CC image from Thomas Hawk.

Some great articles on the challenges to affordable housing in high-demand cities over the past few days, worthy of some reflection:

• San Francisco’s Housing Crisis Explained – an epic long-form article from Tech Crunch looking at just about every angle of San Francisco’s affordability issues.
• The Spectre Haunting San Francisco – Ryan Avent’s reaction in The Economist.
• Sorry Progressives – Supply Matters – reaction from Let’s Go LA concerning the tendency to ignore and/or purposefully discount the supply side of housing markets.

Kim-Mai Cutler’s epic Tech Crunch article addresses all sides of the affordability problems facing San Francisco: noting that the situation isn’t unique to the Bay Area nor is it caused solely by tech-industry demand; the regulatory and political constraints to growth not just in the city but in the entire region; rent control, Prop 13, evictions, etc. After thorough documentation of this complex and multifaceted issue, Cutler circles back to the core issue of supply and demand:

[W]ithout serious additions to the entire region’s housing supply, these crisis measures just make San Francisco’s existing middle- and working-class a highly-protected, but endangered population in the long-run. With such limited rental stock available on the market at any time, what kind of person can afford to move here today when the city’s median rent is $3,350?

For the more extreme groups, you cannot logically fight both development and displacement. The real estate speculation running through the city right now is just as much a bet on political paralysis in the face of a long-term housing shortage as it is on San Francisco’s desirability as a place to live.

Cutler’s article lists a whole host of other potential actions, but concludes that any path forward must work towards adding more housing units to the region’s overall supply.Unfortunately, even this broad conclusion isn’t shared by everyone. In section #5 of Cutler’s article, she notes “parts of the progressive community do not believe in supply and demand.”

Ryan Avent notes that this denial of the market dynamics, no matter the motive, is not only misguided but also counter-productive: “ However altruistic they perceive their mission to be, the result is similar to what you’d get if fat cat industrialists lobbied the government to drive their competition out of business.” This extraction of economic rent from those that own the land and embrace tight land use regulations only aids those with capital: 

The housing dynamic in San Francisco raises the capital intensity of consumption. That contributes to an increase in the capital share of income and to the stock of wealth in the economy. Zoning restrictions are a tool of the oligarchy, effectively. I’m only one-fourth kidding. But they are; they are a means by which owners of capital extract an outsized share of the surplus generated by job creation.

Emphasis added. Yet, not everyone is convinced.

This exact denial of economics confounds Let’s Go LA:

It’s important to recognize that the “supply and demand doesn’t apply” argument is wrong, because if we don’t identify the right problems, we can’t develop solutions that work. And in fact, the housing markets in places like LA and SF are operating pretty much how you’d expect them to work if you accept the basic principles of supply and demand as constrained by the regulatory environment.

For example, why are developers only building markets for the high end of the market? Well, the zoning and permitting requirements make it difficult, time-consuming, and costly to build. Therefore, only a little new supply is going to get built every year.

This point is particularly important, because without agreement on the nature of the problem, it’s hard to even talk about potential policy solutions. And there are a whole host of potential policy solutions once we get over that hump. Unfortunately, discussion about supply constraints in cities (via exclusionary zoning, high construction costs, neighborhood opposition to development, etc) means the conversation naturally focuses on the constraint. Advocating for loosening the constraints can easily be mistaken for (or misconstrued as) mere supply-side economics, a kind of trickle-down urbanism.

This doesn’t need to be the case. Let’s Go LA writes:

Admitting that supply matters doesn’t mean you have to favor unrestrained urban development…

Admitting that supply matters also doesn’t mean you have to favor eliminating existing rent-controlled or rent-stabilized units, and it doesn’t mean that no government intervention is necessary…

Finally, this doesn’t mean that we don’t understand and appreciate the efforts of affordable housing advocates and planners operating within the current zoning and regulatory environment, trying to make sure that low income folks have at least some access to the opportunity of the city…

Another definitional problem when talking about affordability is the very term itself: are we talking about affordable housing? Or are we talking about Affordable Housing? As Dan Keshet notes, affordable housing (lowercase) refers simply to housing that people can afford at market rates – it is both relative to a household’s income (and therefore represents something slightly different for everyone) and also the kind of affordability important to the middle class. Affordable Housing, however, refers to a broad set of subsidized housing programs, ranging from rapid rehousing for the homeless to inclusionary zoning to housing units available for families at 80% of the Area Median Income ($68,500 for a family of four in DC).

Perhaps it’s because of a desire to frame these various subsidy programs more favorably (“affordable housing” sells better than “public housing” or “housing subsidies” – who would be against housing that is affordable?), but the same language that frames subsidy policies favorably can confuse the issue analytically.

The same can be said for housing supply in cities – perhaps the analytic focus isn’t a great selling point or a way to frame the issue.