A Chicago Alderman just demonstrated why trying to solve affordability at a local level works poorly at best.  Alderman Maldonado down zoned a collection of properties to "combat gentrification".  On it's own, that would be the worst solution as it's decreasing available housing, which will only push up the prices of the remaining housing.  There's a small silver lining in that he claimed this was a negotiating tactic to push more affordable housing into development plans. The problem here is, that while affordable housing is a great goal, this is a poor way of getting it.  It's not necessary to negotiate for it if you act in a comprehensive way, because you can simply legislate the requirements.  Legislating creates a predictable and equal environment for development.  Negotiating creates friction, uncertainty and is at risk of being arbitrary.  The developers who succeed in such an environment are often going to be that are best at bending the politicians

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.  Pa

The Economist ran a special report last week comparing Texas and California strengths and weaknesses.  What's unavoidably obvious is that many of California's weaknesses stem from housing affordability. The finances of their schools are severely hampered by 50% higher salaries for teachers.  That's not largesse, it's driven by the higher cost of housing.  Teachers in California need that money to afford to live there. Net migration is negative (though population is still growing), and the overriding factor here appears to be housing costs. California spends a lot to help it's low-income population, almost 120% more money than Texas per person, yet still ends up with only a marginally lower rate of poverty after transfers despite a much higher average wage.  Housing explains about 80% of the higher cost of living that negates California's more substantial efforts to have less poverty. So, if you care about any of these issues, you should ask, are high prope

A number of times recently, while having a discussion about a policy with friends or acquaintances, the regressivity of a policy has been raised as a concern.  In one case it was gas tax, in another a carbon tax, in another a bag fee. Does being regressive make a policy bad?  While I agree, it is a point against, it's not the final decision point.  A policy should be looked at in terms of its larger context.  While it's hard to justify putting additional burdens on those with less, a policy can be enacted within a context of policies that overall lighten the burden.  It's beneficial to do so when the policy has net benefits.  For example, a basic carbon tax is regressive; the poor as a percentage of their income are more dependent on gasoline and energy.  But if a carbon tax is enacted within the context of a equal direct cash payment, the overall effect is progressive. It's also important to recognize that distribution can be the smaller question, even if it'

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 ha

We need housing to be affordable, but how best to do it? If you're thinking about this, you might be interested in this. Bottom-line: Build more housing, ignore rent control. How do you build more housing though? Besides avoiding rent control, and using public money to build housing, how else can you build more housing? Bring down permitting/planning costs. Encourage density. Remove parking requirements. Work together to ensure public transit and other infrastructure. This post inspired by reading...   Seattle City Council Insight

If we want housing affordability, we'll have to confront our bias toward home ownership. While it has some sound reasoning, it's a brush applied too broadly. The expression of this bias has often done real harm to lower income individuals and families. It's not possible to have constant, high appreciation of home values and affordable homes. It's not possible to have affordable rents and unaffordable homes (without subsidy). You can try to force landlords to provide the subsidy, by rent control, but eventually they'll just sell out to homeowners. Those that remain will operate in areas where appreciation is not expected, home value is depressed, and rent control does not have effect. Unfortunately these areas will be the least desirable, either from crime, access to transit, pollution, or some other element that has real costs on the well being of residents. If we want equitable housing, we should abandon the policies that restrict housing supply, and we shoul

Here's a good idea. New York should do this, Chicago should do this, everywhere should. Tax non-primary residences at a higher rate. Opponents argue that it would "weaken the property market". I say good! Housing is too expensive. Higher property values are a bad thing if they don't bring more true value (i.e. better jobs, less dependence on autos, better education, etc.) with it. Developers will react to this tax, but it's most likely they'll start building things that are a better fit for average households. And those pencil apartments? Likely they'll become cheaper. More will be purchased by residents. Those residents will still likely be very wealthy, but if they are true residents they would have competed for housing somewhere else in New York, so this will reduce the rates (if ever so slightly) of other property. The real value however is putting developers focus back on building housing for a broader segment. If zoning is not so egregious as to

I hear stories like the below from time to time, that developers either hold on to properties, or build slow. Sometimes I think it's conspiracy theory talk, but I'm sure it's true at times too. What could we do to address it? "There is also evidence that big builders acquire large plots of land in a local area, then put up houses deliberately slowly in order to maintain the local market price." A common cure to this type of behavior is competition, so this tends to happen where there isn't competition. Maybe a developer owns too much of the land in an area, or maybe it relates to a local rules and preferential treatment via corruption or other effect. I don't put much stock in the idea that developers are getting together to rig the system though. Multi-party, secret agreements like that, where one whistleblower can bring the whole thing down are uncommon. The typical corruption system of powerful "brokers" is a more common arrangement. A