Economy 27-05-2024 10:12 15 Views

More Housing Fixes (Almost) Everything

Bryan Caplan does not write to be popular. He writes not for causes he thinks are likely to win but for causes that deserve to win. I’ve reviewed almost all of his books: The Myth of the Rational Voter (2007), Selfish Reasons to Have More Kids (2011), The Case Against Education (2018), Open Borders (2019), Labor Econ Versus the World (2022), How Evil Are Politicians (2022), and Don’t Be A Feminist (2022), and I look forward to his next project, Poverty: Who to Blame. But for now, I have to content myself with Build Baby Build: The Science and Ethics of Housing Regulation, published in 2024 by the Cato Institute (for which I’ve reviewed books and done contract work) and Caplan’s second graphic novel-style outreach on behalf of a cause that deserves to win: a free market in housing in the United States.

We don’t have as much housing as would be necessary to keep housing costs low because it’s illegal. Governments manufacture scarcity by wrapping building permissions in red tape. It’s absurd, for example, that so much space is zoned for single family detached housing. Many lots where apartment complexes and towers would fit are, unfortunately, limited to single family detached housing: 75 percent of residential land in LA, 77 percent on Portland, 79 percent in Chicago, 81 percent in Seattle, 84 percent in Charlotte, 94 percent in San Jose, and 38 percent in San Francisco. He states his point clearly on page 64, and I paraphrase: the status quo closes off some options, which wastes land, which makes all the options more expensive.

Caplan synthesizes a large body of academic research (so you don’t have to!) to argue that housing deregulation will cure (almost) all that ails us. Housing is expensive, especially in cities like San Francisco, New York, and Boston, because it is prohibitively costly to build. Acreage restrictions, single-family zoning, environmental review requirements, traffic studies, and other rules wrap housing construction in red tape. The result: some new construction happens, but supply is not allowed to expand quickly enough to keep up with rising demand and San Jose homes sell for a median of $1.4 million as of this writing. You can, he explains, get a palace in Lubbock, Texas for what you would spend on a shack in San Francisco.

He answers just about every “what about…?” and argues convincingly that while the costs of housing deregulation are in the billions, the benefits are in the trillions. What we lose from making it easier to build new housing is rounding error compared to what we would gain.

And just what would we gain? We would have cleaner environments with more skyscrapers (Manhattan is probably the most environmentally friendly place on earth in terms of environmental footprint per square foot). We would have cleaner environments and fewer carbon emissions if the housing supply in California could expand more quickly and people didn’t have to move to “browner” parts of the country for cheaper housing — the irony here is that in the name of protecting the environment, we make it harder to build where, from an environmental perspective, we should be building.

Fewer drug-fueled “deaths of despair” with an explosion in construction jobs. Lower crime because more density would mean more eyes on the street and transmission of news about suspicious behavior that is a lot healthier than what you see on Much higher output, to the tune of a 25-40 percent increase in GDP (about $6-$10 trillion). Less traffic. Shorter commutes. Cities that serve people rather than cars. Fewer stubby buildings surrounded by oceans of heat-hoarding blacktop.

When you look at housing, it’s incredible to think about how much public policy is designed to waste resources, like land. While it seems like cities like San Francisco and New York are full, they aren’t. San Francisco, Caplan points out, is a collection of a few skyscrapers surrounded by some “stubby” buildings. To the objection that “there is only so much land out there,” he replies that we can build up, and what’s more, after a building gets to be more than nine floors high, the marginal cost of each additional floor is pretty low. There are, he notes, cost increases after four, six, or nine stories, but then costs flatten. This suggests a rule of thumb he explains “…if it’s worth building 9 stories, it’s probably worth building a full-fledged skyscraper.”

Throughout, Caplan emphasizes consilience: reasons why both left and right should celebrate housing deregulation. As he puts it, “Instead of loudly siding with left or right, [housing deregulation] politely changes the subject.” The right should like that housing deregulation means fewer rules burdening businesspeople and people earn higher real incomes. The left should like that housing deregulation means higher real incomes and lower inequality. As Caplan points out, almost the entire increase in the return to capital charged with worsening inequality is driven by higher housing prices. 

Caplan answers all the usual objections, and in ways I would hope activists might find convincing. “What about the poor?” Is a pretty standard objection to any proposal to price something that isn’t currently priced, like driving. Economists’ proposals to price road access sometimes run into the objection that this would just create “Lexus lanes” for rich commuters, but as Caplan explains, his “package is BETTER for the poor. They might pay a little more to drive, but they’ll pay a lot less to LIVE.” Cheaper housing, better transit, walkability, and lower prices generally would more than offset the extra people would have to pay to drive. Moreover, the price in this case just makes the cost explicit. People are already paying — they’re just paying by sitting in traffic and burning gas.

I’m especially intrigued by his chapter on Frederic Bastiat, housing authority. He exhorts people to consider not just what we’re losing but what we are missing. Yes, we might get rid of some beautiful old architecture (though most of the “historical” buildings and houses I see around me are of dubious architectural distinction), but the cost of protecting beautiful old architecture is the beautiful new architecture we’re losing. We lost the original, beautiful Waldorf-Astoria hotel — but the Empire State Building went up in its place.

Alas, neither side embraces it. H.L. Mencken is said to have defined fundamentalism as the crippling fear that someone, somewhere might be happy. Progressivism, I would argue, is the crippling fear that someone, somewhere might make money. I fear that for progressives, “yes, we would have a lot more affordable housing, but some people would get rich building it” is a deal-breaker. Homeowners love regulation because it protects their property values. Renters, surprisingly, love housing regulation because they just have disdain for rich developers. Environmentalists love housing regulation because dense housing is abstractly green but not visually and tangibly green. Manhattan is probably the most environmentally friendly place on earth, but it doesn’t look like it because it is a concrete jungle. And yet, as Caplan argues based on research by Edward Glaeser and Joseph Gyourko, deregulation could mean 50 percent lower housing costs. Zoning, they argue, means that regulation imposes an effective $1.6 million per acre tax in San Francisco and even $180,000 in relatively laissez faire Dallas.

Finally, Caplan considers how different political philosophies all lead to the same conclusion. Are you a “greatest good for the greatest number” utilitarian? Deregulate housing. An egalitarian who will only put up with inequalities that help the least-well-off? Deregulate housing. A cost/benefit calculator? Deregulate housing. A libertarian? Deregulate housing. And even if you must have some rules governing new housing construction, there are a lot of “keyhole solutions” that cause a lot less damage than the current regulatory hammer. Afraid of tall buildings casting shadows? Tax tall buildings and use the revenue for new parks. Afraid there won’t be enough parking? Let businesses pay to get out of parking requirements.

So how do we get there? He points out that it seems like this should be a slam dunk: “Upshot: Once you grant the TRILLIONS of dollars of gains of housing deregulation, you can’t credibly object with a bunch of BILLION-dollar drawbacks. Yet such innumerate objections can easily win a debate for you.” Status Quo Bias — the conviction that the grass is always browner on the other side of the fence — is a formidable foe. Bright-line property rights, however, are a useful check against stasists who insist on keeping things the way they have always been — and the Supreme Court as it is currently constituted might be positioned to overturn the Euclid v. Amber Realty Co. decision that gave us modern zoning. 

Caplan’s presentation of his argument in the style of a graphic novel is truly unique and innovative: his quantitative and moral arguments are underscored by pictures that, I would hope, sear the message into readers’ minds better than graphs and tables can. Of course, there will be no way to win with some people, who dismiss abstract academic studies that don’t stir the soul but then turn and dismiss Caplan’s arguments in Open Borders and Build Baby Build because they are low-status graphic novels. It’s an issue that deserves to win, though, and Caplan does us all a great service by presenting the argument clearly and concisely in a visually arresting format.

Other news