The Monocrisis

It's housing, stupid

someone get me this poster pls

Historian Adam Tooze has popularized the concept of the “polycrisis”, a set of interrelated and interconnected crises (climate, migration, economic, political) that make each other worse and threaten the stability of the world and its economic and political systems. I’m not gonna talk about the idea so go read Noah Smith or John Ganz if you wanna get a review of the term (though I don’t think it’s very smart).

Regardless, I do think that the opposite is true in most of the developed world, since there’s one issue that makes every other issue worse: housing. Why does housing matter?

You can read a Spanish article I wrote a while back about why housing matters.

Land robbers

What makes cities work, economically speaking? A city is basically a big market for two things: land and labor. Cities are closed systems: a closed system has so much of something to go around. If you want a spot to park near your work, you personally can arrive earlier and get one. But if everyone did that, the parking lot would just fill up earlier - there’s so much parking to go around. Cities, as markets for land and labor, are constrained in both - there’s only so many of either to go around, and when all of it is employed, you either have to ration them or bid up their prices. Over the long term, labor is different, since you can get more people to move in - but land, at some point, runs out, since people tend to not like 7-hour commutes.

Even if all housing and all plots of land were identical on a featureless plane with equal amenities and services, some places would simply be more in demand because of how trendy they are, or because they have cool thrift stores instead of H&M, or literally any other random ridiculous reason. Because there is only so much land for themany people who want to live there, housing there will be more expensive, and therefore it will make economic sense to build biggger, taller buildings in there. What happens when it’s not possible to build taller in high demand land is that people who would live there just move somewhere else, because there’s not an infinite number of houses in the land that’s trendy - and prices go up everywhere else too. The same thing happens if all parts of the city are the same, but all housing is different (some bigger, some nicer, some more modern, some older).

The fact that housing prices are naturally variable due to fixed supply of land and high demand for it creates a sort of musical chairs that means that having too few housing at any part of the scale, especially the top, can create shortages of housing for everyone else - since they bid up prices. In consequence, the total number of housing units regardless of “luxury” status determines the price of housing, and also the rent to inhabit it (since renting has to be, over some time horizon, as profitable as selling). There’s plenty of evidence to back this up too, both in general and for market-rate housing (aka “fancy housing”) specifically - in the neighbourhoods it’s built in, in other neighbourhoods, and even in poorer neighbourhoods.

But why would there be too few homes? The main reason, in most of the developed world (particularly the US and UK) is that it’s too hard to build housing. In the US, the main reason housing is so tightly regulated is that white racists didn’t want to allow Black people (or Hispanics, or Asians, or Natives, or Jews, or other kinds of white people) to live near them, so they came up with facially non-racist ways of keeping white neighborhoods white and keeping rich neighborhoods rich.

In consequence, the vast majority of residential land in major US cities has historically been designated for single-family homes, i.e. a two-storey house with a garden and a white picket fence. Now, I’m not pretending that everyone has to live in a pod, but some people simply don’t need that amount of space - I’m 23 and I want to move out, but a much smaller apartment would be better for the amount of money I’d be paying. Besides, other types of regulations determine how big the houses that are built can be, how they look, how tall they can be, and even how many parking spaces they can have. Consequently, building bigger buildings is much more expensive even in places where they’d make the most sense, and the result is that there’s not enough housing to go around (especially if you’re not a double-income household that owns a car and has good credit), pushing prices up.

Now, not all of these are racist, and not everyone pushing for them is racist either. For example, the reason why New York has basically not built any housing for 60 years isn’t that they hate minorities, but rather than the guy who was in charge of all the building in the city was incredibly racist, so they made it impossible to build anything so nobody else could do racism by building, which means that the racism he did isn’t ever corrected because they didn’t actually change the things he built.

Not In My Back Yard

I’ve written an article for Liberal Currents that goes into these points specifically in more detail.

But how it was made impossible to build anything is really interesting. Besides from just making a lot of regulations, they also decided that any buildings should have a bunch of people comment on whether the building should be built. And people usually say no! But the issue is that those people are rich, old, and white, and they own houses - because poor people don’t have the time to do community meetings on housing projects. They’re usually labeled as “NIMBYs”, which means “Not In My Back Yard” (they don’t like the label).

Now, usually the reason NIMBYs want building housing to be harder is because they own houses, and if there’s fewer overall homes then all existing ones are more expensive, so NIMBYs get wealthier. This behavior is called rent-seeking and it’s usually not good - and because of the way elections and zoning authority overlap, NIMBYs form a concentrated voting bloc called the homevoters. There’s an opposing political bloc made up of like developers and construction workers, but they lose out against the homevoters on nearly every matchup.

Of course, this has pretty big implications for the distribution of wealth. Since most people only have their house as an asset, having a propertied class of rich, white boomers means that their share of wealth goes up and up while everyone else stays the same - since there’s no housing being built (or bought) while prices go up. As a result, the much cited rapid increase in inequality over the last couple of decades is caused, in large part, by a rapid increase in the price of urban land. This has gotten so bad that, in most developed nations, wealth inequality is simply housing ownership inequality - and it’s intimately tied to land use regulations. And of course, given that the NIMBYs are all white, and that the rules and regulations that determined how their houses would be built were written with extremely racist intent, then homevoters entrench and deepen racial inequality and the racial wealth gap specifically.

At the same time, in the US, where you live determines what school you go to, and how much money a school has depends on how rich the neighbourhood is. So, in effect, if you live in a neighborhood where everyone is rich, you go to big well-funded schools, and if you don’t, then you’re screwed. But because everyone in the former is disproportionately white, and everyone in the latter is disproportionately not, then you get into a situation where the best schools are also incredibly segregated. At the same time, income-based segregation is also incredibly high (even though race and poverty are correlated), with similar causes and consequences. Upper middle class people are just separated from everyone else, and they’re benefitting greatly from it. And because social connection across income groups is key for socioeconomic mobility, this has resulted in increased stagnation for all income groups, but especially for the lowest incomes above all.

A city that doesn’t sleep

The labor market is crucial for cities, not just because of the core underlying dynamics of their concentrated, specialized labor markets, but also because of the emerging properties from those markets.

Cities are ruled by the forces of economic agglomeration: the bigger the market, the better the opportunities. Cities, like most economic units, tend to specialize in one task they do better than the rest - such as Wall Street with finance, Hollywood with the media, San Francisco with tech. Adjacent to those people, who do specialized jobs, are others who just provide services to them - restaurants and lawyers and hairdressers and doctors. But those services also required their own services, meaning that the economy grows - which results in further opportunities. A bigger city just has a thicker, denser job market, which allows for more and more specialized jobs, which tend to be more productive and pay better. Thus, cities with bigger job markets tend to be more productive and therefore richer - even at lower rungs in the education ladder, since you have to pay enough for everyone to not work in other sectors.

As a result, bigger cities tend to be richer - for instance, those displaced by volcanic eruptions to bigger cities experienced pay rises, and moving from a smaller to a bigger urban center in Spain is associated with a pay rise. Bigger cities also have more exchanges of ideas, such that many skilled and talented people can bounce projects and proposals off each other: most US inventors live in a handful of cities, and moving to them increases the productivity of other, equally skilled inventors. Similarly, workers in firms in larger cities tend to be more productive, due to a similar exhcange in ideas with more coworkers.

Since economic growth depends, largely, on productivity and technology (at least proximately), these are massive factors in the development of national economies. Since controls on the amount of housing that is built reduce economic dynamism, then they must have an economic cost -the housing shortage reduced US productivity significantly and, in just three top cities, has reduced US economic growth by 36% since the 60s, which caused US GDP to be 14% lower overall¹ The UK’s economic decline is largely mediated by a horrific housing shortage, where wages for those most educated are underperforming pretty much everywhere outside of major urban centers due to an inability to move and obtain better opportunities. In fact, Nazi bombings of British cities during the Blitz ended up being economically beneficial, since it allowed those cities to build more housing in the spots where bombed out buildings once stood.

Baby you can drive my car

As written before, cities are largely built around cars. Regardless of whether people actually prefer this (not really), it’s reasonable to examine whether or not this has been a good arrangement in terms of its consequences.

This has resulted in urban sprawl, larger cities that are less dense and have fewer and fewer people over each square kilometer. These denser urban cores that are not being built have significantly lower carbon emissions than sprawling urban areas - and since carbon emissions from passenger vehicles make up about half of total emissions, and transportation as a whole is one of the biggest contributors, then the least dense cities have, unsurprisingly, the highest per capita emissions. Cars are, overall, bad, and no climate strategy can succeed without curbing driving- you can’t drive away from environmental disasters.

This kind of sprawl has resulted in an increasing distance between workers and their jobs, as well as jobs themselves spreading out from city centers, which oftentimes means that residents with more constraints in their job search tend to choose positions that are not a good fit for them, thus depressing their present and future earnings. And more dependency on cars and more trips will increase the likelihood of traffic accidents, which are a leading cause of death in the US and contribute to its comparatively low life expectancy versus other developed nations.

There is, additionally, another (ugly) side of this: mobility, or lack thereof, is a phenomonon that does not affect individuals evenly. Since cars cost money, those without access to them are overwhelmingly poor, and the dire state of US transit affects the "lower" class most of all. Similarly, gender is another concern: in Latin American cities, men are overwhelmingly likely to drive places, while women walk or take public transportation, and the same is true for European cities. This plays into a longstanding sexism problem in urbanism, which includes such nonsensical decisions as designing cities around someone who is 180cm (6 feet) tall, a height that is not representative of most men, let alone any women². In the US, additionally, urban planners have a long and (at least to them) proud history of racism, with zoning regulations being originally designed as a way to get around constitutional prohibitions on racial discrimination. This has resulted in longstanding (negative) effects on incomes, wealth, and opporuntities for racial minorities.

Conclusion

Not enough housing is a problem - not just because rents are too damn high. Nobody knows how many homes American cities need to build, but it’s certainly more than now; since every single area of life, and most economic issues, are affected by urban life and housing costs. This doesn’t mean bulldozing everything under the sun - it just means no more heeding to rich old people with time on their hands.

1. There are two links because the original paper contains a math error that underestimates the extent of the decline in GDP.

2. I’m 6’2 so IDGAF