There’s
a wonderful comic, originally from Saturday Morning Breakfast Cereal,
that illustrates what it feels like to go through the process of learning about
a complex topic. Even better, it doubles as an explanation of much of what’s
wrong with the internet:
(Source:
Saturday Morning
Breakfast Cereal.)
This isn’t an insult directed at anyone: it’s not that the people
on Mount Stupid are stupid at all. It’s that when a subject is complex and
nuanced, everyone learning about it must at some point traverse Mount
Stupid in their journey to knowledge.
Housing markets are a prime example of a
subject with a “Mount Stupid” in its learning curve. They’re something about
which a whole lot of people know a little…yet they “know” it very confidently
and are eager to share. Meanwhile, the people who know a lot tend to be keenly,
humbly aware of how little they know.
Witness the fact that the wonky,
deep-in-the-weeds (and excellent) housing blog Construction Physics
recently published a blog post by Brian Potter titled, “Is there a
housing shortage or not?”
Like, how are the experts even asking a
question like that? You can walk up to the average American on the street and
say, “What do you think about the housing shortage?” and they’ll probably nod
sagely and have an opinion. So how on earth is a question that seems so
foundational—how many homes are we short?—so contentious?
In fact, “shortage” is quite ill defined. And
the number of homes we “need” is a moving target, despite figures confidently
bandied about (like the 3.5 million for
California—by 2025!—that Governor Newsom made part of his election campaign).
It’s profoundly unclear what number, built where and how, will satisfy a
particular policy goal.
And this has important implications for how we
talk about the housing crisis. It’s analogous to other areas of planning, like
traffic, where projections are not only invariably wrong,
they’re often a deeply harmful
distraction from the conversations we ought to be having.
Projections turn our minds away from holistic,
systems thinking, and toward monomaniacal
solutions, whether that’s “build build build build build build build
build” or “build a carefully calibrated amount of only the right stuff in only
the right places.” They make our thinking more linear than it ought to be. They
push our policy debate toward pronouncements from Mount Stupid.
In reality, we need to be talking about systemic responses that
don’t require us to have a functioning crystal ball, or even be remotely right
about the future.
The most obvious, plain-English interpretation
of “there’s a housing shortage” is a numerical shortage: “There are literally
not enough homes for everyone.” This is flatly not true in the vast majority of
communities. Yet you’ll see people misleadingly use this definition of
“shortage” to argue that building homes should not be a priority.
Take the factoid/meme that there are far more
vacant homes in America (or Your City’s Name Here) than there are homeless
people. By now, that meme has circulated through my social media feeds, and
probably yours, at least a dozen times. It’s a classic case of Shouting From
Mount Stupid. The claim falls into the category of technically true falsehoods:
There are more vacant homes than homeless people, but that doesn’t mean what
it’s usually implied to mean, which is that we don’t need to build anything, we
just need to get people into the homes that exist.
There’s not really any good way to do that.
The unstated assumption of the “vacant homes” factoid as it’s usually deployed
is that it reflects homes that could easily be inhabited but are simply being
held empty by their owners on a whim or for convenience. A lot has been written
about the reasons that is
overwhelmingly false, and I’m not going to turn this piece into a
rant on the “vacancy truther” debate. Suffice it to say that many homes that
show up in statistics as “vacant” aren’t meaningfully “vacant and available for
someone to live in.” They may be newly built, in between tenants or owners,
undergoing renovation, used seasonally, or some other qualifier, or they’re in
either a location or condition where the demand doesn’t exist to fill them. No
one has found a policy—a vacancy tax or other incentive—that will cause more
than a small fraction of these homes to become inhabited.
The deeper truth is that “just enough homes
for every person” is a terrible policy goal, anyway. Every market needs some
slack in it to function effectively. As a general rule, the more slack—the more vacancy—the
more and better options buyers and tenants have when looking for housing.
We want people to have choice: to be able to
move cross-country, move out of a parent’s house or in with a significant
other, get out of a bad relationship, live closer to a new job, or any number
of other reasons that an individual might want to switch homes—and to not have
a hell of a time finding a place to live when these circumstances arise.
On examination, it should be obvious that we
need there to be more homes than households in order for this kind of
choice to exist. So a logical question is, how many more?
“Shortage”
as a Functional, Not Literal, Description
When I say “housing shortage” (which you don’t
have to dig very hard to find in my writing and social media posts) I’m not
talking about absolute numbers of homes. What I mean, and what I think most
people who use the phrase mean, is we don’t have enough homes to avoid bad
things happening.
The “bad things,” of course, are in abundant
evidence. Take California, the state with the worst housing crisis: working-class
people are leaving the state by the hundreds of thousands. Homelessness has
surged. An eviction in San Francisco or L.A. often means having to
leave the city altogether. Record numbers of 35-year-olds live with their
parents. Service workers commute two hours or more to jobs in places like
Silicon Valley. Apartment showings are attended by dozens of prospective
tenants, some of whom wave wads of cash at the landlord.
These are human consequences of a housing
shortage, and by this use of the phrase, they are themselves the
evidence that there is a shortage. People are struggling to find housing.
They’re being squeezed. How much construction—and where, and of what form—would
stop the squeeze? That’s the whole question, and the answer is elusive, not
definitive and knowable.
How
Many Homes Do We “Need”?
If you like graphs and charts, go read Brian
Potter’s whole post on
whether there is a housing shortage or not. It’s fascinating. If
you’re more of a normal person who’s not into graphs and charts, here’s the
takeaway from Potter: we don’t know how many homes we “should” be building, and
most of the metrics we might logically use to project that answer don’t
actually seem to tell us very much.
Potter starts with an apparent contradiction
between two facts, raised by a recent debate spurred by
journalist Kevin Drum. These facts are:
1.
Housing starts fell off a
cliff in the U.S. after the 2008 crash, and haven’t recovered yet. We’re
building less than we historically did for decades on end.
2. Despite this, the number of homes in the U.S. has kept pace with household growth and actually outpaced population growth.
(Click
to enlarge. Source: Kevin Drum.)
Potter goes on to explain why you can’t infer a shortage just
from construction rates alone. There is no “correct” number of homes we should
be building, as a country or in any given city. That number depends on factors
such as:
·
Household size and composition. In
what kinds of groups are people living together?
·
New household formation. When
do people move out from under their parents’ roof, or move out of a shared
apartment with roommates to get their own place, etc.?
·
Population growth. This
includes immigration and domestic migration.
·
The rate of loss of old
homes, either to demolition or conversion.
Here’s the thing: all of the above are
themselves affected by the housing supply that exists, and by how much new
construction is happening! It’s a bunch of interconnected feedback loops:
·
If rents are cripplingly
high, more people will choose to live with roommates well into adulthood, or extended
families will live together who might otherwise not have done so.
Household size will creep upwards.
·
Local/regional population
growth is of course profoundly affected by housing supply. In a sense,
it is possible to choose not to grow: if you simply don’t add homes, you won’t
add households, almost tautologically. What will happen is you’ll alter the mix
of who stays and who leaves. And the rich (both
existing rich, and rich who’ve moved in from elsewhere) will tend to displace
the poor.
·
What about replacement of
old homes? This is affected by a lot of factors, and one interesting thing is
that it’s profoundly different from one country to the next. Japan, often cited as a
YIMBY ideal, has tremendously high housing starts in part because
Japanese homes depreciate to almost worthless over a generation. Meanwhile,
many Americans live in lovingly refurbished 100-year-old homes, and as a lover
of such houses who grew up in one, I’m not going to sit here and tell you
that’s a bad thing!
This stuff is confounding even to the experts.
There is not a neat linear relationship even between things you’d expect. The
most intuitive measure of a housing shortage—home construction failing to keep
pace with population growth—doesn’t tell us very much. (“Hilariously
non-predictive” is how Potter puts it.)
One thing that does: vacancy rates. Potter
presents evidence that within a metro area, rental vacancy rate tracks
pretty convincingly with the rate of increase in rents. When there are few
vacancies, landlords hold all the cards, and tenants get squeezed. When there
are many vacancies, tenants have more options, and landlords can’t hike the
rent as sharply (or at all).
There is still a world of nuance here. This
trend relates to average rents across a region, but a regional vacancy rate may
not tell us much about the options available to the poorest residents of a
place, or within a given neighborhood. It’s also true that the relationship
between vacancy and rent increase falls apart when we try to use it to compare
one city or region to another. Every place appears to be at least somewhat a
unique beast.
But the vacancy thing is pointing at a central
truth: The market meets people’s needs when there are options. That’s the ball
we should really keep our eye on—not hitting some fixed, target level of
housing supply, but making it easy and fast to create more housing options.
A lot of progressives groan at any mention of
“the market” because they read, “let the market decide,” and hear, “for-profit
companies have our best interests at heart.” But that’s not what I mean. “The
market” doesn’t mean “the whims or decision-making processes of market actors”
(that is, developers, in this case). “The market” means feedback loops. It
means the emergent process by which people change their course of action based
on real-time information on what’s working or isn’t. And the shorter and faster
those loops are, the better.
The fastest feedback response in housing is
things like home sharing or taking in a subletter. This should be really easy
and ordinary. Carving more units out of existing dwellings—a separate basement
apartment or backyard ADU—should, again, be something that ordinary
homeowners can do without financial or logistical strain. We don’t
need to leave it to specialized developers. Developing a property to the next
increment should be simple
and as-of-right. None of this negates the need for larger
development, as well.
Our housing policy will be more productive the more it is
focused on allowing a thousand flowers to bloom—let more people create more
options in more places in more ways—than on gazing into the crystal ball to
discern how many homes we need.
Daniel
Herriges serves as Senior Editor for Strong Towns, and has
been a regular contributor since 2015. He is also a founding member of the
organization. Daniel has a Masters in Urban and Regional Planning from the
University of Minnesota, with a concentration in Housing and Community
Development. He grew up in St. Paul, Minnesota, before moving west to the San
Francisco Bay Area, and later east to Sarasota, Florida, where he lives with
his wife, daughter, son, and too many pets.
Daniel’s
obsession with maps began before he could read; a general fascination with
cities and how they work was soon to follow. He can often be found exploring
out-of-the-way neighborhoods (of his own town or another) on foot or bicycle.
Daniel’s lifelong environmentalism can also be traced all the way back to age
4, when he yelled at his parents for stepping on weeds growing in sidewalk
cracks.
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