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Downtown Houston, Texas. (Photo: Jorg Hackemann/Shutterstock)

The Politics of Anti-NIMBYism and Addressing Housing Affordability

• August 27, 2014 • 4:00 AM

Downtown Houston, Texas. (Photo: Jorg Hackemann/Shutterstock)

Respected expert economists like Paul Krugman and Edward Glaeser are confusing readers with their poor grasp of demography.

In this post, I take on economists Paul Krugman and Edward Glaeser. I don’t have a Nobel Prize or a Ph.D. Proceed accordingly. Starting with Krugman:

But why are housing prices in New York or California so high? Population density and geography are part of the answer. For example, Los Angeles, which pioneered the kind of sprawl now epitomized by Atlanta, has run out of room and become a surprisingly dense metropolis. However, as Harvard’s Edward Glaeser and others have emphasized, high housing prices in slow-growing states also owe a lot to policies that sharply limit construction. Limits on building height in the cities, zoning that blocks denser development in the suburbs and other policies constrict housing on both coasts; meanwhile, looser regulation in the South has kept the supply of housing elastic and the cost of living low.

Yes, Krugman concurs with Harvard‘s Edward Glaeser. “Slow-growing states” refers to population change (rate?). Foolishly, Krugman infers migration from population numbers. His words, “Americans are moving to places like Texas, but, in a fundamental sense, they’re moving the wrong way.” In order to understand population growth in Texas cities such as Houston (a Glaeser favorite), start with non-Americans:

“There is no majority group here, not even close,” says Michael Emerson, a Rice University sociologist who studies Houston’s demographic change. He and his research partners put together the 2012 analysis that gave Houston the title of most diverse metropolitan area in America. If you look at the four major ethnic groups — Anglo, black, Asian and Latino — all have substantial numbers in Houston, with no one group dominating. It comes closer to having an equal balance of each group than you would find in New York or Los Angeles.

The city’s transformation to an international megalopolis happened quickly, and only within the past few decades. As the metro area shot to nearly 6 million people, 93 percent of all that growth was non-white.

“Houston runs about 10, 15 years ahead of Texas, 30 years ahead of the U.S., in terms of ethnic diversity and immigration flows,” Emerson says. “So it is fundamentally transformed in a way that all of America shall transform.”

An analysis looking for the relationship between population growth and restrictive housing supply does not control for immigration and birth rates. Krugman pretends that it does, shifting recklessly between population growth and net migration. Houston is an economic draw for all migrants, not a zoning free-for-all. The Texas population miracle deserves more context:

“Historically, if you look at [Texas] growth, about half comes from natural increase and half from migration,” Murdock said. “And the migration numbers were about 50-50, with a little more domestic than international. But when we look at numbers through 2012, about a third of that is international and two-thirds domestic migration.

Indeed, albeit quite recently, domestic migration is adding much more people to the overall count than immigration. That zoning restrictions curtail population growth is a myth. Nothing in Glaeser’s work (which looks at an era when only 25 percent of Texas population growth came from domestic migration) supports such a conclusion. Yet here he is overstating his own research:

The development industry should then be tasked with doing what it does best: building on a vast scale. The places in America that are growing and inexpensive are cities like Atlanta and Houston, where developers have been given a comparatively free hand. …

… And ultimately, if New York wants to make sure that less wealthy people can still afford the city, then the natural solution is housing vouchers. The federal government moved from public housing to vouchers 40 years ago.

Instead of creating a distinct stock of affordable units, vouchers provide support to allow poorer people to pay market rates and to choose where they want to live. With modern technology, landlords need not even know if their tenant is using a voucher, so the poor-door threat is minimized.

Glaeser’s policy recommendations (“pro-building”) are more political ideology than rational choice. Attempts to cool demand are not palatable to certain interests. Hence this comment from a Federal Reserve Bank study I referenced in my last post:

Despite the reasoning showing that limited income is the primary problem and that public subsidies that can be used outside the housing market are generally the reasonable response, some policymakers will only support government subsidies for housing. These policymakers will have to choose between programs that build new units and those that provide households with the equivalent of cash for housing (that is, vouchers). During that decision process, policymakers must address the evidence that housing vouchers appear able to put households into affordable housing units at a significantly lower cost than production programs. Housing vouchers might prove less effective than production programs where government restrictions significantly impede the market supply of housing. In these cases, policymakers should consider the removal of regulations, a challenging task that will require balancing competing interests, including the desire to increase housing quality.

Emphasis added. Those words were written in 2002 and presage Glaeser’s 2014 advice of build more housing and subsidize via vouchers. When one wields a hammer, every problem looks like a nail. However, the current crisis of affordability is not a product of local forces such as land-use regulations:

Going back to the early 2000s, the housing market has been overwhelmingly driven by national phenomena, first the explosion in loose mortgage lending and bubbly prices that finally peaked in 2006, then the collapse in mortgage credit and prices from 2007 to 2010, and then a gradual recovery in prices since then.

The differences between markets through that span are largely in amplitude, not direction. For example, Phoenix home prices rose more during the bubble than national prices, collapsed more during the trough, and consequently have recovered more.

But while national trends like interest rates and mortgage lending standards should influence home prices, many of the forces that should most affect the price of a downtown condo or a suburban split-level are very much local. What kind of job and income growth is a region experiencing? How much does local land-use policy encourage or discourage new housing supply from being built? These are things that ought to determine home prices in a place, but since the early 2000s have been overwhelmed by these national forces.

The local political tension between NIMBYs and free market crusaders does not consider the impacts of national forces on the regional real estate market. This debate inherently fails to properly frame the geographic scale of the problem. On top of that, we have respected expert economists such as Paul Krugman and Edward Glaeser confusing readers with their poor grasp of demography. Little wonder why so many communities appear impotent in the face of skyrocketing rents.

Jim Russell

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