Housing Policy

'Affordable Housing' Policies Have Made Housing Less Affordable

Progressive politicians from L.A. to New York face a crisis partly of their own making

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Heckuva job, L.A. ||| Washington Times
Washington Times

City governments from Los Angeles to Portland to New York to San Francisco to Seattle are declaring various levels of "crisis" to deal with an unexpected rise in homelessness and a chronic shortfall in lower-cost housing. As I argue in today's Los Angeles Times, they need to take a long hard look at their own role in exacerbating the very problem they aim to fix. Excerpt:

Government exertions — and there have been plenty — have barely amounted to a rounding error in the total supply of housing stock. Since the mid-1980s, California's various programs to subsidize, incentivize and mandate affordable housing have produced all of 7,000 units a year, "or about 5 percent of total public and private housing construction," according to a May 2015 report by the California Legislative Analyst's Office. […]

Prices — even in housing — are a function of supply and demand, and politicians along California's coast have been systematically pinching supply for decades.

For example: "Development fees — charges levied on builders as a condition of development — are higher in California than the rest of the country," the LAO report notes (and the difference is substantial: $22,000 versus $6,000, on average). […]

When you make a good more expensive to produce, you're going to get less of it. Housing stock in the L.A. metro area grew by just 20% between 1980 and 2010, according to the LAO report, compared with 54% on average in other American metropolitan areas. […]

This government squeeze is not limited to the creation of housing in the first place, but also to what owners can do with their property. The L.A. City Council has in recent years placed restrictions on landlords wishing to change their rental units into condominiums, homeowners wanting to tear down their own houses and replace them with mansions, and renovators whose add-on plans create an extra-large footprint.

The mother of all supply-crimping landlord restrictions, of course, is rent stabilization. 

Whole thing—including a quote from Paul Krugman!—here. A related piece from July: "The 'Affordable Housing' Bait and Switch, California Style."

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  1. When you make a good more expensive to produce, you’re going to get less of it.

    Nuh uh! Not if it’s done with good intentions! Good intentions trump supply and demand!

    1. The economic spirits pay attention to intent.

  2. “Whole thing?including a quote from Paul Krugman!?here”

    Paul Krugman the economist, or Paul Krugman the columnist?

    1. +2 different writers

  3. The people who decide this country’s land-use policy seem to live in an alternate universe in which Queen Carlotta has proclaimed every day as backwards day. In the metropolitan area where I live, local governments impose density caps as a way to counteract sprawl, and if you point out how absurd that is, people accuse you of being related to a developer.

    Also, nice reference to our lord and savior Paul Krugman. Let the doublethink begin.

    1. Do you live in the Atlanta area or are many cities the same? All kinds of policies to discourage sprawl side-by-side with policies to prevent the evil rich from developing high-density properties.

  4. I would have thought the mass exodus from the Golden State would have created a buyer’s market. Who the hell is moving to California?

    And that Krugman quote was from before he became enlightened.

    1. I saw a study recently. People moving in are almost entirely low income and people leaving are mostly high income. You’re going to have like 7 or 8 people living in a house because they can’t afford it otherwise.

      1. 7 or 8 people living in one house? Surely there’s a law about how many unrelated people can live in one house to prevent just that kind of inhumane living condition.

        1. There is in NYC.

        2. No one checks.

    2. Who the hell is moving to California?

      I get the impression that it is a lot of foreign immigrants (as opposed to US residents), some legal some illegal. A lot of the legal ones are probably middle class or better.

      Yes, illegal. Not “undocumented”. Not “unauthorized”. Illegal.

      1. I moved to California. I expect to be here for 5 years or less. But for someone who is young, outdoorsy, and single it’s a good place to be. Sure I’d never want to raise a family here but the recreational value of where I live is unparalleled.

      2. Or as I like to call them, crimmigrants.

  5. OT, but comic thread was waaaaay early.

    Comic challenge for the readership. Can you make it to the end and read everything? And if you do, does it make you feel any better about Friday Funnies here?

    1. I noticed they don’t allow comments. I wonder why?

      1. BECAUSE THEY’RE OPEN MINDED YOU INTOLERANT SHITLORD

    2. “Can you make it to the end and read everything?”

      No. I got to “style 2” and decided i didn’t care.

    3. Honestly I wanted to close the window after “That you need to know about”….the fuck I do

  6. There are all sorts of ways people can bury their heads in the sand and convince themselves of things that are not true.

    The one that I will never understand is rent control. You basically have to turn off all 5 senses to believe that rent control works.

    Without exception, every place that that has rent control is an expensive shithole. SF, Berkeley, NYC. Without exception.

    1. I put rent control in the same category as “certificate of need” laws. Even a toddler can kinda sorta understand why these laws are dumb. I guess progressives can’t though.

      1. “Even a toddler can kinda sorta understand why these laws are dumb.”

        Tell that to the cave men on the SF Board of Supes…

    2. Badness equals market failure.

      See how easy that is?

    3. Places with rent control have high rents, proving the need for rent control.

      Places with gun control have high crime, proving the need for gun control.

      Its a self-licking ice cream cone of delusion.

    4. every place that that has rent control is an expensive shithole

      Every place that has rent control was already an expensive shithole before there was any such thing as rent control. Zoning regulations and market forces have way more impact than rent control.

      1. Berkeley and SF weren’t. I don’t know the history of NYC’s housing market.

        If I owned a rental property in an area that enacted rent control, my first thought would be “Welp, I never have to paint the place again”.

        1. I’ll have to take your word for it that SF wasn’t expensive before rent control. But in NYC rent control was established in response to low vacancy, ergo high rents. Obviously it doesn’t “work” but that was the idea.

          1. But in NYC rent control was established in response to low vacancy, ergo high rents. Obviously it doesn’t “work” but that was the idea.

            You don’t think the problem would have been resolved and the market eventually corrected without rent control?

            1. No, because other regulations like zoning prevent enough housing from being built to meet demand.

    5. You basically have to turn off all 5 senses to believe that rent control works.

      What are you talking about? It has the word “control” in it. Words have power.

  7. partly of their own making

    I suppose 100% is a part.

  8. ‘Affordable Housing’ Policies Have Made Housing Less Affordable

    “Economics has to be the hardest subject to master! All of our attempts at price controls ans stricter regulation have lead to the exact opposite to what we intended!”

    1. “this is why we need more funding. We need more powerful computers to run better models to see where the countervailing factors to our policies are. Because those policies we know are sound.”

      Spoiler: wreckers and kulaks. Always wreckers and kulaks.

      1. Don’t forget hoarders.

        1. Correct! Also, speculators as a subspecies of hoarders.

    2. Then clearly, we have to double down on them.

  9. “Affordable _______ policies have made _______ less affordable”

    You can pretty much fill in the blank with whatever you want.

  10. Repeat from AM links:
    “Developers claim increasing S.F. transit fees would be crippling”
    […]
    “A fight is brewing between developers and lawmakers over how much the builders should pay to support the city’s transit system.”
    http://www.sfchronicle.com/pol…..ate-result

    The ‘left’ faction of the city government wants to increase “affordable” housing, so in their ignorance, they presume making “market rate” housing more expensive will somehow do that, I guess because ‘multiplier’? What’s more is the presumption that ‘developers’ will pay the fees.
    Anyhow, these fees will add $10,000 to the cost of a 1,000 sq. ft. unit.

    1. Eyeball number based on my very limited contact with developers, that $10K probably translates to at least $150/month in rent.

      Affordable!

  11. The mother of all supply-crimping landlord restrictions, of course, is rent stabilization.

    I think zoning restrictions are way more effective at driving up costs than rent regulations. For example, here in NYC, rent regulation doesn’t apply at rents over $2700 which is already well below the median rate at least in Manhattan. Outside of Manhattan, the so-called “legal” rent is often way higher than the “market” rent and so folks like me still got walloped with 10% to 20% increases every year even under the regs. Meanwhile the zoning in my neighborhood limits building height everywhere.

  12. The only reason i go elsewhere to read columns by Reason writers is to bask in the joy of the general-public’s reaction to modestly-libertarian proposals….

    to wit =

    ” HUGHH0

    This is a typically misleading libertarian, anti-regulatory perspective, one worth no more than the value of the electrons used to disseminate it.

    …Sure, supply-and-demand plays a role, but the numerical fact is that in L.A. more existing affordable units are being destroyed to make way for new, more expensive ones each year than are being built. Current official projections are that this pattern will continue and in five years we’ll end up with less affordability and more homelessness the more construction we approve“”

    Supply and demand “plays a role”… but somehow encouraging more supply doesn’t actually have any effect on prices?

    I can’t cut through the derp here. Need industrial tools.

    1. Don’t you know? Them furriners from China buy expensive property and then just leave it there as money storage. Then they go back to China and don’t pay the income tax here, but they totally send their children to school here, presumably living in residence and not in those unused luxury homes. So all construction is for units that don’t house anyone, leading to less housing access. Solution is of course rent control.

      The preceding paragraph brought to you by Population of Vancouver, We Are Not Racists But…

      1. One of my favorite things to watch leftists do is complain about rich people having and keeping lots of expensive houses. Houses that have to be maintained by gardeners, repairmen, cleaners, etc. Houses that have ridiculously high property tax assessments.

        In other words, leftists hate seeing people employed and public services getting paid for.

  13. NO

    FUCKING

    WAY.

  14. Meanwhile, existing homeowners are taking care of this themselves under the radar; illegally converting garages, adding “granny flats” in single family zones with the full intention of renting them out, taking on more boarders, etc. Water flows downhill and the market will provide, even if that market isn’t free.

    1. There is a six-unit on our block. It was rent-controlled in all units. I don’t know how the owner got the tenants out, but now, there are different people coming and going, usually tugging wheeled luggage. I see the same faces for maybe a week.
      Air BnB or similar, and the owner is probably grinning…

  15. Also- as a general rule, “affordable housing” in the mind of your typical city commissioner means “nice houses for policemen, firemen and teachers”. Not two bedroom apartments for people who work at Walmart or 7eleven; and God forbid! not those icky trailer parks.

    1. Bingo. There is plenty of affordable housing; it’s just in the areas liberals would describe as blighted, even though plenty of people live there just fine. “Eww, there’s pawn shops and tire shops and litter everywhere and not a Trader Joe’s for miles”

      1. The whole point of paying through the nose in NYC is so you don’t have to live in a neighborhood with affordable housing. It’s not the pawn shops, it’s the bullets flying everywhere.

  16. The logic behind slowing house construction is the same as the logic behind slowing freeway construction or slowing refugee status hearings: if you choke back supply with enough fees and red tape, then eventually things will get painful enough that people with move on.

    Many Californians don’t really want there to be more Californians, just as some European countries want the refugees to keep moving through to Germany. That’s why California makes it expensive and annoying to buy a house and why European refugee agencies are telling applicants that their hearing dates will be in 2 to 5 years (a period during which they may not legally work).

    Its not incompetence or ignorance of the consequences; it’s a strategic use of red tape to encourage unwanted people to give up and move along.

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