Nimbys and America's lack of affordable housing in cities

The United States is running out of places for people to live in.

Rent is a bigger and bigger part of our cost of living. Lots of people have been wondering what to do about this problem. One proposed solution is to deregulate housing and encourage denser development. This is called the "market urbanism" approach, because it relies on deregulation - though it would also certainly require big government investments in mass transit.

Another term for this pro-density agenda is "Yimby", an acronym standing for "yes, in my backyard". A related approach is land-value taxation, also called the "Henry George tax", after the 19th-century economist who came up with the idea. This is basically just the idea of giving property tax exemptions for urban buildings - a straightforward way to encourage density.

But many people have been fighting these pro-density ideas. Some are probably afraid that more residents - especially more poor residents - will raise crime or lower property values. Others prize their open space and beautiful views, and fear the aesthetic effects of eliminating urban height restrictions. Still others believe that when new people move into city neighbourhoods, it disrupts the traditional character and culture of these places. These anti-density approaches are often referred to as "Nimby", for "not in my backyard". Nimbys often have another idea for how to lower rents - kick industry out of their cities. Though this policy invariably ends up hurting the urban poor and working class, it is often painted as a "progressive" approach, especially in California. It also happens to be bad for regional and national productivity.


Potential home buyers leaving a house that is on sale in San Francisco. As house prices continue to rise as more technology workers move to the city, many residents seem increasingly drawn to “Nimby”, or “not in my backyard”, approaches to resolve the issue. But others counter that a better answer lies in deregulating housing and encouraging denser development. PHOTO: BLOOMBERG

San Francisco provides a cautionary tale. In the last decade, the city has been flooded with technology workers, pushing rents into the stratosphere - a one-bedroom apartment costs around US$3,500 (S$4694) a month to rent. Rent control is in effect, but that has just increased the incentive for evictions. Despite efforts by anti-eviction activists, the sheer size and persistence of the economic incentives involved are impossible to resist for long.

Nimbys often have another idea for how to lower rents - kick industry out of their cities. Though this policy invariably ends up hurting the urban poor and working class, it is often painted as a "progressive" approach, especially in California. It also happens to be bad for regional and national productivity.

Unlike progressives in New York City, who are often big supporters of density, San Francisco progressives have decided to focus on kicking the tech industry out of the city. Booting tech back to wherever it came from seems like a natural way of restoring the old equilibrium. Sadly, efforts to push tech employees out will fail, and will end up hurting the city's low- income residents even more.

For example, activists have proposed levying a 1.5 per cent payroll tax on tech companies only. The initiative will probably not become law, but it clearly indicates that tech-bashing is the order of the day.

They've also tried to raise tech workers' transportation costs. The city recently reduced the number of places where private tech company buses are allowed to stop, and is considering forcing all tech buses to stop only at a few "hub" locations.

But the most powerful weapon for bashing the tech industry is also the most destructive - a general restriction on the supply of housing itself.

Progressives on the city's Board of Supervisors recently called for certain height-limit restrictions to be lifted only for developments that include 100 per cent below-market-rate housing (the current policy sets the number at 30 per cent). Obviously, developing housing at entirely below-market rates is impossible without heavy government subsidies, so this proposal would effectively stop all new construction in many areas of the city.

The progressive supervisors also want San Francisco to be exempt from a possible new statewide policy to expedite regulatory approval for new housing development. This is essentially a scorched-earth policy - raise rents enough to drive tech out of the city, then lower them again once the industry gives up.

The problem is that other cities in the Bay Area will simply respond in kind. If transportation hassles and high rents start pushing high-earning workers to the South Bay or to Oakland, those cities will likely restrict their own housing development. In fact, South Bay suburban towns have done this for a long time, which is one reason tech workers moved to San Francisco in the first place. Oakland shows some signs of following suit.

Because other cities can and will respond to San Francisco's tech-bashing initiatives, those workers and companies will simply pay the higher costs. But costs will also rise for the working class and poor of the entire Bay Area, especially from housing development restrictions. Those who can pay for the city's misguided approach will grumblingly pay up, and those who can't pay - service industry workers, lower- income minorities etc - will be driven out.

So Nimby solutions are not truly progressive. The scorched- earth policies required to kick the industry out of town will hurt lower-income residents. They will also hold back national productivity, which depends on dense cities. If we're going to create cities where everyone can live and work, we need density - there's just no way around it.

BLOOMBERG VIEW

A version of this article appeared in the print edition of The Straits Times on August 04, 2016, with the headline 'Nimbys and America's lack of affordable housing in cities'. Print Edition | Subscribe