...Archive for May 2016

There’s no substitute for a substitute

Eric Fischer, after heroically reconstructing San Francisco housing data for much of the 20th Century, published an analysis of the determinants of median rents. The hat tip goes to Tyler Cowen, who concludes “basically SF is ****ed.” Less pithy commentators did what less pithy commentators usually do, and used the analysis to claim that it basically supports their preconceptions and what they have been saying all along. It was only March when Hamilton Nolan helpfully concluded, “Build some housing, assholes. A lot!”.

Well, far be it from me to buck the trend. The analysis supports my preconceptions and what I’ve been saying all along.

Fischer_v6_side-by-side-huge

Basically, Fischer estimates a model that puts plausible magnitudes on the price effect of new housing supply. How much new housing would we actually have to build in San Francisco to address the housing affordability problem? The model is certainly contestable, but at least it gives us plausible magnitudes to talk about. To stabilize real rents at their current, absurdly unaffordable level, Fischer finds that the number of housing units would have to increase in real terms by 1.5% per year, holding other factors constant. [*] So, is it plausible that San Francisco could build its way out of its housing crisis? As Fischer notes, that would imply a unit growth rate more than 3 times the average rate since 1975. Hamilton Nolan of build-some-housing-assholes fame concludes that

Those fortunate enough to have nice places to live in San Francisco (and the rest of the Bay Area) have had decades to get this right. And they haven’t. Drastic measures are in order.

Decades! Hamilton, you are more right than you know. The last time San Francisco achieved a unit growth rate of 1.5% was in… 1941. So many decades of NIMBYs! What was really different about 1941 compared to now? No exclusionary zoning regs? No pesky environmentalists? Maybe! But perhaps a more parsimonious explanation is the one that Fischer himself gives.

From 1935 to 1943, the Central Sunset and Parkmerced filled in. From 1944 to 1954, the Outer Sunset and Ocean View were built. And that was essentially the end of the easily developed greenfield housing.

In the history of San Francisco, 1.5% unit growth has never been achieved via “infill” development of an already occupied peninsula. There was a brief boom that managed a few years of 1% to 1.3% growth in the mid-1960s, but during that period developers “still could fill in the hillsides of Twin Peaks and above O’Shaughnessy Boulevard.” After that, the vacant land was gone. From 1967 to the present, the city managed a growth rate of more than 0.5% in barely one third of years (17 years out of the 48 from 1967 through 2014, when the data ends.) During the post-greenfield, post-1967 period, which years were best? Was it during the good old days before “homevoters” shut down the “growth machine” with their exclusionary zoning laws? No. The best years of the post-1967 period in terms of unit growth were 2008-2009, and then again in 2014 (the most recent year in Fischer’s data). No year exceeded 1% unit growth. But 2009 and 2014 did achieve a remarkable 0.9%.

Conventional wisdom has coalesced on the notion that it is NIMBY-ism and exclusionary zoning that are responsible for the crazy, crazy housing prices in San Francisco and other high rent cities, and so the solution to the problem must be a bloody, painful battle to overcome greedy incumbents’ attachments to their homes and neighborhoods. But before we destabilize neighborhoods and displace humans in the name of housing supply, we might want to ask, will all that pain really address the problem? Sure, at the margin, more construction will yield lower prices. And I understand that, following construction boom years, rental prices have stabilized in cities like DC and Chicago.

But within developed cities, construction booms are short and finite. Chemotherapy may be worth the nausea and hairloss if it adds years to ones life, but would it be worth it for an extra week? Infill densification is socially painful and physically expensive in terms of demolition and retrofitting infrastructure. And, yes, buying off the evil NIMBY’s and the permitting authorities who serve them adds to those costs. But how many examples are there of cities that have grown their housing stock in place at anything like the rate that would be required to meet the burgeoning demand in San Francisco or New York? Before we wage war on ourselves, maybe we should inquire whether victory is plausibly achievable. And, if it isn’t, maybe we should come up with a different plan?

The situation is even worse than it appears. The current craze, the only hope on the political horizon, is “affordable density“, which would eliminate regulatory impediments to construction for developers who reserve a percentage of units for means-tested tenants who would pay below-market rent. This trend reflects some mix of a well-intentioned attempt to address displacement and pragmatic acknowledgment that a city that has priced out its teachers and service workers might have a hard time functioning. However, an awkward fact of market pricing is that effective supply is not the number of units built, but the number of units actually made available to the market. Compared to a laissez-faire counterfactual in which redevelopment simply pushes poorer residents out of the city (often the case historically), every human not displaced diminishes the degree to which densification reduces market-rate rents. A market is not a dinner party. The higher the affordable housing requirements, the greater the rate of unit growth required to stabilize market-rate prices. Have we mentioned already that infill unit growth is really hard?

Cities evolve. They grow, they change, they do become more dense. And that is great. San Francisco NIMBYs are always on about Hong-Kong-ization or Manhattanization of the city. I like Manhattan and Hong Kong, and would be excited to see San Francisco’s aesthetically blah, largely single-family-detached west side turn fun like that.

But those neighborhoods are already inhabited. People live in the single family homes. They plant gardens in the generous backyards. In time, I hope those neighborhoods will change, and become more dense. I’m for a whole lot of redistribution, but there are reasons why civilized countries redistribute via financial tax-and-transfer rather than “land reform“, i.e. direct reallocation of real resources. To people who characterize homeowners’ informal sovereignty over their neighborhoods as a subsidy to the “upper middle class” at the expense of the “economically vulnerable”, I’d ask a few simple questions.

  • In a country where the homeownership rate is more than 63%, is it right to characterize homeowners broadly, even in San Francisco, as “upper-middle class”? Many homeowners have lived in their homes for years, and many new homeowners are mortgaged to the hilt.

  • Given that even an ahistorical, sustained trebling of unit growth would probably only stabilize, not reduce, the real price of housing in San Francisco, is it fair to characterize the people who would be helped by increased space for new residents as the “economically vulnerable”?

  • And given that, for perfectly understandable reasons, homeowners and residents resist fast-paced densification of their neighborhoods, which homeowners and residents would most likely be forced to tolerate changes they dislike or that threaten the value of properties? San Francisco has its share of stunningly beautiful neighborhoods affordable only to plutocrats. Will we put high-rises in those neighborhoods? Or, in the anodyne language of economists for every bad thing, will it be the economically vulnerable who must “adjust”?

Is Tyler Cowen right, then? “Basically SF is ****ed?” No. San Francisco could be just fine. The thing about San Francisco is that while greenfields have been exhausted in the city, the San Francisco Bay Area is largely undeveloped. We are always arguing over San Francisco, or Palo Alto (ick). Outside of the 47 square miles of San Francisco proper are almost 3200 square miles in San Mateo, Santa Clara, Alameda, and Contra Costa counties. (I’ll leave out the hoity-toity North Bay counties — Marin, Sonoma, Napa — but if it’s Latin-America-style land reform you want, the vines there are ripe for revolution!) Nobody wants new suburban sprawl, thank goodness. But dense development is not sprawl, even when it is greenfield development. When I argue that Singapore is an example we look should look to, people think I’m trying to make some left-wing point about public housing. I’m not. I don’t actually care very much about that. What excites me about Singapore is this:

SingaporeLivability

It’s silly to characterize what Singapore does as “basically greenfield suburban growth“. Singapore’s new towns are denser than any US city, and nicer than most of them. They are designed for their density, not retrofit. What distinguishes Singapore is a “can do”, dirigiste approach to developing new living space, and a remarkable competence at making density green and livable. Singapore is an exuberant site of architectural experimentation, in both private and public building projects. Singapore’s “new towns” can house 100,000 people in less than 5 square miles. In the San Francisco Bay Area, there is plenty of space for Singapore-style new towns. Even Back East, room could be found for these compact conurbations.

Every piece of Earth has its stakeholders. As with densification of existing cities, plans to build new cities and their supporting infrastructure will provoke bitter controversy. But stakeholders for exurban land are fewer and more dispersed, and so less intensely affected, than city dwellers. The fights will be more winnable and the victories more meaningful in terms of the numbers of new dwellings that can be constructed. In the old city, we are condemned to bitter struggle over what ultimately may be too little to matter.

There are glimmers of hope for new towns, even in the US. See The Economist on “ersatz urbanism” in Florida. But it is in the San Francisco Bay Area, with its dreadful, painful housing situation, and its science fiction tycoons (several of whom individually could provide the necessary finance) where a full-scale, ecotechnological US microcity should really be attempted.

Soon.


Personal Epilogue: I live in San Francisco. I am a renter. I live in a neighborhood with no pretty Victorians, on a block with little anyone would want to preserve for character. My personal preference would be for a lot more density, in my own neighborhood and many others. My apartment building, like the vast majority of SF multi-family dwellings, is rent-stabilized. I support San-Francisco-style rent stabilization, under which initial rents are “market rate” but rent increases are regulated. I think it is a good policy regime. I don’t think the $300-ish per month I may be saving (after a three year tenure, figuring two 10% rent increases) much impacts my views, but “none of us can be perfectly objective arbiters of our own conflicts of interest“, so you be the judge. I detest San Francisco’s high housing (and other) prices, and feel that the cost makes the city culturally gross, a place full of insecure people (very much including me) tacitly or not so tacitly competing in crude financial terms for the right to live here. Conversations always turn to housing, in overt commiserations or covert attempts to feel out where the other person lives, whether they have space, how they can afford it. As I said, it is gross.

Nevertheless, I don’t support the broad-brush anti-NIMBY, anti-zoning, affordability-through-density movement, because I think it is counterproductive. I want more housing, more density, and more development, but I don’t imagine those can possibly address affordability even over the medium term. I think that attempts to supercharge in-place densification i) will not succeed at any remotely sufficient scale; and ii) will cause real harm, and not just or mostly to unsympathetic upper-middle-class baby boomers protecting price-appreciation windfalls. I am very fond, intellectually and personally, of people like Matt Yglesias and Ryan Avent who have made strong cases for upzoning and densification as the way to go. They deserve congratulations for how persuasive their arguments have been. At least within my socioeconomic milieu, their ideas have become enshrined as conventional wisdom. But in my opinion — which of course might be mistaken! — these ideas have supplanted consideration of more effective and less difficult solutions to the very real problems they mean to address.


[*] I’ve tried to reproduce Fischer’s work, see the embedded image above (also Mathematica source code). My version yields slightly different coefficients and requires only 1.3% growth to stabilize prices. Hooray!

Difference

Matt Yglesias, with characteristic perceptiveness, points out (ht DeLong) that

There are significant and salient tension between the economic and identity-oriented wings of the left that conservatives largely avoided… You saw this in the Clinton/Sanders primary where identity politics rhetoric and concepts were mobilized to shore up economic moderation.

Freddie deBoer offers a piece that I enthusiastically recommend. (But then I would, wouldn’t I?) deBoer writes

the existence of tens of millions of nativist racists represents a practical problem to be addressed no matter what your take on their origins. I am not talking about giving concessions that we consider contrary to our basic convictions in an effort to court these voters. I’m not necessarily talking about courting them, as voters, at all. I am not saying we shouldn’t defeat them in elections. I am asking, what do we do with them after the elections have been won? More, I am here asking that we consider whether we want to adopt the basic logic of conservatism: that some people’s distress is deserved and thus safely ignored.

In general, I think attitudes towards difference are an underappreciated fault line of contemporary liberal politics. By difference, I don’t mean individual difference or eccentricity, iconoclasm or nonconformity. What I do mean is consequential divergences of status across different, socially identified groups of people.

There are two axes of difference that seem to me to be particularly relevant. Yglesias identifies these precisely: There is an axis of “identity politics”, and an axis of economic stratification. Both of these axes are associated with “progressivism”, in the sense that both economic stratification and various socially defined identity groups have been associated with perceptions of disadvantage and oppression of the sort “progressivism” seeks to remedy. (See Arnold Kling’s axes.)

However, there are two, quite distinct approaches to remedying this sort of oppression. One way is to alter the way people are sorted and the relative status of the different groups so that the socially consequential groupings are more legitimate. Another way is to try to diminish the legitimacy and the fact of distinctions between groups, so that what groupings remain are more like elective subcultures than implacable social facts.

Along the economic axis, this distinction plays out in the question of meritocracy. “Classical liberals” and the people sometimes referred to as neoliberals don’t challenge the existence of large, consequential differences between rich and poor. They seek to remedy what is oppressive in economic stratification by putting a humane floor beneath the consequences of being sorted downwards, and by working to ensure that the sorting is “fair”. They tend to promote equality of opportunity and emphasize education as a solution. People to whom the label “left” gets applied work instead to compress economic difference, to delegitimize the sorting or at least to dramatically reduce its scope relative to the unjust, socially destructive dispersion they perceive in the status status quo. Both groups find common cause, sometimes, in wanting to put a floor beneath the bottom. But they are in sharp conflict about whether stratification towards the top calls for making the sort fairer or imposing limits.

With respect to identity politics, there is a similar divide, but the labels aren’t as recognizable. There is a strand of left-of-center politics that seeks to simply end group difference, epitomized by Martin Luther King’s call for “a nation where they will not be judged by the color of their skin but by the content of their character”. There is a different strand that views group difference as legitimate, or else inevitable and therefore legitimate, and that seeks to remedy oppression by contesting in politics and society explicitly as groups in order to alter the sorting of material goods and social status across groups. As in economics, where meritocratic liberals and people to their left form uneasy alliances over “safety net” programs, universalists and identity-centered activists can and often do work together to try to remedy disadvantage and oppression attached to social identity. Just as meritocratic liberals acknowledge the fact of economic hierarchy, universalists are not reductionists, they (we) acknowledge the fact that social goods are differentially distributed across identities through mechanisms quite different from within-group economic sorting, and often much more brutal. But, as in the economic sphere, universalists and identity-centered activists ultimately have very different goals and so embrace very different tactics. Universalists want group identity to become less salient and consequential, and so resist tactics that highlight difference in order to promote intragroup solidarity and to sow open conflict with other groups. Identity-centered activists view solidarity and conflict as the best and perhaps only way to overcome identity-distributed oppression. To a universalist, tactics like “no platforming” sow precisely the sort of divisions we ought to be working to overcome. To an identity-centered activist, “no platforming” an apologist for racism or sexual violence is just winning. This distinction blurs in practice, because neither universalists nor identity-centered activists restrict themselves to “neutral” (race-neutral, gender-neutral) tactics. Procedural neutrality is a trope of conservatives, of people working to defend status quo distinctions rather than to alter them. But universalists adopt group-conscious tactics as a means of reducing the salience and importance of group difference (think of how Singapore actively manages the composition of its housing to prevent the emergence of distinct ethnoracial communities), while identity-centered activists work to advance the interests of the groups for which they advocate in ways likely to accentuate the salience of group membership and encourage continued group identification and solidarity.

The core dispute, I think, in identity politics as in economic policy, is over whether to embrace consequential difference across groups but make outcomes more legitimate, or whether to try to reduce the degree to which difference is socially and materially consequential.

The diagram above summarizes the differences as I see them among US liberal-to-left factions. Note that these are questions of more or less, not absolutes. I’d place myself in the “universalist left”, for example, but I do believe that some degree of economic stratification is legitimate and necessary, under economists’ usual rationale of preserving incentives to produce. I just think that the degree of economic stratification that currently prevails is way, way, way, way, way past the point where benefits of sharp incentives to produce are undone by even sharper incentives to cheat and outweighed by destructive social fragmentation.


Update: Eli Schiff offered some similar thought experiments recently, thinking about the acceptability and reputation effects of left- and right-flavored activism in a corporate setting or workplace, depending on whether that activism emphasizes identity or economic concerns. I chatted with Schiff about these, and am indebted to him in thinking about using emphasis on identity politics to cut a 2 x 2 grid. Take a look at his work, his initial cut, or his more elaborate take, also embedded below!

Update History:

  • 15-May-2016, 4:25 p.m. PDT: “…neither the universalists nor the identity-centered activists…”
  • 17-May-2016, 1:15 p.m. PDT: Added bold update re Eli Schiff’s thought experiments on the acceptability of workplace activism.
  • 19-May-2016, 1:15 p.m. PDT: Added horizontal line to separate conclusion from update.