How to beat the NIMBYs without handing over cities to developers

Earlier this week, an ambitious housing bill failed badly in the California legislature, voted down in its very first committee hearing. The opposition from a coalition of traditional wealthy NIMBYs and some environmentalist and tenant rights groups proved far too strong.

The proponents of the bill are right about many things, and will certainly come in for another try soon. But they would be well advised to take a hard look at their political strategy and basic structure of the bill. Why empower private developers to build more when the government could do much of the building itself?

Let's start with the bill's contents. It would have provided for mandatory increases in allowable density (or "upzoning") near public transit, overriding local rules for areas within half a mile of a high-frequency stop, or within a quarter mile of a bus or transit corridor. Given the spacing of those things, the bill would apply to a huge amount of California cities — about half of the single-family homes in Los Angeles, for instance.

So what's the problem?

First, while It is definitely true that California very badly needs more housing, private development is not the only way to get there. Indeed, this bill would have benefited tremendously from adding some Vienna-style social housing — that is, municipal-owned housing for which all residents are eligible, not just the poor.

As I explain with Peter Gowen, social housing is strictly superior to private development for addressing the housing crisis along almost every metric. That's because state and even local governments have a much smaller cost of capital than private developers, most cities have a lot of suitable land they already own (meaning zero acquisition costs in many cases), they require no profit margin, and crucially, such projects can be aimed directly at the middle and bottom of the housing market. The problem with private developers in red-hot housing markets is they naturally build where the big profits are: in the luxury market. In recent years, that is where the vast majority of new construction has gone across the country.

Luxury developments can create local rent increases and displacement even if they reduce overall rents relative to where they would be without the development, and it's not surprising that tenant groups tend to resist simple upzoning. What's more, they are wasteful of resources and space, since luxury units are much larger and tend to have a lot of square footage-eating amenities. Inclusionary zoning (mandating some percentage of affordable units in new building) is an improvement, but doesn't generally create remotely enough units to satisfy demand.

Upzoning advocates argue that if we simply went on a wild private building spree, we'd eventually burn through all the luxury demand and actually reduce the price of midrange and affordable units (as opposed to only slowing the rate of increase). But that could take easily take decades, if it even works at all.

Great big new social housing projects, by contrast — say, one million in California for starters — are a way to efficiently cram in tons and tons of housing supply directly where it is most socially necessary, not where it is most profitable. And unlike traditional American-style public housing which is means-tested for poor people only, social housing could be largely self-funding by including many tenants paying market or somewhat subsidized rents (though a good fraction would be reserved for poor and working-class people, of course). That would have the side benefit of making projects socioeconomically integrated, not poor-only ghettos.

Of course, building social housing would require similar upzoning, adjusting ridiculous parking or setback requirements, and fights against NIMBYs. And since the straightforward Big Government Solution is likely to give some liberals the jitters, we could compromise and set it up such that half of new housing is privately developed.

Second, proponents should take affordability a lot more seriously. In an interview on April 4, one of the main proponents of the bill, Brian Hanlon, admitted they needed to do a lot in this department. Strengthened rent control (which might be on the ballot in Sacramento this year) would be a great addition to this bill — perhaps in any new upzoned neighborhood or around a new social housing project. People in general really need to get over the idea of rent control being a route to instant disaster. In reality, it's a perfectly reasonable way to not just preserve affordable units, but make it possible for healthy communities to grow and thrive. In these red-hot cities, treating housing as a commodity subject to the whims of international capital tends to turn people into "atomized pinball-humans" with no connection to their neighbors or community.

Finally, backers should abandon the neoliberal frame of this being a simple issue of free markets versus government over-regulation. Jonathan Chait, for instance, argues that while there may be complex sub-details, at bottom the housing crisis is explained by an "Econ 101 model of supply and demand." Gentrification is simply caused by "artificially constricted housing supply," and California progressives simply will have to choke down de-regulation and working with private developers if they want to solve the housing crisis. (It's a mark of how influential this frame is that both climate writer David Roberts and leftist Hamilton Nolan present the issue in much the same way.)

As we have seen, this is a terribly mistaken way of thinking about the issue. Neoliberal thinking is not just a highly sub-optimal way of addressing the problem, it is big source of the problem in the first place. NIMBY politics are bad, and often quite racist, but they are also in large part a natural outgrowth of the way the American housing market is structured. A great deal of NIMBYism is simply being a good capitalist by defending the value of one's major asset. (This raises the question of why so much American housing policy is dedicated to helping upper-middle class people put their money into a highly-leveraged, highly-illiquid speculative investment, but that's a subject for another post.)

Incoherent Republican-style notions about deregulation and the markets will be most convincing to the people dead-set against solving the housing crisis at all. Granting the reality that the state is inextricably part of all decisions about the ownership of property is more accurate, allows for better policies, and can then help create an anti-NIMBY coalition that might actually win.