Yes to the City

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From The Wall Street Journal:

At its best, capitalism provides a cornucopia of products affordable to ordinary people. But when it comes to housing, the American economy is failing to deliver the goods. By one leading measure, housing prices in April 2022 were 15% higher, corrected for inflation, than their previous peak in 2006.

The free market has failed to deliver affordable housing to Americans because of government restrictions on supply. In those parts of the country, like Houston, where building activity is lightly regulated, prices remain low despite enormous demand. In other areas, including Boston and San Francisco, new developments are constrained by a thicket of building regulations supported by entrenched local interests—often referred to collectively as Nimby, or Not in My Backyard. Any new demand thus inexorably leads to higher home prices.

Artificial restrictions on housing supply have enriched older homeowners while limiting home ownership among the young. In turn, American GDP suffers, because our most productive regions, such as Silicon Valley, make it impossible to build, forcing people to move instead to less productive, lower-cost locales.

Setting housing markets free, however, would require more than the election of a pro-growth president or governor; there need to be countless smaller victories at the local, city-council and town-planning levels. Now there is Yimby—or Yes in My Back Yard—a pro-growth movement that may be our best hope for making coastal America more affordable.

Max Holleran’s “Yes to the City: Millennials and the Fight for Affordable Housing,” focuses on the fascinating conflict between Yimbys and some more-progressive groups, including old-line environmentalists and community activists, such as the protesters who stormed the 2018 YIMBY town conference in Boston with their yellow shirts, drums, kazoos, vuvuzelas and “giant signs decrying displacement.”

Antigrowth advocates have long depicted developers as greedy destroyers of neighborhoods. Often forgotten is Adam Smith’s wise dictum that “it is not from the benevolence of the butcher, the brewer or the baker, that we expect our dinner, but from their regard to their own interest.” The Yimbys, Mr. Holleran tells us, “successfully reframed urban growth as a progressive goal for creating more equitable and sustainable cities.” The battle is no longer between wealthy developers and the little guys in the neighborhood, but the little-guy renters who are kept out of the market by wealthy boomers.

In one example, Mr. Holleran describes how, beginning in the 1950s, a “group of college professors, concerned citizens, and activists with links to the League of Women Voters” came together in Boulder, Colo., to work toward “a municipal ‘land bank’ of undevelopable property surrounding the city.” These citizens “were devoted to creating an environmental paradise,” Mr. Holleran tells us, but the “protective greenbelt” also created a de facto barrier to the city, inside of which growth was severely regulated. Meanwhile, outside the greenbelt there emerged “an endless stretch of unimaginative suburban homes on cul-de-sacs, connected by highways and strip malls, dotted with box stores.”

That greenbelt has since helped drive Boulder’s average home sales above $850,000 in the first quarter of 2022. Its environmental impact has surely also been negative, as it increases commuter distances—and hence carbon emissions—for those living outside of it and must travel into the city by car.

Boulder’s high housing prices and progressive politics made the city an ideal opportunity for the Yimbys, while the region’s house-rich environmentalists did not garner much sympathy. And so in 2015 the Yimbys easily defeated a ballot referendum that sought to give Boulder neighborhoods “veto power over land use.” It was, Mr. Holleran tells us, “a tremendous win for Yimbys in a city where voting on development mostly goes the other way.”

Link to the rest at The Wall Street Journal

PG notes that there are still vast portions of the United States that feature land with very few inhabitants. Ironically, the population of many parts of rural America has been and is in long-term decline. The US equivalent of Britain’s country villages is crumbling in a great many places.

PG understands the economic and social forces causing people to leave rural areas and move to urban areas are an example of individuals making decisions in their own economic best interests, but in a nation filled with high-speed internet connections, he has yet to see very many large commercial enterprises decide to give up on offices that place employees into close physical proximity with each other. Even if the downtown core of a major city goes into decline, one or more nearby suburban areas start sprouting high-rise offices or suburban campuses where employees are expected to show up on a regular basis.

The COVID lockdowns in the US started a significant portion of the working population who had worked in office environments to begin working from home offices. Based upon what PG has read, now that COVID has declined, a lot of bosses have decided they want to have the worker bees concentrated in one place where face-to-face management may be conducted. A larger number of worker bees than expected have said they’re not going to do so.

PG suggests there is an age factor also at work. When he was young, PG enjoyed living in and visiting large cities quite a lot. Now, not so much. High-rises don’t make his heart go pitty-pat anymore.

One of the nice perks of being a successful indie author is that you can live and work in a place you enjoy being. You walk to work and Amazon doesn’t require you to ever show up at its offices.

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18 thoughts on “Yes to the City”

  1. Those house prices are based on an artificial scarcity created by the rental companies.

    I’m not sure I would call that artificial scarcity. It’s real. Just as real as any owner group holding rather than selling. Prices are always set at the margin.

    We might wait until the end of the current recession to see how those companies fare. Their hold strategy is not sufficient to prevent recession fueled sales and defaults by individual owners. Zillow already has learned a very expensive lesson in their acquisition program. We have only seen Act-1. More to come…

    • The house prices are based on what is available for “sale” at the moment, and the competition over those few available houses. That availability is kept artificially low by the rental companies. They leave just enough houses on the market for people to fight over, to keep the prices high.

      Regular people cannot compete with an Equity firm swimming with cash to “invest”.

      I can’t find the video where the guy running a rental company is bragging about being able to “squeeze” people to pay higher rents. That they have to pay or they have nowhere to go since all of the rents in the area are high.

      • That availability is kept artificially low by the rental companies.

        What makes it artificial? Rental and individual ownership have always been a big part of housing. We have to deal with all market players.

        With low offerings, I suppose some are because individual owners are choosing a hold strategy. Is that also artificial?

        Markets continue to innovate. In the 80s and 90s, we had REITs. Artificial? In the 90s, the government pushed bank mortgage policy by new interpretation of CRA. Artificial? In 2008 we had securitized mortgage bonds. Artificial?

        And availability? Easy to control. Just get out the checkbook. If you write it, they will come.

        • Come now. Let’s have fewer talking points, and more real world discussion.

          Like the kid says in this 60 minutes piece, “Most people our age are not going to be able to have 350k in liquid cash.”

          Lack of new construction and corporate landlords contributing to skyrocketing rent
          https://www.youtube.com/watch?v=ZEwxYvQVU5g

          I won’t argue with your talking points, because they miss the point. HA!

          BTW, my friend retired from the Highway Department, and started his own consultant firm. He makes a comfortable income while wearing his pajamas. We are very proud of him.

          His daughters just finished University, at a very young age, and he just bought two houses for cash so that each girl can have there own place.

          As a new member of the 1% he has that kind of cash on hand, the majority of people do not, and there lies the problem that will come back to bite society fairly soon.

          • Actually, the problem that will bite society *first* won’t be the the top 1% but the ideologue 6%. Well on its way already.

            But as to housing, the bigger problem is “the city” as conceived in the 20th is past its expiration date. Like the public education system it is a product of the industrial age that no longer fits the needs of the residents. Patchwork “fixes” and organized griping achieve nothing when the very urban model is what is at fault. Megacities are alrdady ungovernable and becoming unlivable. The model is unfixable.

            Here, try this one:

            https://www.youtube.com/watch?v=bpAi70WWBlw

            San Francisco is worse. Detroit already collapsed and Chicago isn’t far behind. Ungovernable.

            Zoos evolved and it is time cities evolve, too.

            First principle is decentralization. There really is no economical or social justification for megacities anymore. The ongoing efforts for new, clean sheet cities, is pointing tbe way.

            Second principle is social cohesion. The great sorting has already started the process of cultural differentiation and pretending a country of 400M can be organized the way it was when only a hundred million is fruitless. The only sane way forward is a return to federalism, not just at a state level but at a county level. Centralized authoritarianism trying to force everybody to believe in one “universal truth” is the cause of much of the discord. The new mantra needs to be “live and let live”.

            Third principle is local sustainability. And not just as a buzzword. Energy, for one, needs to be locally produced and controlled. Jobs, too. Food is geography driven so it can’t be decentralized but it can be locally supplemented via vertical “farms”.

            The country is in dire need of rebuilding infrastructure. It is the only thing all political tribes agree on. But just rebuilding the obsolete structures will solve nothing.

            Of course, none of tbe above will happen in an organized fashion under tbe aegis of the IdiotPoliticians™. Instead it will happen piecemeal funded by and responding to the needs of the 1%. Not the absolute best way to go about it but the only, darwinian, way it can happen in the post-globalization era. “Live and let die”.

            Which is why railing against capitalism is just plain silly; it is the only effective mechanism known for aggregating and allocating resources to maintain and evolve society over the long haul. The only sustainable one. Keep an eye on China’s economy to see what economic authoritarianism produces. It’s already playing out. (Hint: there’s a mortgage strike growing there. Dozens of cities already.)

            The latter half of the century is going to be unrecognizable to today’s ideologues since neitber camp is going to get tbeir way.

            Re: the OP?

            No to the city…
            …as it exists.

            • HA! Both you guys are on fire with the talking points, while completely missing the point. That’s very useful for Story, especially for my current WIP[1].

              I needed that element of “nonsense” to explain why the main characters were acting as they did. I just had a placeholder of “Utne Reader” types until this thread. I now know their motivations and mindset better. It goes beyond what you have described to a future with no cities. That’s classic Asimov, where people lived isolated from each other on the planets rather than in Caves of Steel[2].

              Thanks…

              BTW, The synchronicities are astonishing. Along with this thread, the book “Ecology of Souls” by Joshua Cutchin just came out in ebook. It’s a massive 1405 pages that deals with “A New Mythology of Death & the Paranormal”.

              (The sample is huge.)
              https://www.amazon.com/dp/B0B642T28H

              I’m reading through it now. It is astonishing in content, and written “in the clear” rather than the typical esoteric “nonsense”.

              [1] My WIP story started as a triptych, and now I see at least 9 novels in series, with the possibility of many more.

              [2] Also in the short story, “Living Space”, from Earth is Room Enough.

          • Anyone can participate in the US housing market. There are no barriers. In such a market we will see various sectors increasing and decreasing their participation.

            One way is to buy with cash as the cited retiree from the state. Another is to borrow. The kids buying a first house have rarely had the equivalent of $350 in liquid cash. Nor have they had the accumulated assets of a retired state employee. To date, this hasn’t led to a big bite out of society’s backside.

            That’s where the mortgage market comes in. There are zillions of houses purchased that way. The entry of investment companies hasn’t changed that.

            Markets adapt. Each time some new aspect emerges, the temptation is to say that this time the market is doomed. And each time we find it isn’t.

            Truth in posting: I bought my first house with zero down payment

  2. Before the 2008 crash there was a glut of houses on the market. People were building like crazy so that they could then rent those houses out. There was an almost constant stream of infomercials about how you too can be a millionaire, with no money down. People would brag about “owning” ten houses and renting them out.

    Then the ballon payments hit.

    People walked away from houses that were underwater. Big companies bought all of that housing, for cash, and started renting them out. Those companies are traded on the stock market. Those stock valuations are based on the value of the houses and the rent being charged.

    Locally there are signs on most phone poles, “We pay cash for your house.”

    They pay cash for any available house. The few houses that are on the market are thus priced beyond any rational value, so that the rental companies can say, “See, housing prices are X, so we are charging Y for the rent.”

    Those house prices are based on an artificial scarcity created by the rental companies.

    There are whole neighborhoods owned by the same rental company.

    If the government stepped in and made all of the rental companies go “private” they would divest themselves of the houses, and there would be a glut on the market and housing prices would crash.

    BTW, on C.E. Petit’s comment about HOA’s.

    I have a classic story in my queue where the Justice Department quietly bought up a bunch of houses in one gated community for Witness Protection. A few of the original homeowners start to notice and a nice murder mystery entails. The Witness Protection Program cleans up the mess and simply moves more “clients” into the vacant houses. The “little old lady”, who was the master mind, simply smiles and makes her plans for the new “neighbors”.

    I’m trying not to let it be a series.

    • Nice story.

      But there is another bigger reason for high housing prices: supply and demand.
      Builders stopped construction because of the 2008+ glut and again because of the pandemic. And population has continued to grow in the US. Plus, for all the stories of millenials living at home, a majority of them have moved out and are starting to build families.
      (Those high priced rentals? Somebody is *needing* them.)
      If anything, the glut houses are minimizing the problem; the problem would be far worse without them.

      Also, going back to government regulations: in California all new construction has been required to feature solar panels, adding $10,000 per unit to the cost since 2020. With consequent markup. (Nice timing, right? Crazy Eddie rulez!)

      https://news.energysage.com/an-overview-of-the-california-solar-mandate/#:~:text=What%20is%20the%20California%20solar%20mandate%3F%20The%20California,homes%20that%20are%20up%20to%20three%20stories%20high.

      Because, of course, forcing the cost of producing energy unto homebuyers is a “better” policy than building more powerplants. Espe ially as solar panels age, die, and their toxic materials end up in trash dumps. Because that is the crisis du jour in LA as only 10% of panels are recycled as they would if tbey were part of a centralized facility.

      Much like the glut, if you follow the roots of all disfunctions far enough back, you always find an IdiotPolitician™ as the initial cause. Say, Jimmy Carter for subprime mortgages. The law of unintended consequences always strikes because IdiotPoliticians™ never think things through.

  3. The author is sitting there griping about peak home costs and completely fails to mention how the mass exodus from cities during the recent WFH boom helped drive prices through the roof. And, as mentioned above, if locations with light building regulations are lower in cost, then it’s a governing problem more than a capitalist problem.

    • The economically illiterate blame everything on “capitalism”. Mostly because they haven’t clue one what actually *is* capitalism. Or socialism, for tbat matter.

      • The truly virtuous can never be economically illiterate. Anyone remember Biden telling us, “Milton Friedman isn’t running the show anymore?” The virtuous didn’t know who Friedman was, nor did they know what show it was. yet they cheered the pronouncement.

        Today an incremental step towards economic literacy might be reading up on Warren Harding and the depression of 1920-21. Unemployment was over 10%, and GDP fell by more than 20%. Harding fought it hard. He cut government spending way back, and he reduced taxes. It worked. Show of hands… Who knew there was a 1920-21 depression?

        Today, the virtuous response is to increase government spending and increase taxes. Unfortunately for a country saddled with that policy, Milton Friedman is indeed still running the show.

        • Government spending wins elections. Especially if you pre-announce it.
          ( “Everybody gets $1200 if we win control of the senate.” )
          Of course, throwing two extra trillion into a stable economy is *never* going to create inflation, right?

  4. But when it comes to housing, the American economy is failing to deliver the goods.

    Seems capitalism and the economy do deliver affordable housing in places where government doesn’t prevent it. (like Houston) I’d suggest the lack of affordable housing is less a failure of capitalism than it is a failure of government.

    • Restrictive zoning laws have nothing to do with capitalism…
      …and everything to do with “democracy”.
      In LA a $1.2B initiative after six years produced very little at ridiculous costs:

      https://www.latimes.com/california/story/2022-02-23/city-controller-audit-los-angeles-homelessness

      Actual capitalism, in Nevada, is producing factory built high tech 375 sqft mini homes for $50,000 that are truckable and unfold in an hour. They are in the process of adding a second factory and have a waiting list 100,000 long. BOXABL. (Soon to be $60K plus, given the 9% heading to 11%+ inflation rate.)

      Of course, zoning laws make sure they can’t be deployed where tbey are most needed because they are needed precisely for those laws. And it’s easier to blame “capitalism” than to look at the IdiotPoliticians™ they themselves voted in. (Usually to keep out the “deplorables” who need the low cost housing.)

      • …if one defines “democracy” as “who gets elected in somewhat-biased systems that favor entrenched interests.” (I am not saying that “there’s no intersection between existing represenative systems and an ideal democratic government.”)

        Perhaps the best example of this is the rise of the HOA/condominium management entity as a substitute for statutory Jim Crow laws. The deference inevitably shown to “existing residents” is appallingly obvious — and when some of those “existing residents” are themselves appalling, things get Very Interesting Indeed. Worse, because this “delegation” to a nongovernmental entity removes the HOA/condo actions from being “under color of law” (technical term meaning roughly “state government”), potential plaintiffs generally can’t get into court on anything except a breach-of-contract theory — which, if the HOA/condo “contract” gives the manager discretion, is almost impossible to prove.

        And, of course, the ideological argument assumes that there can be “capitalism” without “regulation of the market to ensure market fairness,” usually because the objector is a Special Snowflake Who Would Never Engage in Unfair Practices (just ask them, everything they do or contemplate is fair by definition!). But that’s for another time.

        • In this case “democracy” is “those that choose the rule makers”. Who then cater to tbeir constituency to keep out that aren’t.

          When I lived in the DC region there was a big difference between Prince Georges County and Charles County. PG (at the time) was a mixed use county with housing developments, rental developments, and multiple business developmentsfrom strip to enclosed malls. Cross the border to Charles county (still within less tban a half hour from DC) and building permits required one acre minimum per residence.

          (There was an even bigger difference between tbe north and south sides of tbe beltway. Anacostia in those days was a lot like Detroit these days.It’s been gentrified since and a lot of its residents have been shoved south.)

          “First Mover advantage” isn’t just for the business world.
          No need for a HOA if they only allowed single family residences and the odd gas station or Lucky Seven.

          As for unregulated capitalism, does that beast exist anywhere?

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