Skip to main content

How to make housing affordable

Housing costs in many areas across the States have been rising quickly.  One of the major causes is restrictive zoning that keeps housing in short supply, allowing demand to push prices higher.  Two weeks ago Oregon passed a bill with similarities to the failed California SB50.  This bill takes a statewide response to zoning, upzoning many single family areas to automatically allow higher density housing (quadplexes).

It's a fairly amazing development that other states (and cities) should pay close attention to.  Localizing zoning is a fine idea when the concerns are truly local, but when it comes to housing costs, the effects are much more regional.  Left to business as usual, zoning changes at a pace that does not accommodate demand.  Worse yet, when zoning changes it's often only can occur via a backroom deal, which privileges developers with access, ability, and willingness to manipulate the systems.

When a developer spends 1 year planning a project, prices go up.  Part of the reason is by necessity, as more time is spent and any expenses must be financed longer.  But another reason they go up is that the market becomes more exclusive.  Not only must the developer charge higher rates, but they can charge even more.  In that type of market, a developer makes profits via high margins, not high volume.

Taking the approach Oregon has, opening up change en masse, creates opportunities where development will follow a model more like that found outside cities, where prices are lower.  Prices will still be higher, the land value is still higher, and there's some other requirements to meet, but the gap will be smaller.  Unlike the suburban building though, this new building will be higher density, providing more people with access to the local job market and other services of the developed city.

Chicago, and/or Illinois should follow this example.  While housing prices have not spiked here in the same way as they have on the west coast (or northeast), they have been still been rising in comparison to household income in a way that is making housing less affordable, and the city more exclusive.


Popular posts from this blog

Should roads be free? Can we change that?

It's ironic that in a country where providing free access to basic healthcare, food and water are so contentious, we've been providing one resource for free in astounding quantities: Roads. It's even more ironic, that while proving the roads (and often parking spaces) for free, we've neglected to provide the real need, transportation.

Should roads be free? The evidence, from a 50+ year experiment is no. Free roads leads to overuse and traffic jams, a net negative for every potential road user. There is no amount of roads you can build that prevents this tragedy of the commons. Every major city in the US has traffic jams. A city with "good" traffic is one where those only happen for an hour in the morning and an hour in the evening, and only at certain points.

The trouble with trying to build your way out of traffic jams is that housing and driving patterns always shift to consume everything to capacity and beyond. There is also the cost in terms of money, env…

The promise (and pitfalls) of index based insurance

Insurance in developing nations is far less broadly available than developed ones.  In addition, the risks that citizens of developing nations face, are often much more numerous and severe.  Crop-insurance is a common element of agricultural policy in the United States, but less common in Ethiopia.  As Ethiopia has a much higher percentage of their population engaged in agriculture, shocks, such as drought, crop disease, or severe weather have big impacts.

Insurance's basic principle is simple, spreading risk across a broader pool.  When harmed, you get assistance to lessen the impact, when you're not harmed, your payments cover the costs of others who are.  But deciding who is harmed is a very time consuming task.  Preventing fraud is important to staying competitive, when looking at private enterprise, and important to public trust when dealing with public programs.  But preventing fraud places burdens not only on the insurance provider, but the claimants.  Having to prove l…

Exceptional harms

California was pursuing a new transit oriented development bill, SB50. It morphed into a general housing bill, before being killed by a powerful Senator. His arguments, shared by other LA residents, was that they didn't want local control taken away.

On the surface, that sounds reasonable, who doesn't like more direct democratic processes? But local zoning has failed to address the problems the bill targets, and it is predictable that it will continue to fail, so long as political engagement maintains its current form. In many places, city-by-city control could work, but California is such a jigsaw of localities that each city has incentives to keep following business as usual, which means, zoning restrictions to prop up property values, which inevitably lead to housing shortages and unsustainable costs for anyone who isn't getting the land value windfall.

Even those getting the windfall are trapped into non-optimal decisions by housing immobility. That immobility has be…