I will limit my comment to one issue. The idea that the price of housing is based solely on supply and demand for housing is too narrow. If you look closely at the cities in the US that choose rent control -- New York City, San Francisco, Los Angeles, Washington, D.C. -- you can see an important pattern that affects the textbook model: there are there not easy options for increased supply. In L.A., it is clear that the main constraint is zoning and regulations that limit land use to single-family homes; in Washington, DC this is also true, starting with the federal Height Act; San Francisco is built on a narrow peninsula, and has strict zoning laws. New York has low land availability -- it is built on an island, as well as having zoning and permitting constraints. Chicago does not have rent control -- rents have been allowed to rise so long as tenants are informed. This has not led to lower rents, or even to increased housing -- in fact there has been a decline, due to a combination of factors -- a shift away from smaller buildings, rising rents, even as demand from lower-income renters has increased, according to the Institute for Housing Studies at DePaul University. This means that merely strengthening or suspending rent control is not enough intervention to increase the supply of housing -- especially the kind of low rent housing that is in most need in all of these cities. There would need to be a LONG-TERM regulatory commitment to policies, such as allowing taller buildings, making permits less onerous, enabling rents that reward investment -- but also -- in part because of constrained land availability -- there would need to be regulatory encouragement of lower-cost housing, such as for example requiring low-cost housing be included in every approved development. In addition, it would be beneficial for the ability of the city to house low-income workers that there be subsidized low-cost housing -- NOT the kind of ugly apartment blocks that marred cities and residents in the 70s, but integrated housing for all incomes with subsidized apartments for the people who wait on tables, haul trash and drive buses -- vital urban infrastructure.
There is no good model in the US that I can think of, because politics here is so short-term, and so much driven by the interests of the wealthy. It might make a good case for an independent housing regulatory board made up of businesses, developers, housing advocates, etc, not subject to year-on-year political posturing about "affordability" or whatever the buzzword of the moment is, after which the policy environment switches to something else. I live in Houston, where there is no rent control and no zoning, a lot of segregated housing and one of the most severe shortages of affordable low-income rental housing in the country, according to the City of Houston Department of Housing and Community Development.
I will concede that only supply or demand might sound too restrictive. Thanks for pointing that out. I would say that zoning laws and mixed-use development regulations fall under supply-side policies. Or the current buzzword I hear often, "Income-aligned" housing is critical too.
I heard a good quote from Inside Economics last week that mirrors some of Mamdani's most prominent policies. He's proposed demand-side solutions for supply-side problems.
Really excellent job on a delicate subject! We can learn from Mamdani, but we also can learn from your approach to discussing areas of disagreement! I wish the WSJ had taken your approach but of course they were trying to scare, not inform. BTW, I think the only real option in the "raise taxes on the rich" discussion is to say "by two percentage points." You'd be shocked (or maybe not) by how many people have no idea what 51% means! I'm enjoying your substack posts!
I am so glad my student asked this question! I enjoyed this article very much and to also hear your thoughts on politics, leadership, and something we chat about often - code switching.
I will limit my comment to one issue. The idea that the price of housing is based solely on supply and demand for housing is too narrow. If you look closely at the cities in the US that choose rent control -- New York City, San Francisco, Los Angeles, Washington, D.C. -- you can see an important pattern that affects the textbook model: there are there not easy options for increased supply. In L.A., it is clear that the main constraint is zoning and regulations that limit land use to single-family homes; in Washington, DC this is also true, starting with the federal Height Act; San Francisco is built on a narrow peninsula, and has strict zoning laws. New York has low land availability -- it is built on an island, as well as having zoning and permitting constraints. Chicago does not have rent control -- rents have been allowed to rise so long as tenants are informed. This has not led to lower rents, or even to increased housing -- in fact there has been a decline, due to a combination of factors -- a shift away from smaller buildings, rising rents, even as demand from lower-income renters has increased, according to the Institute for Housing Studies at DePaul University. This means that merely strengthening or suspending rent control is not enough intervention to increase the supply of housing -- especially the kind of low rent housing that is in most need in all of these cities. There would need to be a LONG-TERM regulatory commitment to policies, such as allowing taller buildings, making permits less onerous, enabling rents that reward investment -- but also -- in part because of constrained land availability -- there would need to be regulatory encouragement of lower-cost housing, such as for example requiring low-cost housing be included in every approved development. In addition, it would be beneficial for the ability of the city to house low-income workers that there be subsidized low-cost housing -- NOT the kind of ugly apartment blocks that marred cities and residents in the 70s, but integrated housing for all incomes with subsidized apartments for the people who wait on tables, haul trash and drive buses -- vital urban infrastructure.
There is no good model in the US that I can think of, because politics here is so short-term, and so much driven by the interests of the wealthy. It might make a good case for an independent housing regulatory board made up of businesses, developers, housing advocates, etc, not subject to year-on-year political posturing about "affordability" or whatever the buzzword of the moment is, after which the policy environment switches to something else. I live in Houston, where there is no rent control and no zoning, a lot of segregated housing and one of the most severe shortages of affordable low-income rental housing in the country, according to the City of Houston Department of Housing and Community Development.
I will concede that only supply or demand might sound too restrictive. Thanks for pointing that out. I would say that zoning laws and mixed-use development regulations fall under supply-side policies. Or the current buzzword I hear often, "Income-aligned" housing is critical too.
I heard a good quote from Inside Economics last week that mirrors some of Mamdani's most prominent policies. He's proposed demand-side solutions for supply-side problems.
I like that quote. Thansk for sharing it.
Really excellent job on a delicate subject! We can learn from Mamdani, but we also can learn from your approach to discussing areas of disagreement! I wish the WSJ had taken your approach but of course they were trying to scare, not inform. BTW, I think the only real option in the "raise taxes on the rich" discussion is to say "by two percentage points." You'd be shocked (or maybe not) by how many people have no idea what 51% means! I'm enjoying your substack posts!
Thanks for reading Kim. I appreciate the comment and kind words.
I am so glad my student asked this question! I enjoyed this article very much and to also hear your thoughts on politics, leadership, and something we chat about often - code switching.