Housing Affordability Crisis

There is a housing affordability crisis in US cities today. In his imaginative, animated article for the Huffington Post, Michael Hobbes explains the problem and its causes as one of zoning and self-interested homeowners.

He first acknowledges that city downtowns are where most high-paying jobs are located, and that most people want to live within a 30 minute commute from their work. As cities grew, “[t]hey built upward, divided homes into apartments and added duplexes and townhomes,” to accommodate the increased demand for housing near downtown. Have we just run out of room now? Not exactly... 😞

In the 1970s, likely spurred by the outlawing of explicit housing discrimination based on race, neighborhoods began using zoning and other restrictions to intentionally inflate the price of housing, to prevent poor people (read: black people) from being able to move in. Yeah. Nasty.

Maybe today people are no longer quite as racistly motivated (maybe), but arguably it is in homeowners' best interest to increase their real estate value by limiting the supply of housing. There are many mechanisms they can use to do this. Hobbes mentions requiring large backyards and multiple parking spaces, prohibiting multi-family units, or limiting the height of new apartment buildings to prevent shadows. Some techniques, like requiring extensive “design reviews” which slow down and increase costs for new development, are done in the name of preserving neighborhood character. Whether the motivation is racist, self-interested, or sentimental, the effect is the same: less dense housing gets built, the existing housing becomes more expensive.

I appreciate Hobbes’ simple illustration of housing as supply and demand, with the supply being constrained by all-too-powerful homeowners and neighborhood associations, however, among affordable housing advocates there is disagreement about whether relieving some of the constraints on development would result in lower housing costs. Since developers are incentivized to build more expensive, luxury units, how exactly will that solve the affordability crisis? And isn’t it the most affordable units that are often demolished in favor of new development? Cliffhanger??