The Housing Crisis: A Debate About Supply

Intro

The housing market is undergoing significant change and experimentation after decades of relative stagnation. In California, state housing law is changing rapidly, with several other states following suit. Cities like Minneapolis, Sacramento, Austin, and Spokane have redrawn their zoning maps and removed barriers to housing production.

Meanwhile, research has contributed to our understanding of the relationship between land use rules, housing supply, and housing costs. Studies show that new housing production can set off a cascade effect throughout the market, lowering rents for everyone. However, the debate continues to center around the supply-and-demand issue.

The Supply Skeptics' Argument

Supply skeptics argue that legalizing more housing development in supply-constrained cities will not ease the housing crisis. They see it as a market-based solution that will only benefit capitalists at the expense of the working class.

They rely on a handful of studies with flawed methodologies to support their claims. However, their core argument is philosophical rather than conceptual: they believe that markets exist to enrich capitalists and that any policy that relies on market instruments will inevitably benefit the ultra-wealthy at the expense of everyone else.

Market Fundamentalism vs. Supply Skepticism

Both supply skeptics and market fundamentalists tend to describe "the market" as a single entity locked in a zero-sum struggle with economic democracy. However, neither view is entirely accurate.

The market is not a single entity but a complex system, and its behavior can be influenced by government policies. By setting the rules of the market, the government can steer it towards certain outcomes. Whether these outcomes are desirable is a question of politics and public opinion.

Integrating Market Instruments and Non-Market Interventions

We do not need to accept an either/or distinction between using market tools and employing non-market state intervention to achieve housing for all. In fact, these two approaches are complementary.

Houston, for example, reduced homelessness by nearly two-thirds within a decade by providing deeply subsidized housing to unhoused residents. However, this "Housing First" approach was only effective because Houston had a thriving private housing development industry. The city's abundance of private housing kept rents down, which prevented future increases in homelessness.

Pairing market instruments with non-market tools can be emotionally unsatisfying for those who prefer a more direct confrontation with capital. However, we should prioritize housing for all as an objective over penalizing particular enemies in the capitalist class.

The YIMBY Program and Other Criticisms

The YIMBY (Yes in My Backyard) movement insists that increasing the supply of housing is the key to reducing upward pressure on housing costs. However, the empirical evidence on the YIMBY program is mixed, suggesting that upzoning alone may not dramatically increase supply or reduce rents.

Moreover, while increasing the supply of housing is one way to discipline landlords into lowering rents, it is far from sufficient in a relationship characterized by a power imbalance as fundamental as that of landlord and tenant. Housing markets, like labor markets, are power-laden.

A Polanyian Critique of YIMBYism

Ned Resnikoff argues that the YIMBY movement is too focused on pro-market reforms and neglects the need for non-market solutions. He accuses non-YIMBY "supply skeptics" of failing to grasp the importance of seeing markets as embedded in social institutions and of rejecting market solutions out of hand.

Brian Callaci and Sandeep Vaheesan agree that the details of market governance are crucial but argue that Resnikoff's program of deregulation and subsidies is insufficient to make a major dent in the housing crisis. They emphasize the need for a more active role for the state in the housing market, including establishing and enforcing fair rules for market conduct and providing social housing.

Resnikoff responds by accusing Callaci and Vaheesan of misrepresenting his views and arguing that the YIMBY program is compatible with other ambitious housing goals, such as increased public investment and social housing development. However, he admits that he focuses on land use reform because he believes it is the single most important change that can be made.

The Ultimate Disagreement

The fundamental disagreement between YIMBYs and non-YIMBYs is over the relative importance of land use reform. YIMBYs believe it is the most important solution, while non-YIMBYs believe it is only one part of a larger puzzle that includes addressing the power imbalances in the housing market and providing social housing.