My new book, The Affordable City, is out September 15th. It’s a how-to guide for affordable housing policies and programs, and it makes the case that truly affordable, just, and accessible cities require us to prioritize Supply, Stability, and Subsidy policies. None by itself will ever be enough. Click here to order it from Island Press. You can also purchase it from Amazon and other online booksellers.
To celebrate the release of my book and encourage folks to pick it up from their favorite online bookseller, I’m excerpting several passages from different sections. If you missed the story of the book’s genesis and the excerpt from the intro, I suggest you read that first. You can find it here.
In this post I’m sharing an excerpt from the section on Supply policies, which opens with a discussion of why an abundant supply of housing is necessary for affordable, accessible cities. Specifically, I’m sharing an analogy that I’ve found useful for explaining why supply is important, and how policies that limit supply result in higher prices and costlier development. I recall reading a version of this analogy years ago but couldn’t unearth it during my research, so if you happen to know who came up with it please let me know because I’d love to give them credit.
First I’ll repeat a relevant paragraph from the book’s introduction, then I’ll provide the analogy excerpt:
Supply is about having enough homes for everyone. When housing is hard to come by, all other obstacles to affordability and accessibility become exponentially more difficult to overcome. Rents and home prices rise as a result of scarcity, the cost of construction balloons as land and labor grow more expensive, landlords gain leverage over renters (and sellers over buyers), and poorer tenants are replaced by higher-earning households, with the less fortunate pushed to areas with fewer amenities and limited access to jobs, education, and community. Many cities have limited land available for development, but housing can always be built up rather than out. Oregon’s ban on single-family zoning is one example of how we can make more space on already developed land, though more aggressive tactics will also be required. Providing an abundant supply of homes is about growing the pie for everyone’s benefit rather than dividing it into smaller and smaller slices as a population grows. Supply is about recognizing the economic and physical realities of housing and making the most of both.
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Another popular analogy, comparing housing to automobiles, further illustrates the importance of supply. Unlike new homes in expensive cities, new cars are offered at a wide range of price points. Taking Toyota as an example, there are the Yaris and the Corolla at the low end, starting at around $16,000 to $20,000, all the way up to the Avalon at $38,000 and the Mirai at nearly $60,000. Per car, higher-end vehicles are more profitable, so why does Toyota bother building Yarises and Corollas? Automakers are just as profit motivated as developers, so why does one industry serve people across the income spectrum but the other not?
One important answer is supply constraints. Automakers are allowed to manufacture as many vehicles as they want, their only limitation being the number they think they can sell. Many will be luxury vehicles: Lexuses and Model S’s and even the occasional Lamborghini. But most people can’t afford those cars, so manufacturers need something to offer the middle class. Each individual low- and midrange car isn’t as profitable, but they can sell many more of them, so it still makes sense to build them. Thus, we have a car market with seemingly endless choices.
In 2017, Toyota sold 387,081 units of the Camry, its most popular model in the United States. It sold over 2.1 million vehicles across all models. Toyota’s luxury brand, Lexus, sold 302,132 vehicles across all models in the same year. Now imagine that the federal government decides it wants fewer cars on the road and places a cap on the combined total number of Toyota and Lexus vehicles that can be manufactured each year. If that cap is under 300,000, we can kiss the Camry—and the entire Toyota vehicle line—goodbye. The Lexus is more profitable, and there’s demonstrated demand for at least 300,000 vehicles at that price point, so the automaker will justifiably focus its efforts there. To do otherwise would be poor business sense and a betrayal of Toyota and Lexus shareholders.
With the more affordable line of Toyota vehicles off the market, the average cost of new cars would rise significantly. Middle-class households would be angry that “greedy automakers” were producing vehicles only for the rich. Some elected official, forgetting the origin of the shortfall, might eventually demand that automakers set aside 20 percent of their Lexuses for low-income households.
This cap would also have longer-term effects. Having fewer new vehicles would result in a shortage of used vehicles for down-market buyers. Vehicles wouldn’t fall in value, at least not quite so fast, because the number of would-be used car buyers would far exceed the available supply. Most middle- and upper-middle-class buyers would still be able to afford used vehicles, but these vehicles would never filter down to low-income households. There simply wouldn’t be enough to go around. Is this beginning to sound familiar?
As bad as this scenario is for cars, it’s worse for housing. Cars, for all their usefulness, have serious negative impacts on the environment, urban design, safety, public health, and social cohesion. There’s an argument to be made for limiting the proliferation of personal automobiles, though an arbitrary cap would be a ham-fisted way to do it. People can still get around in lieu of driving their own car, whether by carpooling, transit, walking, or bicycling. What people can’t do is get by without homes, and the workarounds that people devise—overcrowding, illegal dwellings, tent and vehicle dwelling—are deeply harmful.
In the book I have much more to say on the importance of housing supply, what it can achieve, and just as importantly what it can’t. I review roughly a dozen policies that can help promote abundant housing, devoting 2-4 pages to each. These include common strategies such as upzoning and by-right approvals, and less-discussed approaches including allowing housing in commercial zones and supporting counter-cyclical development.
If you’d like to read more, buy my book! I also encourage you to check out excerpts from the Stability and Subsidy sections of my book. You can find those here: Stability. Subsidy.