a problem with building units that will likely be second homes for people who will be exorbitant property taxes here and use very few city services (plus lots of local construction and maintenance jobs for the buildings themselves)

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If the superrich are going to have expensive crash pads that they mostly don't live in better it be a ranch in Wyoming or whatever than something taking up valuable Midtown real estate. NYC doesn't need to prohibit it, but at least jack up the property taxes to discourage it (better to park the $50 million in an apartment building that's rented to others and get a fancy hotel suite when visiting if you don't want to live there as your primary residence).

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The 4th home for billionaires thing, while definitely happening in NYC, seems a bit tagetial to the gentrification discussion. Is it kind of gross that all these new, tall buildings are basically empty? Yea. But it’s not like 57th street was some charming working class area before the billionaires arrived. I’m honestly fine with it as long as we tax them. And it’s not like billionaires are scooping up newly constructed 1 bedrooms in bed-study.

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Part of the problem with NYC is liberally dispensing tax abatements as incentives to developers. My understanding is that this has been phased out, which is good, but the "at least they'll pay property taxes" argument doesn't always works as well here as it should.

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founding

Maybe just tax second and third homes differently? New York currently has a system for rich people to track how many nights they spend in the city, so that they can collect income tax for anyone who spends more than 183 nights per year in the city. Just expand it so that they collect a "second home tax" for any property that is used primarily by individuals that spend less than 183 nights per year in the city. That will tilt the financial balance of building somewhat more towards things that actually address supply and demand issues, and provide a new source of revenue from the buildings that continue to exist this way.

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That's a great idea. The way I'd apply it is to add the extra tax for unoccupied nights. So if you want to buy a place a rent it to someone else or buy a place and live in it as your primary residence, great, because either way you're occupying housing, but if you buy it and neither use it as your primary residence nor let someone else use it as their primary residence you need to pay extra taxes.

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Perhaps we should leave NYC out of it? Maybe it’s one of those edge cases make bad law situations? The conditions in NYC aren’t really generalizable to other large US cities. Does Denver deserve the same policy prescriptions presented for NYC?

(Yes, I say this just after replying to someone below and discussing NYC.)

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I know NYC likes to think of itself as special, and it is unique in many ways, but the basic laws of supply and demand aren't radically different here -- just more high-paying jobs, more people interested in apartment living, and better transit. But people still make housing cost-housing size-schools-commute-disposable income decisions here like they do in Denver or SF or Atlanta or wherever. Every growing, high(ish)-cost cities (which all of those are) needs more housing.

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And you don't think the billionaires wanting to park their money in NYC would have bought some other chunks of real estate if the supertall towers weren't there? That building the towers caused the billionaires to flock to NYC real estate?

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I think that might actually be the case where induced demand does exist. If a Russian billionaire wants to find $50 million in real estate (and isn't interested in investing in an apartment building to rent to others) an estate somewhere is probably the alternative to a $50 million condo. Much less true in the "working rich" price range where people want a place to actually live in a specific area, have, say, $1-3 million to spend on it, and will spend it on an old building if there's not a fancy new building to spend it on.

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"billionaire wants to find $50 million in real estate (and isn't interested in investing in an apartment building to rent to others) "

I think you would find exactly this service would pop up if these luxury estates didn't exist. Real estate management companies would be more than happy to make a turn key opportunity for someone to park their money into rental buildings.

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Part of the problem you describe (I bet a big part of it, though I'm no expert) might flow from the fact that, because housing supply is so constrained in NYC, distortions get introduced into the market, that, among other things, end up rendering super luxury units a bigger portion of the market than a more freely demand-driven dynamic would result in. In other words, to paraphrase Matt, supplying new housing inventory becomes the preserve of "developers" rather than builders, and we end up getting all kinds of weird results.

If we did as you suggest (instead of simply making it legal to build whatever the market demands), I fear the resulting reduction in available profits might undercut the purpose of such a move. Also, I suspect billionaires would just scoop up multiple units, and combine them. I suppose you could pass laws preventing this, but at that point we're into a game of whack-a-mole.

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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.

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Post-pandemic dense cities like NYC are going to be very interesting in the next 2-5 years. I think the challenge people like Moss will face is that the people they hated can very easily return to the city - they have money. The trick will be making their return possible while also meeting that demand so everyone else isn’t priced out.

I’m a bit worried on that front because it really looks like demand has shifted to the less dense townhomes, brownstones, and row houses in Brooklyn and Queens. The ones with with some green space. That’s going to incentivize development of less density, the opposite of what we need.

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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?

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founding

I think the trouble here is that it's pretty clear that (1) is not backed up by evidence... Or at least that there is quite a bit of evidence to the contrary. Looking at places that don't have a housing crisis, or even cities that do but *used" to allow substantial new housing (NYC through the 50s was desirable *and* broadly affordable to the middle class) it's easy to find examples of affordable housing without a superfund site. We've just had such bag housing policies in so many places since the 70s that it's hard to see that!

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Good stuff.

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?

https://www.sightline.org/series/winning-abundant-housing/

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."

https://www.sightline.org/2020/08/03/five-steps-to-prevent-displacement/

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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.

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