Since at least 1950, notes housing economist Joseph Gyourko, there has been a growing price divide between low-cost areas where housing is plentiful and cheap, and desirable areas where housing is scarce and expensive. In 1950, housing in the most expensive metropolitan areas cost twice what it did in an average market. By 2000, it was four times as expensive, and Gyourko expects that difference to keep growing.
Some of the differences are just high demand meeting physical limits — many of those cities are hard up against one body of water or another. And their ability to spread outward in other directions is constrained by highway congestion, as well as the length of time that people are willing to commute to work each day.
But physical limits can’t explain all, or even most, of the difference. A lot of it comes from the simple fact that those cities make it very expensive for people to build.
The problem is bad in many coastal areas, but it’s worst in California. A recent paper by Gyourko, a professor at the Wharton School, and Harvard University’s Ed Glaeser estimates that in San Francisco, houses cost nearly three times what they would in an unregulated market. In Los Angeles, they’re two times higher, and my home city of Washington is not far behind:
These abstract numbers translate into higher rents and mortgage payments that are making it increasingly hard for even middle-class families to keep a roof over their heads. Jenny Schuetz, a fellow at the Brookings Institution, looked at Freddie Mac data on multifamily apartment buildings financed by the agency and found that in California, by 2016, someone with the median family income could afford only about 40 percent of apartments. That was down from about 75 percent in 2010, and it’s well below the average in other places, which runs closer to 100 percent. America as a whole may not have an affordable-housing crisis, but certain American cities obviously do.
Any number of solutions have been proposed for these problems — rent control, housing vouchers, turning more of currently available housing into public housing. But these policies don’t actually fix the problem. There will still be lots of families that can’t find housing; all these policies change is which families get locked out.
But to an economist, the solution is simple: Just make it easier to build more stuff. Fundamentally, prices in these places are going up because there are more people who want to live in these areas than there are housing units. In the resulting bidding war, low-income residents lose out to people who have more resources.
San Francisco could be doing a lot if it would allow more density. There are plentiful nearby suburbs with large single-family lots, and while there’s some question about how many really tall buildings we should be constructing in a hot earthquake zone, they could certainly go higher than they are now. But both the city and the surrounding community are choked with those “housing stops”: rules that restrict density and add in layers and layers of approvals for everything, which means it takes forever to get stuff done. That is enormously expensive, as it means that developers have to sit on land, paying hefty carrying costs, while they slowly work their way through the process.
Housing would still be more expensive in places such as San Francisco if these cities allowed free building, because these cities are desirable and they’re hard up against physical limits. Some families wouldn’t make enough to afford to live there at market rate, and if they weren’t subsidized, they’d have to move. But the scale of the problem would be much smaller, and middle-class families could cope.
Which is why this is one of the rare issues on which economists seem to be pretty much unanimous: American cities need to trim back the legal restrictions that constrain housing supply. As long as landlords have a preference for affluent market-rate tenants over families that are economically struggling — and they do — then there is no housing policy that can keep struggling families in their homes, or slow the pace of gentrification, without fixing supply. It seems stupid to have to say it, and yet clearly it has to be said: To house more people, you need to build more houses.
In recent months we’ve had a ray of hope on that front. Housing activists have had some success using state governments to override local opposition to building low-income housing. And a group in California decided to try to do something similar for market-rate development: A proposed law called SB-827 would have wrested control of zoning decisions near mass transit from local communities that often use ordinances to block denser development.
That bill just died in the California Senate, unable to even get out of committee.
It’s not really that surprising that it died. YIMBYism — yes-in-my-back-yard-ism — is always a tough fight against entrenched local interests. What’s remarkable is who killed it. It wasn’t just prosperous suburban homeowners, snug on their one-acre lots. The list of opponents reads like a who’s who of Democratic Party interest groups: the Sierra Club, the construction unions and, incredibly, even some affordable-housing activists, who think that encouraging market-rate development will encourage gentrification without helping lower-income families get access to housing. In the narrow areas where SB-827 would spur development, they may even be right — but city- or state-wide, the only way that California can hope to relieve the rent crisis among struggling families is to build enough new units that those families no longer have to compete with the affluent for the sharply limited housing stock.
YIMBYism is shaping up to be for the Democrats what free trade was for the Republicans — an issue where the policy elites are all singing from the same hymnal but a substantial portion of the base simply refuses to come in on the chorus. Hopefully Democrats can do better than Republicans have at finessing the divide between their base and their wonketariat. But if so, they’ll need to find a way to expand their activist coalitions.
Coastal cities, after all, don’t suffer from onerous real estate regulations because their bureaucracies were afflicted with some mysterious fungal blight. Most of those rules have some powerful Democratic constituency behind them, one that wields a substantial bloc of votes and maybe even a good argument about why these rules are necessary. Prevailing-wage laws to keep union members happy. Strict environmental review, and generous rights to sue, to please conservationists. Community review standards that not only give affluent communities the ability to limit economic diversity but also let gentrifying neighborhoods extract concessions from developers for long-term residents. Health and safety codes. Earthquake-proofing. And so on down the line.
One solution YIMBYs talk about a lot is reducing the minimum number of parking spaces required per housing unit, because that’s what the broadest left-wing coalition can agree on. And they’re right; parking minimums are stupid! But the only way that parking minimums could be making the housing in California’s major cities cost two or three times what it ought to is if Californians were living in apartments the size of parking spaces. Getting rid of parking minimums would be a good first step, but California would still have a long way to go before it had anything close to reasonably affordable housing for its middle class. And so far, apparently, the ruling coalition can’t even bring itself to take that first step.