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Free Markets Accomplish Progressives' Housing Ideals

Shane Phillips

The people who live in coastal urban cities tend to be a pretty progressive bunch. We’re leading the country on minimum wage laws, paid sick leave, climate change mitigation, and a host of other important issues. We care deeply about equality of opportunity, and we’re willing to invest our time and money to advance that effort—even if the people we help don’t always look like us or come from the same neighborhood, state, or even country. I’m proud to count myself among their number.

And then we turn to housing. Maybe it’s just because we’re doing great on so many other fronts, but when I look at our inability to solve the housing crisis in places like San Francisco, New York, and Washington, D.C., I’m left feeling nothing but depression and hopelessness. It’s all the more frustrating because unaffordable housing might be the most important economic problem facing residents of progressive U.S. cities, and we’re perfectly, comprehensively, and unmistakably blowing it.

Rents rose faster than incomes in more progressive, coastal U.S. cities, while incomes rose faster than rents in more conservative cities such as Houston and Atlanta.

The causes of this failure are too numerous to ever fully enumerate in a single blog post, and, admittedly, some are out of the hands of cities themselves. But I don’t want to be too forgiving—state and federal policy plays a role, for example, but progressive U.S. cities are also typically located in progressive U.S. states, and federal policy applies equally to all, including the cities that have managed to remain affordable. There’s also the impact of global capitalism on a few world class cities, but it’s hard to feel genuine pity for places where foreign investors are willing to dump billions of dollars. Boo-hoo.

At its heart, this is a problem of progressive governance and/or policy, and we need to face it head on. We can’t blame this on someone else. It’s our fault. There really is something inherently flawed in the way we’ve approached housing policy for the past several decades (at least), and I would argue that it comes down to a kind of cognitive dissonance on three key issues. In the following ways, our policies just don’t align with our stated ideology:

 Progressive Ideology

 Progressive City Policy

 We are pro-environment…

 …but anti-growth and density

 We are pro-immigration…

 …but anti-migration

 We are pro-equity…

 …but anti-housing

Quick disclaimer: “Progressives” are not a monolithic group, and these views won’t be representative of every individual who identifies as progressive. That said, in my experience, they are fairly representative of many if not most progressive city residents that I have met and discussed housing policy with. Your mileage may vary—though I doubt it will by much.

With that disclaimer out of the way, I’d like to get into some detail on these three policy/ideology disconnects, and why they’re so harmful to the goal of broad-based affordability in our cities.

Pro-Environment, Anti-Density

Cities have a reputation as dirty places. All those people, buildings, cars, pavement—it’s an environmental tragedy, right? Many well-meaning progressives seem to have taken that view to heart, and for decades have wielded environmental protection laws to keep buildings small and relatively spread out, and populations as low as possible—all in the name of preserving the environment.

But on a per-person basis, dense urban centers absolutely crush the suburbs on environmental-friendliness. We have smaller homes, often with shared walls, floors, and/or ceilings, all of which helps to reduce heating and cooling costs. We’re more likely to walk, bike, or take transit when we get around. And we share may public amenities, like parks, libraries, and roads, with many more of our neighbors. The map below is just one example of the environmental impact of dense housing, showing just how stark the difference in household carbon emissions is between the dense boroughs of New York City and the suburban communities that surround it.

Average annual carbon emissions per household in the New York metro area. Dense, “dirty” New York City produces about half as many emissions, per household, as the “green” suburbs beyond. Image from Berkeley’s CoolClimate maps site.

The real problem here is that housing is never just a question of “build” or “don’t build.” It’s “build here” or “build somewhere else.” And if you live in a coastal U.S. city, somewhere else is usually way worse for the environment. People don’t disappear just because they can’t move to our cities; they move to the suburbs of Texas, where housing continues to be produced in abundance and, as a result, costs have stayed reasonably low.

Opposing development on behalf of the environment is essentially “greenwashing,” and we need to acknowledge it for the lie that it is. It’s an environmental crime, not a triumph. We don’t celebrate the environment by moving into its midst and paving it over.

In many metro areas, household emissions in the suburbs are roughly double those of city households. Another way of putting that: In terms of environmental impact, each time we turn away a person from our green, efficient cities, we’re effectively cloning them and shipping them off to the suburbs of Texas to do twice as much harm.

Pro-Immigration, Anti-Migration

Sticking with the “global thinking” theme, consider the different approaches that progressives take to immigration into our country versus migration into our cities.

We’ve been convinced that the built environment, not the people who inhabit it, is what makes a community.

On the one hand, we offer our full-throated support for liberalizing federal immigration laws and creating paths to citizenship for undocumented workers. We do so because we recognize that immigrants add value to our country, that at our core we are a country of immigrants and this is a source of strength and resilience, and that most immigrants are simply moving here in search of greater opportunity, which we can all appreciate.

On the other hand, when a person wants to move to any of our thriving coastal cities in search of greater opportunity—whether they’re citizens or not, rich or poor, immigrant or migrant—well sorry, pal, but we’re all full up. We understand that the United States is a symbol of hope and aspiration for people around the world, and we welcome immigrants to our shores with open arms, but only so far as the borders of our city. If they want past this border, they’re gonna have to earn enough to displace a poor person, because we’re damned well not building any new housing for them to live in.

The timing is ironic, in a way. As we look with scorn upon Donald Trump and his plan to build an impenetrable wall between the U.S. and Mexico, we’ve erected a wall around our cities—no less effective for its invisibility—to protect existing residents from the invasion of “outsiders.” Our country is open, but our cities are full.

A Community of Buildings

To be clear, none of this is intended to equate the challenges faced by new residents (many of whom contribute to gentrification, if unwittingly and unwillingly) to those of poor immigrants or families at risk of displacement in coastal U.S. cities. The issue is that we’re pitting new residents against old ones when 90% of the problem could be resolved by simply building enough new housing to accommodate all comers.

We’ve allowed mostly wealthy, mostly white homeowners to dictate our future and leave us fighting over the scraps of the housing market, even as their homes each increase in value by tens or hundreds of thousands of dollars each year. We debate how to raise a few billion dollars for affordable housing on the backs of new residents—enough to build a couple thousand low-income homes, maybe—while the value of single-family homes in Los Angeles County alone have increased by $500 billion over the past 25 years.

We’ve been convinced that the built environment—not the people who inhabit it—is what makes a community; that neighborhood integrity is about the character of buildings, not that of our neighbors. This is not a progressive ideal.

Rather than turn these people away, we need to recognize that new residents are just people like us, looking for a better life and new opportunities. Adding enough new homes so that they can find somewhere to live is a very small ask. We have to stop acting as though the subjective value of “neighborhood character” (which has always been and will always be a moving target) is of equal importance to the hard economic realities of unaffordable housing, inequity of opportunity, and homelessness.

Pro-Equity, Anti-Housing

Some of you may remember the hub-bub in 2014 over Thomas Piketty’s book, “Capital in the Twenty-First Century,” which examined wealth inequality in Europe and the U.S. over the past few centuries. It was an absolute blockbuster (for an economics book), showing that the share of income coming from returns on capital was increasing over time, which was bad news for those of us who don’t earn most of our money on stocks, property, or other capital investments (i.e., most of us). It was a rallying cry for progressives around the developed world.

What you may not have heard about was the critique of Piketty’s work by a 26-year-old MIT graduate student named Matthew Rognlie, who basically said that the issue isn’t so much capital in a general sense, but housing in particular. In other words, the growing value of housing relative to other assets (as well as labor income) is responsible for almost 100 percent of increasing wealth inequality in the Western world. The below chart shows the share of income from capital, with and without housing included.

When you look at capital income as a share of all income, the gains of the past 40 years essentially disappear when you remove housing from the equation. In other words, almost 100 percent of the increase in wealth in equality can be attributed to housing.

The reason housing is growing as a share of capital income is because housing has become so much more expensive over the last few decades, especially in coastal U.S. cities. Home and property owners are raking it in. We have a system in which relatively affluent residents in our cities each own a hugely valuable capital asset—their land and the home that it sits upon—which is appreciating at nearly double-digit rates each year, while everyone else just gets to pay more for rent, forever.

So long as housing production and vacancies stay low, that trend will continue. There is a wealth inequality crisis afoot, and progressive cities are its greatest perpetrator. San Francisco is the vanguard of this movement: the most progressive city in the U.S., and one in which it is nearly impossible to afford unless you are very rich (enough to afford $3,000/month rents or $1 million homes) or very poor (and therefore eligible for a small number of subsidized housing units). It’s a “poor door” masquerading as a city, and the rest of us are on the same trajectory.

The outcomes of our housing policies fly in the face of our ideology. For those in need, we support providing supplementary income, health insurance, educational support, and other social welfare programs—and then we erase their value by making our cities too expensive for those most in need of these benefits. Either low income residents can’t afford to live in the city at all, or the cost of housing is so high that the value of the benefits is exceeded by the added cost of rent.

By doing essentially nothing but letting things happen, conservative America is kicking our ass at providing opportunities for low income and working classes to build wealth and get ahead. Cities like Dallas, Phoenix, and Atlanta have managed to stay affordable by simply allowing housing to continue to be built as their populations grow, and the result is that people keep moving there. As someone in his early 30s who is wondering how I’ll ever be able to buy a home and build wealth for myself, I see the appeal. And that sucks, because I have no interest in living in any of those places. There will always be a premium to be paid for living in a great city, but the premium in our coastal cities is far beyond reason.

Atlanta skyline. A city with less economic opportunity than many coastal cities, but where owning a home or paying an affordable rent is still within reach to moderate-income households.

For those earning in the $30,000-$60,000/year range, owning a home in a place like Los Angeles or New York is completely out of the question. All these households have to look forward to is to either find a rent controlled unit and hold onto it until they die, or forever face the uncertainty of a rental market where rates can increase 2, 3, even 5 times faster than their incomes. And good luck saving any money for retirement in the meantime. These are not real options; they’re an ultimatum.

So, this is the paradise we’ve built across the progressive cities of the United States. Are we proud? I’m not. We’ve walled off our cities to those of lesser and greater means, making pathetic, often subtly racist or classist arguments about “character” and “culture.” We’ve destroyed any possible opportunity for low-income and working class households to build wealth in the same way as their affluent neighbors, or we've displaced the poor households so that they’re no longer neighbors at all. We’ve enabled the sprawling environmental destruction of cities like Phoenix or Las Vegas by failing to provide alternative, more desirable sites for new housing. We have failed, abjectly—and we’re too blinded by our own biases to change the course.

But hey, at least our hearts are in the right place.

Reprinted from Market Urbanism.

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