Noah Smith has a position advocating for policy changes to encourage more housing. Sometimes you do the following:
Housing policy is incredibly difficult in America – and in many other rich countries – because housing has to do two jobs at once. There are two a use is good as well as investment property. A house is a place to live, but it’s also something that should make you rich over time, when its value increases. These two goals are in direct conflict – if owner-occupied housing becomes more affordable, that makes most Americans poor.
When I say “the majority of Americans”, I am not exaggerating. The homeownership rate is about two-thirds, with only minor fluctuations. And for middle-class Americans, most of their wealth is the value of their home
This fact sets up a direct and inevitable conflict between the two largest segments of American society: home buyers versus home owners. If you are buying a house for the first time or you want to upgrade, you want the house prices to be as low as possible. But if you’re already a happy homeowner, you want to price that home as high as possible, so you can get buyers to pay you more money when you’re ready to sell. It’s basically a zero-sum game.
But when it comes new constructionit’s a great sum game. (To be clear, in this section Smith is discussing a change in the number of houses available. So AFAIK there is no disagreement on this point.)
There are two ways of thinking about socio-economic questions—the flow of money and the consumption of goods and services. In my opinion, the approach to making money often leads to sloppy thinking. So some people complain that building more new homes won’t lower the cost of home ownership. But who cares? The point of building more housing isn’t to lower the price (which Smith rightly says is a zero-sum game), it’s to have more housing. So while building more houses may not be cheap (although ceteris paribus it usually does), it will certainly provide more housing. Countries don’t get rich by having a lot of money (Zimbabwe has plenty), they get rich by having a lot of things.
When you drive around America, you can see how rich the landscape is by looking out your car window. But there are a few exceptions. There are certain neighborhoods in New York City, San Francisco and West LA that are richer than they look. I’ve been told that the neighborhoods are trendy and expensive, but they look run down, with ugly buildings that don’t look well maintained.
As most of you know, the reason for this separation is the law. Rent control laws, restrictions on condo conversions, a cumbersome permit process, union labor requirements, affordable housing regulations, restrictive zoning laws, and many other laws cause property owners to allow their buildings to fall into disrepair.
The cause of all this was solved by Kurt Vonnegut Harrison Bergeron. The pursuit of excellence leads to inequality. If we allow market forces to create good neighborhoods in these deprived areas, low-income residents can be replaced by wealthier residents. So all these wrong laws are passed in the name of “the poor”. Keep the place low and the poor can still live there.
There’s just one problem. In the long run, it is the poor who suffer the most from the lack of housing. The wealthy can often find ways around unfair government regulations, while the poor who aren’t lucky enough to enter a rent-controlled facility often end up homeless.
If a country has 100 million houses and 110 million households, about 10 million households may end up homeless. That problem cannot be solved by rent control, as landlords will choose to rent to wealthy tenants who can be sure to pay rent on time. YIMBYs understand that the only sustainable solution is to build another 10 million houses. It doesn’t matter if the new units are “affordable”, as new construction will tend to drive down the prices of existing homes, which will be pushed out by wealthy people moving into the new McMansions. Indeed, affordable housing mandates actually create housing Underneath inexpensive, as they encourage new construction.
So why is housing such an important public policy issue? Why don’t I write articles about the television production industry, or the dry cleaning industry?
The houses have two special features. First, housing costs are the largest component of consumption. Second, it is an inefficient industry, especially in some key coastal areas. And this inefficiency is largely due to regulation. I would add that the other two major economic problems, health care and education, are also industries that take up a large portion of GDP and are heavily distorted by subsidies and regulations. In all three cases, the media focuses on money issues, and solutions can only come from getting closer to these industries. output view. The goal should be to improve the total quantity and/or quality of output, and produce each unit of output at the lowest opportunity cost. Financial solutions such as subsidies and price controls are merely a foil for deeper problems.
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