The Dark Side of Housing Bipartisanship

Plus: Texas Gov. Greg Abbott is fooled by TikTok housing falsehoods, Austin building boom cuts prices, and Sacramento does the socialist version of "homeless homesteading."

Happy Tuesday and welcome to yet another edition of Rent Free. This week's stories include:

• Texas Gov. Greg Abbott bizarrely cites TikTok falsehoods while calling for a crackdown on investor-owned housing.
• Austin, Texas, builds a lot of homes and sees home prices drop. Scientists are baffled.
• Sacramento, California, experiments with leasing public land to the homeless.

But first, our lead story about the darker side of housing bipartisanship. As most of the coverage of the 2024 YIMBYtown conference detailed, housing is one of those issues where Republicans and Democrats—while generally more polarized than ever—can still work across the aisle to pass zoning reform.

The flip side of this dynamic is that Republicans and Democrats work against their own co-partisans to undermine zoning reform. For an example of this, witness what happened in Arizona yesterday.

---

In Arizona, Starter Homes Are Finished

Gov. Katie Hobbs, a Democrat, has earned herself a place in housing history/infamy by vetoing H.B. 2570, aka the Arizona Starter Homes Act, on Monday. Hers is the first gubernatorial veto of a major YIMBY bill.

The bill aimed to make smaller, owner-occupied housing easier to build by limiting local governments' abilities to ban smaller homes, require new housing to sit on larger lots, enforce purely aesthetic design requirements, force new housing to be covered by homeowners' associations (HOAs), or mandate community amenities that would require an HOA to manage.

H.B. 2570's deregulatory means in the service of more traditionally liberal ends of housing affordability produced unusually bipartisan votes in the Arizona House and Senate, with Republicans and Democrats pretty evenly represented in both the 'yes' and 'no' columns.

"We had very progressives like myself partnering with very strong conservatives, who saw this as a property rights issue, whereas people like myself look at it as a basic equal opportunity issue," Rep. Analise Ortiz (D–Glendale) told Reason last week.

A majority of legislators from her own party voting in favor of the Starter Homes Act wasn't enough to bring Hobbs around.

"This is unprecedented legislation that would put Arizonans at the center of a housing reform experiment with unclear outcomes," said the governor in a veto statement. "This expansive bill is a step too far and I know we can strike a better balance."

Hobbs' veto statement cited only the opposition of the U.S. Department of Defense—which complained the bill didn't exempt areas around military bases—and firefighters, who said limitations on local setbacks regulations and required amenities like swimming pools could increase fire hazards. (The Starter Homes Act bill expressly protects local health and safety regulations.)

Conspicuously, the governor did not mention the primary organized opposition to the Starter Homes Act: Arizona's cities.

As Reason reported last week, Arizona's influential League of Cities and Towns—a publicly funded association of municipalities that lobbies the state legislature—was dead set against the bill from the beginning. The league had refused to negotiate on it or propose amendments.

After the bill passed, Hobbs told reporters that she was undecided on the bill and that she would have preferred housing bills that also have the support of local governments.

In Arizona, Democrats have long been the party of local control.

As the usual minority party in control of the state's largest city governments, Arizona Democrats have been constantly fending off Republican efforts to preempt local, liberal regulations and taxes. Of all the elements of local control, cities are the most jealous guardians of their land-use powers.

The rising salience of housing has upset this dynamic somewhat. Among the champions of H.B. 2570 were a number of progressive Democrat lawmakers. They're now complaining about the influence cities are wielding in the legislature.

"Cities and their lobbyists cannot continue to be the only barrier to statewide zoning reform solely to retain power and uphold policy decisions that have been historically detrimental to so many, especially communities like mine," said Sen. Anna Hernandez (D–Phoenix).

My statement on the veto of the Arizona Starter Homes Act, HB2570. https://t.co/pm35LPzEtY pic.twitter.com/CkrsnT9IDz

— Senator Anna Hernandez (@AnnaHernandezAZ) March 18, 2024

An irony of the bipartisan nature of housing politics is that it might be too bipartisan. Conservative Republicans and progressive Democrats both support zoning reform. In the Legislature, they can form alliances to get bills passed. But come election day, they're still going to vote like conservative Republicans and progressive Democrats.

If Hobbs' calculation is that she can upset YIMBY Democrats while still keeping their votes, she might not be wrong.

As one former Arizona Democrat lawmaker and YIMBY activist told The Atlantic's Jerusalem Demsas for a recent article, "If [Hobbs] ended up being the biggest NIMBY in our state, I'd still vote for her reelection because zoning, even though I'm one of the biggest zoning-reform advocates in the state…still doesn't rise high enough for me to flip my vote."

In her veto letter, Hobbs tries to have it both ways on housing. She says she's "supportive" of the Legislature's ongoing "efforts" to find a compromise on other housing bills that would liberalize accessory dwelling unit laws, all for residential redevelopment of commercial properties, and the like. She also says that "the status quo is not acceptable."

Nevertheless, her veto preserves a status quo that increasing numbers of Republicans and Democrats find untenable.

---

Texas Gov. Greg Abbott's TikTok Housing Politics 

When a politician says they love free markets, you always know a "but" is coming.

Such was the case with Texas' Republican Gov. Greg Abbott, who said on X that he "strongly supports free markets. But this corporate large-scale buying of residential homes seems to be distorting the market and making it harder for the average Texan to purchase a home."

I strongly support free markets.

But this corporate large-scale buying of residential homes seems to be distorting the market and making it harder for the average Texan to purchase a home.

This must be added to the legislative agenda to protect Texas families. https://t.co/VBs6Rluh3K

— Greg Abbott (@GregAbbott_TX) March 15, 2024

Abbott was quote tweeting a profanity-laced TikTok video in which a woman claims that "private equity firms purchased 44 percent of single-family homes in America."

"This must be added to the legislative agenda to protect Texas families," said Abbott. No one said politics in the 21st Century would be uninteresting.

Cracking down on corporate home ownership has to date been mostly a cause of left-wing politicians, and heterodox right-wingers like U.S. Sen. J.D. Vance (R–Ohio). They blame institutional investors for driving up the prices of single-family homes that could have been purchased by individual families who, the story goes, are now stuck perpetually in the renting market.

In fact, the woman in the TikTok video didn't quite have all her facts straight.

Writing over at Housing Wire, Logan Moshtashami cites data from Freddie Mac showing that large corporate purchasers who bought 100 or more homes in the last year make up about 2.5 percent of home sales. In the second quarter of 2023, very large landlords owning over 1,000 homes purchased just .4 percent of single-family homes.

Reading is a good thing folks ???????? https://t.co/IYogNbORuD pic.twitter.com/bD0nSCLJXG

— Logan Mohtashami (@LoganMohtashami) March 15, 2024

Investor-purchased homes have made up between 20 and 30 percent of home sales going back to the start of the century, but the vast majority of these investors are mom-and-pop landlords who own under 10 properties.

This is a far cry from BlackRock buying up all the homes. While a growing (apparently bipartisan) collection of politicians likes to complain about this phenomenon, it's not necessarily a bad thing.

Renters who either don't qualify for financing or who aren't looking to buy can still have access to single-family housing by renting it from an investor-owner. Research shows that restrictions on investor-owned housing result in lower-income renters being excluded from single-family neighborhoods.

One way to boost homeownership would be to legalize the production of smaller starter homes. A bill that would have done just that happened to pass in Arizona. We know how that turned out.

---

In Austin, Proof of YIMBY Concept

A wave of in-migration to booming Austin, Texas, saw home prices, rents, and incomes increase. This has been followed by a rash of new home and apartment construction, which is now pulling housing prices back down.

Overall, rents are down 7 percent this year, according to Apartment List data culled by The Wall Street Journal. The Journal gives this all a somewhat negative framing, describing a "glut" of luxury apartments and single-family homes selling at a loss.

It's also yet more proof that the basic supply and demand story continues to be true, even for housing. Despite some important zoning reforms, Austin is far from a YIMBY paradise. Nevertheless, development is a lot less restricted there than in other high-cost "superstar" cities.

As a result, new construction in the city is able to partially accommodate new demand and moderate price spikes.

The Texas-sized edition of Rent Free earlier this month covered some of the ways that the city and the state could liberalize development even more to boost construction and bring prices down.

---

In Sacramento, the Socialist Version of Homeless Homesteading

Sacramento, California, is trying out a novel approach to the city's homelessness crisis: leasing public land to an officially sanctioned homeless encampment. CalMatters reports:

When Sacramento changed its plan to demolish a homeless encampment on a vacant lot on Colfax Street, instead offering the homeless occupants a lease, activists and camp residents celebrated it as a win.

The first-of-its-kind deal, which allows the camp to remain in place and govern itself without city interference, was held up as a model Sacramento could replicate at future sites.

It's produced mixed results. Those who didn't like the encampment's presence haven't been mollified. Many of the encampment residents complain of a lack of city-provided services.

Homeless advocates still argue the city lease allows people with nowhere else to go some level of stability and sanctuary, and makes it easier for homeless service providers to maintain contact with the people they're trying to help.

The experiment appears to be the socialist version of the "homeless homesteading" I proposed last year. The idea was to give the homeless title to public land they already occupy. Once they owned the land, the homeless could go about improving homes on-site. If their presence continued to produce nuisances, nearby property owners could purchase the land from them. Encampment residents could use the proceeds of the sale to buy more traditional housing.

It's an "off the wall" idea, to be sure. By only leasing the land to the homeless, Sacramento is short-circuiting the Coasian bargaining that promised the biggest benefits of homeless homesteading.

---

Quick Links

• Vancouver, Canada, is taking land rights for indigenous communities seriously. But now that the area's First Nations use their land rights to build housing, the neighbors are having second thoughts.

this is so funny.

rich liberals in Vancouver who have been protesting for land be returned to Indigenous people are now upset because one of the city's last plots of underdeveloped land was sold to local tribes and they're razing it to build an ultra-high density condo project. pic.twitter.com/OnhP5ht77w

— pagliacci the hated ???? (@Slatzism) March 14, 2024

• Speaking of starter homes in Arizona, the city of Mesa's zoning board voted to recommend denying a 26-unit townhome project in response to complaints from homeowners near the project site.
• The New Republic published a takedown of the YIMBY case that building more housing reduces housing prices which ends up conceding the core YIMBY premise that building more housing reduces housing prices.
• New York Senate Democrats continue to push for a radical "Good Cause Eviction" bill. See Reason's past coverage of the bill here.
• Milwaukee, Wisconsin, presses ahead with zoning reforms that would loosen density restrictions across the city.
• The housing production power combo appears to be Democrat-run cities in Republican-run states, where everyone is at least minimally interested in growth.

On the other hand, all these cities are run by Dems. The existing housing power combo seems to be a Dem-run city in a GOP-run state, where everyone is at least minimally interested in growth. https://t.co/6fLsGTjjZi

— Christian Britschgi (@christianbrits) March 18, 2024