NIMBY

NIMBYs Argue New Housing Supply Doesn’t Make Cities Affordable. They’re Wrong.

Tokyo is a shining example of how free market housing regulations can keep even big, growing cities affordable.

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Rudi1976/Dreamstime.com

The idea that cities would be more affordable places to live if more housing construction were allowed to take place is both remarkably simple and remarkably controversial.

When the Los Angeles Times polled voters in late 2018 about the cause of the state's housing shortage, just 13 percent identified a dearth of new residential construction as a primary factor, behind things like a lack of rent control, or foreign real estate speculators.

In Seattle, moderate, middle-class activists argued against a city council-led effort to allow for taller, denser construction in some neighborhoods on the grounds that it would make the city's affordability problems worse, not better.

The same point was advanced by the much more left-wing Los Angeles Tenants Union, which argued in a recent Medium essay that new market-rate housing construction "does not lead to lower housing prices, but rather spurs gentrification and displacement."

Yet just today, The Wall Street Journal offered a stunning rebuke of this argument with a profile on the one city that demonstrates free market housing policies can really work: Tokyo.

According to the Journal, the Japanese capital of nearly some 13 million people saw the construction of 145,000 new housing units started in 2018—more than New York City, Los Angeles, Houston, and Boston combined. The country as a whole has managed to add close to the same amount of new housing as the U.S., despite having about half the population.

All this new housing construction has kept rents relatively flat, with the average cost of renting a two-bedroom apartment in Tokyo hovering at $1,000 a month for the past decade. That's well below median monthly rents for the two-bedroom apartments in, say, Los Angeles ($1,750), New York City ($2,500), or San Francisco ($3,110).

A Financial Times article from 2016 similarly notes that while home prices have more than doubled in San Francisco (where over 80 percent of homes are now valued at more than $1 million), housing prices in Tokyo have barely budged.

Tokyo, and Japanese cities more broadly, have managed to stay affordable by building more. These same cities have managed to build more by scrapping regulations that delay or forbid new housing construction.

According to today's Journal article, the Japanese government made sweeping changes to the country's zoning laws at the turn of the century, allowing larger, denser housing construction, and empowering private consultants to issue building permits, essentially creating "a free trade zone" for new development, in the words of one expert.

Indeed, while U.S. cities have hundreds of separate zoning categories that minutely control what kind of activity can take place on a single plot of land, Japan has just twelve zoning categories, which are also far more permissive.

In Japan, housing can still be built on land zoned for commercial or industrial uses, while even the most residential zoning permits small shops and offices. Compare that to some U.S. cities where zoning regulations will allow, for example, a restaurant on a plot of commercially-zoned land, but no other businesses.

Also helping things tremendously is the fact that most development in Japan is by-right, meaning so long as your project satisfies the underlying zoning code, you have a right to build it. Many cities in the U.S. give planning officials the discretion to deny projects, something that slows down approval of new construction and invites all manners of NIMBYism.

In short, Japan and Tokyo are living proof of how a much freer market in land use and construction can keep cities affordable even as their populations grow. Unfortunately, no U.S. city is even close to embracing Japan-style zoning reform.

Local governments are often far too beholden to incumbent homeowners (who fret that new construction will depress the value of their property) or anti-development activists (who are often desperately trying to keep the forces of gentrification at bay) to embrace Tokyo-style deregulation.

Efforts to move more zoning decisions up the state level—where pro-development interest groups might have more sway—have been met with stiff opposition.

Japan seems to have solved this by making zoning a national issue. Given the U.S.'s constitutional setup, that's neither feasible or desirable.

That means that, in the short run at least, U.S. cities will continue to get more expensive. Much of the blame for these price hikes will continue to fall not on restrictive regulations governing new building, but on the new building itself.

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75 responses to “NIMBYs Argue New Housing Supply Doesn’t Make Cities Affordable. They’re Wrong.

  1. Sure, easy for them to do. They have so much land there, they don’t know what to do with it!

    That was sarcasm for those of you who haven’t calibrated lately.

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    2. This is interesting because I had always heard that Tokyo rents were ridiculously expensive.. Not sure what their idea of a 2 bedroom apartment looks like.

      1. Basically your closet with a wall down the middle.

  2. So, the larger the supply of something, the lower its cost. Okay, now do labor.

    1. In fairness that’s a little more complicated, because a larger supply of people create demand for more and other stuff which in turn creates jobs in other areas. But in some static labor market of same type of work/ low skilled work your argument makes sense. But Reason will never run that article.

      1. “But in some static labor market…. ” – what is a static market? Markets are, by definition, the dynamic interaction between consumers and sellers.

        Most empirical studies i’ve seen show a short term decrease in wages for native born workers with at most a high school degree, and long term benefits for all laborers. My solution for the temporary losers is not to shield them from competition, like alt right pussies want to do.

        Instead i would remind them that they grew up in the most prosperous country in the world, with access to educational opportunities people from central america couldn’t dream of, but somehow can’t compete with immigrants who grew up in poverty and barely speak English. I.e. they done fcked up, and have no one but themselves to blame if I think it’s a better idea to hire Jose over Joseph.

        1. You showed you’re fucking retarded eith your use of alt right.

          1. whatever you say, Jessie.

        2. > somehow can’t compete with immigrants who grew up in poverty and barely speak English.

          Perhaps the reason they can’t “compete” is that they are not allowed to work illegally for under minimum wage, or do not wish to?

    2. You don’t understand the metrics John. Also, you’re racist and you just don’t know it.

    3. This is the reason unions exist

    4. Okay, now do labor.

      Maybe later. I’m kind of tired right now.

      But seriously, you think libertarians are going to agree with you that restricting markets to keep prices high is a good thing?

      1. Labor market isnt free due to welfare programa. Why do open border idiots not get this?

    5. if the local supply of labor increases, it puts downward pressure on local wages. However, because each new laborer is also a consumer, they increase demand for local goods and services putting upward pressure on local wages. The net effect is ambiguous. Economics 101. Libertarians have it right. Alt right folks still haven’t learned the basic lessons of Ricardo and comparative advantage, nearly 200 years after his death.

      1. However, because each new laborer is also a consumer, they increase demand for local goods and services putting upward pressure on local wages. The net effect is ambiguous.

        ::Ignores inflation::

      2. We get it. You’re ignorant. Why you use the alt right term instead of logical argument.

        1. kill yourself, jessie. You can’t even spell your own fcking name right.

          1. How does this not violate posting standards? I get that posters often try to see who can be the most obnoxious, but this has crossed a line.

    6. “So, the larger the supply of something, the lower its cost. Okay, now do labor.”

      +1, it’s basic supply and demand. Adding low skilled labor puts downward pressure on low skilled wages. It’s really basic economics.

      1. you non-libertarian types always forget that laborers are also consumers. Therefore, an increase in the number of laborers = an increase in the number of consumers. Both supply of labor and demand for goods/services increase in that locality. The net effect on prices, including the price of labor is ambiguous. That is econ 101.

        Also, if someone can’t compete with third world immigrants who barely speak English after growing up in the US, they are an irredeemable fck up.

        1. ::Still ignores inflation::

          Also, if someone can’t compete with third world immigrants who barely speak English after growing up in the US, they are an irredeemable fck up.

          Shitlib parrots neocon economic theory.

          1. He also ignores the restrictive market function from government taxation to fund the welfare programs for low wage workers distorting the actual markets. Hes an idiot.

          2. Inflation has absolutely nothing to do with that discussion.

            1. Inflation has absolutely nothing to do with that discussion.

              Sure it does.

            2. yup. nominal vs real variables. it’s not worth talking to red rocks white privilege or jessie. Pretty sure red rocks is has legal MR, and Jessie doesn’t know how to spell JESsie.

              1. Shitlib thinks inflation isn’t real.

  3. It really is amazing how many people can not grasp the laws of supply and demand. It is the most basic of all economic theories, and one of the most foolproof.

    1. I know. It isn’t even an “ism” or an outlook or a philosophy. It just is. It is like the laws of thermodynamics. Or conservation of energy. If there is a demand, there will be supply. The only question is the price.

    2. I think they can grasp it, but dislike it because it thwarts their plans.

    3. Seriously. How hard is it to understand that if you bulldoze houses to build something else (apartments, for example) there are fewer houses. Fewer houses with the same demand for houses makes houses more expensive. You can’t make housing cheaper by reducing the supply of houses.

      1. if you bulldoze homes to replace them with homes, it’s unclear from your premise that you indeed have less homes. If you bulldoze single family dwellings and replace them with higher density condos, apartments, townhomes, etc, you now have more homes.

        1. Condos, apartments, and townhomes aren’t helpful if you’re worried about the prices of houses. They aren’t adequate substitutes.

          1. Some people find condos, townhouses and apartments them better than houses. I own a townhouse for just that reason. I don’t have to cut grass, paint or find someone else to do it. It gets done for me, leaving me time to do things I want to do.

            1. It’s not about better. They’re different markets. It’s like limiting the supply of cars but using the materials to increase the supply of motorcycles. You can’t just say, “hey both transportation so totally interchangeable.”

              1. they are all in the market for housing. They are not hermetically sealed markets. Housing prices generally move together, regardless of SFD, townhome, or condo – this is because they are closely equivalent substitutes.

            2. The childless find them adequate substitutes.

              1. People in tight markets (e.g. SF Bay area) find them to be better than living in their cars.

              2. Incorrect. I’m childless. I’m not interested in having to follow rules imposed by the property owner (when it is someone other than me) HOAs, etc. I also need a place for my tools and my car. I also got tired of people breaking into my car.

                I get that some people would rather have their car broken into periodically and be told they aren’t allowed to have a cat if it means that they don’t have to budget for a new roof every 20 years all by themselves, I figure they’re a better judge of what matters to them than I am, but you cannot call an apartment an adequate substitute for a house. It isn’t and never will be. These are two separate markets and you can’t reduce the price of houses by bulldozing them and building apartments.

                1. it is, and always will be a substitute good by definition of the term. If you haven’t ever studied economics, stfu about it. If you have studied economics and are still saying this retarded nonsense, consider killing yourself for your own good.

                  1. Rather than telling me to sftu, you might want to try explaining the way in which reducing the supply of houses will lower their cost.

  4. The same point was advanced by the much more left-wing Los Angeles Tenants Union, which argued in a recent Medium essay that new market-rate housing construction “does not lead to lower housing prices, but rather spurs gentrification and displacement.”

    I’m going to be a heretic and say that they both may be right.

    First off, it’s hard to fight against the skepticism in the simpler supply-demand argument because approx. 100% of the stories you read in the legacy…er, mainstream, er, establishment, er, lamestream media are left-of-center anti-growth. However, because of the way housing has been regulated, developers no longer want to built low-cost (and by low cost, I don’t mean subsidized “affordable” housing, I mean inexpensive housing by virtue of cost inputs) housing anywhere because the profit margins are too slim. So they tend to build more upscale housing which kind of gentrifies the neighborhood.

    Yes, it’s still the fault of lefty urban planners, but they create a problem, point to it and say, “Look at this market failure!” and thus justify further market intrusions.

    1. “I don’t mean subsidized “affordable” housing, I mean inexpensive housing by virtue of cost inputs) housing anywhere because the profit margins are too slim. So they tend to build more upscale housing which kind of gentrifies the neighborhood.”

      In SF, the lack of space is bad enough, but then the added regs do what you claim. No builder builds low(er)-margin housing; you are not going to make it up volume.

    2. I think this is the crux of the issue. Regulation is fairly invisible to anyone other than the producers in a market, but everyone can see prices and inventory. Thus when regulation constricts supply and increases cost, it looks to consumers as if building more housing just leads to gentrification and housing units that ‘nobody can afford.’

  5. good luck ever hoping that anything like this could ever happen in California.

  6. All this new housing construction has kept rents relatively flat, with the average cost of renting a two-bedroom apartment in Tokyo hovering at $1,000 a month for the past decade. That’s well below median monthly rents for the two-bedroom apartments in, say, Los Angeles ($1,750), New York City ($2,500), or San Francisco ($3,110).

    What’re the relative sizes of these apartments?

    I’m will to bet you get less than half the apartment for that 1k in Tokyo than you do for the $1750 in LA.

    1. Yeah, in Tokyo I’m guessing $1k rent gives you a sleep pod and common bathroom.

      1. This is a common misconception about Tokyo because people think Singapore levels of population density (probably people who never lived/traveled there). In reality, Tokyo is a megacity that fits our conception of something like Philadelphia, except if Philadelphia was 100% urban. Then you throw in the Greater Tokyo Area (imagine if Philadelphia suburbs were as developed as center City) and you start to get a picture of how $1k can get you a lot of space. Tokyo is just that large.

    2. Even in NYC, apartments are still bigger than much of the world. People still don’t realize how much bigger everything is in America, and how much more stuff we all have compared to the rest of the developed world.

      1. I agree. Cost per sqft is a better metric.

        1. Taking from two random sources, so beware!

          Average Apartment Size in NYC: 866 sqft

          680 sqft

          So, take that as you will. That looks like the cost per square foot is still cheaper than in Tokyo, extrapolating from the costs given above, but I don’t know. More data is needed.

          1. Right. But considering Japanese people weight half the average american, they have much larger apartments.

          2. Nobody here needs more data – really.

  7. So these guys think that if they pass a law reducing the effect of gravity by 20%, all the cars will be lighter, and get better mileage?

    1. Pi = 3.0! See how easy that is?

  8. Dr. Strange’s entire backstory is one long convoluted attempt to get a rent controlled pad in New York.

  9. Tokyo, and Japanese cities more broadly, have managed to stay affordable by building more. These same cities have managed to build more by scrapping regulations that delay or forbid new housing construction.

    That’s only one reason – and may even mistake cause for effect. Far more important is:

    a)they have high property taxes (1.4%-1.7%) without a whole bunch of loopholes/distortions – which keeps land prices low and eliminates pure price speculation. Low land prices are the biggest factor in affordable housing and eliminating speculation forces an owner to profit via development not via sitting/waiting/NIMBYing.

    b)mortgages in Japan are based on one’s income/future NOT on some loan-to-value of the property itself. Banks have zero interest in potentially having to foreclose and dispose of the property themselves (prob cuz of a above). That means house prices overall are directly linked at the macro level to people’s earnings and are not disconnected as they are here. It also means companies (which still have a bit of lifetime employment idea there) which pay those incomes are more generally involved in using their bargaining/borrowing power to secure affordable housing for their employees.

    The combo means that there is no special interest at work to create constipated zoning rules and if anything the reverse. Japan learned its lesson from its bubble.

    1. Check out Otaku JFree over here, with all his gay facts and knowledge.

  10. I got respect for Japan during a layover in Tokyo Narita airport. A smoking room inside the terminal. Buy a beer when buying over the counter food. Passing out sample of whatever whiskey the were pushing in the Duty Free. Generally treated adults like adults.

    As close to the mythical Libertarian Paradise I’ve ever personally experienced.

    1. If you do any international traveling you find that most countries don’t have the hangups America does about the little stuff.

    2. It is a wonderful place to visit.

      However, not a good place for gun ownership.

      1. I lived in Japan almost 20 years. Across from my building was a river that ran up into the mountains and I often saw hunters along the river, with shotguns, hunting birds. Yes, ownership is restrictive, but there is ownership.

      2. At least it’s the one place where one could argue gun ownership isn’t necessary. Let’s hope Japan remains 99% Japanese for eternity…

  11. I lived in Japan almost 20 years before returning to the States. Last year my daughter graduated an American university (debt-free), moved to Tokyo (she is a dual passport holder) and now rents an affordable apartment on her small salary. There is no major American city where she could have done this. Of course, she lives in one room.

  12. These pro-growth, pro-development articles/propaganda bits make me puke.

    1. Well, importing third-world refuse is certainly going to lead to fights over further development. Guess you shouldn’t have pimped unlimited immigration.

  13. Well if you can’t increase supply you can always work to reduce demand. It seems LA, NY, and San Francisco are working diligently to discourage people from wanting to move there

  14. It’s bad enough that only 13% of LA voters identify lack of supply as the cause of high prices.

    It’s worse that their alternative explanations are to complain about a lack of things that actually make the problem worse.

  15. You would think an article like this would mention Houston, which has no zoning laws whatsoever.

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  18. Build more? sounds like a scam to just line the pockets of rich developers!

    everyone knows the solution to making housing affordable in the face of limited supply is for the government to subsidize demand with tax credits.

    (this is sarcasm)

  19. It seems that prices still raise without regard to the scope of the housing construction sector not only in the USA but in many countries. If you will look for special offers, cheap real estate ads placed on websites like Cyprus real estate, you will find many good places to live with the low cost of renting.

  20. Twenty-five-year Tokyo resident here. This article is missing a huge point: Tokyo is being divided up into insanely small parcels by greedy heirs to their parents’ land.

    The current trend is for a plot with a small house (maybe 1,200 sqft), a parking space, and a tiny garden to be split up into three, four or even five postage-stamp lots with a supposed family home of 600-800 sqft built on each one. Many of the parcels are flag lots with six-foot-wide access to the street. All greenery on the property is sacrificed in a city already deprived of public parks and green spaces. The permanent degradation in quality of life brought about by the construction of these new future shantytowns is horrendous.

    The lack of reasonable zoning laws encourages ever more people to flee outlying regions and cram into a 31-million-person megalopolis while regional cities decay. Tokyo is the functional equivalent of NY, LA, and Washington, D.C. combined. Public policy should not encourage the city to grow while the country’s population craters. Decentralization is what’s needed here.

    Comparisons of prices across regions and over time should be made on a like-for-like basis. Sure, the average rent for a 2br might be flat (not in central Tokyo, where rents are way up), but the size is declining beyond already cramped standards, and the trend is worse for family homes and other larger properties, which are vanishing.

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