Local residents might complain about cranes and “luxury” developments, but the truth is that cities with the strongest economies have not allowed construction of enough housing units to meet growing demand. This has caused what Rick Jacobus at Shelterforce calls “the new planning dilemma: where to put the rich?”
While housing affordability in these cities must be addressed through a multitude of policies, a necessary condition is additional market-rate supply. There should be more cranes rather than fewer because building more units for the rich keeps them from outbidding others for the existing housing stock. I say that cities should keep building housing, for if we put the rich in shiny new apartments they will be less likely to outbid others for older housing stock.
To warehouse the rich means to relax zoning and regulations to allow the market to build more market-rate units primarily targeted to the growing urban demographic of young, highly-educated, and mobile residents. I am not denying other affordable housing programs and policies, and I strongly support many of those approaches. I am suggesting, however, that building the rich places to live keeps them from digging deep into the housing stock and displacing others.
Who are the rich? Not as rich as you think: in the District of Columbia, the average one-bedroom apartment in a new building constructed after 2010 has an average asking rent slightly over $2,300 per month. While this is by no means a bargain, it is not quite the lap of luxury. For such an apartment at that price, the landlord is targeting someone making a bit over $84,000 annually — 1.1 times the median income for the District.
These 80-thousandairs are not some set of boulevardiers with top hats and monocles, but they are your friends, the niece you are proud of, and many of you. It also turns out that many cities are not building enough housing for this demographic — the rich, educated, and mobile — so when they come to a thriving city, and they will, their incomes drive up housing costs as we would expect. If not encouraged into new proverbial “glass and steel” apartments, they will go after the “turning around” buildings and cause displacement.
One regrettable approach in some regions has been to simply hope that restrictions on new housing supply might magically repel the rich from coming, or at least circle the economic wagons around incumbent residents. We see this in the Bay Area where they have decided to close the castle gates and take a protectionist approach.
From 2011 through 2017 the region that is home to San Francisco and Silicon Valley created 531,400 new jobs but built only 123,801 new housing units. Is anyone surprised, then, when a 28-year old engineer at a booming tech firm outbids a long-time resident to rent a humble 1,000-square-foot ranch house in Mountain View?
I respect that any new development might come at the risk of displacement, but cities can start with low-hanging fruit of building infill housing where there is no direct displacement — build on parking lots, warehouses, and strip malls. The negative impacts of absentee landlords and tenants — the “foreign billionaire problem” — can also be addressed through vacancy taxes and non-resident taxes to ensure units serve the local population.
Beyond that, other progressive policies are not only congruent with, but necessary for a pro-supply agenda. Such policies can include inclusionary zoning programs where developers set aside affordable units, land value taxation, tax-increment financing around new transit projects, and committing various revenue streams for affordable housing construction while minimizing veto points.
What cities cannot do is NIMBY their way to affordability in hopes of standing at the economic beach and holding back the tides of change and residential growth. Not only are cities ever-evolving concepts that should not be encased in amber, but at best NIMBY approaches have failed to preserve or expand affordability.
At worse, NIMBY anti-growth forces exacerbate the affordability issue and serve to protect wealthy incumbent homeowners in exclusionary posh neighborhoods while giving them windfall profits. Instead, let’s build more housing — all housing — including new places for the rich. Warehouse them in glass and steel, and maybe they won’t outbid the neighbors.