Wednesday, September 19, 2018

Why Do So Many Affordable-Housing Advocates Reject the Law of Supply and Demand?

By Roderick M. Hills Jr.

Housing prices are famously out of control in many cities — the average studio apartment in San Francisco goes for nearly $2,500 a month, more than $2,900 in Manhattan. This trend has inspired a movement called “YIMBY,” for “Yes in My Back Yard.”

YIMBYs push for reductions on zoning restrictions to increase the supply of housing, reasoning that
all new housing, market-rate as well as subsidized, helps to keep housing prices under control.

“We should build more housing in every neighborhood — especially high-income neighborhoods,” reads the mission statement of the YIMBY Party, based in San Francisco. “… Increasing supply will lower prices for all and expand the number of people who can live in the Bay Area.”

The YIMBY movement has become popular enough to win some bipartisan support: Housing and Urban Development Secretary Ben Carson endorsed on Twitter a pro-YIMBY column by Bloomberg’s Noah Smith.

To some people, the YIMBY platform will sound painfully obvious. But YIMBYs face enormous opposition from self-styled progressives who flatly dismiss the idea that adding new market-rate housing to a city will improve housing affordability. Sometimes these activists go even further and argue that adding market-rate housing to cities actively hurts the poor (on the grounds that expensive apartments attract wealthier residents who bid up rents). Such activists will fiercely oppose even new market-rate buildings that include subsidized units.

They end up allying themselves with NIMBY (“Not in My Back Yard”) homeowners who oppose all new construction in their neighborhoods. Working together, the two groups help choke off new construction that could ease housing prices.

Call this attitude “Left NIMBYism.” Left NIMBYism not only flatly contradicts the logic of supply and demand but also flies in the face of empirical studies of what happens when cities see new construction. In its stubborn rejection of empirical reality, the Left NIMBYist view of housing markets shares characteristics of ideologically motivated refusals to accept evidence in other contexts, such as climate change or the safety of vaccines.

our authors for the Coalition for Community Advancement flatly asserted in 2016 that market-rate housing had no role to play in the policy discussion over housing affordability. Under a headline that said “Supply is not the Solution,” they wrote: “The only increase in housing supply that will help to alleviate New York’s affordable housing crisis is housing that is truly affordable to low-income and working-class people.” Bizarrely, the group was arguing against a plan to build 6,500 new apartments, of which fully half would go for below-market rents. The Los Angeles chapter of the Democratic Socialists of America put that idea more bluntly: “New housing is built at the high end of the market not to bring working-class people of color in, but to shut them out.”

The logic underlying those sorts of statements is remarkably flimsy. Attributing rent increases to new market-rate housing is like attributing rainstorms to umbrellas. High demand for housing is driven by jobs that attract newcomers who bid up rents. New construction follows along. If new market-rate housing is not built, then wealthier-than-average people will just place higher bids on existing units, thereby preventing “filtering.”

Read the rest here.


  1. The main reason affordable housing market advocates, and those who support them, disregard supply and demand is that affordable housing is politically too valuable. Solving the housing issue by letting the free market work would not only pull a major political plank out from under liberals, it would be visible evidence that free markets, not the STATE, works.

  2. Check the comments to this article at the Washington Compost. Not pretty to those in favor of free markets, private property and freedom in general.

    We have a long way to go.

    1. You mean a short path to inevitable Facist Socialism

    2. @Alex

      I shouldn't have done it, but I couldn't stay away. Something about the comments fascinates me. It's not so much that they deny the law of supply and demand, but rather that they (almost to a man) posit some extenuating circumstances which, they claim, will hamper its operation (e.g. "there's a physical limit to urban space" or "more rich people would just move in.") IMO it's ridiculous to claim to even have this degree of hypothetical knowledge of a complex system, and also ridiculous to assert that these factors are sufficiently influential to overcome Econ 101, but they seem to have convinced themselves of it.

      This seems to be an inherent problem with the economic argument. It's fundamentally utilitarian and general. It invariably leaves some weasel room for someone to declare "well these are special circumstances because yadda yadda yadda."

      Personally, I view the moral argument as vastly superior. These people, for all their supposed good intentions, are ultimately saying "it's OK to grab someone and throw them into a cage if they charge what some 3rd party believes to be the 'wrong' price to rent their own property." To me, this is the crux of the issue, and the whole economic argument is mostly just besides the point.

      And yet hardly anyone outside of hardcore libertarians ever puts it that way. Remember, that these lefty rent control advocates, in many other contexts, are crazy about personal liberties. They'll go to the wall for a transgender person to have the freedom to choose their bathroom. And yet then they're going to turn around and try to say that the freedom to negotiate rents, wages, etc., is unimportant?? This is a glaring moral inconsistency that deserves to be called out. I feel like, if I was in their shoes, I might be more likely to be swayed by this type of argument, because it's harder to weasel out of. But then, I'm weird...

  3. When clear-thinking economists talk about the Law of Supply and Demand, they experience the discussion as a search for something true about reality and as non-negotiable as gravity.

    When confused interventionists talk about Supply and Demand, they experience it as a proposition for how society should be arranged. To them economics is a discussion about how best to arrange the rules of the game, not an attempt to discover the rules that already exist and cannot be avoided. The one's who have really thought through their confusion think all our economics is some sort of clever trick to distract them when we really could just arrange society however we'd like if we weren't such jerks.