Affordable Housing Through More Wealth Concentration!

13 11 2015

Housing means a lot. Where you live can often be your destiny. It may determine everything from your physical and mental health, to your education and earning power, to your understanding of the world around you.

Housing also means wealth. There was much jubilation from some quarters when it was posited that the persistent inequality posited by Thomas Piketty in Capital could at least in part be explained by the value of housing as wealth.

Housing keeps rising in cost, and we’re not building enough new housing to keep up with demand. Is amending (or ending) zoning codes to encourage dense, mid-rise housing the solution? Or will it just entrench wealth inequality be destroying the last vehicle for wealth accumulation (and preservation) left to the working and middle classes?

Thus the increasingly popular notion that the problem lies with zoning codes that prevent new housing from being built. Relax zoning codes, or eliminate them to allow developers to build denser housing. Increase the supply, bring the costs down, and don’t bother with “affordable housing” ration requirements which often face stiff resistance from developers and NIMBY homeowners.

And indeed, zoning codes are odd things. They are often huge and complicated–typically for a large city, the zoning code will be the size of the entire rest of the municipal code. Despite being filled with technical guidance, they are sort of arbitrary; they define things like floor area ratio which limit how much of a lot can be taken up with floor, or setbacks from the street, or even in extreme cases defining what constitutes a family.

It is indisputable that zoning codes drive up the cost of housing by limiting supply. They are too restrictive, and particularly in cities (I’m going to focus on cities rather than suburbs) they are used to exclude. Cities need much more density, particularly along major arteries, and they need the public transportation infrastructure to trivialize cars.

But not before working people have the bargaining power to trivialize the home as wealth. Until that happens, the Better Living Through Zoning Abrogation plan is simply a way to shove the working class gentry and middle class backwards and eliminate the last vestige of wealth outside of the very top of the economy.

There is a certain kind of nastiness to the idea that (in cities, not suburbs) greedy NIMBY homeowners are the problem. For basically the entire U.S. labor force, property ownership is the only form of economic security that exists. Social Security benefits are low, debt has exploded, defined-benefit pensions are non-existent. The U.S. household savings rate is essentially non-existent. It takes alienation from the reality of economic insecurity to propose eliminating the number one tool homeowners use to protect their sole source of security.

People will support affordable or dense housing in the abstract but oppose significant new housing units being built close to their own properties. The impact on local schools, streets, and other resources can be significant, and the increase in supply will naturally drive down the value of a single-family home. This isn’t a normative argument; the reasons homeowners resist “density” nearby are numerous, but often reducible to classism and racism. I’m not defending it; I’m just pointing out it exists.

Classism and racism underpin much of the opposition to density–any study will show that attitudes about “the wrong types of people” are a powerful motivator in opposition to new residential development. But it is also true that wealth as represented by homeownership extends from the poor through the working class to the middle class, and across racial lines. In Chicago, a cruelly segregated city with an appalling history of housing discrimination (and predatory housing and lending practices stretching back over generations) black homeownership is still at over 40%–this tracks with the national figures. Tanking the wealth in homes by abundant supply and (however irrationally) unappealing new development will not just impact white yuppies in condos.

One cannot just ignore the ferocity (really a form of anxiety) when economic security is threatened. It is too important a variable to simply disregard for purposes of a thought experiment. “Okay, forgetting for a moment that people have often invested half a lifetime of labor in building up one source of wealth and will react irrationally when that is threatened…” is not a serious argument. It is an abstraction that makes the argument itself trivial.

It therefore is a perfect liberal technocratic argument: an abstraction that allows for a conclusion that “everyone benefits because everything is cheaper.” It is the justification for every bit of neoliberal policy making, from “free trade” to the dismantling of public sector unions. It ignores the way power is ordered and social relations actually exist, couches itself in progressive terms (make housing more affordable, particularly for people of color) but would ultimately result in something that further disadvantages poor, working and middle class people but leaves the power and wealth of the people at the top untouched.

It is conceivable that eliminating zoning codes that protect low-density housing would ultimately result in so much housing that the cost of housing would plummet. It is possible. But here are some things that would definitely happen if such reforms aren’t accompanied by other sweeping reforms:

First, wealth in the form of rents would accrue to large developers over time. Particularly in a capital-intensive business like housing, where one needs to buy up lots of properties and finance a massive (and tightly regulated) construction project, there won’t be many mom and pop developers. As you wipe out the wealth of two-income working class families, you will be redirecting more wealth to big developers. Given the value in consolidating operations (and the nature of property ownership) landlord corporations would increase in size and marketshare over time.

Second, speaking of tightly regulated, as this wealth accrues, new entrants into the market will be locked out by inescapable regulations that politically powerful developers will at least influence, if not outright control. You’re dealing with housing, where human beings have to live, not abstract widgets. Things like fire safety, sustainable and safe materials, disaster-resistance, etc., cannot simply be left to the market. They have to be regulated, and they will be regulated in such a way that the barriers to entry into markets will be immense.

Third, exclusive neighborhoods will continue to exist, but become ultra-exclusive, private-club style neighborhoods. Particularly where wealth is concentrated and thus the velocity of property turnover is lower, these communities will continue to exist and to exclude people to protect the resources and wealth in those neighborhoods. Legal structures (such as private clubs or unity of ownership of a “single” piece of property) will allow for communities to resist dense development and thus keep their residents rich and protect valuable resources. In other words, the privately funded and protected ultra-rich neighborhoods that characterize developing-world cities? They would exist here.

I’m not trying to knock down a strawman–I know that people aren’t all screaming “abolish zoning codes!” so much as advocating for looser restrictions. There are many species of this argument, including eminently sensible proposals like high-density zoning near public transportation (and expansion of public transportation). In practice One can guess where the looser restrictions will go–on the edge of some desirable neighborhoods but not others. In fact that’s a great way to increase the value of some neighborhoods. Maybe where the developers live? That’d be some nice synergy.

Critics of zoning may not want to abolish it altogether (in which case, we can imagine where it would be used to defend wealth) but some do, however, refer to FAR and height restrictions as “artificial” which raises the question of what a “natural” restriction would be. (The implication, of course is clear: there is no such thing as a “natural” height restriction, and therefore no restriction is appropriate). In the book that helped bring the debate into the public intellectual discourse, Matthew Yglesias writes,

The real gains to be made here are at the state and local levels. Counties, municipalities, states, and everyone else involved in promulgating land-use regulations need to ease off on parking requirements, artificial constraints on lot size, height restrictions, etc. (Yglesias, Matthew (2012-03-06). The Rent Is Too Damn High: What To Do About It, And Why It Matters More Than You Think (Kindle Locations 802-803)).

I have no doubt that as pressure builds to provide for more affordable housing because of increasing rents and stagnant wages, “easing up” on restrictions will be the proffered solution, in a way that depletes the wealth of homeowners, because it is precisely the solution that can bring down prices without jeopardizing the truly wealthy.

Proponents will paint the opponents as NIMBY yuppies and maybe there will even be some cool “Yuppie Tears” memes that get passed around. The proponents will also be people for whom the sudden evaporation of a sole source of wealth is an abstraction, not a terror.


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16 11 2015
Eli

For basically the entire U.S. labor force, property ownership is the only form of economic security that exists.

Except for that portion of the labor force (a majority, in Chicago) which rents and thus doesn’t have even that form of economic security. These people are directly harmed by actions taken to protect the wealth of incumbent homeowners.

The proponents will also be people for whom the sudden evaporation of a sole source of wealth is an abstraction, not a terror.

Perhaps because those people have never had any source of wealth to begin with.

I share your skepticism regarding just-so stories about what will happen when regulators “get out of the way of the market.” Benjamin Ross’s Dead End has a lot of nice detail on how–just as you say–restrictive covenants, HOAs, and other para-policy mechanisms spring up to restrict density in those places where zoning doesn’t do so. It will take new regulation, not the removal of existing regulation, to create more density.

But I don’t see how you can make a left argument for keeping the current zoning laws, designed to protect the interests of incumbent homeowners, in place. Yes, some of those owners are working-class. But they are generally wealthier (and not merely due to their accrued housing wealth; they have higher incomes, too) than renters. When the interests of homeowners and renters are opposed–as they are on the question of how much housing there should be–I don’t see any case to be made for siding with the former over the latter.

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