People Who Support Affordable Housing Should Support Housing for Rich Assholes
Not that all rich people are assholes, but really: either way
I’ve long been amused by what I call “in-between fallback arguments”. These are the arguments that people make when they can’t or won’t defend their actual position. A classic in-between fallback argument was “It’s okay if you’re gay as long as you don’t flaunt it,” as if a reasonable compromise was for gay people to buy a garden shed and bury it underground so they’d have some place to go to when they felt the need to gay it up. “Schools should teach evolution and creationism” was another in-between fallback argument; this put a personal religious belief on par with a fundamental scientific concept. And I, personally, would have been fine with that if the religious belief being taught was my belief that life was created by the really big beaver who lives in the lake near my house.
A popular in-between fall back argument these days is “I oppose this high-end housing development because what we need is affordable housing.” This argument is ubiquitous in left-NIMBY1 world; any Twitter thread about housing or public meeting about a high-end development project will include it in some form. It sounds reasonable, because it ostensibly champions the interests of poor people at the expense of the rich. And who wants to side with yuppies and real estate developers, i.e. the villains in every ‘80s slobs vs. snobs comedy? Unfortunately, I think people who make this argument misunderstand the situation; in most cases, building high-end housing is compatible with — and will probably directly contribute to — the cause of providing more affordable housing.
New housing is often billed as “luxury” housing. This shouldn’t be too surprising; builders want to build in desirable areas, and they often target the part of the market where margins are highest. Also, “luxury” is also just a bullshit marketing term; a building is not “luxury” simply because the developer declares it so. No building is going to say “We’re not luxury — we’re for losers, fuckups, people who are just scraping by. Most of our residents are recently-divorced guys and part-time prostitutes.” You’ll never see this ad on Zillow:
New construction tends to be high-end partly because the newness itself drives up the price. An apartment doesn’t become affordable because someone slaps a big, red “AFFORDABLE” label on the transom; price is a function of location, newness, amenities, and many other factors that are relatively fixed. The only way to make a new construction in a desirable location low-cost would be to seriously crap it up; you’d have to install moldy drywall, get some dogs to piss on the carpet, and make one window impossible to open and another impossible to close. I once lived in an apartment where someone had scratched “EAT SHIT AND DIE BITCH” on the front door — we could hire someone to scratch “EAT SHIT AND DIE BITCH” on every front door of every new construction in America, and that would drive down the price of those units. But I’m not sure that would be good policy.
Of course, the main way that housing becomes affordable is for someone to metaphorically (and in at least one case literally) scratch “EAT SHIT AND DIE BITCH” into a door. That is: Housing becomes more affordable as it ages. Even if the housing doesn’t devolve into some vomit-smelling roach trap — and it doesn’t have to! — the price will go down as consumers’ preferences evolve. Old buildings don’t have gyms. Some are wired for landline phones, but not cable. Have you ever seen the kitchen in an old building in New York? It’s the size of a mortuary cooler — they were clearly thinking “That’s the woman’s domain! Make it a tiny grey box with a scalding-hot pipe in the middle!” The sinks usually drain into old, narrow pipes, so you can’t have a disposal or a dishwasher, and honestly, even putting water in your sink is not recommended. Even when well-kept, the “luxury” buildings of yesterday become the affordable buildings of today.
Which is why high-end development creates affordable housing. Economists call the passing-along of units “filtering”, and Noah Smith has made the process more vivid with his “Yuppie Fishtank Theory”, which argues that you need to build steel-and-glass buildings (“fishtanks”) so that yuppies will live in those instead of getting into bidding wars for older units. This is the argument for how making it easier to build reduces gentrification, and as a New Yorker, I believe this theory to the marrow of my bones. What not everyone understands is that the yuppies will come; there’s no stopping them, they’re inevitable, it’s basically an invasion of zombies with vape pens and Banana Republic clothes. If a city doesn’t let developers build fishtanks for yuppies to live in, they’ll inevitably bid up the price of the older buildings in the places they want to live. If Sesame Street was an actual New York neighborhood, Big Bird would be out on his ass, those brownstones would be occupied by 28 year-old Social Media Managers, and Oscar’s trash can would be rented by an entry-level Credit Suisse employee paying $4,200/month. Building new housing reduces the housing crunch no matter what part of the market it’s in.
That’s the theory, anyway. But do things work that way in practice? The evidence strongly points to “yes”. A 2019 study by economist Evan Mast found that for every 100 market-rate units built, as many as 48 moderate-income households can move into nicer housing. Several studies have found that market-rate housing decreases the cost of housing in surrounding areas: This paper by Xiaodi Li of the NYU Furman Center found that for every 10 percent increase in the housing stock, rents decrease by 1 percent, and Kate Pennington of UC Berkeley found that rents fall by 2 percent for parcels within 100 meters of a new construction. You can read a more thorough review of the literature here. People are right to note that economic theory doesn’t always translate to the real world, but the evidence suggests that housing markets tend to exist in a universe in which the law of supply and demand is very much in effect.
When people say “we need affordable housing”, they often mean “we need public housing.” I’m broadly pro-public housing; I see it as part of the solution to urban housing problems. But to frame public housing and new developments as “either/or” is a false choice; new housing should be seen as enabling public housing solutions.
The first point here is that new buildings are often required to have a certain number of “affordable” units made available at below-market rates.2 These efforts to create mixed-income housing are a response to the high-capacity public housing projects of the ‘50s and ‘60s. Those large-scale projects were abysmal failures; they effectively warehoused poor people and became pockets of concentrated poverty and crime. There’s evidence that demolishing public housing projects in Chicago led to more employment, fewer arrests, and other positive outcomes for the projects’ former residents, and I think its safe to say that a policy has failed when the universal recommendation of policy wonks is: “Stuff it full of dynamite and blow it to hell.” Mixed-income development is an attempt to do public housing better, and you need new buildings in order to do it.
The second point is that building more housing at market rates can greatly reduce the size of the gap that public housing is meant to fill. Building public housing is hard, as shown in David Simon’s We Need a Hero, the most acclaimed miniseries that nobody has ever watched (I’ll get around to it, I swear). Also, public agencies aren’t built to be real estate developers, which is a point made here by those hardcore Ayn Rand acolytes at the Brookings Institute. Furthermore, building large amounts of public housing makes it difficult to avoid the warehousing problem mentioned in the previous paragraph. The more public housing you need, the harder things get; a thriving private sector helps bring public solutions within reach. Private housing really needs to be like underwear, which is to say: It should be plan A. Public housing can be a bathing suit — a serviceable Plan B — but if you’re relying too heavily on Plan B, you’re doing something wrong.
Much of this debate is intertwined with the debate over gentrification. I’ve written before about how I find the progressive line on gentrification to be deeply un-progressive; long story short, I like integration and think there should be more of it. But there are legitimate concerns about people being forced out of neighborhoods. My goal is for people to be able to choose where to live, and while there are limits to that — I will probably not be able to afford to live in Venice any time soon — if possible, I’d like people to be able to stay where they are if that’s what they choose. Which brings us to this chart, from a study by urban planner Howard Slatkin:
The headline here is that people want to live in areas with more construction. The co-headline is that Black people, especially, are choosing to live in areas with the most construction. This directly contradicts the left-NIMBY narrative in which poor, Black people are being displaced by high-end development. Either Black people like living in fishtanks just as much as other people, or the fishtanks are making it easier for them to stay where they are, or both.
I sometimes feel that the “we need affordable housing” argument is a variant of the “we need a FULL SOCIALIST REVOLUTION” argument. There’s a type of person who is basically uninterested in politics unless it involves the glorious triumph of the workers over capitalism (which has been imminent for as long as I can remember). This type of person never accepts half a loaf, or even 99 percent of a loaf, because doing so might obscure capitalism’s harshness and delay its demise. It’s this logic that I think causes some people to dismiss every project that doesn’t perfectly reflect their idealized vision of a housing project as “a giveaway to greedy developers”.
But I’ve also heard the “what we need is affordable housing” argument made in good faith by well-intentioned people. I’ve heard it made by people who are sincerely troubled by the cost of living in major cities. I share that concern; it’s why I became interested in housing policy. That interest has led me to believe that the first thing we need to do — the thing that absolutely has to happen before any other policy can work — is make it easier to build. Build what? Anything — whatever people want built. We have no good options as long as we’re artificially constricting supply; we’re just creating a bidding war that rich people are sure to win.
Yuppies living in steel-and-glass apartment buildings are not a group whose interests are likely to spark a mass popular movement. You’ll probably never encounter a throng of people marching the streets with signs that say “Floor-to-ceiling windows are a HUMAN RIGHT!” and “WiFi in the spa area NOW!” That’s as it should be. What’s unfortunate is that people who want to help working class people sometimes fail to see how the different segments of the housing market are connected. Blanket opposition to high-end development has negative effects for everyone down the line. If people oppose a development project for some reason, then they should be up-front about that reason, because “what we need is affordable housing” is a lousy argument even as in-between fallback arguments go.
“NIMBY”, if you’re not familiar, stands for “not in my backyard”. It’s shorthand for people who generally oppose development. By “left-NIMBY”, I mean people on the left who oppose development; “right-NIMBY” folks generally have different sets of arguments and concerns.
Cities use different methods to make these units available at below-market rates, and I’m including this footnote in order to note that I think those methods are a real mixed bag. Rent control basically never works, so I prefer subsidies, which contain their own set of problems. The finer points of below-market housing deserve their own column, but I’m summarizing my view by saying that I think some of these policies can produce good results, but design really matters.
Great article. We can also see a similar phenomenon happening right now in the used car market. I know a number of people who have only ever bought used cars and (reasonably) thought that the new car market didn’t affect them. But then we had the pandemic, and various supply shortages dramatically reduced the supply of new cars. Guess what happened to used car prices - they shot up, because there are people who need cars and if they can’t buy a new one they will buy a used one. When you constrain the supply of the new thing, you increase the prices on the used things.
I have been grinding this ax for years now. You can't solve housing supply issues with guarantees that 15% of units will be affordable (below market) and simultaneously zone your city to a point where it's infeasible for developers to build anything that won't have astronomical returns - they won't build large developments in more middle class areas because it simply costs too much vs the rents they'll be able to charge, so they only get built in areas poorer people probably won't ever be able to live in while the housing stock elsewhere stagnates or decays. Make it as easy to build as possible (responsibly) and things naturally become affordable.