Want to Reduce the Cost of Housing? Build More of It - Bloomberg. By Matthew Yglesias

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Everyone agrees that the rent (or the mortgage) is too high, but the best ways to make it more affordable aren’t very popular.

May 5, 2024

When it comes to the current debate over housing affordability, I feel like my position has been clear and consistent: Twelve years ago, I wrote a book called The Rent Is Too Damn High. At the same time, I also have to admit that most Americans do not share my preferred solutions.

My basic argument can be summarized in three words: Build more housing. There are a lot of ways to make that easier — feel free to buy the book! — but increased supply doesn’t seem to be what voters have in mind when they think about ways to bring down housing costs.

Only 30% to 40% of voters believe that a greater supply of housing would moderate prices, according to research from academics who are broadly sympathetic to the YIMBY (Yes In My Backyard) movement. Their research also shows that this is not generalized skepticism of supply-and-demand dynamics. If you ask the same question about other commodities, people understand the linkage.

In their most recent paper, the researchers — Christopher Elmendorf, a law professor at the University of California at Davis, and the political scientists Clayton Nall of UC Santa Barbara and Stan Oklobdzija of Tulane — survey voters about what they think would work. The most popular options are rent control, government subsidies for down payments, property tax cuts and regulations to prevent Wall Street firms from buying housing.

Economically, this is basically all nonsense.

If you push subsidies into a supply-constrained market, prices will go up in response, and you’ll be left right where you started. If you impose rent control, it will help incumbent renters who never plan to move, but it only serves to exacerbate scarcity.

Meanwhile, YIMBY solutions such as changing zoning to allow for more construction are both less popular and viewed as less efficacious. Interestingly, and contrary to the “homevoter hypothesis” that supply restrictions represent a deliberate effort to inflate housing costs, the research finds that renters are more hostile to denser zoning than homeowners are.

So, are Americans doomed? Not necessarily. But the research is a potent reminder that lots of popular attention on a problem doesn’t always help solve it.

There is a healthy amount of elite awareness in the US that there are too many regulatory restrictions on housing supply — that was the view not only of Barack Obama’s economic policy team, but also Donald Trump’s and now Joe Biden’s. At the same time, bipartisan deals are usually popular regardless of the substance, and there is political upside to solving problems regardless of what people think about how you solved it.

Under the circumstances, the best path forward for supply-side reform is probably quiet bipartisanship — motivated state legislators and governors working together — rather than noisy partisan coalitions.

In Washington state, for example, a promising bill reducing minimum lot sizes passed the House with overwhelming bipartisan support and a Republican lead author in a blue state. The law, unfortunately, got bottled up in the Senate, but these kind of intra-elite issues are solvable in principle. In New York, in contrast, Governor Kathy Hochul’s splashy 2023 housing reform effort failed in a way that may be unfixable. She’s the Democratic governor of a blue state, so she tried to build a partisan coalition that paired upzoning with other progressive housing reforms. Republicans attacked the package, the politics got dicey, and vulnerable Democrats started to bail. The package not only failed, but unlike the version in Washington state, the whole approach may be irredeemable. There simply isn’t enough public support for upzoning to be done on a party-line basis.

There is, however, one potential exception.

The research indicates that there is a lot of support for zoning reforms designed to facilitate “affordable housing for middle-income households.” The policy landscape is littered with so-called “inclusionary zoning” policies that aim to accomplish this. Unfortunately, as a new report from the UC Berkeley Terner Center for Housing shows, these policies mostly serve as regulations that further constrain the overall supply of housing.

This is a potentially fixable problem of policy design. Inclusionary zoning customarily requires a share of units to be rented out so cheaply as to be uneconomical to build. It then also requires that only certain households be eligible for the units, which both limits the number of people who can benefit and requires incredible amounts of paperwork.

One could imagine policies that fit the same high-level description while being dramatically simpler. What if any unit that’s cheaper than the average new unit in the area counted as “affordable,” and the project were then given an express lane to permitting, exemption from parking requirements, and authorization to build taller? Conventional “affordable” housing policies use metrics like 80% of area median income to define eligibility. But in other contexts it’s acknowledged that a family earning a good bit more than that is still middle class. Biden’s tax policy proposals define anyone who earns less than $400,000 — over four times the median household income — as middle class. Housing policy could be equally elastic.

Granted, these kind of limitations are not really good economics. It’s pretty clearly established that even the most upscale new developments improve overall affordability. But the important thing is to maximize supply given the constraints of politics and public opinion. As long as we take a reasonably flexible view of affordability, Americans can have a lot more new affordable housing.