I think understanding this debate requires a little more history. Here's a stylized history:
In the 50s-70s there was a lot of white flight and disinvestment from cities, leaving numerous close in urban neighborhoods with poor, often heavily Black populations (Columbia Heights, South End/Roxbury in Boston, the Mission in SF, etc). Then in the 90s and 2000s, for various reasons, urban living became more desirable among young educated professionals. These people, like Matt, typically didn't have the money to live in the existing rich neighborhoods like this so they ended up in poorer ones. But these people also had way more money than the existing residents of these neighborhoods. So they drew new development aimed at them as customers, and because they had greater influence they secured improvements to the neighborhood. Also, displacing poor people also displaces the challenges of poverty. This leads to a virtuous cycle where the neighborhood keeps getting more desirable and thus more expensive.
Typically this involves the construction of a bunch of new homes, but not nearly as many as the number of people who now are interested in moving there. Even if that happened it's implausible it would fix the problem both because the new homes are more expensive and because the demand precedes the new supply.
The basic moral of the story is that the low prices in the original neighborhoods was a demand phenomenon, and when the demand returned the prices rose.
It's worth asking what could have prevented this. I think the only answers are legally prohibitions on moving, or preventing the increased desire for urban living (maybe by having crime not decline?). Which is to say that it can't be prevented.
This is uncomfortable for many, because it implies that some form of displacement is inevitable, but that's because it's the pre-1990 situation that was an anomaly. Lots of people have the desire to ensure that the burden of change doesn't fall primarily on the disadvantaged. But fundamentally this is impossible -- that's what it means to be disadvantaged. The only solution is to reduce disadvantage directly (like with the CTC, although I am generally more radical than Matt in this direction).
One big problem is that many people believe that once you move into a given neighborhood, you get to call "dibs", and stay there in perpetuity. And this apparently applies even if you live in some of the most expensive neighborhoods in the world.
This is a very wise comment. In a market economy, the rich will do as they will and the poor will do as they must. Those between the poles will face constraints inversely proportional to their means.
Because money is a flexible tool, poor people, almost tautologically, will have more difficulty adapting to change than the affluent.
Markets are really good at getting people to produce shit efficiently. The Chicago mercantile exchange has done far more to feed urban populations than Jacobin requisitions or Trotsky’s flying brigades.
Markets are not great at providing security to the masses or allocating the fruits of industry.
Sound public policy involves layering non-market social guarantees on top of market based production. It requires the restraining such guarantees to a level commensurate with production.
America is immensely rich and can afford solid guarantees.
I’d venture to say the likes of Denmark and Sweden have moved a bit further from the market based and have had notable success for the masses, documented in index after index of median quality of life.
A mixed system is best. The U.S. is a mixed system. Canada is too. I preferred Canada to the US before the pandemic, but now I’m not sure which one I like more. The spirit of solidarity can lead to over-regimentation
I've always disliked a binary of "free" vs. "nonfree" in this discussion. Allegedly free markets still need governing bodies to set some property rights, and allegedly nonfree markets can't control every single aspect of trade. I see all markets as mixed--the type of mix is very fairly open for debate, of course.
History provides a useful discipline in defining categories. The U.S. in 1880 was a free market society. Federal spending was 3-4% of GDP, borders were open if you weren’t Chinese, and there were no social guarantees. Still, many railroad companies profited handsomely from subsidies.
Mid-Victorian Britain (after the repeal of the Corn Laws) was almost as free, but had somewhat higher taxes, higher debt service costs, and a much better banking system. No big country has had more economic freedom for long than the US did in the late 19th century.
I think there is an enormous benefit to having, for example, Vermont implement a single-payer health coverage system and immiserating its citizens rather than doing it at the federal level and immiserating us all.
We can also have culture and morality and even regulation that blunts these impacts.
Part of our current problems as a society as far as I’m concerned is that far too many adopted that 80s corporate raider ethos that the only important stakeholders in business are the ownership. That maximizing profits for shareholders is more or less the only value, and “fuck off” to any other stakeholders.
On the front lines of gentrification in Philly, one can see how investment in neighborhoods can be done humanely and compassionately to those displaced..or quite the opposite if your and your investors profit are your only concern.
Seems bad to be “just asking questions” about residency permits, something we see in China or Cuba. Setting that aside, your morality tale gets causation wrong and you’re also wrong about how to prevent displacement. For causation, neighborhoods were already improving. Crime was falling. Businesses and governments were investing in them by building for example, grocery stores and new metro stops. These projects were the result of people already in the neighborhood, not some magical white newcomers. Everyone wants their neighborhood to be better, and we do what we can to make that so. As for displacement, you ignore how new construction affects rents in existing housing. True, new construction is more expensive. Who wouldn’t want to live somewhere new instead of somewhere run down by use? True, new construction only happens when rents rise. But new construction (1) absorbs newcomers and (2) draws richer people out of existing homes. Contrary to popular belief, for new construction, the residents are disproportionately local, not rich foreigners. So, new construction softens the market for existing construction, thus leading to more affordable rents generally. The moral of your story is that regulation prevented the housing that would have prevented displacement, not that we are helpless without Stalin-style restrictions on where people can move.
I'm not at all suggesting residency permits, not am I saying the problem is rich foreigners. The problem is that a specific urban configuration had the advantage of providing affordable housing in good locations but was fundamentally unsustainable because it required fashion among rich people to require living far away.
In other situations, displacement can be addressed with new construction, rent control, and many other tools. Similarly new construction can almost completely substitute for richer people living in older housing stock in many places, such as the college town I live in (if only we built enough).
But the specific situation of gentrification in formerly desirable neighborhoods in the last 25 years was always going to be very hard to avoid, because essentially all of the housing stock was very undervalued and it all got revalued in a short span of time.
One person's "run down by use" is another person's "historic, full of character".
One person's "new is good" is another person's "they don't make 'em like they used to, new construction is cheap, characterless garbage."
There are also plenty of people (at least where I live) who think that any improvements to the neighborhood will change the "character" or "culture" of the neighborhood, so yes, there are people who are effectively saying "keep it shitty".
I otherwise agree with you here, and also agree that this is inevitable unless we are going to tell people they can't move when and where they like.
“…people who are effectively saying ‘keep it shitty’”
I moved to NYC in 1993, which coincided with what detractors called the “Disneyfication” of Times Square. These were usually the same people who bemoaned the loss of “character” and “grittiness” of the city. The other side of that coin, of course, was, on average, 7 homicides per day, 365 days a year.
The only major European city that has a similar dynamic to American ones is Berlin because of the wall. And just like in the U.S., once the cheaper neighborhoods in (western) East Berlin were available, they were much closer to the city center than the (western) neighborhoods in West Berlin that were cheaper. So they’ve all gotten nicer, which makes the punks in Friedrichshain angry, but it’s because of a unique historical circumstance, not because of the uniquely predatory attitudes of people who don’t get why Berlin is the greatest city in the world.
Right. This is pretty much the whole subject of critically acclaimed French cinema of the last ~30 years it seems: the segregation of the banlieue and the systemic poverty in the suburbs.
I agree with Sam. One reason I despise the gentrification debates (like the ones raging in my LA neighborhood) is that the “anti-gentrification” camp focuses on displacement as a root problem requiring a solution, rather than a symptom of other systemic issues that are objectively more worthy of thoughtful debate and solutions.
Lack of educational opportunities that turns into lack of economic opportunities, discriminatory hiring practices that limit access to high paying jobs, and redlining and other discriminatory lending practices that prevent home ownership are all disproportionately experienced by people of color. And that’s why displacement, a natural byproduct of a particular neighborhood becoming a nicer place to live, is alleged to be a problem.
But if people of color benefitted equally from newfound local prosperity, the “problem” of displacement would instead be viewed as a natural economic phenomenon and more fundamentally as a housing supply issue. Fixing systemic racism is no easy task, I get it, but yelling about gentrification is just wasting energy that could be put to more productive use.
"...the city could take some of that new tax revenue and just buy up the rental properties from the landlords and sell them to the current residents for a dollar".
This is a terrible use of public funds, resulting in big wins for a few individuals at the expense of everyone else.
If you’re interested in extremely frustrating left-NIMBY arguments, check out the housing discourse in Ireland. A coalition of incumbent home owners, ‘historical preservation’ weirdos and left wing people who don’t understand economics prevent basically any new housing construction. Throw in an absurd planning application process and an extreme parochialism and you get one of the most dysfunctional housing markets in the world!
In Ireland there were only 700 places to rent in the entire country in September. I don't know if it has changed since then, but that is terrible policy.
Interesting! How widespread is the phenomenon there? Can you recommend any further reading? I’m an urban planner and the arguments in this post pretty much describe my professional life, and I’d love to learn more about the dynamics in other places.
Sorry, I tried to share a link and it didn’t work. Search for Dr Rory Hearn’s articles in Journal.ie for some good examples of the dumb stuff people come up with to argue against new housing
I do find the left-nimby sensibilities understandable, though. The pool of people who tend to be left-NIMBYs are highly educated and usually relatively affluent people with artistic sensibilities and good hearts at the same time—not the most common combination. They, like the wealthy educated neoliberals and conservatives, appreciate historical character and artistic beauty. But, like more typical lefties, they want good things in life to be accessible to people who aren’t wealthy. So, they want to make housing more affordable without sacrificing too much historical architectural character or charm. Basic spatial logic makes that difficult-to-impossible. But there is something to it—there is something peaceful and relaxing about physical environments that are not shot through with constant visual reminders of ultra-modern development and glass and chrome, etc. The ambiance created by the relative absence of such monstrosities is truly a luxury that less affluent people deserve to benefit from. I don’t know how I would function without it. But if huge, modern developments are the only way to really level up quality of life while making it more accessible given current population trends, then the left-NIMBY sensibilities will have to be sacrificed. But that is actually not a small thing, and it is a major tragedy of our time.
I have a much less charitable take on the historic preservation wing of left-nimbys. They want to install their aesthetic preferences on everyone else. To quote you
there is something peaceful and relaxing about physical environments that are not shot through with constant visual reminders of ultra-modern development and glass and chrome, etc.
I don't think that's true. And lots of people don't agree either. Rather the subset of historic preservationists assume that everyone shares (or would share) their aesthetic preferences and that it is a public good.
I think if we put these people in charge of movies they would try to limit production of comic book movies and argue they are doing it for the public when they are really doing it to cater to their aesthetic tastes.
I don't think of my terrible apartment building as historic, but whatever aesthetic enjoyment people outside draw from looking at wood windows is dwarfed by the cost I feel living in a perpetually drafty apartment.
They exist because we insanely allowed people with abnormally high aesthetic preferences regulatory control. If we allowed this for fashion, every person would bankrupt themselves on clothes trying to meet the regulatory requirement for clothing styles per season
Agreed. I know a number of people who are extremely angry (think “they’re destroying the neighborhood”)that buildings they find ugly are going up in the neighborhood. And they want to preserve the Sears prefab houses because they fit their aesthetic. I suspect that they would have been against new mid century modern houses.
If we didn’t have change in architecture we’d all still be living in Romanesque houses.
But the choice has never been between housing scarcity on the one hand and leveling old neighborhoods to build high rises on the other. It’s entirely possible to respect the character of a city but still allow construction. The problem is that all Nimbyism is based on old fashioned, reactionary hostility to change. Left wing people just pretend it’s something else. Visit Dublin and see how derelict the center of the city is and then speak to a left nimby about rejuvenating it. They’ll start talking about absentee landlords, ‘vulture funds’ and the 1916 Rising. It’s insane.
Isn’t the solution to preserve specimens of old architecture but not insist on preserving all of it. It really would be unfortunate if all the old Victorians in SF were bulldozed. That doesn’t imply every old Victorian must be protected. Why can’t there be an historic district of 20-50 blocks with very strict preservation rules and then a free market elsewhere. Anyone who wants to drink in the character of old SF could go to the historic district, walk around, maybe stop in a cafe. Those who just want an affordable home could live elsewhere.
This is analogous to national parks. It’s important to preserve a good specimen of each type of ecosystem, and our national parks have done a spectacular job of that. There are few enough old growth trees in the contiguous US that destroying one is s crime against nature. That doesn’t mean that every forest needs to be preserved. Most second growth forests aren’t that interesting, They can be used as tree farms as long as there are enough parks to accommodate those who want unspoiled nature.
The national park example is a good one, because that's a case where the government took it upon itself to acquire and maintain the property on its own bill.
I'm always tempted to let my radical flag fly, and similarly say that if a society says that certain buildings should be preserved, it should be incumbent upon the government of that society to acquire the buildings themselves, or at least subsidize the extra cost it takes to maintain them in their state. It comes out as some sort of weird horseshoe mesh between libertarian right and socialist left views.
I'm gonna be blunt. I've lived in SF for 11 years. The Victorians have done nothing for me in the 11 years I've been here. And I don't think I'm alone in this.
And there are several problems with the 20-50 blocks proposal.
1. Preservationists always look to expand preservation zone. It has happened in SF, NYC.
2. We run into the problem that there are lots of archetectural styles in SF. And if you allow 20-40 blocks for the victorians, fans of those archetectural styles will quickly say we also want 20-40 blocks.
3. SF Victorians aren't unique in the way the ecosystem of Yellowstone is. You can find quite similar victorians all throughout upstate NY. If you want to see them, why can't you go see them there?
I rather like the idea of telling architecture snobs to fly to Rochester. Still, I think there’s a utilitarian case for preserving a small slice of old SF. The Bay and the topography and the weather make it unique and charming.
My pet project is to reclaim most of the South Bay, build mid rise and garden apartments, and increase the housing stock.
I would really enjoy seeing an earnest debate where preserving Victorians was traded off against preserving salt marshes. Try to preserve everything and working stiffs get screwed.
The simple way to resolve this is that if you like that style, buy one and you can keep it that way. You just can't tell your neighbors that they HAVE to keep it that way.
Yes. But where do you draw the line? No one wants to be the guy who says "This 120 year old house is not worth saving." And our current system of historic preservation is tuned toward preserving everything.
I'm totally willing to be that guy. My sister once lived in an apartment built into a 150 year old house that absolutely should have been condemned as a public health hazard.
Eh, it depends on where I think. I would guess an 120yr old house would be pretty rare in many parts of the US, but not that uncommon in the Northeast?
Here in Britain about 1/5th of our housing stock is pre-1914, and certainly such houses do sometimes get torn down.
Allowing new construction and respecting the character of a city are in more tension than you'd like to acknowledge. At some point, you can't add in more housing without replacing existing buildings. Obviously we can pick and choose which existing buildings we replace (like that old laundromat in SF), often improving both character and housing stock, but there is a limit.
The notion of a city's "character" is illusory. "Character" isn't just what the buildings look like. It is the era and the population and how the interact with same.
Buildings should reflect and support the society they are built for, not define and control them.
Cities are supposed to change. They aren't eternal. As people come and go, as the population (mostly) grows and occasionally shrinks, as the world changes, the city -- its buildings, infrastructure, rules -- should also change with it.
San Francisco, for example, is not what it was in the 00s, or 80s, or 60s, or the 1850s. It is absurd to insist buildings abide by those design choices or needs and never change.
When people talk about the "character" of a city, they often mean sentimental and simple ideas about landmarks and design, frozen in a moment in time. Unless you're also going to roll the population and technology and world back to whatever time you are thinking of and hold it there, it's just not appropriate.
(And if you do that, well, you're basically Colonial Williamsburg.)
You're correct that physical aesthetics affect all people regardless of ideology. Nostalgia is a helluva drug. Left NIMBYs also tend to fall into a trap of ideological aesthetics, where anything that isn't fully public housing, or at least rent controlled housing means that it'll be taken advantage of by greedy developers who want to gentrify neighborhoods. (Right NIMBYs of course have their own version amounting to not wanting to live next to "those people".)
I don't agree with the generalization that left NIMBYs have superior artistic sensibilities or "good hearts" relative to any other group. In my (vast) professional and personal experience with this phenomenon, they engage in a lot of motivated reasoning. As discussed at length in this comment thread, most people dislike change, which is understandable but doesn't give people the right to dictate policy beyond the bounds of their own property.
And aesthetics are a personal preference, not a policy matter.
Thats a lot of hoops to jump through when "I on the left for everything, but my house is worth a lot of money, so suck it" is 99.95% of the time the real motivation.
Charitably, I find the motivations intertwined. Small c conservatism is usually driven by fear of loss in some way, and one of those that plays prominently in SF politics is loss of property value and (to a lesser extent) convenient parking.
Though SF specifically, there is a bit of racism mixed in too. Lots of old white boomers really do not like how many areas of SF have become heavily asian, with the more recent influx of south asians being a bridge too far for many. Much of "but the techies are taking over" is really anti-asian sentiment coded behind occupation.
<they want to make housing more affordable without sacrificing too much historical architectural character or charm.>
The answer to this isn’t (or doesn’t have to be) NIMBYism though. One of the reasons we have only “glass and steel” modern construction is that those are the materials and typologies that make dollar sense. Those 5 over 1s pencil in a way almost nothing else does given constraints like the building code.
Relax the building code to make new construction cheaper so that more aesthetic styles and material types pencil. Let a thousand porticos bloom, or whatever. Building code is the next YIMBY frontier!
Perhaps there is a better outlet for left NIMBY intuitions. A century ago, there was a movement to build exurban “garden communities.” Many advocates wanted to bring decent housing to ordinary workers and understood this was basically impossible in dense, urban areas.
It is not difficult to build rustic cottages in the exurbs. You can even have aesthetically pleasing facsimiles of Tuscan and French provincial towns. Hell, for the cost of a big, suburban home you could build an ante bellum style plantation house.
However, the median earner will never be able to afford an attractive, Victorian home for the same reason a median earner will never be able to afford a Winslow Homer painting-- it’s impossible to miss new ones and that guarantees high prices.
Still, it is possible to bring replica ye olde housing to the masses just as it is really easy to crank out Winslow homer prints-- you just have to convince people that replicas are ok.
People love replicas but don't want to admit it. Replicas are safe. Most people's experience with art starts with replicas. In my case starting with posters in college, then "fine" arts prints from New York Graphic Society, then originals. What % of American housing units aren't replicas?
I don’t know why, if buildings really had “historic character and artistic beauty”, someone or a group wouldn’t buy them to preserve or move them. Items with real aesthetic value are usually great status symbols, for their rarity and exquisiteness. I suspect that we don’t see people buying to preserve because those buildings in fact don’t have historic character and artistic beauty.
By the way, as a long time Philly resident and real estate development dabbler locally, huge thanks to San Fran and New York, Boston, DC for pricing everyone out.
You’ve made Philly a much more desirable destination for recent grads and professionals who want an urban lifestyle that is reasonably affordable.
Funny but unfortunate lingering views. Have you visited recently?
Philly and Baltimore were particularly badly effected by “white flight” in the 60-80s but here in Philly at least, we’ve meaningfully reversed those unfortunate trends. We still have enormous poverty crime and racial segregation problems for sure, but there is a ton going on here, and I’d venture to say culturally speaking, Philly is overtaking a ton of “1st tier” cities in importance as they price out artistic talent. Our restaurant and arts scene is top notch and this is much of the reason people want to be in city centers to begin with. The city is buzzing with life, investment, growth and creativity.
I’ve been seeing a few articles about the AirBnB apocalypse. Apparently due to the surge in demand during covid a lot of people bought vacation homes and condos to rent on AirBnB, Vrbo, etc. The were getting top dollar for say 20 nights a month. But now, due to people preferring hotels for various reason, oversupply, etc. rates and occupancy have plunged and people are losing their shirts.
The article mentioned people who are still able to succeed and they talked about the need for good design, the value of repeat guests. One made note of the coffee and wine people liked and made a point of having it stocked when they checked in.
The public seems to have the view that landlords have all the power. They think, “I can just buy something and charge whatever I want for rent.” But that’s totally not how it works.
For whatever reason people have a hard time seeing the real estate market work in the same way as the vehicle, laptop, laundry detergent, stock, etc. market.
I've had good landlords and bad landlords -- our current landlord has for the most part been very good, responsive to our concerns and also certainly put in a lot of renovation work before we moved in. Nevertheless, *even granting that he's a good landlord,* the median and modal amount of days per month that he interacts with the property we rent is zero (which is, to be clear, fine by us).
We don't have to pretend that being a landlord is literally zero work to acknowledge that there's a reason that supracompetitive profits from mere ownership of capital are termed "rents."
Except that, in the context of residential or commercial rentals, even if the landlord does literally zero work the vast majority of months, it's the landlord who bears the risk of the building being damaged, destroyed, left vacant for some prolonged period, etc., and that's setting aside the question of whether the building is already fully paid for. (I would reason that supracompetitive profits from mere ownership of capital are termed "rents" comes from late 18th Century/early 19th Century *agricultural* landlords, who indeed operated in a largely passive, extremely low risk capacity.)
"It's the landlord who bears the risk of the building being damaged, destroyed, left vacant for some prolonged period, etc.,"
Surely we expect the cost of insurance provision and a vacancy buffer to be priced into rents just as mortgage costs are, no?
The real risks faced by the landlord are basically insufficient or inaccurate vetting of tenants resulting in the innumerable problems that having a bad tenant can cause, or else competition from additional comparable housing units driving market rental rates below the cost of mortgage + insurance.
But in contexts where the latter risk is very unlikely to materialize in the medium term (i.e., basically all large coastal metros) that's not really asking the landlord to bear much risk, and as someone who strives to be a good tenant (plus the fact that vetting is basically a one-time process) the fact that the landlord has to screen bad tenants does have implications for what policies I support but it's not really the landlord providing me personally with much in the way of a service (i.e., something I would be willing to pay for) so much as just them paying information costs that I'm not responsible for creating.
(Not sure about the agricultural rents issue, would have to brush up on economic history, although I'm not sure there's even a tangible point of disagreement there tbh.)
"Surely we expect the cost of insurance provision and a vacancy buffer to be priced into rents just as mortgage costs are, no?"
Yes, and? Those are still expenses associated with risks that the landlord has.
"The real risks faced by the landlord are basically insufficient or inaccurate vetting of tenants resulting in the innumerable problems that having a bad tenant can cause,"
Yes, which necessarily requires landlords to charge rents over what the day-to-day operating costs are.
You also omit that landlords need to recondition units, replace appliances, make repairs not covered by insurance, etc.
"Those are still expenses associated with risks that the landlord has."
The point is that these aren't risks that are uniquely borne by landlords nor are they risks that landlords have any comparative advantage in bearing (owner-occupied housing also has insurance), and moreover we agree the landlords aren't even bearing the monetary costs of them since it's passed through in rent, so there's relatively negligible value-add by the fact that a landlord is the ultimate beneficiary (but not the ultimate payor) for insurance, and we agree that the insurance exists precisely to mitigate risks. So with respect to insurable costs the landlord just isn't bearing that much risk in the first place, so it seems odd to claim that they should entitled to any kind of significant risk premium.
I agree that landlords will rationally charge above the day to day operating costs of a property, and that good landlords will do some level of replacement, repairs, etc. I'm not claiming that being a landlord is *literally* zero work nor that it involves zero risk (hell, I consider it enough of a PITA that I'm not particularly interested in being one myself), my point is just that when you (1) amortize out appliance replacement, reconditioning and repairs over the term of a lease, (2) compare the expense of such repairs to value of equity gained by having someone else cover a mortgage and the tendency of housing to appreciate in price, and (3) compare a $1000 dishwasher every....ten? fifteen years? to the cost of a unit in the mid hundreds of thousands to millions of dollars (and with monthly rent on the order of several thousand dollars minimum in coastal markets), these interventions by a landlord are basically rounding errors compared to the capital gains of landlording, all while the actual amount of labor probably averages very generously to something like one workweek a year.
I'm probably on net one of the more pro-landlord folks on this board, and I recognize that my landlord, in addition to being good about general landlording obligations, also provides me the service of not requiring the massive transaction costs associated with relocating from/to owner-occupied housing, but while "landlords don't do anything" is obviously not *literally* true, it's nevertheless *approximately true* even just as a matter of labor expenditure on the property, and the comparison of the cost of labor and capital inputs relative to capital gains and asset value makes that look even more lopsided.
I don't think this makes landlords as a class or my landlord in particular evil any more than I think owners of dividend stocks receiving a distribution of profits are evil, but I also think that "landlords don't do anything" seems like a much better approximation of the day to day activities of my landlords vis a vis the properties I've rented than "landlords do an amount of work commensurate with a full-time job in order to cover the costs of real estate ownership in the way that owner-occupiers generally do."
The point is that your landlord is effectively just acting like a bank. They invest a large amount of money up front to acquire X and then re-sell the time-limited rights to use X. This assumes financial risk, but doesn't involve any time consuming labor, which makes it very scalable. In most cases, the landlord has a larger bank behind them backing the property, but at a lower risk level.
For what it's worth, I think you're pretty wrong on the cost/work/paperwork time involved in owning a rental unit (at the mom & pop level) vs actual profit margin which is typically negative for at least a few years after a purchase.
But you also forgot about depreciation of rental property (which argues in your favor about long-term profitability)
The real estate market works the same way as the used car market, with the same “lemon” problem. Sellers have all the information about quality and upkeep, and buyers have very little, so it incentivizes sleaziness and hiding things that are broken until after the purchase. There is no reliable way to get an excellent used car or an excellent landlord, you just hope for something good enough, and usually get it.
I find this post very curious. I came out *less* convinced than coming in. MY basically concedes that in fact in some cases poor people will be priced out , but assures us it’s “fine” because of the overall growth effects in incomes opportunities etc. but as in the immigration debates, the key question is “fine for whom?”. The poor seniors now priced out of the rental home will not benefit from rising median wages, new employment opportunities or nice new restaurants and gyms, for example… it’s a glaring omission that MY gives no thought to those people and how to address the pain they will suffer. I agree that the solution cannot be stagnation, but I can’t take seriously any proposal that doesn’t suggest serious thought has been given to the implication of social disruption and shows serious care for the poor and disadvantaged. Anyone who thinks “but overall growth is up” is some sort of trump card is this argument merely demonstrates they are out of touch.
So what's the alternative, keep neighborhoods bad to live in so people don't get "priced out"? Or why preference the status quo, we could actively make neighborhoods worse to live in to push rents further down. Why not?
How about the alternative of actually allowing people to build enough housing that things could be nice *and* prices could be lower than they are now...? That also has the benefit of not casually disregarding people's property rights.
You’re entirely missing the point. You’re defending one policy proposition. I’m not attacking the proposition per se, but rather the seriousness (or good faith) of anyone who’s advocate for it while ignoring the full implications. A serious proposition for this positions would consider what to do to help displaced people, or minimize their displacement, or both.
The serious proposition is to actually let people build enough housing that the supply increase prevents this from happening. You don't really hear about this kind of thing happening in Japan, for example.
Also where is the evidence that material amounts of people are actually being displaced by demand enhancement from development, as opposed to just being pushed out by fixed supply getting more expensive in the face of higher exogenous demand? That is, why isn't it more likely that high rents are caused by more people wanting to live in city X for a number of reasons unrelated to development in a specific neighborhood, but there aren't any more houses in city X, so prices go up? I've yet to see real evidence of development causing displacement, as opposed to lack of supply causing high prices and then displacement?
I have no doubt people are losing housing to rising rents. That's the problem MY is reacting to. But I am very skeptical any material amount of that is caused by development externalities.
"In Tokyo, any resident that gets displaced are able to move into the newly built high density apartment at their existing rental price. My aunt lived in a 1960s built apartment in Tokyo, they built a 40 story apartment nearby, she moved into the new apt at the same rental rate."
If you re-read my original comment, you’d notice that my claim is nothing more than MY’s own concession of this point! You can argue with him and claim that actually development literally is good for everyone, or at least not bad for anyone. If you can make that point, great, but that’s very much not MY’s argument in this post and it is to HIS argument that I was responding. For the third and last time, I am not litigating the case per se, but critiquing the blind spot apparent in MY’s specific argumentation.
But that's what I'm responding to. He's conceding that development can have positive externalities by making the surrounding neighborhood more desirable to live in. And that effect, on its own, can put upward pressure on rents. I'm not relitigating that either. I'm saying that if the development actually adds to the housing stock, then that, on its own, puts downward pressure on rents. But, as you add more to the housing stock in a neighborhood, those positive externalities are going to likely diminish. But more housing stock will keep adding more downward pressure on rents. So what I'm saying is don't build a little, build a lot.
The further point I was making was that I don't think Matt's point is specific to development that increases the housing stock, and so I don't actually think it's an argument against allowing increases in the housing stock. When most people say "development", they mean people renovating buildings, whether or not doing so actually adds to the housing stock. Certainly if you renovate a bunch of properties in a neighborhood, the positive aesthetic externalities may raise other rents in the neighborhood. Is there any place that actually stops people from renovating *existing* property to be nicer? I don't think so. And so the rent-raising part is going to happen anyways, whether or not you allow building more housing units. The only question left is whether you are going to blunt the increase that causes by actually allowing more housing units.
In the eyes of the progressive left, cities are in a catch 22; you spend money to make a crummy neighborhood better, it's considered racist because it increases gentrification; don't do it, it's still considered "racist" because now you're neglecting the BIPOC communities. Either way, they these people will argue that the city is racist, and there exists no decision that would make them happy.
I think understanding this debate requires a little more history. Here's a stylized history:
In the 50s-70s there was a lot of white flight and disinvestment from cities, leaving numerous close in urban neighborhoods with poor, often heavily Black populations (Columbia Heights, South End/Roxbury in Boston, the Mission in SF, etc). Then in the 90s and 2000s, for various reasons, urban living became more desirable among young educated professionals. These people, like Matt, typically didn't have the money to live in the existing rich neighborhoods like this so they ended up in poorer ones. But these people also had way more money than the existing residents of these neighborhoods. So they drew new development aimed at them as customers, and because they had greater influence they secured improvements to the neighborhood. Also, displacing poor people also displaces the challenges of poverty. This leads to a virtuous cycle where the neighborhood keeps getting more desirable and thus more expensive.
Typically this involves the construction of a bunch of new homes, but not nearly as many as the number of people who now are interested in moving there. Even if that happened it's implausible it would fix the problem both because the new homes are more expensive and because the demand precedes the new supply.
The basic moral of the story is that the low prices in the original neighborhoods was a demand phenomenon, and when the demand returned the prices rose.
It's worth asking what could have prevented this. I think the only answers are legally prohibitions on moving, or preventing the increased desire for urban living (maybe by having crime not decline?). Which is to say that it can't be prevented.
This is uncomfortable for many, because it implies that some form of displacement is inevitable, but that's because it's the pre-1990 situation that was an anomaly. Lots of people have the desire to ensure that the burden of change doesn't fall primarily on the disadvantaged. But fundamentally this is impossible -- that's what it means to be disadvantaged. The only solution is to reduce disadvantage directly (like with the CTC, although I am generally more radical than Matt in this direction).
One big problem is that many people believe that once you move into a given neighborhood, you get to call "dibs", and stay there in perpetuity. And this apparently applies even if you live in some of the most expensive neighborhoods in the world.
https://www.mcsweeneys.net/articles/i-am-a-local-where-are-you-from
Any sensible tax code would heavily punish retirees who want to hog real estate near the best jobs
This is a very wise comment. In a market economy, the rich will do as they will and the poor will do as they must. Those between the poles will face constraints inversely proportional to their means.
Because money is a flexible tool, poor people, almost tautologically, will have more difficulty adapting to change than the affluent.
Markets are really good at getting people to produce shit efficiently. The Chicago mercantile exchange has done far more to feed urban populations than Jacobin requisitions or Trotsky’s flying brigades.
Markets are not great at providing security to the masses or allocating the fruits of industry.
Sound public policy involves layering non-market social guarantees on top of market based production. It requires the restraining such guarantees to a level commensurate with production.
America is immensely rich and can afford solid guarantees.
“Markets are not great at providing security to the masses or allocating the fruits of industry”
Free markets are better than anything else that has been tried.
Did New Deal reforms result in less security for the masses?
The US has (very fortunately) not moved too far from a market economy. The masses have greatly benefitted from that fact.
I’d venture to say the likes of Denmark and Sweden have moved a bit further from the market based and have had notable success for the masses, documented in index after index of median quality of life.
Just don't check on what getting an apartment in Stockholm is like if you think it's all fun and games when you try rent control.
No doubt you are looking at very carefully chosen indexes.
Having periodic depressions is not good for the masses.
A mixed system is best. The U.S. is a mixed system. Canada is too. I preferred Canada to the US before the pandemic, but now I’m not sure which one I like more. The spirit of solidarity can lead to over-regimentation
I've always disliked a binary of "free" vs. "nonfree" in this discussion. Allegedly free markets still need governing bodies to set some property rights, and allegedly nonfree markets can't control every single aspect of trade. I see all markets as mixed--the type of mix is very fairly open for debate, of course.
History provides a useful discipline in defining categories. The U.S. in 1880 was a free market society. Federal spending was 3-4% of GDP, borders were open if you weren’t Chinese, and there were no social guarantees. Still, many railroad companies profited handsomely from subsidies.
Mid-Victorian Britain (after the repeal of the Corn Laws) was almost as free, but had somewhat higher taxes, higher debt service costs, and a much better banking system. No big country has had more economic freedom for long than the US did in the late 19th century.
I would much prefer our mixed system to lean much more to the states rather than to the federal government.
Given how negatively I see state governments in general, I would not rather see the system lean there.
I think there is an enormous benefit to having, for example, Vermont implement a single-payer health coverage system and immiserating its citizens rather than doing it at the federal level and immiserating us all.
We can also have culture and morality and even regulation that blunts these impacts.
Part of our current problems as a society as far as I’m concerned is that far too many adopted that 80s corporate raider ethos that the only important stakeholders in business are the ownership. That maximizing profits for shareholders is more or less the only value, and “fuck off” to any other stakeholders.
On the front lines of gentrification in Philly, one can see how investment in neighborhoods can be done humanely and compassionately to those displaced..or quite the opposite if your and your investors profit are your only concern.
Seems bad to be “just asking questions” about residency permits, something we see in China or Cuba. Setting that aside, your morality tale gets causation wrong and you’re also wrong about how to prevent displacement. For causation, neighborhoods were already improving. Crime was falling. Businesses and governments were investing in them by building for example, grocery stores and new metro stops. These projects were the result of people already in the neighborhood, not some magical white newcomers. Everyone wants their neighborhood to be better, and we do what we can to make that so. As for displacement, you ignore how new construction affects rents in existing housing. True, new construction is more expensive. Who wouldn’t want to live somewhere new instead of somewhere run down by use? True, new construction only happens when rents rise. But new construction (1) absorbs newcomers and (2) draws richer people out of existing homes. Contrary to popular belief, for new construction, the residents are disproportionately local, not rich foreigners. So, new construction softens the market for existing construction, thus leading to more affordable rents generally. The moral of your story is that regulation prevented the housing that would have prevented displacement, not that we are helpless without Stalin-style restrictions on where people can move.
I'm not at all suggesting residency permits, not am I saying the problem is rich foreigners. The problem is that a specific urban configuration had the advantage of providing affordable housing in good locations but was fundamentally unsustainable because it required fashion among rich people to require living far away.
In other situations, displacement can be addressed with new construction, rent control, and many other tools. Similarly new construction can almost completely substitute for richer people living in older housing stock in many places, such as the college town I live in (if only we built enough).
But the specific situation of gentrification in formerly desirable neighborhoods in the last 25 years was always going to be very hard to avoid, because essentially all of the housing stock was very undervalued and it all got revalued in a short span of time.
One person's "run down by use" is another person's "historic, full of character".
One person's "new is good" is another person's "they don't make 'em like they used to, new construction is cheap, characterless garbage."
There are also plenty of people (at least where I live) who think that any improvements to the neighborhood will change the "character" or "culture" of the neighborhood, so yes, there are people who are effectively saying "keep it shitty".
I otherwise agree with you here, and also agree that this is inevitable unless we are going to tell people they can't move when and where they like.
“…people who are effectively saying ‘keep it shitty’”
I moved to NYC in 1993, which coincided with what detractors called the “Disneyfication” of Times Square. These were usually the same people who bemoaned the loss of “character” and “grittiness” of the city. The other side of that coin, of course, was, on average, 7 homicides per day, 365 days a year.
The only major European city that has a similar dynamic to American ones is Berlin because of the wall. And just like in the U.S., once the cheaper neighborhoods in (western) East Berlin were available, they were much closer to the city center than the (western) neighborhoods in West Berlin that were cheaper. So they’ve all gotten nicer, which makes the punks in Friedrichshain angry, but it’s because of a unique historical circumstance, not because of the uniquely predatory attitudes of people who don’t get why Berlin is the greatest city in the world.
Right, as far as I can tell "suburb" is often racially coded opposite of the US in many European countries.
Right. This is pretty much the whole subject of critically acclaimed French cinema of the last ~30 years it seems: the segregation of the banlieue and the systemic poverty in the suburbs.
Excellent insights, thanks for sharing
I agree with Sam. One reason I despise the gentrification debates (like the ones raging in my LA neighborhood) is that the “anti-gentrification” camp focuses on displacement as a root problem requiring a solution, rather than a symptom of other systemic issues that are objectively more worthy of thoughtful debate and solutions.
Lack of educational opportunities that turns into lack of economic opportunities, discriminatory hiring practices that limit access to high paying jobs, and redlining and other discriminatory lending practices that prevent home ownership are all disproportionately experienced by people of color. And that’s why displacement, a natural byproduct of a particular neighborhood becoming a nicer place to live, is alleged to be a problem.
But if people of color benefitted equally from newfound local prosperity, the “problem” of displacement would instead be viewed as a natural economic phenomenon and more fundamentally as a housing supply issue. Fixing systemic racism is no easy task, I get it, but yelling about gentrification is just wasting energy that could be put to more productive use.
"...the city could take some of that new tax revenue and just buy up the rental properties from the landlords and sell them to the current residents for a dollar".
This is a terrible use of public funds, resulting in big wins for a few individuals at the expense of everyone else.
If you’re interested in extremely frustrating left-NIMBY arguments, check out the housing discourse in Ireland. A coalition of incumbent home owners, ‘historical preservation’ weirdos and left wing people who don’t understand economics prevent basically any new housing construction. Throw in an absurd planning application process and an extreme parochialism and you get one of the most dysfunctional housing markets in the world!
In Ireland there were only 700 places to rent in the entire country in September. I don't know if it has changed since then, but that is terrible policy.
Interesting! How widespread is the phenomenon there? Can you recommend any further reading? I’m an urban planner and the arguments in this post pretty much describe my professional life, and I’d love to learn more about the dynamics in other places.
Sorry, I tried to share a link and it didn’t work. Search for Dr Rory Hearn’s articles in Journal.ie for some good examples of the dumb stuff people come up with to argue against new housing
Thank you!
I do find the left-nimby sensibilities understandable, though. The pool of people who tend to be left-NIMBYs are highly educated and usually relatively affluent people with artistic sensibilities and good hearts at the same time—not the most common combination. They, like the wealthy educated neoliberals and conservatives, appreciate historical character and artistic beauty. But, like more typical lefties, they want good things in life to be accessible to people who aren’t wealthy. So, they want to make housing more affordable without sacrificing too much historical architectural character or charm. Basic spatial logic makes that difficult-to-impossible. But there is something to it—there is something peaceful and relaxing about physical environments that are not shot through with constant visual reminders of ultra-modern development and glass and chrome, etc. The ambiance created by the relative absence of such monstrosities is truly a luxury that less affluent people deserve to benefit from. I don’t know how I would function without it. But if huge, modern developments are the only way to really level up quality of life while making it more accessible given current population trends, then the left-NIMBY sensibilities will have to be sacrificed. But that is actually not a small thing, and it is a major tragedy of our time.
I have a much less charitable take on the historic preservation wing of left-nimbys. They want to install their aesthetic preferences on everyone else. To quote you
there is something peaceful and relaxing about physical environments that are not shot through with constant visual reminders of ultra-modern development and glass and chrome, etc.
I don't think that's true. And lots of people don't agree either. Rather the subset of historic preservationists assume that everyone shares (or would share) their aesthetic preferences and that it is a public good.
I think if we put these people in charge of movies they would try to limit production of comic book movies and argue they are doing it for the public when they are really doing it to cater to their aesthetic tastes.
And I guess partly my hatred of historic preservation comes down to the fact my building has drafty wood windows due to the preservation nuts.
https://sfplanning.org/sites/default/files/documents/publications/Standards_Window_Replacement.pdf
I don't think of my terrible apartment building as historic, but whatever aesthetic enjoyment people outside draw from looking at wood windows is dwarfed by the cost I feel living in a perpetually drafty apartment.
Window rules are the worst. And I can never tell the difference in materials when I'm passing by!
They exist because we insanely allowed people with abnormally high aesthetic preferences regulatory control. If we allowed this for fashion, every person would bankrupt themselves on clothes trying to meet the regulatory requirement for clothing styles per season
You pose fashion as a hypothetical, but dress codes do exist and can be quite costly to maintain the stricter they get.
San Francisco's rules for this stuff are absurd. They prevent energy-efficient improvements, and they are unevenly enforced.
SF has some of the least-intelligent discourse and planning around housing growth I have ever seen.
San Francisco, and I say this as a public sector employee, the type of governance only affordable to the very rich and very poor.
Agreed. I know a number of people who are extremely angry (think “they’re destroying the neighborhood”)that buildings they find ugly are going up in the neighborhood. And they want to preserve the Sears prefab houses because they fit their aesthetic. I suspect that they would have been against new mid century modern houses.
If we didn’t have change in architecture we’d all still be living in Romanesque houses.
Today's "ugly house" is tomorrow's classic design. Aesthetics are no reason to stop housing development.
I am imagining someone in the Tudor era complaining that this new Tudor architecture is ugly and tacky.
But the choice has never been between housing scarcity on the one hand and leveling old neighborhoods to build high rises on the other. It’s entirely possible to respect the character of a city but still allow construction. The problem is that all Nimbyism is based on old fashioned, reactionary hostility to change. Left wing people just pretend it’s something else. Visit Dublin and see how derelict the center of the city is and then speak to a left nimby about rejuvenating it. They’ll start talking about absentee landlords, ‘vulture funds’ and the 1916 Rising. It’s insane.
Isn’t the solution to preserve specimens of old architecture but not insist on preserving all of it. It really would be unfortunate if all the old Victorians in SF were bulldozed. That doesn’t imply every old Victorian must be protected. Why can’t there be an historic district of 20-50 blocks with very strict preservation rules and then a free market elsewhere. Anyone who wants to drink in the character of old SF could go to the historic district, walk around, maybe stop in a cafe. Those who just want an affordable home could live elsewhere.
This is analogous to national parks. It’s important to preserve a good specimen of each type of ecosystem, and our national parks have done a spectacular job of that. There are few enough old growth trees in the contiguous US that destroying one is s crime against nature. That doesn’t mean that every forest needs to be preserved. Most second growth forests aren’t that interesting, They can be used as tree farms as long as there are enough parks to accommodate those who want unspoiled nature.
The national park example is a good one, because that's a case where the government took it upon itself to acquire and maintain the property on its own bill.
I'm always tempted to let my radical flag fly, and similarly say that if a society says that certain buildings should be preserved, it should be incumbent upon the government of that society to acquire the buildings themselves, or at least subsidize the extra cost it takes to maintain them in their state. It comes out as some sort of weird horseshoe mesh between libertarian right and socialist left views.
I've heard there's a lot of property owners who actively fight off the historic site designation because of the increased burden of red tape.
Yeah. Owners of historical buildings generally can't renovate the interior to make it more livable.
I'm gonna be blunt. I've lived in SF for 11 years. The Victorians have done nothing for me in the 11 years I've been here. And I don't think I'm alone in this.
And there are several problems with the 20-50 blocks proposal.
1. Preservationists always look to expand preservation zone. It has happened in SF, NYC.
2. We run into the problem that there are lots of archetectural styles in SF. And if you allow 20-40 blocks for the victorians, fans of those archetectural styles will quickly say we also want 20-40 blocks.
3. SF Victorians aren't unique in the way the ecosystem of Yellowstone is. You can find quite similar victorians all throughout upstate NY. If you want to see them, why can't you go see them there?
I rather like the idea of telling architecture snobs to fly to Rochester. Still, I think there’s a utilitarian case for preserving a small slice of old SF. The Bay and the topography and the weather make it unique and charming.
My pet project is to reclaim most of the South Bay, build mid rise and garden apartments, and increase the housing stock.
I would really enjoy seeing an earnest debate where preserving Victorians was traded off against preserving salt marshes. Try to preserve everything and working stiffs get screwed.
The simple way to resolve this is that if you like that style, buy one and you can keep it that way. You just can't tell your neighbors that they HAVE to keep it that way.
Yes. But where do you draw the line? No one wants to be the guy who says "This 120 year old house is not worth saving." And our current system of historic preservation is tuned toward preserving everything.
I'm totally willing to be that guy. My sister once lived in an apartment built into a 150 year old house that absolutely should have been condemned as a public health hazard.
I can't be that guy, because I'm not a guy, but I am definitely a person who says, "This old house is not worth saving."
Eh, it depends on where I think. I would guess an 120yr old house would be pretty rare in many parts of the US, but not that uncommon in the Northeast?
Here in Britain about 1/5th of our housing stock is pre-1914, and certainly such houses do sometimes get torn down.
Allowing new construction and respecting the character of a city are in more tension than you'd like to acknowledge. At some point, you can't add in more housing without replacing existing buildings. Obviously we can pick and choose which existing buildings we replace (like that old laundromat in SF), often improving both character and housing stock, but there is a limit.
The notion of a city's "character" is illusory. "Character" isn't just what the buildings look like. It is the era and the population and how the interact with same.
Buildings should reflect and support the society they are built for, not define and control them.
Cities are supposed to change. They aren't eternal. As people come and go, as the population (mostly) grows and occasionally shrinks, as the world changes, the city -- its buildings, infrastructure, rules -- should also change with it.
San Francisco, for example, is not what it was in the 00s, or 80s, or 60s, or the 1850s. It is absurd to insist buildings abide by those design choices or needs and never change.
When people talk about the "character" of a city, they often mean sentimental and simple ideas about landmarks and design, frozen in a moment in time. Unless you're also going to roll the population and technology and world back to whatever time you are thinking of and hold it there, it's just not appropriate.
(And if you do that, well, you're basically Colonial Williamsburg.)
I superlike (c) this comment!
You're correct that physical aesthetics affect all people regardless of ideology. Nostalgia is a helluva drug. Left NIMBYs also tend to fall into a trap of ideological aesthetics, where anything that isn't fully public housing, or at least rent controlled housing means that it'll be taken advantage of by greedy developers who want to gentrify neighborhoods. (Right NIMBYs of course have their own version amounting to not wanting to live next to "those people".)
I don't agree with the generalization that left NIMBYs have superior artistic sensibilities or "good hearts" relative to any other group. In my (vast) professional and personal experience with this phenomenon, they engage in a lot of motivated reasoning. As discussed at length in this comment thread, most people dislike change, which is understandable but doesn't give people the right to dictate policy beyond the bounds of their own property.
And aesthetics are a personal preference, not a policy matter.
Thats a lot of hoops to jump through when "I on the left for everything, but my house is worth a lot of money, so suck it" is 99.95% of the time the real motivation.
I used to think property value was the primary driver of nimbyism, I've now concluded small (c) conservatism is the primary driver.
Charitably, I find the motivations intertwined. Small c conservatism is usually driven by fear of loss in some way, and one of those that plays prominently in SF politics is loss of property value and (to a lesser extent) convenient parking.
Though SF specifically, there is a bit of racism mixed in too. Lots of old white boomers really do not like how many areas of SF have become heavily asian, with the more recent influx of south asians being a bridge too far for many. Much of "but the techies are taking over" is really anti-asian sentiment coded behind occupation.
<they want to make housing more affordable without sacrificing too much historical architectural character or charm.>
The answer to this isn’t (or doesn’t have to be) NIMBYism though. One of the reasons we have only “glass and steel” modern construction is that those are the materials and typologies that make dollar sense. Those 5 over 1s pencil in a way almost nothing else does given constraints like the building code.
Relax the building code to make new construction cheaper so that more aesthetic styles and material types pencil. Let a thousand porticos bloom, or whatever. Building code is the next YIMBY frontier!
Perhaps there is a better outlet for left NIMBY intuitions. A century ago, there was a movement to build exurban “garden communities.” Many advocates wanted to bring decent housing to ordinary workers and understood this was basically impossible in dense, urban areas.
It is not difficult to build rustic cottages in the exurbs. You can even have aesthetically pleasing facsimiles of Tuscan and French provincial towns. Hell, for the cost of a big, suburban home you could build an ante bellum style plantation house.
However, the median earner will never be able to afford an attractive, Victorian home for the same reason a median earner will never be able to afford a Winslow Homer painting-- it’s impossible to miss new ones and that guarantees high prices.
Still, it is possible to bring replica ye olde housing to the masses just as it is really easy to crank out Winslow homer prints-- you just have to convince people that replicas are ok.
People love replicas but don't want to admit it. Replicas are safe. Most people's experience with art starts with replicas. In my case starting with posters in college, then "fine" arts prints from New York Graphic Society, then originals. What % of American housing units aren't replicas?
I don’t know why, if buildings really had “historic character and artistic beauty”, someone or a group wouldn’t buy them to preserve or move them. Items with real aesthetic value are usually great status symbols, for their rarity and exquisiteness. I suspect that we don’t see people buying to preserve because those buildings in fact don’t have historic character and artistic beauty.
We must preserve this beige concrete apartment block that was built in 1970. It's historic.
By the way, as a long time Philly resident and real estate development dabbler locally, huge thanks to San Fran and New York, Boston, DC for pricing everyone out.
You’ve made Philly a much more desirable destination for recent grads and professionals who want an urban lifestyle that is reasonably affordable.
Obligatory: https://m.youtube.com/watch?v=oURuN3yYzX8
Funny but unfortunate lingering views. Have you visited recently?
Philly and Baltimore were particularly badly effected by “white flight” in the 60-80s but here in Philly at least, we’ve meaningfully reversed those unfortunate trends. We still have enormous poverty crime and racial segregation problems for sure, but there is a ton going on here, and I’d venture to say culturally speaking, Philly is overtaking a ton of “1st tier” cities in importance as they price out artistic talent. Our restaurant and arts scene is top notch and this is much of the reason people want to be in city centers to begin with. The city is buzzing with life, investment, growth and creativity.
I’ve been seeing a few articles about the AirBnB apocalypse. Apparently due to the surge in demand during covid a lot of people bought vacation homes and condos to rent on AirBnB, Vrbo, etc. The were getting top dollar for say 20 nights a month. But now, due to people preferring hotels for various reason, oversupply, etc. rates and occupancy have plunged and people are losing their shirts.
The article mentioned people who are still able to succeed and they talked about the need for good design, the value of repeat guests. One made note of the coffee and wine people liked and made a point of having it stocked when they checked in.
The public seems to have the view that landlords have all the power. They think, “I can just buy something and charge whatever I want for rent.” But that’s totally not how it works.
For whatever reason people have a hard time seeing the real estate market work in the same way as the vehicle, laptop, laundry detergent, stock, etc. market.
"The public seems to have the view that landlords have all the power."
See also the routine claim in progressive on-line spaces that, "Landlords don't do anything."
I've had good landlords and bad landlords -- our current landlord has for the most part been very good, responsive to our concerns and also certainly put in a lot of renovation work before we moved in. Nevertheless, *even granting that he's a good landlord,* the median and modal amount of days per month that he interacts with the property we rent is zero (which is, to be clear, fine by us).
We don't have to pretend that being a landlord is literally zero work to acknowledge that there's a reason that supracompetitive profits from mere ownership of capital are termed "rents."
Except that, in the context of residential or commercial rentals, even if the landlord does literally zero work the vast majority of months, it's the landlord who bears the risk of the building being damaged, destroyed, left vacant for some prolonged period, etc., and that's setting aside the question of whether the building is already fully paid for. (I would reason that supracompetitive profits from mere ownership of capital are termed "rents" comes from late 18th Century/early 19th Century *agricultural* landlords, who indeed operated in a largely passive, extremely low risk capacity.)
"It's the landlord who bears the risk of the building being damaged, destroyed, left vacant for some prolonged period, etc.,"
Surely we expect the cost of insurance provision and a vacancy buffer to be priced into rents just as mortgage costs are, no?
The real risks faced by the landlord are basically insufficient or inaccurate vetting of tenants resulting in the innumerable problems that having a bad tenant can cause, or else competition from additional comparable housing units driving market rental rates below the cost of mortgage + insurance.
But in contexts where the latter risk is very unlikely to materialize in the medium term (i.e., basically all large coastal metros) that's not really asking the landlord to bear much risk, and as someone who strives to be a good tenant (plus the fact that vetting is basically a one-time process) the fact that the landlord has to screen bad tenants does have implications for what policies I support but it's not really the landlord providing me personally with much in the way of a service (i.e., something I would be willing to pay for) so much as just them paying information costs that I'm not responsible for creating.
(Not sure about the agricultural rents issue, would have to brush up on economic history, although I'm not sure there's even a tangible point of disagreement there tbh.)
"Surely we expect the cost of insurance provision and a vacancy buffer to be priced into rents just as mortgage costs are, no?"
Yes, and? Those are still expenses associated with risks that the landlord has.
"The real risks faced by the landlord are basically insufficient or inaccurate vetting of tenants resulting in the innumerable problems that having a bad tenant can cause,"
Yes, which necessarily requires landlords to charge rents over what the day-to-day operating costs are.
You also omit that landlords need to recondition units, replace appliances, make repairs not covered by insurance, etc.
"Those are still expenses associated with risks that the landlord has."
The point is that these aren't risks that are uniquely borne by landlords nor are they risks that landlords have any comparative advantage in bearing (owner-occupied housing also has insurance), and moreover we agree the landlords aren't even bearing the monetary costs of them since it's passed through in rent, so there's relatively negligible value-add by the fact that a landlord is the ultimate beneficiary (but not the ultimate payor) for insurance, and we agree that the insurance exists precisely to mitigate risks. So with respect to insurable costs the landlord just isn't bearing that much risk in the first place, so it seems odd to claim that they should entitled to any kind of significant risk premium.
I agree that landlords will rationally charge above the day to day operating costs of a property, and that good landlords will do some level of replacement, repairs, etc. I'm not claiming that being a landlord is *literally* zero work nor that it involves zero risk (hell, I consider it enough of a PITA that I'm not particularly interested in being one myself), my point is just that when you (1) amortize out appliance replacement, reconditioning and repairs over the term of a lease, (2) compare the expense of such repairs to value of equity gained by having someone else cover a mortgage and the tendency of housing to appreciate in price, and (3) compare a $1000 dishwasher every....ten? fifteen years? to the cost of a unit in the mid hundreds of thousands to millions of dollars (and with monthly rent on the order of several thousand dollars minimum in coastal markets), these interventions by a landlord are basically rounding errors compared to the capital gains of landlording, all while the actual amount of labor probably averages very generously to something like one workweek a year.
I'm probably on net one of the more pro-landlord folks on this board, and I recognize that my landlord, in addition to being good about general landlording obligations, also provides me the service of not requiring the massive transaction costs associated with relocating from/to owner-occupied housing, but while "landlords don't do anything" is obviously not *literally* true, it's nevertheless *approximately true* even just as a matter of labor expenditure on the property, and the comparison of the cost of labor and capital inputs relative to capital gains and asset value makes that look even more lopsided.
I don't think this makes landlords as a class or my landlord in particular evil any more than I think owners of dividend stocks receiving a distribution of profits are evil, but I also think that "landlords don't do anything" seems like a much better approximation of the day to day activities of my landlords vis a vis the properties I've rented than "landlords do an amount of work commensurate with a full-time job in order to cover the costs of real estate ownership in the way that owner-occupiers generally do."
The point is that your landlord is effectively just acting like a bank. They invest a large amount of money up front to acquire X and then re-sell the time-limited rights to use X. This assumes financial risk, but doesn't involve any time consuming labor, which makes it very scalable. In most cases, the landlord has a larger bank behind them backing the property, but at a lower risk level.
For what it's worth, I think you're pretty wrong on the cost/work/paperwork time involved in owning a rental unit (at the mom & pop level) vs actual profit margin which is typically negative for at least a few years after a purchase.
But you also forgot about depreciation of rental property (which argues in your favor about long-term profitability)
The real estate market works the same way as the used car market, with the same “lemon” problem. Sellers have all the information about quality and upkeep, and buyers have very little, so it incentivizes sleaziness and hiding things that are broken until after the purchase. There is no reliable way to get an excellent used car or an excellent landlord, you just hope for something good enough, and usually get it.
I find this post very curious. I came out *less* convinced than coming in. MY basically concedes that in fact in some cases poor people will be priced out , but assures us it’s “fine” because of the overall growth effects in incomes opportunities etc. but as in the immigration debates, the key question is “fine for whom?”. The poor seniors now priced out of the rental home will not benefit from rising median wages, new employment opportunities or nice new restaurants and gyms, for example… it’s a glaring omission that MY gives no thought to those people and how to address the pain they will suffer. I agree that the solution cannot be stagnation, but I can’t take seriously any proposal that doesn’t suggest serious thought has been given to the implication of social disruption and shows serious care for the poor and disadvantaged. Anyone who thinks “but overall growth is up” is some sort of trump card is this argument merely demonstrates they are out of touch.
So what's the alternative, keep neighborhoods bad to live in so people don't get "priced out"? Or why preference the status quo, we could actively make neighborhoods worse to live in to push rents further down. Why not?
How about the alternative of actually allowing people to build enough housing that things could be nice *and* prices could be lower than they are now...? That also has the benefit of not casually disregarding people's property rights.
You’re entirely missing the point. You’re defending one policy proposition. I’m not attacking the proposition per se, but rather the seriousness (or good faith) of anyone who’s advocate for it while ignoring the full implications. A serious proposition for this positions would consider what to do to help displaced people, or minimize their displacement, or both.
The serious proposition is to actually let people build enough housing that the supply increase prevents this from happening. You don't really hear about this kind of thing happening in Japan, for example.
Also where is the evidence that material amounts of people are actually being displaced by demand enhancement from development, as opposed to just being pushed out by fixed supply getting more expensive in the face of higher exogenous demand? That is, why isn't it more likely that high rents are caused by more people wanting to live in city X for a number of reasons unrelated to development in a specific neighborhood, but there aren't any more houses in city X, so prices go up? I've yet to see real evidence of development causing displacement, as opposed to lack of supply causing high prices and then displacement?
I have no doubt people are losing housing to rising rents. That's the problem MY is reacting to. But I am very skeptical any material amount of that is caused by development externalities.
Coincidentally, I just saw this retweet tonight:
https://twitter.com/Noahpinion/status/1607936965181337600
"In Tokyo, any resident that gets displaced are able to move into the newly built high density apartment at their existing rental price. My aunt lived in a 1960s built apartment in Tokyo, they built a 40 story apartment nearby, she moved into the new apt at the same rental rate."
If you re-read my original comment, you’d notice that my claim is nothing more than MY’s own concession of this point! You can argue with him and claim that actually development literally is good for everyone, or at least not bad for anyone. If you can make that point, great, but that’s very much not MY’s argument in this post and it is to HIS argument that I was responding. For the third and last time, I am not litigating the case per se, but critiquing the blind spot apparent in MY’s specific argumentation.
But that's what I'm responding to. He's conceding that development can have positive externalities by making the surrounding neighborhood more desirable to live in. And that effect, on its own, can put upward pressure on rents. I'm not relitigating that either. I'm saying that if the development actually adds to the housing stock, then that, on its own, puts downward pressure on rents. But, as you add more to the housing stock in a neighborhood, those positive externalities are going to likely diminish. But more housing stock will keep adding more downward pressure on rents. So what I'm saying is don't build a little, build a lot.
The further point I was making was that I don't think Matt's point is specific to development that increases the housing stock, and so I don't actually think it's an argument against allowing increases in the housing stock. When most people say "development", they mean people renovating buildings, whether or not doing so actually adds to the housing stock. Certainly if you renovate a bunch of properties in a neighborhood, the positive aesthetic externalities may raise other rents in the neighborhood. Is there any place that actually stops people from renovating *existing* property to be nicer? I don't think so. And so the rent-raising part is going to happen anyways, whether or not you allow building more housing units. The only question left is whether you are going to blunt the increase that causes by actually allowing more housing units.
In the eyes of the progressive left, cities are in a catch 22; you spend money to make a crummy neighborhood better, it's considered racist because it increases gentrification; don't do it, it's still considered "racist" because now you're neglecting the BIPOC communities. Either way, they these people will argue that the city is racist, and there exists no decision that would make them happy.