Americans are being eaten alive by housing costs. In July, prices rose over 10 percent in major cities like San Francisco and Denver. Nationally, they rose at twice the rate of wages.
The quest to slay this particular dragon has produced an eclectic movement of technocratic lefties, libertarians, and reformists conservatives who share one particular solution: reforming land use regulations. More interestingly, they're pitching this as an under-appreciated way to tackle rising inequality.
It makes basic economic sense. Local governments have regulations dictating who can build what kind of building where. If those rules are strict or burdensome enough, they'll constrict the supply of housing. (San Francisco is notoriously sclerotic in this regard.) If a lot of people are moving into an area, that means there's a lot of demand for housing. So if supply can't keep up, prices are gonna spike.
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As for what this could do about inequality, housing is the driving force behind rising costs of living. Bring those down, and you raise real incomes. You also open up vibrant economic centers to people who need better jobs but can't afford to live in the areas where the jobs are.
It's certainly not a bad idea. But unfortunately, it has some serious limitations.
The first is just practical. There's no central federal regulation governing land use zoning, the preservation of historic buildings, green spaces, urban walkability, or where one can stick a mix-used development. So there's no one lever to place pressure on. Indeed, there's often no central authority in individual cities. The housing problem in the Bay Area, for example, stretches across the cities of San Francisco, San Jose, and Oakland.
There are certainly other movements, like the one to raise the minimum wage, that have focused on city-by-city organizing. But in that case the grand prize is clearly a federal wage hike. For land use, you'd need to establish some sort of federal system — like a standardized package of regulations, which local governments are cajoled into adopting through fiscal incentives. (Think of how highway funding was used to entice states into making the drinking age 21.) Advocates tend to say they aren't calling for annexation or centralization, but the logic of the problem quite obviously screams for exactly those things.
Which brings up a deeper and more human problem: Cities don't just manage themselves. This is a collective action problem that can't be tackled by the free market alone. The necessity of municipal top-down planning is unavoidable, and that means local democratic debate. Imagine living in a city where all those forms of land use regulation really were minimized, and new residents came streaming in. People would hate it. Which is probably why it's so hard to make it happen. The densest cities in the world are actually incredibly impoverished, and it's probably not a coincidence that when residents have serious socioeconomic power — and thus political clout — density becomes a lot harder to ramp up.
It seems an easy call to say San Francisco's laws are a mess. But exactly what should the trade-off be between the housing supply and preserving historical sites, aesthetic appearances, or whatnot? There are no "right" answers to these questions. That a bunch of libertarians and conservatives are signing on to an idea that implies corralling everyone into adhering to a standardized minimum ought to tell you that, at best, they haven't thought through their own idea. (Frankly, concern-trolling lefties seems to be a fair part of the attraction.)
There's also one last, primordial economic problem.
As mentioned, San Francisco's plight begins with the fact that so many people want to move there. But why? That it's a paradise for hippies seems insufficient inducement by itself. Rather, American society is beset by inequality. This means that much of the wealth our economy produces every year flows to a chosen minority of the populace. The rest of us are left with ever-more economic insecurity, and sometimes outright deprivation. The safe perches are the places where the U.S. economy remains at its most vibrant: major urban hubs like San Francisco.
But again, thanks to inequality, there is a fair-sized minority of the national population that can afford the sky-high rents. So they move in and take up every last inch of space, and everyone else is left scrambling at the socioeconomic edges. The cost of land naturally rises as the economic activity on it becomes more attractive. So in a society marked by a highly unequal distribution of incomes, it must be the case, by definition, that the poor will be squeezed out of the places they most desperately need to access.
It's theoretically possible to build so much housing that you soak up the demand from the upper class. Then prices come down, and then you keep building until you've got enough affordable housing for everyone. But as we've seen, the practical, political, and sociological hurdles to actually pulling that off are enormous.
But if we had less inequality, the rich couldn't price the poor out to begin with. We'd probably also have more economically vibrant areas to choose from. People would be more financially able to move between them, and that would lower the moral stakes of giving each individual community free rein to plan its own development.
Some immediate solutions to the housing crisis do come to mind: At minimum, we should quadruple the annual federal budget for housing vouchers, from $50 billion to $200 billion. Adding on a program of relocation vouchers would also be a good idea, but again, only if we're willing to fork over the cash.
But fundamentally, we need an assault on the relative divergence between incomes: high-end tax hikes to cut down the upper class' purchasing power, minimum wage hikes, unions, and a full-employment monetary policy to give workers more bargaining power.
Land use reform to some degree would certainly be a worthwhile addition to all this: Hit the problem at both ends and meet in the middle.
But quite often, its advocates seem to talk about it so they can avoid mentioning all that other icky socialist stuff.
