Annie Lowrey has a fascinating short piece in the Atlantic that I missed when it first appeared last month. The subject is our national housing shortage, which various experts tell her is around 4-7 million homes. But then she immediately makes a sensible comment:
None of the estimates capture what I’ve come to think of as the affordability gap: the difference between the housing we have and the housing we would need in order to ensure that working-class people could once again live in our big coastal cities for a reasonable cost. Freddie Mac does not purport that building 3.8 million units would make New York accessible to big middle-class families and end homelessness in San Francisco. The National Association of Realtors is not contemplating whether janitors can walk to work in Boston.
This is the real question Lowrey wants to answer, but the answers aren't there:
No one can say just what it would take to make Brooklyn affordable for workers who don’t have a college degree, render San Francisco accessible to families with kids and elderly couples on fixed incomes, or allow extended-family members in Boston to buy apartments within a few blocks of one another.
.
No one can say, but it turns out that housing experts are pessimistic:
As a general point, “it’s really hard to imagine the most expensive cities becoming significantly cheaper,” Schuetz told me. For one thing, creating new units would cause an increase in household formation: Young workers could opt for studios rather than shared apartments; multigenerational households could break apart. For another thing, high-income, high-cost cities have so much pent-up demand that any one city would have trouble becoming much more affordable on its own. If San Francisco built thousands of units, new parents would stay in the city rather than decamp for the East Bay. Newcomers would move in from around the region and across the world.
But what would happen if, as housing activists would like, our most crowded cities set aside most of their building restrictions and just let the free market adjust to whatever number of people wanted to move there? The numbers are staggering:
San Francisco would have an employed population 510 percent bigger than it does today—implying an overall population of something like 4 million, rather than 815,000, with 2 million housing units instead of 400,000. The Bay Area as a whole would be five times its current size, the economists estimated. The average city would lose 80 percent of its population. And New York would be a startling eight times bigger. Some back-of-the-envelope math (mine, not theirs) suggests that the United States would have—deep breath here—perhaps 75 million more housing units in its productive cities than it currently has.
I don't know that I believe these numbers, but they certainly provide a flavor of what it would take to accommodate everyone who wanted to live in New York or San Francisco. And it's obviously not within light years of being realistic.
I very much doubt this is a conclusion that Lowrey wanted to reach, but there are two main takeaways from all this:
- A large but not ridiculous amount of new construction would probably have only a very small effect on prices.
- If we lifted building restrictions enough to allow people to afford to live where they want, it implies a level of new construction that's wildly beyond plausibility.
None of this means we don't need to build more housing, especially in California, which accounts for the lion's share of the US shortage. But is there anything we can do to make big, desirable cities genuinely affordable? Probably not.
If the question isn't "How do we provide housing for everyone who wants to
live in New York or San Francisco", say, perhaps any monies should be spent
providing businesses with incentives to get them to locate facilities, branches,
new construction away from these megalopolises. There's a lot of space in
American and many other fine places to live. And building costs can be significantly less there.
YOU DON'T SAY. Finally, some people who actually know something about how large/expensive metro area housing demand works are saying that building lots more units wouldn't actually make those units cheaper. No shit! The pent-up demand (both primary and secondary) is too high because we've throttled building by too much for too long. And it's basically impossible to fix in the foreseeable future. But building a lot *would* alleviate things at least a little bit.
And there's another aspect that building a lot more units would impact: the national housing market, i.e. the people who can afford to relocate or for whom housing drives them to relocate. *That's* where building a lot of units, literally anywhere where there is more demand than supply, will help out. If you build 3M more units in NYC, it will at least slow the overall increase there. At the very least, it would allow more people to move to NYC (or wherever) which would alleviate some of the demand pressure in other areas where people who would right now otherwise be moving to NYC/SFBA/LA/DC are staying or choosing to move instead.
Building only a few units results in upward price pressure locally as new units are 1.15x more expensive to build and rent/sell while really only being 1.1x as good as comparable units - which raises the market price for those comparable units, which then trickles down to the next-best, and so on (numbers made up, but concept is the only important part so long as the rental/sale price of new units is substantially higher than existing units). Building lots of units at one time doesn't really have that problem.
I've got kind of a voting/political issue with this, however: rapidly building that much housing would give Republicans an even greater structural advantage as Democratic voters would be even more highly concentrated in only a few states.
Aaaand this was supposed to be a new top-level comment, not a reply to you (:
Good points.
Absolutely correct that increased supply in one region will positively impact other areas. I found it fascinating that the article seemed to paint this in a negative light. More supply in SF might decrease demand in East Bay....the HORRORS!
So, the solution is to make secondary metro areas more attractive.
Sure. Any ideas on how to do this? Cause most countries suck at this. Either they force people to stay in place as they make secondary cities better (China is a big example of this) or they pour money into smaller cities and watch as they still struggle to compete with top tier cities (Europe does a lot of this).
>>Either they force people to stay in place as they make secondary cities better (China is a big example of this)<<
China doesn't do that. At all. All the big top-tier cities are home to huge numbers of migrants from other regions.
Don’t raise the bridge, lower the river. “Two and through.”
I don't know that I believe these numbers
I know I don't. New York City with 70 million people? Seems unlikely.
If we lifted building restrictions enough to allow people to afford to live where they want
Now we're in the realm of absurdity. There have always been individual neighborhoods or sections of metro areas that are too expensive for the non-rich. This was true even in the days before zoning and NIMBYism. So, we have a real world experiment about what a deregulated housing market looks like. It's called "the past." And in the main it was better, because at least the phenomenon of entire metro areas increasingly being out of reach for the non-affluent wasn't a thing. Also, there are several natural limits to the population expansion that can occur in cities, the most fundamental one being the limited supply of buildable plots of land (even high rises have to go somewhere!). There's also the finite nature of critical infrastructure like water, waste disposal and energy. And there's moreover the fact that plenty of people have zero desire to live in a crowded city. Indeed plenty who do would like to leave!
If we took away the NIMBY veto and adopted a strong "shall issue" legal regime with respect to building permits, we could build more housing and be more productive. And a lot of people would see increased quality of life. The artificial constraints we put on the production of housing units are a massive own goal against our own self-interest. But jettisoning this system doesn't mean the Bay Area will quintuple in size, or NYC will be larger than France.
I agree the numbers are ridiculous. Certainly there are people constrained by their jobs to work in SF or NYC and who would love to reduce their commute by moving into town. But the idea that tens of millions of people yearn to live in massive cities doesn't ring true at all. Weren't there all these articles during the pandemic about people taking advantage of remote work to escape places like SF and NYC?
I can only think of one acquaintance who moved to NYC. There was the cousin of an co-worker who moved to SF. I don't know of anyone who moved to LA or Chicago or Philly. This is anecdotal, but I just don't think many people want to move to huge cities; they are forced to by employers or trapped there by family or circumstances. They don't know how to escape.
As long as we are dreaming of eliminating NIMBY by legislation, let's consider other remote dreams. How about restoring the income distribution of the 1940s to 1970s which would increase average household income of the bottom 90% by around $22k/yr? How about limiting the maximum compensation of any employee of a limited liability company to $1M/y? How about a long range plan to tax billionaires out of existence? How about making non-compete agreements illegal? I could go on but I'll stop.
"I know I don't. New York City with 70 million people? Seems unlikely."
Ladies and Gentlemen, I give you The Caves of Steel.
Metro Tokyo has 37m people. 70m may be unrealistic, but surely NYC has as much demand for living in it as Tokyo does.
Kevin's quote (and my report) don't refer to metro NY, but to the five boroughs, which have a current population around 8.7 million.
Ugh, and my reply...
The point is, making New York City eight times bigger is the stuff of science fiction. We'd be talking about a population density of well over 200,000 persons per square mile.
Before you can comment on the issue, I suggest:
Try going through the process of planning. Find an asphalt parking lot in a downtown near you. Identify the applicable zoning regulations. Find the applicable municipal codes and the state's building codes (building, fire, plumbing, mechanical). Check if it's within a flood zone (via FEMA flood maps). Confirm if the jurisdiction has additional codes that apply that also require additional permits besides the city's building permit office.
I do not believe anyone of you, KD included, will make it through the whole process of just gathering the resources to do your basic due diligence on this site, let alone do the due diligence.
But if anyone does make it through and identifies and gathers all the resources to do their due diligence, feel free to respond to my comment. We can discuss the push-pull of public policy and the role of incentives and disincentives, the profit margin most developers need before they can get financing, and the differences between vertical and horizontal density. 😀
Such gatekeeping!
I've been through those things. It's not actually that hard, but it is time consuming. But not that time consuming if it's your job to do it.
The solution to all of this is obvious: we need more people in this country
Greater inflow of immigrants
Public messaging to encourage people to have lots of children
With that, we'll be on our way to Matt Yglesias' utopian One Billion Americans (he actually wrote a book with that title)
The more people, the more CO2 emissions, faster global warming, and depletion of natural resources.
The estimate on the massive population growth in SF and NYC is just a wild guess. Building a 'model' doesn't make it anything more than a wild guess. We all know that, let's not pretend there is science involved here just because we called it a model.
Building lots of houses is a pretty simple task. This is an easy problem to solve if we want to solve it.
I can't understand why so many people would want to live in the Democrat-controlled hell-holes! /s
If we want better outcomes, we should take as example places that have better outcomes.
Tokyo rents haven't risen in a generation. And a studio apartment is easily affordable to workers there. Their secret is that if you own some land and want to build housing somewhere, you can. And if you don't want to build a bunch of parking, you don't need to.
U.S. cities developed this way and we made it illegal to keep doing that around 1950. The reason we made it illegal wasn't for some important new urban planning insight, it was because of racial issues. We should simple go back to 1943 zoning codes and see what happens.
Have we ever had a time when "working-class people could once again live in our big coastal cities for a reasonable cost?" Seems to me working class people living in big cities have almost always had to live in marginal housing. See Jacob Riis. New Deal tried with public housing, but hasn't that been a failure in many cities?
Marginal housing? That's definitely not accurate. Wide swaths of large coastal cities in America are home to sprawling neighborhoods that were once inhabited by factory workers, clerks, bus drivers etc. And, while modest, the homes weren't "marginal."
Ultimately the problem is that the more you build in desirable locations, the more "investors" that will show up set up Airbnb's, rentals, second/third homes. Unless you require those units to be owner occupied, you'll never solve the problem.
Presumably if you built tens of millions of new housing units, eventually the Airbnb/investor demand would dry up. After all, even NYC can’t support a million Airbnbs all simultaneously trying to find a renter this weekend. There is a limit to everything, even demand from investors for housing.
Seems wrong. Tokyo has done a fantastic job on housing affordability compared to London, NYC, SF etc. And it's one of the most visited cities on the planet (and happily for their tourism sector, it's coming back strongly after the pandemic plunge).
Airbnb has a huge presence in Japan, including Tokyo.
If you just repeal the laws that make it illegal to meet the demand for shelter, it's amazing what can happen.
This is an easy one for me. Affordability is always tied to distance or crappy-ness, or both, from work. I mean, that's it. This analysis is really on the border of absurd. Really? NYC is not dense enough for you now?
The only chart worthy thing would be that as cars and public transport replaced the horse and walking, unsurprisingly, the cheap neighborhoods had to move farther out.
It cracks me up that conservatives put blame on US building codes, as if there aren't plenty of countries with zero building codes where one can easily see how it goes if you don't have alot of regulation, there is even a rather entertaining movie about Brazils' favelas City of God. No affordability crises there. You don't even have to go as far as Brazil, just zip down to Mexico, and drive around and see all the partially completed concrete block "homes" -- its simple, you save up for a few more concrete blocks then head out with your nephew and throw them up. It only takes ten years to build your cave, but hey, no pesky government regulation!
Listen, how about just studying Vienna and calling it a day? Well, it might be because the percentage of housing in Vienna which is owned by the gov is so laughable compared to our capitalist utopia that no one wants to try.
What is crappy-ness from work and how does it vary geographically? 😀
More seriously, there are denser cities than NYC. Tokyo for example. So it’s not impossible to imagine a denser NYC.
Well, you got me there, I don't think there is a metric called crappyness from work.
However, what I think was going through my head was that historically downtowns had neighborhoods which were geographically close, but crappy.
I heard on NPR SoCal the other morning that its gentrifiers like me who are actually a major cause of the problem. Here in LA, there is a neighborhood called Highland Park which is close to downtown but used to be fairly crappy, solidly lower middle class. As it gentrifies, developers and homeowners pick up crappy houses and rebuild them, often adding Accessory Dwelling Units. Problem is taking a $400K house, and rebuilding it to a cool modern place close to LA and and ADU and it goes for closer to $2M.
So its not only a lack of housing stock, its that with the new push towards urbanism affordable housing is actually being gentrified at a rate faster than new housing is built.
I never actually thought that the crappy neighborhoods close to downtown LA were serving a purpose, but they were.
And crappy of course is an attempt at humor. Even a $400k house is expensive, so one identifying characteristic of those house is the people who live in them don't have excess income to constantly tune them up.
Also its harder to keep a house pristine if, say, six people live in a two bedroom. But lack of spending on the house plus more people in it is of course what makes it affordable.
So I don't think there is any market adjustment (like relaxing zoning or codes) that would result in more cheaper housing, the market itself is too strong of a force in favor of more expensive housing, always has been.
Market adjustments work only to push prices higher? That doesn't sound correct.
How could we explain lower price to income/wealth ratios in different cities? Different countries? Over time?
Given that we don't really have anything resembling an open market for housing in the US, it's hard to definitively state that markets cannot properly function in the housing industry.
What I mean is there is no market adjustment ANYONE WANTS that would push prices lower, so its not surprising that it hasn't happened in desirable metro areas.
There are plenty of cheap houses in the US, there are parts of Detroit almost abandoned.
I was responding to Kevin's post about making the impossible, affordable housing in a desirable market.
A desirable housing market is subject to the economics of housing, which is you can't just build it cheaper and ship it from China, and you can't arbitrarily move it anywhere with a lower cost of labor. Plus, there is no market incentive, none, to build a house you can sell for $400k when the market for the same house is $800k, none. Unless you have government intervention.
Its childish to think that existing property owners would ever vote in favor of such massive building that so many units are built that the market itself depresses demand so much that prices fall in a housing market is a desirable area.
That's why the numbers in Kevin's post are so absurd.
Which is the point Kevin is making, I think.
Don't be so quick to judge the concrete block construction in Mexico or Central America more broadly. Different building needs in different climates.
Could they look nicer and have more cosmetic touches? Sure. But they're perfectly acceptable as housing. There's nothing *wrong* with them.
In the future everyone in New York will live in a kind of large barracks patrolled by prison guards, except for the 1%.
Because it's about freedom.
The problems are not limited to large metro areas like NYC and SF.
Here in Santa Fe, NM, a town of about 80k city/ 155k metro, there is essentially no affordable housing options for anyone making even median household income for the city/county.
This is happening in Spokane, in Ithaca, in Bend ... it's happening just about anywhere that has some semblance of a reason to want to live there.
Maybe the solutions for large metro areas are necessarily different from those that are needed in small-medium cities, but the problems are not restricted to just the large metro areas.
This is a way bigger issue than I understand, but if the issue is college educated people make more, then wouldn't it be cheaper to just send people to college?
I know that doesn't solve the problem of where firefighters and police and teachers and maintenance guys live...
I believe I have read in the LA Times that a lot of LA firefighters live in Arizona, come here and work 7 days straight, then go back to Arizona.
Is there anything we can do? The short term is limited, but in the long term there are examples of growing, wealthy cities that remained affordable. Tokyo made an effort to build enough housing every year for decades and many working class people can afford to live there.
I recall reading about Hong Kong a while back. Apparently the British made sure that enough housing was being built to allow many working class people to continue to live there. They made sure to zone some land every year. And every year to approve building projects on some of the land that had been previously zoned. And make sure each year that there was financing for the projects that had previously been approved. etc. Lots of rich people in HK. Lots of workers too. Eventually they new Chinese overlords broke the system. Shrug.
Of course, decades ago much of Hong Kong was affordable so they didn't have to reverse the situation. Even Tokyo, which I'd always thought of as over priced, had areas that were affordable. In America, where many cities have large sections only the rich can live in, we might be too far gone. In any case, it would take decades to really make a dent. I still kind of suspect we could make these places affordable again if we really wanted to. I'm not sure enough of the population really does.