How not to solve the housing crisis

The idea that building more homes will solve the housing crisis is hardening into orthodoxy. This article from the Atlantic sums up both the content and the tone of the pro-building argument: only building more homes can solve the housing crisis, and if you don’t believe this, you are stupid.

As one of the stupid people, I’d like to summarize my position. I will do my best to forego my usual snark. (I realize I have already engaged in snark. So perhaps it’s better so say I will tone down my snark as much as possible.)

Much of the pro-developer movement starts with the premise that the housing market is just basic economics. Supply and demand. This ignores a few key points — for most people, the only housing market they care about is hyper-local. Demand is not static. And the housing market is not one single market, but several.

Let’s start with the biggest source of people’s skepticism: their lived experience. When the Minecraft condos start to go up in your neighborhood, rents and property values go up. This may not be true across the entire metro area, but I don’t care about the entire metro area because I don’t live in the entire metro area. When housing goes up in my neighborhood, the prices also go up. I live in Jamaica Plain, where we’ve seen an increase of at least 10% in the number of housing units. Prices have only gone up.

Or look at the Fenway, where the housing stock has quite possibly doubled. It’s become the most expensive zip code in the USA. The Fenway was one of the neighborhoods I looked in when renting my first apartment in Boston in 1993. I liked it because of the green space and because it was affordable. Now it’s very much not affordable despite the fact that the number of units available have boomed.

This, I think, is why the folks calling for more housing stock tend not to be people who live in low-income (or even mixed-income) neighborhoods. People who don’t have a lot of money don’t want new housing because they know it’s not being built for them. (This, in fact, is simple economics. Developers want to be able to sell what they build for as much money as possible.)

And yes, I am familiar with the argument that we just haven’t built enough yet — that we must turn every neighborhood in Boston into Boylston Street in the Fenway if we want housing to be affordable. (This despite the fact that even after all the construction, Boston has yet to come close to its peak population in 1950, when somehow we managed to fit 200,000 more people in the city limits than we have now) Even if that is true, which I doubt, it essentially means people have to be driven out of their neighborhoods until such time as there’s enough housing stock to start the trickle-down effect. You can see why folks might be skeptical.

It’s important to realize that the demand for housing in any given neighborhood is not static. And building homes for the wealthy (see developer economics above) brings in amenities for the wealthy. Which makes wealthy people want to live there. The idea that relentless building will drive prices down depends on the idea that the number of people seeking housing units is static. But that’s not how the housing market works. People consider moving to places that feel comfortable to them. The more comfortable you make the city for rich people, the more of them will want to live here. I can’t imagine this is a controversial idea.

Finally, there’s this. In the Atlantic article I linked to, the author laments that people understand that you have to build more cars when there’s a car shortage. Why are they so dumb that they can’t apply this principle to housing?

Well, the car market provides a pretty nifty analogy. Let’s say I can’t afford a Honda Civic because the prices are too high. I think we all understand that getting Mercedes to manufacture more S-Class cars is not really going to bring the price of a Civic down. And so it is with housing. The people moving into high-end apartments and condos in the Fenway, the Seaport, and everywhere else where these things exist are not weighing whether to live in one unity of a 3-family outside Nubian Square or a luxury condo. Their decision to move into the Seaport doesn’t bring the price down in Nubian Square because they were never going to move there.

I don’t think it’s accidental that the pro-developer movement is mostly middle and upper class and mostly white. It feels very much to me like people who have benefited from the current system arguing against all evidence that the current system can, in fact, be used to fix the problems it has created.

I get it. If you’re a middle class person in America, whatever financial security you have almost certainly derives from home ownership. (Either yours or that of your parents and/or grandparents.) Property values go up, families accumulate wealth — this is how it should work for everybody, right? Well, ideally, except that capitalism requires winners and losers. If everybody wins, it’s no longer capitalism. So we have to subvert capitalism in the case of housing, to recognize that it’s not just another consumer good.

The pro-developer movement reminds me in this way of “social entrepreneurship,” which is the idea that you can use capitalism to solve the problems created by capitalism. I worked for seven years in a “social entrepreneurship” organization whose stated mission was “to close the opportunity divide.” Twenty years in, the organization has helped a relative handful of people into the middle class, but by and large, the opportunity divide in this country remains as big as ever because that’s the way the system is designed to work: some people have to be poor so that others can get rich. Unless you address the deeper issues, you’re only treating symptoms while the disease rages on.

I don’t expect that anything I’ve said here will change the minds of any dedicated build-baby-build people, because their support of this idea is fundamentally faith-based. In this case the faith is in the ability of a capitalist system to solve the problems it creates without making systemic changes. My hope, though, is that there are folks who are not yet true believers who might be swayed by a different point of view.

And if you’re not swayed by me, I encourage you to listen to what people who live in the neighborhoods being transformed by the re-gentrification of cities have to say rather than just writing them off as too stupid to understand the obvious solution. You might learn something.