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Former Biden advisor takes on housing affordability in the Washington Post

Last week the Washington Post published a reasonable summary of the housing affordability crisis and the potential solutions to it, framed in a plea to the Democratic presidential candidates to prioritize it.

The authors begin by defining the crisis as “a severe lack of housing supply,” especially at the low end of the market. Not only that, nationally that supply is continuing to decrease and vacancy rates are plummeting. Even though an estimated 1.4M units are being built each year, the country loses 1.7M units due to old age or (increasingly) natural disasters. That’s 300K fewer units than we’d need to keep the housing supply constant, nevermind to start chipping away at the dearth. This limited supply correlates with unaffordability for the working class, they later quantify, “The median cost of rent and utilities is up 13 percent over the past nearly 20 years, median income is up less than 1 percent.”

They also call out some additional consequences of the affordability crisis, for example how it exacerbates the wealth gap. “An entire generation of families whose parents found in housing a critical path to building wealth, find it now blocking the way.” It also undermines labor mobility, which in turn diminishes the economy. Finally, it’s an obvious contributor to the increasing issue of homelessness in our cities.

So why isn’t there enough housing? The authors attribute the causes of the crisis to high government fees, stiff zoning restrictions, and the rising costs of labor and materials. These high costs, the authors argue, relegate development to the luxury end of the market.

The last third of the article is dedicated to solutions to the problem. As advice for national candidates, they focus on expanding existing programs to subsidize low-income development, the Low-Income Housing Tax Credit and the New Market Tax Credit, as well as the Opportunity Zone tax credit. The Housing Trust Fund and Capital Magnet Fund are also lauded. In addition, they recommend that municipalities ease overly restrictive zoning and lower high fees for new building, and in terms of federal policy, the government could incentivize those changes by making federal funding contingent on them.

The authors do acknowledge that building our way out of the problem will still take time, and recommend increasing funding to the federal housing voucher program, as well as increasing the value of those vouchers. They also mention rent control as a short term solution, but caution that “it may exacerbate the problem, by limiting the returns to builders and their incentive to construct more dwellings.”

I liked this article for the simplicity with which they illustrate the problem, coupled with their straightforward and specific solutions. I particularly like the idea of tying federal benefits for cities and states to progress made toward affordability. The part where I feel this article missed the mark is their explanation of the genesis of the crisis and their neglect of cities in that narrative.

My simplified version of the housing affordability crisis would center more around the increasing popularity of larger cities after decades of neglecting and restricting urban development in favor of single-family, suburban development further and further away from city centers. They do acknowledge, “In today’s economy, the best job opportunities are often in the nation’s big urban areas, but this is also where housing is least affordable,” but they don’t explicitly make the connection that the demand for city housing causes the higher prices. Instead, the article overemphasizes the role of increased building costs, and consequently the recency of the issue. They say the rise in materials cost is “driven in significant part by the trade war and higher tariffs,” even while noting elsewhere that the effects of the crisis were being felt far before Trump was elected.

Finally, by sidestepping cities’ role in the cause of the crisis they underemphasize them in their list of solutions. They say, “It would also make sense to increase the value of the vouchers to provide low-income families the chance to move to low-poverty, higher-opportunity neighborhoods,” but make no other prescriptions about density, only glancing the issue by recommending less restrictive zoning. Yes, we need to build more affordable housing and use public dollars to incentivize and accelerate that development, but new housing will do little good if it isn’t concentrated where people want and need to be.

Simple Supply and Demand?

The debate around whether building more market rate housing will alleviate the housing affordability crisis can sometimes feel like it degenerates into a false dichotomy: “YIMBY! It’s simple supply and demand!” vs. a host of excuses for why supply and demand doesn’t neatly apply to the housing market. A more nuanced economics perspective might be that yes, supply and demand does apply to the housing market, but it is a heterogeneous market, so we must also consider the cross-price elasticity of demand. As Rick Jacobus's piece in Shelterforce explains, the cross-price elasticity of demand is “a measure of how readily people switch from one submarket to another,” and accordingly, “how a change in the price of one product impacts the level of demand for another product.”

The fact that housing markets are heterogeneous is pretty intuitive. Most obviously there’s location; NYC is a separate market from LA. Even within a geographic location there are distinct submarkets, like the student housing submarket called out by Jacobus or the yuppie submarket of new construction, amenity-rich, one-bedroom apartments. These submarkets may have blurry edges, and units can change submarkets over time or with investment. For example, is Newark a separate submarket from NYC? Or, a luxury unit could slide into the next lower price range as it ages, or a student house could be remodeled and upgraded into a unit for young professionals or families. Similarly, housing in different markets are substitutes for residents, meaning a student may be able to find a mid-range apartment if they can afford it, instead of a student apartment.

The question then is not whether new market rate housing will affect rents at the bottom of the market, but by how much. This illustration of the concept shows how lower prices might trickle down to the next market tier.


It makes it pretty easy to imagine that prices in the "Very Low Cost" tier will be little affected by changes at the top. However, according to the California Housing Project, this UC Berkeley study found “New Affordable Housing Twice As Effective at Combating Displacement of Lower-Income Families.” Turn that around, and we learn that building market rate units would have an equivalent effect on the bottom of the market as building half as many affordable units. Which ain’t nothing!

Indeed, the cross-price elasticity of demand in any housing market is certainly not 1, as it would be in a completely homogeneous market. All of the usual arguments for why supply and demand don’t apply simply translate to a lower elasticity of demand. Supply in the high end goes up, but that just attracts foreign investors and most units stay vacant? That’s just that many more units that won’t trickle down to the next housing bracket. Increase in the mid market range allows some roommates to uncouple and get their own places? Same thing. None of these arguments cause supply and demand to completely fall apart. They just suggest that the effect of increasing supply in one part of the market will have less effect in another part of the market. It doesn’t mean that effect is zero.

I-5 Rose Quarter Improvement Project Comment

This is the public comment I wrote in response to the Environmental Assessment of the I5 RQIP.

I strongly believe that the I-5 Rose Quarter Improvement Project will not only fail to deliver the improvements it promises, but it will have an overall detrimental effect on Portland, the state of Oregon, and our planet.

ODOTs primary motivation is to improve traffic flow on I5 through Portland. To get buy-in from the city, they’re throwing in the sweeteners of freeway caps and some nominal pedestrian and bicycle infrastructure improvements. All of this for the high price of half a billion dollars and years of construction, assuming all goes as planned.

The changes to pedestrian and bicycle infrastructure are treated too much as an afterthought in this plan. The sparse details currently available have caused both the PBOT Bicycle Advisory Committee and Pedestrian Advisory Committee to endorse the No Build alternative. One concrete detail of the bike plan that particularly concerns me is the removal of the quiet Flint Street bridge, and diversion of bike traffic onto a main car thoroughfare with an unprotected bike lane. I worry that these types of concerns will fall to the wayside as the project moves forward with priority #1: the freeway.

In terms of mitigating congestion, I believe the overall approach of widening the freeway with additional entry and exit lanes simply will not work. If vehicle volumes were to stay the same, then yes, the additional capacity might provide for more smoothly flowing traffic. However, history has proven time and again that this temporarily unencumbered flow will only invite more driving, recreating just as much congestion within a few short years, and this time with more cars. This phenomenon of induced demand cannot be overlooked (as it was in the EA), especially in light of Portland’s growing population.

Once we acknowledge that the increased freeway capacity will result in more vehicle miles traveled (VMT), the claim in the EA that vehicle emissions could go down as a result of this project is laughable. This project has the potential to dramatically increase emissions as well as pollution in the immediate area, and the EA completely failed to consider anything beyond a best case scenario of zero VMT increase.

As global warming looms large in the next couple decades, we have a responsibility to decrease emissions as much as possible. Since the transportation sector makes up such a large share of greenhouse gas emissions in Oregon as well as globally, we must take an extra critical look at these types of projects to ensure that they are moving us in the right direction. Committing resources to make driving easier is questionable to begin with, and the I5 RQIP purposely ignores its environmental consequences, inadequately modifies infrastructure for alternative modes, all while failing to mitigate congestion on I5. No build!

The Green New Deal and Density

A large part of my enthusiasm for promoting development that facilitates dense, city living is the belief that it is more sustainable, in terms of both resource and energy consumption. Accordingly, Alex Baca’s piece in Slate (though not its headline) rang true to me: The Green New Deal’s Huge Flaw. The author, Alex Baca, calls out not exactly a “flaw” in AOC’s proposal, but that by failing to address the car-centric structure of America, the Green New Deal is missing out on a key way to reduce both energy consumption and economic inequality.

A large part of Baca’s argument is the claim that personal car usage is a large fraction of America’s energy consumption and pollution. According to Baca, “America’s largest source of greenhouse gas emissions is transportation. In California, the proportion of CO2 from transportation is even higher: above 40 percent.” To dig into that a bit, the “transportation sector” defined for most energy studies includes both passenger and freight, as well as all vehicles from motorcycles to airplanes to cargo ships. The EIA report on worldwide Transportation Sector Energy Consumption says, “Passenger or personal mobility-related fuel consumption accounted for 61% of total world transportation energy consumption in 2012. Among the personal mobility modes of transport, light-duty vehicles accounted for 44% of total world transportation energy use.” The share of personal vs. total transport for Americans is even higher, suggesting that indeed a large fraction of emissions can be attributed to personal cars. Lawrence Livermore National Laboratory reported that transportation accounted for over 30% of national energy consumption in 2017 (also their flow charts are amazing for understanding energy use, and they’ve been producing them since the 70s!!).

“But the Green New Deal is all about electric vehicles!” you retort. Sure, but better than converting gasoline vehicle miles traveled (VMT) to electric VMT would be reducing VMT entirely.

Baca rightly attributes America’s intense dependence on cars to suburban sprawl, enabled by highways and federal spending packages of decades past and current. An ambitious policy like the Green New Deal could work to reverse that trend, focusing development on increasing density in existing cities, instead of building even further out exurbs. Baca also acknowledges the *convenient* housing crisis, stating “the scale of housing demand at this moment is such that we could build...in car-centric suburbs, too, and provide a human density that would not just support transit but also reduce the need to travel as shops, jobs, and schools crop up within walking distance.” Density density density!

Baca also provides a good summary of how sprawl exacerbates existing economic disadvantage by gating access to employment and services on access to a personal vehicle.

She concludes by citing a few specific recommendations for AOC’s proposal: tracking transportation-related emissions and explicitly combat spatial mismatch between jobs and residences.

“A Green New Deal must insist on a new, and better, land use regime, countering decades of federal sprawl subsidy. The plan already recognizes the need to retrofit and upgrade buildings. Why not address their locations while we’re at it?”

SMBC on Gentrification

Well, nice to see that my pet topic is even getting talked about in my favorite web comic :)

 https://www.smbc-comics.com/comic/the-real-villain

"None of the local tenants own any property." Yes. So what to do?

An interesting solution was brought up by CityObservatory. Planners in Washington DC are proposing to "use a combination of private investment and public funds to acquire existing housing, and maintain its availability for low and moderate income households." Instead of building public housing projects, why not take the cheaper, existing more affordable housing and use funds to keep it that way? I like it.

Filtering and Related Phenomena

In the housing affordability crisis, it’s the lowest income bracket that winds up getting priced out and displaced, so how can we expect the almost exclusively luxury housing being built in the tightest rental markets to solve the problem? Even market-rate housing is already too expensive (see: the definition of the affordability crisis). While it may be true that high-end development alone won’t solve the affordability crisis, especially for the lowest income renters, there are several mechanisms by which it can definitely help.

The most obvious of these is tightly related to supply and demand. In its simplest form, the argument is that if you increase the supply of housing, competition for units will go down, and rents along with it. Acknowledging the spectrum from comparatively affordable older units to luxury new construction, we can still see that providing new housing for the highest income bracket relieves pressure at the next say high-middle income bracket, which in turn relieves pressure for middle income housing, and so forth. Build some high end units, and eventually some lower end units will become vacant on the other end.

The second mechanism by which market-rate or more luxury development lowers rents for all is called “filtering.” According to the Washington Post, “Filtering is the process by which, as housing ages, it becomes less desirable to wealthier residents, thereby becoming affordable to the middle class and poor.” In fact, much of what we consider affordable housing today was originally built as market-rate housing (and probably marketed as luxury :P).

It should be noted, however, that if newer units are not added to the market, filtering will not happen. If there are no newer, sexier units for higher income renters to move into, they will continue to compete for the slightly older, would-be affordable units, keeping rents high even as the units age. In this way, the two phenomena are actually one and the same. So really, filtering is the process by which "older market-rate housing becomes more affordable as new units are added to the market," (source: Berkeley IGS).

While filtering may not solve the entire affordability crisis today, with the anticipated growth of cities in the coming decades, we need to be building now if we want to have a large stock of more affordable housing in the future.

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??

The Need for Vision Zero

An illustration by Karl Jilg, commissioned by Claus Tingvall.

I'm your density

The world is becoming a denser place. Not only is the global population growing, but the population is concentrating itself in bigger and denser cities. 1 in 5 people today live in a city with over 1 million people, predicted to rise to 1 in 3 by 2030. In the United States today, 3 in 4 live in a city.

Source: UN's: The World's Cities in 2018 (Data Booklet)

And if humans are going to continue living on this planet, that density is probably a good thing. As Oscar Boyson summarizes in his discussion-starter video The Future of Cities,

"When density is done right, it's the best if not the only solution to our growing climate crisis."

-Oscar Boyson

So how do we build dense urban centers in a sustainable way, while also maintaining or even improving quality of life for those who live there? There are plenty of problem areas to focus on, like education, employment, or renewable energy, but the two issues I'm hoping to examine first in this blog are transportation and housing. Here are some pithy thoughts of mine to start with:

Transportation

Biking is super fun. Cars killed the city (everyone hates walking under a freeway). Biking and walking make people healthier. Public transportation evens the playing field. A University of Waterloo Study (among others) finds a direct link between commute time and overall satisfaction in life. Not to mention the environmental benefits of limiting car use, and the decreased wear and tear on infrastructure.

Lastly, car traffic just sucks. (And more roads don't fix the problem.)

Housing

Affordability. Gentrification. Displacement. Homelessness. Loss of green-space. Eviction. Rent control. NIMBY, YIMBY, PHIMBY?? How do we increase residential density without destroying existing communities? Some solutions I do like the sound of: mixed-use development, residential infill, eliminating parking requirements.

Overall, my goal here is primarily to educate myself on these topics, and hopefully make those learnings accessible to anyone else who wants to follow along. I'll begin with the articles and media that have gotten me interested over the past few years, and then branch out into new material, maybe eventually even doing some of my own data analysis 😮 Cities are the future. Let's do them right.