Build more houses!

Public housing, market rate, even if values depreciate.

Next:Economy Newsletter Image generated using Microsoft Image Creator and Adobe Photoshop   We need more market rate houses. Really. Sometimes the best ideas can be the most obvious. Cities desperately need more affordable housing? Then build more houses. And as Noah Smith puckishly points out, any houses will do, even if they're priced at the market rate. Though somewhat counterintuitive—more market rate apartments would likely raise average rents, after all—Smith argues that just because the averages go up, affordability doesn't necessarily follow, since the people moving into new market rate apartments leave vacant (more-affordable) units in their wake. Here's his explanation why, using the notoriously expensive Bay Area as his example: When the tech workers move to the new tower, what happens to those rental units they just vacated? Those units go on the market! And unless landlords want to let their units sit vacant for many months (which costs them a lot of money), they have to rent those units at a discount to whatever they were charging before. Who moves into those newly discounted units? Maybe some other tech yuppies looking for a bargain. Maybe some service workers paying market rent in the East Bay and commuting over every day to work in SF. Maybe some middle-class family currently paying market rent elsewhere in SF. It's not clear. But whoever it is, the availability of a discounted market-rate unit gives them some negotiating leverage with their current landlord. Smith makes it clear that cities should be building public housing too. But public housing and market rate units are different facets of the same housing system. While they may not serve the same constituencies, growing the share of both can help bring down prices across the board. As Smith insists, "Even though building market-rate housing isn't always the only thing you need to do, you do need to do it!" + Bloomberg's Sarah Holder concurs: "No, Really. Building More Housing Can Combat Rising Rents." + Public housing may be the more important lever for truly affordable housing. The New Republic's Michael Friedrich worries that any gains in affordability from building new market rate housing would be marginal at best. But both he and Smith agree that fixing the housing market will require a mix of solutions.   Do we want more homes or more valuable homes? Austin, Texas, offers a glimpse at how building new units can improve housing affordability in a localized market. In "America's Magical Thinking About Housing," the Atlantic's Derek Thompson explains that Austin has been "adding homes more than twice as fast as the national average and nearly nine times faster than San Francisco, Los Angeles, and San Diego." (Axios recently noted that "Austin is one of just three major housing markets in the U.S. that has enough supply to meet demand "—although there's still a shortage of the most affordable homes.) As Austin's housing supply has gone up, prices have come down—7% in the past year. Good news! But not everyone's celebrating. Thompson reveals that the dropping prices are causing consternation among current homeowners. . .and the financial class represented by the Wall Street Journal. And that's because our housing market embodies two competing values: In the U.S., our houses are meant to perform contrary roles in society: shelter for today and investment vehicle for tomorrow. . . . If homeownership is best understood as an investment, like equities, we should root for prices to go up. If housing is an essential good, like food and clothing, we should cheer when prices stay flat—or even when they fall. Instead, many Americans seem to think of a home as existing in a quantum superposition between a present-day necessity and a future asset. Adding more housing will probably depreciate current home values. But that doesn't mean we shouldn't build it. + From Bloomberg: "Zoning Reform, Now a Bipartisan Cause, Tries to Build a Bigger Tent."   Public housing by any other name. . . With affordability so low, public housing may just have its moment in the spotlight—even if it's called "'social housing' produced by 'public developers'" by the time it gets there. Vox's Rachel Cohen reports on a program in Montgomery County, Maryland, that’s building publicly owned housing by making private developers "attractive bids" —or as the county's chief real estate office colorfully put it, by "replacing the investor dudes from Wall Street." And it's been a success so far, with a 268-unit mixed-income building already 97% filled and two larger apartment complexes on the way. Now other areas like Atlanta and Boston are looking to implement similar plans. This scheme boosts both affordable and market rate housing, and does so while still making a profit, even if the gains aren't as large as big developers might want. And that's the point. While it's still an open question whether plans like these can target those with the most financial need, at the very least, they "grow the overall pie of affordable units throughout a city." And that's important too. + Modern Housing: An Environmental Common Good, a new report from Dan Hill and Mariana Mazzucato, contends that "we must fundamentally rethink our approach to housing" in order to "produce housing that is dignified, durable, beautiful and adaptable, and made available for all, as a common good." + From the San Francisco Chronicle: "S.F. Teachers Could Get More Affordable Housing in the City with New District Plan."   —Tim O’Reilly and Peyton Joyce This message was sent to alexvarboffin.abbb@blogger.com. 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