What Are Good Housing Policies

Let this now be the end of our long journey. You gods and all you goddesses to whom the glory of the Dardanians and Troy Has been anathema, at last you may release us from your hatred; and, O sacred Prophetess who can tell what the future knows. You know that I ask for nothing more than what Is mine by what the Fates allow to me. Grant that at last we Teucrians can bring our wandering tempest-tossed household gods to Latium

Virgil. The Aeneid (p. 161). University of Chicago Press. Kindle Edition.

The Aeneid is an origin story. After the destruction of Troy by the Greeks, Aeneus, the hero of the story, leads what’s left of the people of Troy on a journey to form a new city, a new empire. This new city and new empire would be Rome. It is in this way that Virgil anchors his contemporary Rome into the cannon of well-known Greek epics and stories. For many in the housing and real estate world, especially housing providers, the last two years have been a dark time.

What lies on the other side of pandemics and rampant regulation that harms the housing economy? When will it end and how do we know when we’ve arrived at our Livinium? The answer can be, with investment and hard work, adoption of housing policies that create return on investment, reduce inflation, and help working people who need housing.

What are the good housing policies?

End zoning

It has been more than a decade since I first argued for what I called, “Zero Based Zoning,” the idea that removing zoning requirements could spark a burst of housing production that could ameliorate housing inflation. The idea was never to take away rules about health and safety, mostly found in the building code, but to eliminate the maddeningly arbitrary rules about where housing can be built, how many people it can serve, and what it looks like. Zoning, remember, is exactly that, rules that designates zones where some things can be built and others can’t.

Zoning emerged in the first quarter of the 20^th century as a way to bring order to uses in growing and industrial cities. The idea was not to let the “pig into the parlor,” preventing noxious uses of land like a rendering plant, for example, from being built right next to single-family homes. What it fueled, though, was a segregation of land use, a problem accelerated by “free” highways that enabled people to live in one place, drive to work and to retail and recreation. Zoning led to what is typically called “sprawl,” and to patterns and typologies that others have called “racist.”

Abolition of zoning and the many layers of rules and permitting required to maintain it would reduce barriers for developers and builders to enter the market, compete, and provide value for people who need housing, especially in cities experiencing lots of growth. Zoning empowers people who have already arrived in a community by giving them incremental power over how land gets used. Red herrings like worries about loss of views, parking, and tree canopy form the political basis that local elected officials use to write rules that raise barriers and thus land and housing prices. This siphons money from poor people’s pockets into rich people’s equity in their single-family homes. This is the real civil rights issue in housing today.

End extortion and bribery

Mandatory Inclusionary Zoning (MIZ), the practice of conditioning the permitting and construction of new housing on the producers paying a per square foot tax on new housing is not only morally dubious it is inflationary, resulting in less and more expensive market rate housing which further justifies fees to pay for subsidies. I’ve settled on calling it bribery of a third world variety.

The scheme is growing in popularity and is the single worst housing policy in the United States, encouraging low-grade warfare between supposedly “greedy developers” and advocates for the poor. The result is usually that myopic development interests simply price the bribes to local government for the permits into their cost structure and pass it on to consumers. Meanwhile, people who need housing don’t get it; non-profit beneficiaries of this kinds of boondoggles produce units at a trickle and at great expense.

People short on rent need cash, not a unit someday

I am consistently stunned by the left and housing advocates who resist the idea of using housing subsidies to buy down the burden of high rents or low wages with cash. The solution, for them, is always very expensive capital construction or wage controls, both of which are inflationary, making housing problems worse. The tragic irony is that the more money that gets dumped on solving housing problems by building a very limited supply of pricey subsidized non-profit housing higher prices go rationalizing the need for, you guessed it, even more money.

I’ve done the math. In Seattle, there is an inclusionary scheme that has produced about $96 million and will likely continue producing cash into the future. What would it look like if that money paid people’s rents?

As fanciful as this may seem, the simple math always shows that it is far more efficient to give people money for rent now than to build expensive housing that needs to be maintained decades into the future. Economies change, and building “permanent” subsidized housing saddles organizations and governments with costs even beyond the end of a “housing crisis” however that is measured. Shouldn’t we bet on things getting better not getting worse?

Build housing for those who need it most

Every economy has people in it who cannot afford to pay for the basics of life. Fortunately, these people are relatively small in number. This is not the middle class or working poor or even people experiencing unemployment and economic dislocation. Most people can and want to work, and when they do, they expect to earn more over time and most do. When people who can and do work experience housing challenges, the best way to address those is with cash.

But there are people who because of disabilities, age, addiction, or mental illness will never be able to fully enter the work force and pay market rents even with a cash subsidy. Some people need aggressive case management, continual support from a network of service providers and peers in order to stay housed. Often, providing these support services is best when provided along with housing, health care, and other supports like education or therapy. For this population, it makes sense to invest – even at significant expense per unit – in capital construction projects. In fact, the concentration of subsidies can make these kinds of projects make more financial sense.

“Who can tell what the future knows?”

If there is a “housing crisis” it is entirely self-inflicted. As much as we want to believe that the latest feel-good redistributive scheme will solve housing problems either because if fulfills some need for fairness or because it will finally appease the woke mob, these schemes only add costs to producing housing. Like the crowd of Trojans around the wooden horse, we want to believe that we have finally found the end, and that the latest scheme isn’t just the solution, but the capitulation of the other side. It doesn’t work like that. And simply rejecting the bad ideas isn’t enough either; burning the horse on the beach would not have resolved the deep divides in a weary community.

However, it is simple. If housing is a right, then there still has to be enough built to satisfy demand. If the government and subsidies and extortionary schemes intend to universal housing it will only be possible with an end of rules that limit production. If there is scarcity, then the government will ration housing, an arrangement that will lead to corruption and ongoing dissatisfaction.

On the other hand, if we allow private money to build housing, yes it will increase profits. But new construction will also increase employment and economic opportunity; most importantly it will increase the number of housing options and create competition. It is this competition that will yield benefits for the consumer in the form of lower prices.

Pairing a freer housing market with lightning fast cash subsidies when people have troubles would mean an end to the “more money” culture around housing advocacy and government policy and thus reduce housing cost inflation. Finally, it is a good investment to house the most vulnerable but also do reduce their number by supporting recovery when possible. We can reach the “retreating shores” of housing security for almost everyone if we just decide to.