Monday, May 23, 2022

What does Jerry Brown know that Mayor Cooper has yet to learn?

Nashville Mayor John Cooper signed a bill to require developers to build affordable housing.  This makes housing more costly, reducing supply, so Cooper also includes incentives to increase supply, trying to give back with one hand what he is taking away with the other.  This is exactly what the Stanford Law Review [see below] called a " 'kludgy' set of policies that can actually prevent new development and end up increasing housing prices."  

Cooper is repeating--rather than learning from--the mistakes of the past.
  • Affordable housing mandates reduce the supply of affordable housing
    • These kinds of zoning restrictions are popular because they drive the price of existing housing above replacement cost, benefiting Nashville's homeowners. But they come at the expense of renters and new residents. As the Financial Times put it:
      They are the ransom that renters and recent buyers must pay to existing homeowners – whose homes the rules protect – for use of an artificially limited stock of housing. So severe have those restrictions become that the value of the ransom runs into the trillions. 
  • Nice summary of the affordable housing crisis from Stanford Law Review
    • [the cause of the affordable housing crisis] is uncontroversial among urban economists but not broadly understood by low-income families, advocates for low-income families, housing activists, and their allies in academia, policy, and government—in short, the housing advocacy community. In the face of higher housing costs, the housing advocacy community tends to argue for a “kludgy” set of policies that can actually prevent new development and end up increasing housing prices
To alleviate the crisis, reduce the barriers to expanding housing supply, like local zoning, regardless of what kind of housing it is.  New supply will bring down all prices.  But as the Financial Times notes above, this would be politically unpopular, as homeowners benefit from strict zoning that limits new supply because it raises their housing prices.  

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