This article is a re-print of the article of the same name in the July 25/August 1, 2022, issue of The Nation. It is altered here in this way: In original, the “Yes” argument is first, and here I put the “No” argument first. I also added sidebar quotes.
The debate involves concerns on a national level. The “No” argument brings up racial issues, which, while undoubtedly valid, to me cloud the discussion — which I interpret to be more about overall affordability. The “No” authors regard affordability and racism as being inseparable, and perhaps they are — but I’d rather we have two individual debates.
As to how much of this is applicable to our housing situation here in Arcata, I will leave that up to you to determine. I do tend to agree with the “No” advocates in that: “We can’t rely on the private sector to solve a problem of its own making.”
For me, there are vast holes in the presentations on both sides. Still there are many excellent points raised, particularly if we are to assume that the factual statements given here are correct. Such as:
- Only 5 percent of multifamily homes are condos, about the lowest rate in 50 years.
- In California, nearly 90 percent of multifamily rental units are market-rate, and about 90 percent of low-income households live in market-rate homes.
And there are many statements that are presented as fact which I regard as dubious. But, after all, this is a debate, and the writers are permitted to say whatever they want. My comments are in red here.
- “The scarcity of available apartments is what drives high housing costs, not stainless-steel appliances or a small fitness room.”
I believe that it’s the cost of construction that is the largest contributing factor to high housing costs. -
“…more market-rate development means more taxes for cities, which can then be poured into rental subsidies and homeowner assistance, creating a more hospitable place for poor and working-class residents.”
Yes, there are more taxes, but this goes into infrastructure, schools, police, etc etc — all the costs of keeping a city alive. How much goes into rental subsidies? It’s a difficult figure to quantify, as there are so many programs involved. According to urban.org the expenditures of State and Local governments amount to about 1.7%-2% of their budgets. On a Federal level, the total budget for the Housing and Urban Development Department (HUD) is under 1.5% of the Federal budget.
There’s not a lot of money that can be “poured” into rental subsidies. - “Trickle-down housing policy is a farce. In a highly speculative housing market, increasing the supply does not automatically reduce housing costs. When cities permit more market-rate development, developers build more market-rate housing, because that is what will yield the highest return on investment. Especially when labor productivity lags in the construction sector, the profitability of housing production depends on rising rents. Rents are set not based on the quality of a home but on whatever the market will allow.”
I’m including this article for your consideration and potential discussion. It does not present solutions, only positions. If you’d like to comment, please write to “affordable” at this website address or through the Contact Us page, and I’ll include your comments below.
Housing and Homelessness
Urban Planning and Development
The Debate
July 25/August 1, 2022, Issue
https://www.thenation.com/article/society/affordable-housing-debate/
Does Building Luxury Condos Create More Affordable Housing?
Brian Hanlon and Ned Resnikoff write that building market-rate housing lowers prices for everyone, while John Washington and Tara Raghuveer argue that the private sector can’t fix itself.
By Brian Hanlon, Ned Resnikoff, John Washington and Tara Raghuveer
No
We can’t rely on the private sector to solve a problem of its own making. We can’t just tweak a racist and failed system. We need a wholesale transformation.
Today’s housing market is a catastrophic failure, built through land theft and chattel slavery and shaped by the relentless prioritization of those who profit from our basic need for a home. Black incomes are 60 percent of white incomes, and Black families hold nearly 10 percent as much wealth as white families hold. Millions of tenants are forced to make the choice between paying the rent and feeding their kids. Two years of a pandemic and economic turmoil have inflicted more pain as tenants accrued rental debts, struggled to access inadequate federal assistance, and were evicted from their homes. Rents were up 17.5 percent over the course of 2021, squeezing Black and brown tenants the most.
The problem isn’t a lack of luxury condos; the problem is racial capitalism. Under this system, wealthy people, who are overwhelmingly white, gain profit and power from the exploitation and oppression of working-class and poor people of all colors. Our housing system was designed around an accumulation of capital that depends on severe inequality and, more specifically, on the subjugation of Black tenants.
Trickle-down housing policy is a farce. In a highly speculative housing market, increasing the supply does not automatically reduce housing costs. When cities permit more market-rate development, developers build more market-rate housing, because that is what will yield the highest return on investment. Especially when labor productivity lags in the construction sector, the profitability of housing production depends on rising rents. Rents are set not based on the quality of a home but on whatever the market will allow. This is why most “luxury” housing is so ugly and poorly built.
“Affordability” is an abused concept in development deals and local policy-making. Developers receive public subsidies and tax abatements to build market-rate apartments, sometimes with conditions to set aside “affordable” units. Those conditions rarely create truly affordable housing, because the definitions of “affordable” have more to do with what is affordable for the developer than with what is affordable for a working family. Affordability standards are determined by “area median income,” but the area isn’t a neighborhood; often it’s a county or a metro area, and the incomes aren’t limited to tenants but also include those of property owners.
Even if private development could solve the problem of housing supply, who benefits from the increased supply—and at what cost? Mac Properties, a Chicago developer that markets apartments to young professionals through pool parties and hashtags, began developing a corridor in the Midtown neighborhood of Kansas City, Mo., in 2007. Between 2010 and 2021, the area’s Black population decreased by 21 percent. The only thing that trickled down to residents like Pat Lucas was a 30-day notice to leave her home of 17 years. After her eviction, Lucas described Mac’s impact on her neighborhood. “Mac thinks we’re degenerates,” she said. “They convince us that we aren’t worth anything. And you know that ain’t right.”
The most important question is: How can we guarantee that every person has a permanent, safe, accessible home? The answer isn’t zoning changes; it’s social housing. The government must guarantee housing as a public good and then construct or rehabilitate millions of homes that will be permanently off the private market and not available for speculation. A large-scale social housing program should be paired with strong, universal rent controls.
We have an obligation to reject cutesy, technocratic suggestions from advocates and instead follow the demands of organized tenants. They are the closest to the perils of racial capitalism and therefore the closest to the solutions—they are the experts of their own liberation.
Maya Neal, a tenant in Midtown and a leader of KC Tenants, called her fellow renters to unionize at a rally in May. “It can feel inevitable that gentrifiers are just gonna run us over, mow us down, push us out,” she said. “It can feel inevitable that they’ll pay off our city’s leaders and get their sweet little deals. It can feel inevitable that people like me will have to sacrifice our mental health, our physical health, our babies, and our humanity, all for this violent mess. It can feel inevitable that a gorgeous gathering like this won’t be possible in a few years because the profiteers will have turned us into ghosts. I refuse to become a ghost. And none of that is inevitable—not if we organize.”
JOHN WASHINGTON AND TARA RAGHUVEER
Yes
In good leftist fashion, we’ll first answer the question by challenging its premise. New market-rate homes are rarely “luxury condos.” Only 5 percent of multifamily homes are condos, about the lowest rate in 50 years. The issue at hand concerns housing that does not receive subsidies to cover rent for low-income households. In California, nearly 90 percent of multifamily rental units are market-rate, and about 90 percent of low-income households live in market-rate homes.
As for “luxury” — don’t believe what the landlords tell you. The scarcity of available apartments is what drives high housing costs, not stainless-steel appliances or a small fitness room. And that scarcity is real; contrary to what you may have heard, American cities don’t have a vast supply of apartment towers held vacant as investment vehicles. In fact, our rental vacancy rate is at a historic low.
The best way to end a housing shortage is by building more. New research, made possible by previously unavailable, fine-grained data sets, shows that market-rate construction makes affordable housing available via “migration chains.” High-income people move into new housing, middle-income people move into the housing previously occupied by high-income residents, and so on—all the way down the income ladder. In this way, building more “luxury condos” frees up low-cost housing for low- and middle-income households.
Displacement is real, but building market-rate homes does not increase displacement pressures. While scholars have long known that building more homes reduces prices at the regional scale, more recent research reveals that market-rate home-building reduces rents and evictions even at the neighborhood level. Removing restrictions on home-building in urban areas also reduces racial and economic segregation, greenhouse gas emissions, and homelessness. Furthermore, landlords find it harder to discriminate against potential tenants with housing vouchers in a loose housing market.
While those members of the left who are opposed to building market-rate housing sometimes deride pro-development theories of affordability as “trickle-down economics,” they’ve got it exactly wrong. The bogus thesis of trickle-down economics says that by cutting taxes on the rich, you’ll spur economic growth that eventually benefits everyone. Trickle-down boosters believe that supply (of investment capital from cutting taxes) generates its own demand (for consumer goods and jobs). We’re saying the reverse: Demand (for homes) should drive a supply response (constructing more homes).
Building more market-rate housing is a necessary but not sufficient condition to create more inclusive, affordable, and sustainable communities. As California Assemblymember Alex Lee — the author of social housing legislation cosponsored by California YIMBY — put it, being pro-housing means taking a “yes, and” approach: Yes to more market-rate housing — and yes to more subsidized affordable housing, social housing, renter protections, renter subsidies, and paths to homeownership. And so on.
But why build more market-rate housing at all? Migration chains work, but wouldn’t permitting only affordable projects work even better? No, for a few reasons.
First, the choice between market-rate and subsidized affordable homes is a false one. Upzoning, or permitting builders to construct apartments in areas where only single-family homes had been allowed, reduces competition between for-profit and subsidized nonprofit developers for buildable land.
Second, while we must put more public dollars toward building affordable homes, it is impossible to meet our current housing needs with 100 percent subsidized affordable housing. Los Angeles, for instance, must plan for 456,643 new homes through 2029 to meet state-mandated affordability goals. At a cost of about $500,000 per unit, it would cost the city of Los Angeles $228 billion to meet its housing needs. The only solution for building at the necessary scale is to rely on private development, affordable housing developers, and — where possible — public agencies.
Third, more market-rate development means more taxes for cities, which can then be poured into rental subsidies and homeowner assistance, creating a more hospitable place for poor and working-class residents.
Lastly, we cannot let the continued existence of capitalism stop us from delivering relief to people who are currently housing-insecure or homeless. In the short to medium term, no viable path exists toward a world in which private real estate ceases to exist.
Abundant housing benefits everyone except landlords and private equity firms. And when paired with other policies aimed at reducing inequality and promoting inclusive growth, a pro-housing strategy can lead us to a more egalitarian, solidaristic, and sustainable future.
BRIAN HANLON AND NED RESNIKOFF
Brian Hanlon Brian Hanlon is the CEO and cofounder of California YIMBY.
Ned Resnikoff TWITTER Ned Resnikoff is the policy director at California YIMBY.
John Washington John Washington is a tenant organizer based in Buffalo and the training lead with the Homes Guarantee campaign.
Tara Raghuveer Tara Raghuveer is a tenant organizer with KC Tenants, the citywide tenant union in Kansas City, Mo., and the Homes Guarantee campaign director.