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April 8, 2013 / Jake Seliger

Connecting the dots between beliefs: an example from density and housing policy

In “New York City, NIMBY Paradise: New Yorkers genuinely believe that their housing restrictions are normal” Megan McArdle points out that “a combination of zoning ordinances, building permits, and local NIMBY opposition had made New York distinctly unfriendly to new development, and that it would be rational to build far more units than the city currently allows” but that “I am constantly surprised by the extent to which New Yorkers regard all this not only laudatory, but normal–even as they bemoan the high cost of housing.”

I too am surprised. It’s at least intellectual coherent to complain that prices are high or to argue that development should be limited, but the two together is bizarre. I’m living in Manhattan and occasionally lament to friends or people in bars or whatever that we don’t get more housing built,* which would reduce rents (or at least rent increases), and they inevitably look at me like I’m from Mars. Then they say, “But there’s construction all over the city!” Which is (sort of) true, in the sense that walking around the East Village and LES reveals a fair number of projects—but almost all of them are short. When I mention supply and demand, I get funnier looks, like I’ve just revealed I’m a community, Christian, libertarian, or some other suspicious outsider.

I just don’t think most people connect difficulty in building, or how supply affects demand.

IMG_2181The other day I was wasting time on Reddit and spent time responding to people in this thread about housing in Seattle, which is another place where it’s hard to build and rents are rising, and a lot of people on the thread manifest the kind of difficulty in connecting supply and demand you’re talking about in your post and that I’ve noticed out and about. If I were being mean / direct, I would posit that most people like to complain and don’t understand, or choose not to understand, simple economics.

If I’m being less mean, I’d argue that most people just lunge at a random opinion, hold it, and don’t really think anything more about it; that’s one of Jonathan Hadit’s important points in The Righteous Mind. Still, I never hear, “Extensive housing regulation leads to high prices and that’s a desirable trade-off,” or “We should accept high prices as a reasonable consequence of limiting construction.” Those are normative statements and closer to morality or philosophy, and they’re at least reasonable.

Most people, however, have only a vague sense of the link between public policy and their living arrangements. My Dad, when I told him about this, mentioned that he used to work for cities and had to listen to people express their opinions, most of which were incoherent. Apparently little has changed, except that the incoherent can organize through the Internet.

Anyway, Matt Yglesias has pointed out in many contexts that “Gentrification can’t be stopped by halting construction—to have a chance you need even more construction.” People with money will simply outbid people with less for scarce real estate resources, and various legislative efforts to prevent this basic dynamic have failed and always will fail because people are cleverer than legislatures and markets want to clear. It’s also common for people in hot urban areas like New York and Seattle to lament gentrification, high rents, and developer avariciousness.

If this were limited only to random idiots in bars and coffeeshops, that would be okay, but many reporters are economically illiterate too. One recent random but representative example is Lynn Thompson’s Seattle Times story “Would new rules leave loopholes for big houses on small lots?,” which spends 900 words discussing housing issues but doesn’t include supply or demand.

I sent a letter to the editor of the Seattle Times and to Thompson pointing this out, and I got a nice note back from Thompson saying that “I did another story about a month ago that found that we have enough growth through 2040 under current zoning [. . . .]” But what does “enough” mean? It too is a basically incoherent concept, at least in economic terms, because particular individuals don’t know what “enough” means. That’s why we have markets. Moreover, she didn’t mention price, or the pricing issues

Her colleague Sanjay Bhatt, however, reported that Single-family home prices rose by 20% from 2012 – 2013, and rents in Seattle and environs have been rising faster than inflation for a decade or more.

Why don’t reporters working in this field understand econ 101? And why do editors let them get away with it? The omission is glaring, and it works to undermine the confidence of anyone with any reasonable amount of knowledge in the Seattle Times (and other papers, which routinely make the same kinds of errors). I don’t mean to pick on Thompson or the Seattle Times in particular, since they just happen to be salient examples and the general problems I’m describing here are widespread.


* Are or sex chat are more fun and was the norm is college, but not everyone is ready for the latter five minutes after meeting. A shame, really, but I learned many things from Martha McPhee’s wonderful novel Dear Money, and one is that people above the age of 30 often regard real estate and wealth as a sort of sexual sport.

2 Comments

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  1. Josh / Apr 8 2013 10:36 pm

    The main argument I read concerning supply and demand seem to be that environmental reviews take too long and make it difficult for developers. Seems like a shady and inhumane argument to me. http://www.manhattan-institute.org/html/cr_25.htm I’m also interested in information concerning why fixed housing prices are not desirable for the resident or for the world we create (because that is why we have houses, to house people, right? Not just so that someone can make lots of money?).

    • kaoD / Apr 11 2013 11:26 am

      > why fixed housing prices are not desirable [?]

      Because that’s how economy works? Why would I bother building somewhere with fixed prices?

      That’s what markets are for.

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