CSY Replay #10: Rethinking the Affordable Housing Crisis Series
CSY Replay #10: Rethinking the Affordable Housing Crisis Series
Where is housing in America headed? A past example that hasn't been fully understood could explain.
Source: housingisahumanright.org
(Note: Now’s as good a time as any to bring this series back. I completed it very early into my transition to the Substack platform, and there might not be many more recent viewers who have checked it out. I encourage you to check out the links to the entire series as well. -Pete)
Originally published: April 24, 2024
Earlier entries to the series:
So now I’m bringing this series to a close.
I recently found I’m not the only one thinking about our nation’s bipolar views on housing in America. This is a great piece to check out because it spells out our nation’s conflicted views on housing. We want housing to be an essential good that remains affordable, yet we also want housing to be the foundation of generational wealth. We often exclude out-of-hand housing that is indeed affordable, and lose the opportunity to revitalize urban neighborhoods, because we yearn for short term gains. A good read.
Anyway, here’s a summary of what I presented in the first four entries in the series. In the first entry I listed what I saw as the conventional causes of the contemporary housing crisis:
o The post Great Recession collapse in housing production.
o Zoning, specifically widespread single-family zoning.
o High interest rates, low inventory.
o Excessive government regulation raises the cost of housing production.
o Household incomes haven’t kept up with housing costs.
o A reliance on “filtering” to create affordable housing.
There’s general consensus among today’s most visible pro-housing activists, YIMBYs (for “Yes-In-My-Back-Yard”), that today’s affordable housing issues are directly related to the above causes. But I also note that differences in information, income, savings, access to mortgage financing, crime, school quality and more contribute to the housing crisis. There are unconventional causes of the housing crisis that arise as social and cultural behaviors in the housing market. For example:
o The nature of housing demand has changed significantly in the last half century.
o The financing tools for creating housing supply hasn’t changed as much as the demand has changed.
o Aversion to subsidized housing.
o Aversion to gentrification.
o “We want what we want, where we want it.”
o Geography.
My main point is this – we don’t take these social and cultural causes into account nearly as much as we should. Nor do we consider how the biases that social and cultural causes create are manifest in the housing market. In parts 2-4 I look at how social and cultural biases play out in the housing market:
o Housing exuberance – property owners whose expectations heighten prices and rents before even increased demand does.
o Segregation – taking away demand from some portions of a metro area creates more demand in others, driving up costs.
o Inventory mismatch – greater demand for a development type (pre-WWII style development, for example) that’s declining in inventory.
The Housing Crisis Battleground
During this housing crisis, the battle lines have formed and hardened. Pro-housing YIMBYs have grown in prominence as they’ve pushed to get more housing built in the places most in need of it. They grew in response to NIMBYs – “Not-In-My-Back-Yard” – who, for decades, coalesced to protest development proposals that they deem would negatively impact their property values. They’ve been vocal about the impact of new housing, particularly rental housing, on their property values and community character.
Recently there’s also emerged another group, known as left-NIMBYs. In the coastal cities where the housing crisis is deepest, left-NIMBYs are usually property owners protesting development because of fears that increases in market-rate housing results in higher rents and prices. It lines the pockets of “evil” developers, promoting gentrification and displacement.
Huge generalizations are coming here. YIMBYs dismiss NIMBYs because they stand in the way of more housing being built. NIMBYs dismiss YIMBYs because they believe YIMBYs fail to understand the importance of their investment. Left-NIMBYs dismiss YIMBYs as the activists leading the charge of gentrification and displacement, and quietly being in the back pocket of developers.
A Rust Belt Alternate View
I’d describe my views as sort of a “cautious YIMBY”. Some might say I’m more in alignment with left-NIMBYs, but I disagree. Not because of fears of gentrification and displacement; I understand the need for places to revitalize. However, the economic imbalances that social and cultural causes create in cities are very real.
My Rust Belt upbringing provides a different perspective.
I’ve spent the vast majority of my life living no more than about 30 miles from the Great Lakes. Detroit, where I was born and raised, and Chicago, where I’ve lived since adulthood, have avoided the extremes that the housing crisis has produced. Chicago has a reputation for being the most affordable large city in America, while Detroit might be known for being the least expensive (yes, there is a difference).
How did they accomplish this? Not for anything they did, really; mostly for what they didn’t do. They did not grow substantially in population after the middle of the last century. They’ve been low-growth metros, at best, for my entire lifetime. Both have clusters of high-priced housing; Chicago has rents and prices that are nearly as high (in some places) as you would find in high-priced coastal cities. But Rust Belt priciness is a mirage.
High-priced parts of the Chicago and Detroit metro areas are more than balanced out by deeply undervalued housing elsewhere. That’s been achieved by their stagnant growth, which impacts the poorest quality housing, and the poorest residents, most.
The Rust Belt stands out from other regions in the nation. It’s easy to understand why. Coastal cities saw an astounding rebirth over the last 25-30 years. They leaned in on their advantages in tech, finance, education and healthcare. They reversed the downward trend that many had witnessed since the early ‘70s. Even if their population only inched upward slightly, the changes in median household sizes meant that demand for housing was increasing at an even faster rate.
Cities in the South and West continued their strong growth over the same period. Some became the direct beneficiaries of high prices and rents in coastal cities, as coastal residents gave them strong consideration over the last 5-10 years. That added to the already strong demand. As a result, Sun Belt cities are demonstrating some of the same housing development pressures as the coastal cities.
But that just hasn’t been the case in Rust Belt cities. They’ve made significant positive turns, but little like we’ve seen in coastal and Sun Belt cities. In fact, we might view the general growth and development trajectory of coastal, Sun Belt and Rust Belt metros something like this:
The Unintended Consequences of YIMBYism?
Without a doubt, I view YIMBYism, policies intent on reducing development barriers and creating more housing, as the appropriate policy response – where it’s needed. From my perspective, more housing is crucial in virtually every metro area from Boston to Washington, DC on the East Coast, and from Seattle to San Diego on the West Coast. YIMBYism may also be the appropriate policy response in Sun Belt cities. Metros like Atlanta, Dallas, Phoenix and Las Vegas have grown immensely over the last few decades but have done so with low-density sprawl development. As they enter their next phase of development, Sun Belt cities will have to do a better job of filling in, not just moving outward. YIMBY policy implementation would be fantastic progress on the coastal and Sun Belt metros.
My concern is that the YIMBY tsunami will eventually touch all major cities nationwide, including low-growth ones. Unlike high-growth or moderate growth metros, stagnant metros will try to incentivize growth through new housing development. Contrary to prevailing thought, this will create housing gluts. Affluent communities in a metro area will be able to maintain their value, but the overall decline in value goes to those who can least afford it and will never make it up.
It’s happened before.
Consider the last time a concerted effort was made at the national level to increase housing units in the middle of a housing crisis, in the late 1940’s and early 1950’s. The federal Housing Act of 1949 spurred widespread new housing construction and provided funding for slum clearance and redevelopment in cities. The Interstate Highway Act enacted seven years later enabled new housing developments to be connected in ways never seen before. Welcome to suburbia.
But not every city or metro area was in the same place demographically. Consider a comparison between Los Angeles County and the city of Los Angeles in California and Cook County and Chicago in Illinois. Los Angeles County and Cook County were similarly sized in population in 1950 but diverged dramatically since. Look at these charts below. Decennial U.S. Census data here shows population growth and housing unit growth between 1950 and 2020 for the counties in question:
In 1950, Los Angeles was still firmly in a high-growth phase that began at the turn of the 20th century. Los Angeles County had 4.1 million residents in 1950, with 1.9 million living in the city itself. By 2020 that would grow to 10 million and 4 million, respectively. Housing unit growth closely tracked population growth for most of this period, and there was a 20-year period between about 1985 and 2005 population growth exceeded housing unit growth. These figures, however, underestimate the impact of substantial decreases in household size over the last 75 years. It led to a corresponding increase in demand for smaller units, which wasn’t being met. That’s how LA County’s housing affordability got out of control.
Meanwhile, Cook County had unknowingly completed a 100-year cycle that saw its population jump from 43,000 to 4.5 million. But Chicago would undergo a steep decline in population that would impact the population trajectory of the county overall. Between 1950 and 2020, Chicago’s population would fall by nearly 900,000 people. By 2020 Cook County had 5.3 million residents. Interestingly, housing unit growth exceeded population growth in Cook County for almost the entire 70-year period of analysis. Or more accurately, population loss was faster than housing unit loss in Cook County. That’s how Chicago became more affordable, in relative terms. The differences are even more profound at the city level:
Los Angeles and Chicago certainly traveled different paths over the last 75 years. However, banks, builders, state transportation agencies and local governments were all equally incentivized to build housing and infrastructure, in both places. The same incentive produced widely different results.
The Future of YIMBYism
I think YIMBYism has reached a point that it’s close to being viewed as the mainstream position in urbanism now. YIMBY policies, like eliminating single family residential zoning, are working their way through state legislatures across the country.
Of course, there will be winners and losers as YIMBYism spreads. First, perhaps unsurprisingly, I view coastal cities as benefitting the most. The YIMBY movement formed there and developed as a response to coastal city challenges. I see YIMBYism as a way to make already strong cities become more available and affordable to more people. Rust Belt cities might be a mixed lot. YIMBYism can result in better-designed and developed Rust Belt cities than we have now, but demand has to increase to see positive things happen. The cities I’m most concerned about in this context would be in the Sun Belt. It’s conceivable that Sun Belt cities have had strong growth for so long that its leaders will believe it will stay that way. If any of them are unknowingly at the end of a high-growth phase, just as 1950’s Rust Belt cities were as the suburbs and Sun Belt began their boom, there could be real problems.
But, just as suburban expansion that began 75 years ago resulted in widely varying results nationwide, I envision the same happening with YIMBYism as well. The differing results come from unexpected or unanticipated changes in demographics. For example, no one in 1955 really foresaw the population peak and decline in Rust Belt metros, and had no idea of what the impact would be. Just as no one really understood the impact of downzoning multifamily residential districts in cities into single family districts in the ‘70s and ‘80s, so they could compete with the booming suburbs.
We’ve already witnessed the impact of a demand for smaller households on our housing inventory. We’re acknowledging and preparing for the increasing number of seniors in the population, and their housing needs. But what of continually falling birth rates? Our federal government’s failure to act on immigration reform? The likelihood that climate change produces some form of climate-induced migration?
It’s the unknown unknowns that worry me.