The Rent Is Too Damn High—and It's Going To Stay That Way


The phrase made famous in 2009 by longshot New York City mayoral candidate Jimmy McMillan is now a reality for millions of tenants across the United States.

According to the U.S. Bureau of Labor Statistics, inflation has pushed overall consumer prices up by 154 percent since 1984. During the same period, urban rents increased by 227 percent. The website Apartment List finds that the percentage of renters nationwide who are cost-burdened—meaning more than 30 percent of their income goes to rent—rose from 24 percent in 1960 to 49 percent in 2014.

These numbers reflect a regional problem, says Emily Hamilton, a researcher with George Mason University's Mercatus Center. "It's not really a nationwide phenomenon," she explains. Rather, "it's driven by land use regulations in the most expensive markets that make it nearly impossible to add enough to the housing supply to accommodate the number of people who would like to live there."

According to data from Zillow, a real estate website, monthly rent for a median-priced one-bedroom apartment in San Francisco is $3,500, up from $2,060 in 2011. Seattle's median monthly rent for a one-bedroom apartment nearly doubled in the same period to $2,035. In Los Angeles, the price rose from $1,275 in late 2010 to $2,350 today.

What explains the steady climb in rental prices and all the affordability challenges that come with them? Rising demand and stagnating supply.

Experts say cities should add one unit of new housing for every two new jobs that come to town. America's boom cities are nowhere close to that. The San Francisco metro area has added 6.8 jobs for every new housing permit issued between 2010 and 2015. In Los Angeles, the ratio was 4.7 jobs for every housing permit. In New York, it was three jobs for every new housing permit issued.

Cities can't keep up with the inflow of new residents because they've made it as difficult as possible to add additional units, accomplishing this with restrictive zoning codes that limit how much new housing can be built and lengthy approval processes that ensure whatever new residential developments are permitted then take years to complete.

In addition, many states have established urban growth boundaries that prevent housing being built on rural or agricultural land at the fringes of urban areas. The idea behind these policies is to protect natural environments. The effect has been to stop the development of affordable suburban housing that would take the pressure off city centers and give workers more choices.

San Francisco, to take the most egregious example, puts strict limits on density, ensuring much of the city's land is reserved for single-family housing. According to a report from the city Planning Department, single-family homes make up 27 percent of the city's units while occupying 62 percent of its residential territory.

Should you find a slice of land in San Francisco appropriately zoned for apartments, chances are you'll spend years (and potentially millions of dollars) getting permission to build on it. An apartment building larger than 10 units takes, on average, more than six years to construct. Nearly four of those years are spent getting all the necessary permits and then fighting to protect them from local NIMBYs claiming your new building will cast too many shadows.

Sometimes, even local governments' housing schemes are tripped up by their rules. In Los Angeles, Metro—the area's transit agency—has spent over a decade trying to develop land it owns into supportive housing for the formerly homeless. Neighboring businesses have managed to delay the effort with administrative appeals and lawsuits alleging insufficient environmental review.

For each project that's delayed, an unknown number of developers are deterred altogether. As a result, there's just not enough housing to go around.

That's bad for more than just rental prices. Wealthier residents, unable to move into condos that were never built, outbid longtime residents for formerly affordable apartments, hastening gentrification. Those down the income ladder find themselves competing for an inadequate supply of public housing or moving farther and farther away from work and family.

Cities in 21st century America offer a cornucopia of cultural, social, and economic opportunities that Americans living just a century ago likely could not have imagined. But the more governments try to regulate what these cities should look like, the more exclusive and less dynamic they'll become.