In a recent post, Scott Alexander doubled down on his argument that constructing extra housing usually ends in larger housing costs. In his earlier publish, he pointed to the truth that housing is usually costlier in greater cities. I supplied a counterexample, citing Houston and Austin. I additionally argued that large cities are costly for causes unrelated to their giant amount of housing, corresponding to the benefits supplied by agglomeration. Exogenous provide will increase, corresponding to making it simpler to construct new housing, usually cut back housing costs.
Right here’s how Alexander responded to certainly one of my arguments:
I began the publish with a graph of about 50 cities, exhibiting a constructive correlation between density and worth. I’m having bother seeing how Sumner’s level isn’t simply “for those who take away 48 of these cities and cherry-pick two, the connection is unfavorable”.
I feel Alexander misunderstood this argument, so let me return and make the purpose extra rigorously. It will likely be useful to make two separate arguments:
1. You’d count on large cities to be costlier even when constructing housing reduces housing costs.
2. Austin and Houston are usually not the one counterexamples; there are lots of different such anomalies.
Let’s begin with a easy mannequin the place there are zero restrictions on housing building in all cities. Assume that America has 100 cities, every with industries of various productivity. In that mannequin, the most important cities shall be subsequent to the areas of biggest productiveness. (These areas of productiveness had been as soon as linked to pure components corresponding to ports and mineral assets, however are more and more linked to industries with community results like finance, vitality, leisure and tech.) Once more, assume there aren’t any obstacles to constructing, that’s, building of housing is so unconstrained that each single metropolis makes fashionable Houston appear to be a NIMBY stronghold.
Housing costs on this hypothetical financial system shall be larger within the bigger cities, ceteris paribus, regardless that constructing extra housing would possibly effectively depress costs. That’s as a result of in a bigger metropolis, individuals can pay extra for comfort (i.e., an excellent location). That may be true even when these greater cities weren’t extra productive. As an example, individuals would pay additional to cut back commuting prices, or to be near facilities. However the greater cities are (by assumption) additionally extra productive, which supplies one more reason for housing costs to be larger in greater cities—larger wages. This thought experiment means that the empirical relationship Alexander depends upon to make his argument would apply even when his argument weren’t true.
One response is that these industries with community results solely exist in locations like New York as a result of there are many individuals, and which you could’t have plenty of individuals with out plenty of housing. That’s true, however has no bearing on the query of how extra housing impacts costs on the margin. And from the earlier thought experiment, it’s clear that taking a look at easy correlations doesn’t resolve that drawback.
Alexander would possibly fairly reply that my mannequin is overly simplistic. Constructing restrictions differ from one metropolis to a different. In that case, you would possibly count on some exceptions to the iron legislation that greater cities are costlier than smaller cities. And since (he assumes) I discovered just one such anomaly, the correlation among the many remaining cities is simply too sturdy to elucidate by (exogenous) components aside from metropolis measurement.
Really, I cited Austin and Houston merely as one instance, and I picked this instance as a result of they’re positioned in the identical state. The truth is, there are lots of, many examples of bigger cities which can be cheaper than smaller cities. And in just about each single case the reason is that the smaller however costlier cities have extra restrictions on constructing. Within the listing beneath, the metro areas on the left are bigger and cheaper than the metro areas on the best:
Chicago >>> San Francisco Bay Space
Dallas/Forth Price >>> Washington DC
Houston >>> Boston or Seattle
San Antonio >>> Portland
Phoenix >>> San Diego
Colorado Springs >>> Boulder
In every case, the bigger metro space is cheaper than the smaller one. And in every case there are stricter limits on constructing within the costlier metropolis.
That doesn’t show Alexander is incorrect. It’s doable that the rationale for costlier housing within the NIMBY cities has nothing to do with restrictions on constructing. However I doubt it. I believe that if Houston had adopted extreme restrictions on constructing within the Eighties, then individuals would now attribute the ensuing excessive housing costs as being because of all of the oil cash sloshing by means of its financial system. However Houston determined to open its doorways to anybody who wished to maneuver there. In consequence, regardless that Houston is the worldwide vitality capital and is stuffed with effectively paid petroleum engineers, and regardless that vitality is without doubt one of the world’s largest industries, Houston remains to be an affordable place to reside. As an alternative, it received a lot greater. BTW, Houston additionally has effectively paid aerospace engineers, effectively paid enterprise executives and effectively paid medical doctors, and so on. There’s greater than sufficient cash in Houston to drive up housing costs if they’d restricted constructing.
Replace: Emily Hamilton of the Mercatus Heart has a wonderful publish explaining how Houston’s YIMBY insurance policies result in higher housing affordability.
It might seem that Alexander is “Reasoning from a amount change.” In any case, it is mindless to debate the impression of a change in amount on worth, with out understanding why amount modified. If Oakland will get extra housing as a result of it deregulates, costs will in all probability fall. If Oakland will get extra housing as a result of it turns into trendier, then costs will in all probability rise. Alexander appears to know this drawback, and thus not less than implicitly appears to consider that each single issue that may enhance Oakland’s housing provide would have the impact of boosting demand by greater than provide. That’s, he appears to consider that NIMBY insurance policies make cities cheaper. That’s theoretically doable, however appears unlikely most often.
To recap my argument:
1. The correlation Alexander cites proves nothing—you’d count on greater cities to be costlier even when (on the margin) constructing extra housing didn’t elevate costs.
2. Alexander is appropriate that if his mannequin had been incorrect then you definately’d count on some exceptions to the widely constructive relationship between density and worth, because of differential restrictions on constructing. However loads of such exceptions do exist, and virtually all the time in precisely the locations predicted by YIMBY proponents of extra constructing. Elsewhere in his publish he dismisses intercity comparisons between fashionable coastal cities and heartland cities. Nonetheless, the examples I present present that I didn’t simply cherry decide one exception with my Austin/Houston comparability, there are lots of such anomalies. And one can discover such anomalies even inside coastal areas. The Bay Space is costlier than LA, regardless of being smaller. It has extra restrictive zoning. The Boston metro space is costlier than metro DC, regardless of being smaller. Boston has extra restrictive zoning. And you’ll’t say that LA and DC are usually not fascinating markets.
Simply to be clear, our dispute has completely no coverage implications. As an example, I stated:
If constructing extra housing raises its worth, then the argument for extra building is even stronger.
And Alexander responded:
I agree with all this.
That is vital, as a result of his previous post had appeared to point that he thought it was a “drawback” that new building led to larger housing costs. He beforehand stated:
It is a coordination drawback: if each metropolis upzones collectively, they will all get decrease home costs, however every metropolis can reduce its personal costs by refusing to cooperate and hoping everybody else does the exhausting work.
What “exhausting work”?
Within the new publish he makes it very clear that this isn’t a “drawback.” He helps the YIMBY place.
Thus we each assist making it simpler to construct housing in Oakland, though he thinks this is able to elevate costs and I feel it will decrease them. If I’m incorrect, that’s, if extra housing boosted home costs in Oakland, then we each agree that this is able to be an particularly good end result. And I concede that I may be incorrect.
P.S. Barely off subject, it’s price recalling why new homes ought to be “unaffordable” for common Individuals. Consider a steady-state society with solely 100 households, dwelling in 100 homes of various high quality. Assume that every home lasts 100 years. Every year, the worst home is torn down, and a brand new home is constructed. To ensure that the standard of the housing inventory to rise by 1%/yr, the brand new home have to be twice nearly as good as the common current home. Every year, the households all shift over one home, shifting progressively to raised and higher properties. The richest household lives within the newly constructed home, which is (by assumption) unaffordable to the opposite 99 households.
In a extra reasonable mannequin with inhabitants development, not each new home is unaffordable to the underside 99%. However even with inhabitants development, new building in an financial system with rising dwelling requirements will are typically a lot nicer than the present inventory of housing, which signifies that new building will usually be “unaffordable” to the common household. If new housing is reasonably priced to the common household, then society won’t progress.
P.P.S. Alexander describes my earlier publish as follows:
Scott Sumner is an economist and blogger
I don’t see myself as a well-known particular person, however I share his view that I’ve the potential to carry good opinions. So far as the query of whether or not I do really maintain good opinions, I’ll let readers resolve.
In a recent post, Scott Alexander doubled down on his argument that constructing extra housing usually ends in larger housing costs. In his earlier publish, he pointed to the truth that housing is usually costlier in greater cities. I supplied a counterexample, citing Houston and Austin. I additionally argued that large cities are costly for causes unrelated to their giant amount of housing, corresponding to the benefits supplied by agglomeration. Exogenous provide will increase, corresponding to making it simpler to construct new housing, usually cut back housing costs.
Right here’s how Alexander responded to certainly one of my arguments:
I began the publish with a graph of about 50 cities, exhibiting a constructive correlation between density and worth. I’m having bother seeing how Sumner’s level isn’t simply “for those who take away 48 of these cities and cherry-pick two, the connection is unfavorable”.
I feel Alexander misunderstood this argument, so let me return and make the purpose extra rigorously. It will likely be useful to make two separate arguments:
1. You’d count on large cities to be costlier even when constructing housing reduces housing costs.
2. Austin and Houston are usually not the one counterexamples; there are lots of different such anomalies.
Let’s begin with a easy mannequin the place there are zero restrictions on housing building in all cities. Assume that America has 100 cities, every with industries of various productivity. In that mannequin, the most important cities shall be subsequent to the areas of biggest productiveness. (These areas of productiveness had been as soon as linked to pure components corresponding to ports and mineral assets, however are more and more linked to industries with community results like finance, vitality, leisure and tech.) Once more, assume there aren’t any obstacles to constructing, that’s, building of housing is so unconstrained that each single metropolis makes fashionable Houston appear to be a NIMBY stronghold.
Housing costs on this hypothetical financial system shall be larger within the bigger cities, ceteris paribus, regardless that constructing extra housing would possibly effectively depress costs. That’s as a result of in a bigger metropolis, individuals can pay extra for comfort (i.e., an excellent location). That may be true even when these greater cities weren’t extra productive. As an example, individuals would pay additional to cut back commuting prices, or to be near facilities. However the greater cities are (by assumption) additionally extra productive, which supplies one more reason for housing costs to be larger in greater cities—larger wages. This thought experiment means that the empirical relationship Alexander depends upon to make his argument would apply even when his argument weren’t true.
One response is that these industries with community results solely exist in locations like New York as a result of there are many individuals, and which you could’t have plenty of individuals with out plenty of housing. That’s true, however has no bearing on the query of how extra housing impacts costs on the margin. And from the earlier thought experiment, it’s clear that taking a look at easy correlations doesn’t resolve that drawback.
Alexander would possibly fairly reply that my mannequin is overly simplistic. Constructing restrictions differ from one metropolis to a different. In that case, you would possibly count on some exceptions to the iron legislation that greater cities are costlier than smaller cities. And since (he assumes) I discovered just one such anomaly, the correlation among the many remaining cities is simply too sturdy to elucidate by (exogenous) components aside from metropolis measurement.
Really, I cited Austin and Houston merely as one instance, and I picked this instance as a result of they’re positioned in the identical state. The truth is, there are lots of, many examples of bigger cities which can be cheaper than smaller cities. And in just about each single case the reason is that the smaller however costlier cities have extra restrictions on constructing. Within the listing beneath, the metro areas on the left are bigger and cheaper than the metro areas on the best:
Chicago >>> San Francisco Bay Space
Dallas/Forth Price >>> Washington DC
Houston >>> Boston or Seattle
San Antonio >>> Portland
Phoenix >>> San Diego
Colorado Springs >>> Boulder
In every case, the bigger metro space is cheaper than the smaller one. And in every case there are stricter limits on constructing within the costlier metropolis.
That doesn’t show Alexander is incorrect. It’s doable that the rationale for costlier housing within the NIMBY cities has nothing to do with restrictions on constructing. However I doubt it. I believe that if Houston had adopted extreme restrictions on constructing within the Eighties, then individuals would now attribute the ensuing excessive housing costs as being because of all of the oil cash sloshing by means of its financial system. However Houston determined to open its doorways to anybody who wished to maneuver there. In consequence, regardless that Houston is the worldwide vitality capital and is stuffed with effectively paid petroleum engineers, and regardless that vitality is without doubt one of the world’s largest industries, Houston remains to be an affordable place to reside. As an alternative, it received a lot greater. BTW, Houston additionally has effectively paid aerospace engineers, effectively paid enterprise executives and effectively paid medical doctors, and so on. There’s greater than sufficient cash in Houston to drive up housing costs if they’d restricted constructing.
Replace: Emily Hamilton of the Mercatus Heart has a wonderful publish explaining how Houston’s YIMBY insurance policies result in higher housing affordability.
It might seem that Alexander is “Reasoning from a amount change.” In any case, it is mindless to debate the impression of a change in amount on worth, with out understanding why amount modified. If Oakland will get extra housing as a result of it deregulates, costs will in all probability fall. If Oakland will get extra housing as a result of it turns into trendier, then costs will in all probability rise. Alexander appears to know this drawback, and thus not less than implicitly appears to consider that each single issue that may enhance Oakland’s housing provide would have the impact of boosting demand by greater than provide. That’s, he appears to consider that NIMBY insurance policies make cities cheaper. That’s theoretically doable, however appears unlikely most often.
To recap my argument:
1. The correlation Alexander cites proves nothing—you’d count on greater cities to be costlier even when (on the margin) constructing extra housing didn’t elevate costs.
2. Alexander is appropriate that if his mannequin had been incorrect then you definately’d count on some exceptions to the widely constructive relationship between density and worth, because of differential restrictions on constructing. However loads of such exceptions do exist, and virtually all the time in precisely the locations predicted by YIMBY proponents of extra constructing. Elsewhere in his publish he dismisses intercity comparisons between fashionable coastal cities and heartland cities. Nonetheless, the examples I present present that I didn’t simply cherry decide one exception with my Austin/Houston comparability, there are lots of such anomalies. And one can discover such anomalies even inside coastal areas. The Bay Space is costlier than LA, regardless of being smaller. It has extra restrictive zoning. The Boston metro space is costlier than metro DC, regardless of being smaller. Boston has extra restrictive zoning. And you’ll’t say that LA and DC are usually not fascinating markets.
Simply to be clear, our dispute has completely no coverage implications. As an example, I stated:
If constructing extra housing raises its worth, then the argument for extra building is even stronger.
And Alexander responded:
I agree with all this.
That is vital, as a result of his previous post had appeared to point that he thought it was a “drawback” that new building led to larger housing costs. He beforehand stated:
It is a coordination drawback: if each metropolis upzones collectively, they will all get decrease home costs, however every metropolis can reduce its personal costs by refusing to cooperate and hoping everybody else does the exhausting work.
What “exhausting work”?
Within the new publish he makes it very clear that this isn’t a “drawback.” He helps the YIMBY place.
Thus we each assist making it simpler to construct housing in Oakland, though he thinks this is able to elevate costs and I feel it will decrease them. If I’m incorrect, that’s, if extra housing boosted home costs in Oakland, then we each agree that this is able to be an particularly good end result. And I concede that I may be incorrect.
P.S. Barely off subject, it’s price recalling why new homes ought to be “unaffordable” for common Individuals. Consider a steady-state society with solely 100 households, dwelling in 100 homes of various high quality. Assume that every home lasts 100 years. Every year, the worst home is torn down, and a brand new home is constructed. To ensure that the standard of the housing inventory to rise by 1%/yr, the brand new home have to be twice nearly as good as the common current home. Every year, the households all shift over one home, shifting progressively to raised and higher properties. The richest household lives within the newly constructed home, which is (by assumption) unaffordable to the opposite 99 households.
In a extra reasonable mannequin with inhabitants development, not each new home is unaffordable to the underside 99%. However even with inhabitants development, new building in an financial system with rising dwelling requirements will are typically a lot nicer than the present inventory of housing, which signifies that new building will usually be “unaffordable” to the common household. If new housing is reasonably priced to the common household, then society won’t progress.
P.P.S. Alexander describes my earlier publish as follows:
Scott Sumner is an economist and blogger
I don’t see myself as a well-known particular person, however I share his view that I’ve the potential to carry good opinions. So far as the query of whether or not I do really maintain good opinions, I’ll let readers resolve.
In a recent post, Scott Alexander doubled down on his argument that constructing extra housing usually ends in larger housing costs. In his earlier publish, he pointed to the truth that housing is usually costlier in greater cities. I supplied a counterexample, citing Houston and Austin. I additionally argued that large cities are costly for causes unrelated to their giant amount of housing, corresponding to the benefits supplied by agglomeration. Exogenous provide will increase, corresponding to making it simpler to construct new housing, usually cut back housing costs.
Right here’s how Alexander responded to certainly one of my arguments:
I began the publish with a graph of about 50 cities, exhibiting a constructive correlation between density and worth. I’m having bother seeing how Sumner’s level isn’t simply “for those who take away 48 of these cities and cherry-pick two, the connection is unfavorable”.
I feel Alexander misunderstood this argument, so let me return and make the purpose extra rigorously. It will likely be useful to make two separate arguments:
1. You’d count on large cities to be costlier even when constructing housing reduces housing costs.
2. Austin and Houston are usually not the one counterexamples; there are lots of different such anomalies.
Let’s begin with a easy mannequin the place there are zero restrictions on housing building in all cities. Assume that America has 100 cities, every with industries of various productivity. In that mannequin, the most important cities shall be subsequent to the areas of biggest productiveness. (These areas of productiveness had been as soon as linked to pure components corresponding to ports and mineral assets, however are more and more linked to industries with community results like finance, vitality, leisure and tech.) Once more, assume there aren’t any obstacles to constructing, that’s, building of housing is so unconstrained that each single metropolis makes fashionable Houston appear to be a NIMBY stronghold.
Housing costs on this hypothetical financial system shall be larger within the bigger cities, ceteris paribus, regardless that constructing extra housing would possibly effectively depress costs. That’s as a result of in a bigger metropolis, individuals can pay extra for comfort (i.e., an excellent location). That may be true even when these greater cities weren’t extra productive. As an example, individuals would pay additional to cut back commuting prices, or to be near facilities. However the greater cities are (by assumption) additionally extra productive, which supplies one more reason for housing costs to be larger in greater cities—larger wages. This thought experiment means that the empirical relationship Alexander depends upon to make his argument would apply even when his argument weren’t true.
One response is that these industries with community results solely exist in locations like New York as a result of there are many individuals, and which you could’t have plenty of individuals with out plenty of housing. That’s true, however has no bearing on the query of how extra housing impacts costs on the margin. And from the earlier thought experiment, it’s clear that taking a look at easy correlations doesn’t resolve that drawback.
Alexander would possibly fairly reply that my mannequin is overly simplistic. Constructing restrictions differ from one metropolis to a different. In that case, you would possibly count on some exceptions to the iron legislation that greater cities are costlier than smaller cities. And since (he assumes) I discovered just one such anomaly, the correlation among the many remaining cities is simply too sturdy to elucidate by (exogenous) components aside from metropolis measurement.
Really, I cited Austin and Houston merely as one instance, and I picked this instance as a result of they’re positioned in the identical state. The truth is, there are lots of, many examples of bigger cities which can be cheaper than smaller cities. And in just about each single case the reason is that the smaller however costlier cities have extra restrictions on constructing. Within the listing beneath, the metro areas on the left are bigger and cheaper than the metro areas on the best:
Chicago >>> San Francisco Bay Space
Dallas/Forth Price >>> Washington DC
Houston >>> Boston or Seattle
San Antonio >>> Portland
Phoenix >>> San Diego
Colorado Springs >>> Boulder
In every case, the bigger metro space is cheaper than the smaller one. And in every case there are stricter limits on constructing within the costlier metropolis.
That doesn’t show Alexander is incorrect. It’s doable that the rationale for costlier housing within the NIMBY cities has nothing to do with restrictions on constructing. However I doubt it. I believe that if Houston had adopted extreme restrictions on constructing within the Eighties, then individuals would now attribute the ensuing excessive housing costs as being because of all of the oil cash sloshing by means of its financial system. However Houston determined to open its doorways to anybody who wished to maneuver there. In consequence, regardless that Houston is the worldwide vitality capital and is stuffed with effectively paid petroleum engineers, and regardless that vitality is without doubt one of the world’s largest industries, Houston remains to be an affordable place to reside. As an alternative, it received a lot greater. BTW, Houston additionally has effectively paid aerospace engineers, effectively paid enterprise executives and effectively paid medical doctors, and so on. There’s greater than sufficient cash in Houston to drive up housing costs if they’d restricted constructing.
Replace: Emily Hamilton of the Mercatus Heart has a wonderful publish explaining how Houston’s YIMBY insurance policies result in higher housing affordability.
It might seem that Alexander is “Reasoning from a amount change.” In any case, it is mindless to debate the impression of a change in amount on worth, with out understanding why amount modified. If Oakland will get extra housing as a result of it deregulates, costs will in all probability fall. If Oakland will get extra housing as a result of it turns into trendier, then costs will in all probability rise. Alexander appears to know this drawback, and thus not less than implicitly appears to consider that each single issue that may enhance Oakland’s housing provide would have the impact of boosting demand by greater than provide. That’s, he appears to consider that NIMBY insurance policies make cities cheaper. That’s theoretically doable, however appears unlikely most often.
To recap my argument:
1. The correlation Alexander cites proves nothing—you’d count on greater cities to be costlier even when (on the margin) constructing extra housing didn’t elevate costs.
2. Alexander is appropriate that if his mannequin had been incorrect then you definately’d count on some exceptions to the widely constructive relationship between density and worth, because of differential restrictions on constructing. However loads of such exceptions do exist, and virtually all the time in precisely the locations predicted by YIMBY proponents of extra constructing. Elsewhere in his publish he dismisses intercity comparisons between fashionable coastal cities and heartland cities. Nonetheless, the examples I present present that I didn’t simply cherry decide one exception with my Austin/Houston comparability, there are lots of such anomalies. And one can discover such anomalies even inside coastal areas. The Bay Space is costlier than LA, regardless of being smaller. It has extra restrictive zoning. The Boston metro space is costlier than metro DC, regardless of being smaller. Boston has extra restrictive zoning. And you’ll’t say that LA and DC are usually not fascinating markets.
Simply to be clear, our dispute has completely no coverage implications. As an example, I stated:
If constructing extra housing raises its worth, then the argument for extra building is even stronger.
And Alexander responded:
I agree with all this.
That is vital, as a result of his previous post had appeared to point that he thought it was a “drawback” that new building led to larger housing costs. He beforehand stated:
It is a coordination drawback: if each metropolis upzones collectively, they will all get decrease home costs, however every metropolis can reduce its personal costs by refusing to cooperate and hoping everybody else does the exhausting work.
What “exhausting work”?
Within the new publish he makes it very clear that this isn’t a “drawback.” He helps the YIMBY place.
Thus we each assist making it simpler to construct housing in Oakland, though he thinks this is able to elevate costs and I feel it will decrease them. If I’m incorrect, that’s, if extra housing boosted home costs in Oakland, then we each agree that this is able to be an particularly good end result. And I concede that I may be incorrect.
P.S. Barely off subject, it’s price recalling why new homes ought to be “unaffordable” for common Individuals. Consider a steady-state society with solely 100 households, dwelling in 100 homes of various high quality. Assume that every home lasts 100 years. Every year, the worst home is torn down, and a brand new home is constructed. To ensure that the standard of the housing inventory to rise by 1%/yr, the brand new home have to be twice nearly as good as the common current home. Every year, the households all shift over one home, shifting progressively to raised and higher properties. The richest household lives within the newly constructed home, which is (by assumption) unaffordable to the opposite 99 households.
In a extra reasonable mannequin with inhabitants development, not each new home is unaffordable to the underside 99%. However even with inhabitants development, new building in an financial system with rising dwelling requirements will are typically a lot nicer than the present inventory of housing, which signifies that new building will usually be “unaffordable” to the common household. If new housing is reasonably priced to the common household, then society won’t progress.
P.P.S. Alexander describes my earlier publish as follows:
Scott Sumner is an economist and blogger
I don’t see myself as a well-known particular person, however I share his view that I’ve the potential to carry good opinions. So far as the query of whether or not I do really maintain good opinions, I’ll let readers resolve.
In a recent post, Scott Alexander doubled down on his argument that constructing extra housing usually ends in larger housing costs. In his earlier publish, he pointed to the truth that housing is usually costlier in greater cities. I supplied a counterexample, citing Houston and Austin. I additionally argued that large cities are costly for causes unrelated to their giant amount of housing, corresponding to the benefits supplied by agglomeration. Exogenous provide will increase, corresponding to making it simpler to construct new housing, usually cut back housing costs.
Right here’s how Alexander responded to certainly one of my arguments:
I began the publish with a graph of about 50 cities, exhibiting a constructive correlation between density and worth. I’m having bother seeing how Sumner’s level isn’t simply “for those who take away 48 of these cities and cherry-pick two, the connection is unfavorable”.
I feel Alexander misunderstood this argument, so let me return and make the purpose extra rigorously. It will likely be useful to make two separate arguments:
1. You’d count on large cities to be costlier even when constructing housing reduces housing costs.
2. Austin and Houston are usually not the one counterexamples; there are lots of different such anomalies.
Let’s begin with a easy mannequin the place there are zero restrictions on housing building in all cities. Assume that America has 100 cities, every with industries of various productivity. In that mannequin, the most important cities shall be subsequent to the areas of biggest productiveness. (These areas of productiveness had been as soon as linked to pure components corresponding to ports and mineral assets, however are more and more linked to industries with community results like finance, vitality, leisure and tech.) Once more, assume there aren’t any obstacles to constructing, that’s, building of housing is so unconstrained that each single metropolis makes fashionable Houston appear to be a NIMBY stronghold.
Housing costs on this hypothetical financial system shall be larger within the bigger cities, ceteris paribus, regardless that constructing extra housing would possibly effectively depress costs. That’s as a result of in a bigger metropolis, individuals can pay extra for comfort (i.e., an excellent location). That may be true even when these greater cities weren’t extra productive. As an example, individuals would pay additional to cut back commuting prices, or to be near facilities. However the greater cities are (by assumption) additionally extra productive, which supplies one more reason for housing costs to be larger in greater cities—larger wages. This thought experiment means that the empirical relationship Alexander depends upon to make his argument would apply even when his argument weren’t true.
One response is that these industries with community results solely exist in locations like New York as a result of there are many individuals, and which you could’t have plenty of individuals with out plenty of housing. That’s true, however has no bearing on the query of how extra housing impacts costs on the margin. And from the earlier thought experiment, it’s clear that taking a look at easy correlations doesn’t resolve that drawback.
Alexander would possibly fairly reply that my mannequin is overly simplistic. Constructing restrictions differ from one metropolis to a different. In that case, you would possibly count on some exceptions to the iron legislation that greater cities are costlier than smaller cities. And since (he assumes) I discovered just one such anomaly, the correlation among the many remaining cities is simply too sturdy to elucidate by (exogenous) components aside from metropolis measurement.
Really, I cited Austin and Houston merely as one instance, and I picked this instance as a result of they’re positioned in the identical state. The truth is, there are lots of, many examples of bigger cities which can be cheaper than smaller cities. And in just about each single case the reason is that the smaller however costlier cities have extra restrictions on constructing. Within the listing beneath, the metro areas on the left are bigger and cheaper than the metro areas on the best:
Chicago >>> San Francisco Bay Space
Dallas/Forth Price >>> Washington DC
Houston >>> Boston or Seattle
San Antonio >>> Portland
Phoenix >>> San Diego
Colorado Springs >>> Boulder
In every case, the bigger metro space is cheaper than the smaller one. And in every case there are stricter limits on constructing within the costlier metropolis.
That doesn’t show Alexander is incorrect. It’s doable that the rationale for costlier housing within the NIMBY cities has nothing to do with restrictions on constructing. However I doubt it. I believe that if Houston had adopted extreme restrictions on constructing within the Eighties, then individuals would now attribute the ensuing excessive housing costs as being because of all of the oil cash sloshing by means of its financial system. However Houston determined to open its doorways to anybody who wished to maneuver there. In consequence, regardless that Houston is the worldwide vitality capital and is stuffed with effectively paid petroleum engineers, and regardless that vitality is without doubt one of the world’s largest industries, Houston remains to be an affordable place to reside. As an alternative, it received a lot greater. BTW, Houston additionally has effectively paid aerospace engineers, effectively paid enterprise executives and effectively paid medical doctors, and so on. There’s greater than sufficient cash in Houston to drive up housing costs if they’d restricted constructing.
Replace: Emily Hamilton of the Mercatus Heart has a wonderful publish explaining how Houston’s YIMBY insurance policies result in higher housing affordability.
It might seem that Alexander is “Reasoning from a amount change.” In any case, it is mindless to debate the impression of a change in amount on worth, with out understanding why amount modified. If Oakland will get extra housing as a result of it deregulates, costs will in all probability fall. If Oakland will get extra housing as a result of it turns into trendier, then costs will in all probability rise. Alexander appears to know this drawback, and thus not less than implicitly appears to consider that each single issue that may enhance Oakland’s housing provide would have the impact of boosting demand by greater than provide. That’s, he appears to consider that NIMBY insurance policies make cities cheaper. That’s theoretically doable, however appears unlikely most often.
To recap my argument:
1. The correlation Alexander cites proves nothing—you’d count on greater cities to be costlier even when (on the margin) constructing extra housing didn’t elevate costs.
2. Alexander is appropriate that if his mannequin had been incorrect then you definately’d count on some exceptions to the widely constructive relationship between density and worth, because of differential restrictions on constructing. However loads of such exceptions do exist, and virtually all the time in precisely the locations predicted by YIMBY proponents of extra constructing. Elsewhere in his publish he dismisses intercity comparisons between fashionable coastal cities and heartland cities. Nonetheless, the examples I present present that I didn’t simply cherry decide one exception with my Austin/Houston comparability, there are lots of such anomalies. And one can discover such anomalies even inside coastal areas. The Bay Space is costlier than LA, regardless of being smaller. It has extra restrictive zoning. The Boston metro space is costlier than metro DC, regardless of being smaller. Boston has extra restrictive zoning. And you’ll’t say that LA and DC are usually not fascinating markets.
Simply to be clear, our dispute has completely no coverage implications. As an example, I stated:
If constructing extra housing raises its worth, then the argument for extra building is even stronger.
And Alexander responded:
I agree with all this.
That is vital, as a result of his previous post had appeared to point that he thought it was a “drawback” that new building led to larger housing costs. He beforehand stated:
It is a coordination drawback: if each metropolis upzones collectively, they will all get decrease home costs, however every metropolis can reduce its personal costs by refusing to cooperate and hoping everybody else does the exhausting work.
What “exhausting work”?
Within the new publish he makes it very clear that this isn’t a “drawback.” He helps the YIMBY place.
Thus we each assist making it simpler to construct housing in Oakland, though he thinks this is able to elevate costs and I feel it will decrease them. If I’m incorrect, that’s, if extra housing boosted home costs in Oakland, then we each agree that this is able to be an particularly good end result. And I concede that I may be incorrect.
P.S. Barely off subject, it’s price recalling why new homes ought to be “unaffordable” for common Individuals. Consider a steady-state society with solely 100 households, dwelling in 100 homes of various high quality. Assume that every home lasts 100 years. Every year, the worst home is torn down, and a brand new home is constructed. To ensure that the standard of the housing inventory to rise by 1%/yr, the brand new home have to be twice nearly as good as the common current home. Every year, the households all shift over one home, shifting progressively to raised and higher properties. The richest household lives within the newly constructed home, which is (by assumption) unaffordable to the opposite 99 households.
In a extra reasonable mannequin with inhabitants development, not each new home is unaffordable to the underside 99%. However even with inhabitants development, new building in an financial system with rising dwelling requirements will are typically a lot nicer than the present inventory of housing, which signifies that new building will usually be “unaffordable” to the common household. If new housing is reasonably priced to the common household, then society won’t progress.
P.P.S. Alexander describes my earlier publish as follows:
Scott Sumner is an economist and blogger
I don’t see myself as a well-known particular person, however I share his view that I’ve the potential to carry good opinions. So far as the query of whether or not I do really maintain good opinions, I’ll let readers resolve.
In a recent post, Scott Alexander doubled down on his argument that constructing extra housing usually ends in larger housing costs. In his earlier publish, he pointed to the truth that housing is usually costlier in greater cities. I supplied a counterexample, citing Houston and Austin. I additionally argued that large cities are costly for causes unrelated to their giant amount of housing, corresponding to the benefits supplied by agglomeration. Exogenous provide will increase, corresponding to making it simpler to construct new housing, usually cut back housing costs.
Right here’s how Alexander responded to certainly one of my arguments:
I began the publish with a graph of about 50 cities, exhibiting a constructive correlation between density and worth. I’m having bother seeing how Sumner’s level isn’t simply “for those who take away 48 of these cities and cherry-pick two, the connection is unfavorable”.
I feel Alexander misunderstood this argument, so let me return and make the purpose extra rigorously. It will likely be useful to make two separate arguments:
1. You’d count on large cities to be costlier even when constructing housing reduces housing costs.
2. Austin and Houston are usually not the one counterexamples; there are lots of different such anomalies.
Let’s begin with a easy mannequin the place there are zero restrictions on housing building in all cities. Assume that America has 100 cities, every with industries of various productivity. In that mannequin, the most important cities shall be subsequent to the areas of biggest productiveness. (These areas of productiveness had been as soon as linked to pure components corresponding to ports and mineral assets, however are more and more linked to industries with community results like finance, vitality, leisure and tech.) Once more, assume there aren’t any obstacles to constructing, that’s, building of housing is so unconstrained that each single metropolis makes fashionable Houston appear to be a NIMBY stronghold.
Housing costs on this hypothetical financial system shall be larger within the bigger cities, ceteris paribus, regardless that constructing extra housing would possibly effectively depress costs. That’s as a result of in a bigger metropolis, individuals can pay extra for comfort (i.e., an excellent location). That may be true even when these greater cities weren’t extra productive. As an example, individuals would pay additional to cut back commuting prices, or to be near facilities. However the greater cities are (by assumption) additionally extra productive, which supplies one more reason for housing costs to be larger in greater cities—larger wages. This thought experiment means that the empirical relationship Alexander depends upon to make his argument would apply even when his argument weren’t true.
One response is that these industries with community results solely exist in locations like New York as a result of there are many individuals, and which you could’t have plenty of individuals with out plenty of housing. That’s true, however has no bearing on the query of how extra housing impacts costs on the margin. And from the earlier thought experiment, it’s clear that taking a look at easy correlations doesn’t resolve that drawback.
Alexander would possibly fairly reply that my mannequin is overly simplistic. Constructing restrictions differ from one metropolis to a different. In that case, you would possibly count on some exceptions to the iron legislation that greater cities are costlier than smaller cities. And since (he assumes) I discovered just one such anomaly, the correlation among the many remaining cities is simply too sturdy to elucidate by (exogenous) components aside from metropolis measurement.
Really, I cited Austin and Houston merely as one instance, and I picked this instance as a result of they’re positioned in the identical state. The truth is, there are lots of, many examples of bigger cities which can be cheaper than smaller cities. And in just about each single case the reason is that the smaller however costlier cities have extra restrictions on constructing. Within the listing beneath, the metro areas on the left are bigger and cheaper than the metro areas on the best:
Chicago >>> San Francisco Bay Space
Dallas/Forth Price >>> Washington DC
Houston >>> Boston or Seattle
San Antonio >>> Portland
Phoenix >>> San Diego
Colorado Springs >>> Boulder
In every case, the bigger metro space is cheaper than the smaller one. And in every case there are stricter limits on constructing within the costlier metropolis.
That doesn’t show Alexander is incorrect. It’s doable that the rationale for costlier housing within the NIMBY cities has nothing to do with restrictions on constructing. However I doubt it. I believe that if Houston had adopted extreme restrictions on constructing within the Eighties, then individuals would now attribute the ensuing excessive housing costs as being because of all of the oil cash sloshing by means of its financial system. However Houston determined to open its doorways to anybody who wished to maneuver there. In consequence, regardless that Houston is the worldwide vitality capital and is stuffed with effectively paid petroleum engineers, and regardless that vitality is without doubt one of the world’s largest industries, Houston remains to be an affordable place to reside. As an alternative, it received a lot greater. BTW, Houston additionally has effectively paid aerospace engineers, effectively paid enterprise executives and effectively paid medical doctors, and so on. There’s greater than sufficient cash in Houston to drive up housing costs if they’d restricted constructing.
Replace: Emily Hamilton of the Mercatus Heart has a wonderful publish explaining how Houston’s YIMBY insurance policies result in higher housing affordability.
It might seem that Alexander is “Reasoning from a amount change.” In any case, it is mindless to debate the impression of a change in amount on worth, with out understanding why amount modified. If Oakland will get extra housing as a result of it deregulates, costs will in all probability fall. If Oakland will get extra housing as a result of it turns into trendier, then costs will in all probability rise. Alexander appears to know this drawback, and thus not less than implicitly appears to consider that each single issue that may enhance Oakland’s housing provide would have the impact of boosting demand by greater than provide. That’s, he appears to consider that NIMBY insurance policies make cities cheaper. That’s theoretically doable, however appears unlikely most often.
To recap my argument:
1. The correlation Alexander cites proves nothing—you’d count on greater cities to be costlier even when (on the margin) constructing extra housing didn’t elevate costs.
2. Alexander is appropriate that if his mannequin had been incorrect then you definately’d count on some exceptions to the widely constructive relationship between density and worth, because of differential restrictions on constructing. However loads of such exceptions do exist, and virtually all the time in precisely the locations predicted by YIMBY proponents of extra constructing. Elsewhere in his publish he dismisses intercity comparisons between fashionable coastal cities and heartland cities. Nonetheless, the examples I present present that I didn’t simply cherry decide one exception with my Austin/Houston comparability, there are lots of such anomalies. And one can discover such anomalies even inside coastal areas. The Bay Space is costlier than LA, regardless of being smaller. It has extra restrictive zoning. The Boston metro space is costlier than metro DC, regardless of being smaller. Boston has extra restrictive zoning. And you’ll’t say that LA and DC are usually not fascinating markets.
Simply to be clear, our dispute has completely no coverage implications. As an example, I stated:
If constructing extra housing raises its worth, then the argument for extra building is even stronger.
And Alexander responded:
I agree with all this.
That is vital, as a result of his previous post had appeared to point that he thought it was a “drawback” that new building led to larger housing costs. He beforehand stated:
It is a coordination drawback: if each metropolis upzones collectively, they will all get decrease home costs, however every metropolis can reduce its personal costs by refusing to cooperate and hoping everybody else does the exhausting work.
What “exhausting work”?
Within the new publish he makes it very clear that this isn’t a “drawback.” He helps the YIMBY place.
Thus we each assist making it simpler to construct housing in Oakland, though he thinks this is able to elevate costs and I feel it will decrease them. If I’m incorrect, that’s, if extra housing boosted home costs in Oakland, then we each agree that this is able to be an particularly good end result. And I concede that I may be incorrect.
P.S. Barely off subject, it’s price recalling why new homes ought to be “unaffordable” for common Individuals. Consider a steady-state society with solely 100 households, dwelling in 100 homes of various high quality. Assume that every home lasts 100 years. Every year, the worst home is torn down, and a brand new home is constructed. To ensure that the standard of the housing inventory to rise by 1%/yr, the brand new home have to be twice nearly as good as the common current home. Every year, the households all shift over one home, shifting progressively to raised and higher properties. The richest household lives within the newly constructed home, which is (by assumption) unaffordable to the opposite 99 households.
In a extra reasonable mannequin with inhabitants development, not each new home is unaffordable to the underside 99%. However even with inhabitants development, new building in an financial system with rising dwelling requirements will are typically a lot nicer than the present inventory of housing, which signifies that new building will usually be “unaffordable” to the common household. If new housing is reasonably priced to the common household, then society won’t progress.
P.P.S. Alexander describes my earlier publish as follows:
Scott Sumner is an economist and blogger
I don’t see myself as a well-known particular person, however I share his view that I’ve the potential to carry good opinions. So far as the query of whether or not I do really maintain good opinions, I’ll let readers resolve.
In a recent post, Scott Alexander doubled down on his argument that constructing extra housing usually ends in larger housing costs. In his earlier publish, he pointed to the truth that housing is usually costlier in greater cities. I supplied a counterexample, citing Houston and Austin. I additionally argued that large cities are costly for causes unrelated to their giant amount of housing, corresponding to the benefits supplied by agglomeration. Exogenous provide will increase, corresponding to making it simpler to construct new housing, usually cut back housing costs.
Right here’s how Alexander responded to certainly one of my arguments:
I began the publish with a graph of about 50 cities, exhibiting a constructive correlation between density and worth. I’m having bother seeing how Sumner’s level isn’t simply “for those who take away 48 of these cities and cherry-pick two, the connection is unfavorable”.
I feel Alexander misunderstood this argument, so let me return and make the purpose extra rigorously. It will likely be useful to make two separate arguments:
1. You’d count on large cities to be costlier even when constructing housing reduces housing costs.
2. Austin and Houston are usually not the one counterexamples; there are lots of different such anomalies.
Let’s begin with a easy mannequin the place there are zero restrictions on housing building in all cities. Assume that America has 100 cities, every with industries of various productivity. In that mannequin, the most important cities shall be subsequent to the areas of biggest productiveness. (These areas of productiveness had been as soon as linked to pure components corresponding to ports and mineral assets, however are more and more linked to industries with community results like finance, vitality, leisure and tech.) Once more, assume there aren’t any obstacles to constructing, that’s, building of housing is so unconstrained that each single metropolis makes fashionable Houston appear to be a NIMBY stronghold.
Housing costs on this hypothetical financial system shall be larger within the bigger cities, ceteris paribus, regardless that constructing extra housing would possibly effectively depress costs. That’s as a result of in a bigger metropolis, individuals can pay extra for comfort (i.e., an excellent location). That may be true even when these greater cities weren’t extra productive. As an example, individuals would pay additional to cut back commuting prices, or to be near facilities. However the greater cities are (by assumption) additionally extra productive, which supplies one more reason for housing costs to be larger in greater cities—larger wages. This thought experiment means that the empirical relationship Alexander depends upon to make his argument would apply even when his argument weren’t true.
One response is that these industries with community results solely exist in locations like New York as a result of there are many individuals, and which you could’t have plenty of individuals with out plenty of housing. That’s true, however has no bearing on the query of how extra housing impacts costs on the margin. And from the earlier thought experiment, it’s clear that taking a look at easy correlations doesn’t resolve that drawback.
Alexander would possibly fairly reply that my mannequin is overly simplistic. Constructing restrictions differ from one metropolis to a different. In that case, you would possibly count on some exceptions to the iron legislation that greater cities are costlier than smaller cities. And since (he assumes) I discovered just one such anomaly, the correlation among the many remaining cities is simply too sturdy to elucidate by (exogenous) components aside from metropolis measurement.
Really, I cited Austin and Houston merely as one instance, and I picked this instance as a result of they’re positioned in the identical state. The truth is, there are lots of, many examples of bigger cities which can be cheaper than smaller cities. And in just about each single case the reason is that the smaller however costlier cities have extra restrictions on constructing. Within the listing beneath, the metro areas on the left are bigger and cheaper than the metro areas on the best:
Chicago >>> San Francisco Bay Space
Dallas/Forth Price >>> Washington DC
Houston >>> Boston or Seattle
San Antonio >>> Portland
Phoenix >>> San Diego
Colorado Springs >>> Boulder
In every case, the bigger metro space is cheaper than the smaller one. And in every case there are stricter limits on constructing within the costlier metropolis.
That doesn’t show Alexander is incorrect. It’s doable that the rationale for costlier housing within the NIMBY cities has nothing to do with restrictions on constructing. However I doubt it. I believe that if Houston had adopted extreme restrictions on constructing within the Eighties, then individuals would now attribute the ensuing excessive housing costs as being because of all of the oil cash sloshing by means of its financial system. However Houston determined to open its doorways to anybody who wished to maneuver there. In consequence, regardless that Houston is the worldwide vitality capital and is stuffed with effectively paid petroleum engineers, and regardless that vitality is without doubt one of the world’s largest industries, Houston remains to be an affordable place to reside. As an alternative, it received a lot greater. BTW, Houston additionally has effectively paid aerospace engineers, effectively paid enterprise executives and effectively paid medical doctors, and so on. There’s greater than sufficient cash in Houston to drive up housing costs if they’d restricted constructing.
Replace: Emily Hamilton of the Mercatus Heart has a wonderful publish explaining how Houston’s YIMBY insurance policies result in higher housing affordability.
It might seem that Alexander is “Reasoning from a amount change.” In any case, it is mindless to debate the impression of a change in amount on worth, with out understanding why amount modified. If Oakland will get extra housing as a result of it deregulates, costs will in all probability fall. If Oakland will get extra housing as a result of it turns into trendier, then costs will in all probability rise. Alexander appears to know this drawback, and thus not less than implicitly appears to consider that each single issue that may enhance Oakland’s housing provide would have the impact of boosting demand by greater than provide. That’s, he appears to consider that NIMBY insurance policies make cities cheaper. That’s theoretically doable, however appears unlikely most often.
To recap my argument:
1. The correlation Alexander cites proves nothing—you’d count on greater cities to be costlier even when (on the margin) constructing extra housing didn’t elevate costs.
2. Alexander is appropriate that if his mannequin had been incorrect then you definately’d count on some exceptions to the widely constructive relationship between density and worth, because of differential restrictions on constructing. However loads of such exceptions do exist, and virtually all the time in precisely the locations predicted by YIMBY proponents of extra constructing. Elsewhere in his publish he dismisses intercity comparisons between fashionable coastal cities and heartland cities. Nonetheless, the examples I present present that I didn’t simply cherry decide one exception with my Austin/Houston comparability, there are lots of such anomalies. And one can discover such anomalies even inside coastal areas. The Bay Space is costlier than LA, regardless of being smaller. It has extra restrictive zoning. The Boston metro space is costlier than metro DC, regardless of being smaller. Boston has extra restrictive zoning. And you’ll’t say that LA and DC are usually not fascinating markets.
Simply to be clear, our dispute has completely no coverage implications. As an example, I stated:
If constructing extra housing raises its worth, then the argument for extra building is even stronger.
And Alexander responded:
I agree with all this.
That is vital, as a result of his previous post had appeared to point that he thought it was a “drawback” that new building led to larger housing costs. He beforehand stated:
It is a coordination drawback: if each metropolis upzones collectively, they will all get decrease home costs, however every metropolis can reduce its personal costs by refusing to cooperate and hoping everybody else does the exhausting work.
What “exhausting work”?
Within the new publish he makes it very clear that this isn’t a “drawback.” He helps the YIMBY place.
Thus we each assist making it simpler to construct housing in Oakland, though he thinks this is able to elevate costs and I feel it will decrease them. If I’m incorrect, that’s, if extra housing boosted home costs in Oakland, then we each agree that this is able to be an particularly good end result. And I concede that I may be incorrect.
P.S. Barely off subject, it’s price recalling why new homes ought to be “unaffordable” for common Individuals. Consider a steady-state society with solely 100 households, dwelling in 100 homes of various high quality. Assume that every home lasts 100 years. Every year, the worst home is torn down, and a brand new home is constructed. To ensure that the standard of the housing inventory to rise by 1%/yr, the brand new home have to be twice nearly as good as the common current home. Every year, the households all shift over one home, shifting progressively to raised and higher properties. The richest household lives within the newly constructed home, which is (by assumption) unaffordable to the opposite 99 households.
In a extra reasonable mannequin with inhabitants development, not each new home is unaffordable to the underside 99%. However even with inhabitants development, new building in an financial system with rising dwelling requirements will are typically a lot nicer than the present inventory of housing, which signifies that new building will usually be “unaffordable” to the common household. If new housing is reasonably priced to the common household, then society won’t progress.
P.P.S. Alexander describes my earlier publish as follows:
Scott Sumner is an economist and blogger
I don’t see myself as a well-known particular person, however I share his view that I’ve the potential to carry good opinions. So far as the query of whether or not I do really maintain good opinions, I’ll let readers resolve.
In a recent post, Scott Alexander doubled down on his argument that constructing extra housing usually ends in larger housing costs. In his earlier publish, he pointed to the truth that housing is usually costlier in greater cities. I supplied a counterexample, citing Houston and Austin. I additionally argued that large cities are costly for causes unrelated to their giant amount of housing, corresponding to the benefits supplied by agglomeration. Exogenous provide will increase, corresponding to making it simpler to construct new housing, usually cut back housing costs.
Right here’s how Alexander responded to certainly one of my arguments:
I began the publish with a graph of about 50 cities, exhibiting a constructive correlation between density and worth. I’m having bother seeing how Sumner’s level isn’t simply “for those who take away 48 of these cities and cherry-pick two, the connection is unfavorable”.
I feel Alexander misunderstood this argument, so let me return and make the purpose extra rigorously. It will likely be useful to make two separate arguments:
1. You’d count on large cities to be costlier even when constructing housing reduces housing costs.
2. Austin and Houston are usually not the one counterexamples; there are lots of different such anomalies.
Let’s begin with a easy mannequin the place there are zero restrictions on housing building in all cities. Assume that America has 100 cities, every with industries of various productivity. In that mannequin, the most important cities shall be subsequent to the areas of biggest productiveness. (These areas of productiveness had been as soon as linked to pure components corresponding to ports and mineral assets, however are more and more linked to industries with community results like finance, vitality, leisure and tech.) Once more, assume there aren’t any obstacles to constructing, that’s, building of housing is so unconstrained that each single metropolis makes fashionable Houston appear to be a NIMBY stronghold.
Housing costs on this hypothetical financial system shall be larger within the bigger cities, ceteris paribus, regardless that constructing extra housing would possibly effectively depress costs. That’s as a result of in a bigger metropolis, individuals can pay extra for comfort (i.e., an excellent location). That may be true even when these greater cities weren’t extra productive. As an example, individuals would pay additional to cut back commuting prices, or to be near facilities. However the greater cities are (by assumption) additionally extra productive, which supplies one more reason for housing costs to be larger in greater cities—larger wages. This thought experiment means that the empirical relationship Alexander depends upon to make his argument would apply even when his argument weren’t true.
One response is that these industries with community results solely exist in locations like New York as a result of there are many individuals, and which you could’t have plenty of individuals with out plenty of housing. That’s true, however has no bearing on the query of how extra housing impacts costs on the margin. And from the earlier thought experiment, it’s clear that taking a look at easy correlations doesn’t resolve that drawback.
Alexander would possibly fairly reply that my mannequin is overly simplistic. Constructing restrictions differ from one metropolis to a different. In that case, you would possibly count on some exceptions to the iron legislation that greater cities are costlier than smaller cities. And since (he assumes) I discovered just one such anomaly, the correlation among the many remaining cities is simply too sturdy to elucidate by (exogenous) components aside from metropolis measurement.
Really, I cited Austin and Houston merely as one instance, and I picked this instance as a result of they’re positioned in the identical state. The truth is, there are lots of, many examples of bigger cities which can be cheaper than smaller cities. And in just about each single case the reason is that the smaller however costlier cities have extra restrictions on constructing. Within the listing beneath, the metro areas on the left are bigger and cheaper than the metro areas on the best:
Chicago >>> San Francisco Bay Space
Dallas/Forth Price >>> Washington DC
Houston >>> Boston or Seattle
San Antonio >>> Portland
Phoenix >>> San Diego
Colorado Springs >>> Boulder
In every case, the bigger metro space is cheaper than the smaller one. And in every case there are stricter limits on constructing within the costlier metropolis.
That doesn’t show Alexander is incorrect. It’s doable that the rationale for costlier housing within the NIMBY cities has nothing to do with restrictions on constructing. However I doubt it. I believe that if Houston had adopted extreme restrictions on constructing within the Eighties, then individuals would now attribute the ensuing excessive housing costs as being because of all of the oil cash sloshing by means of its financial system. However Houston determined to open its doorways to anybody who wished to maneuver there. In consequence, regardless that Houston is the worldwide vitality capital and is stuffed with effectively paid petroleum engineers, and regardless that vitality is without doubt one of the world’s largest industries, Houston remains to be an affordable place to reside. As an alternative, it received a lot greater. BTW, Houston additionally has effectively paid aerospace engineers, effectively paid enterprise executives and effectively paid medical doctors, and so on. There’s greater than sufficient cash in Houston to drive up housing costs if they’d restricted constructing.
Replace: Emily Hamilton of the Mercatus Heart has a wonderful publish explaining how Houston’s YIMBY insurance policies result in higher housing affordability.
It might seem that Alexander is “Reasoning from a amount change.” In any case, it is mindless to debate the impression of a change in amount on worth, with out understanding why amount modified. If Oakland will get extra housing as a result of it deregulates, costs will in all probability fall. If Oakland will get extra housing as a result of it turns into trendier, then costs will in all probability rise. Alexander appears to know this drawback, and thus not less than implicitly appears to consider that each single issue that may enhance Oakland’s housing provide would have the impact of boosting demand by greater than provide. That’s, he appears to consider that NIMBY insurance policies make cities cheaper. That’s theoretically doable, however appears unlikely most often.
To recap my argument:
1. The correlation Alexander cites proves nothing—you’d count on greater cities to be costlier even when (on the margin) constructing extra housing didn’t elevate costs.
2. Alexander is appropriate that if his mannequin had been incorrect then you definately’d count on some exceptions to the widely constructive relationship between density and worth, because of differential restrictions on constructing. However loads of such exceptions do exist, and virtually all the time in precisely the locations predicted by YIMBY proponents of extra constructing. Elsewhere in his publish he dismisses intercity comparisons between fashionable coastal cities and heartland cities. Nonetheless, the examples I present present that I didn’t simply cherry decide one exception with my Austin/Houston comparability, there are lots of such anomalies. And one can discover such anomalies even inside coastal areas. The Bay Space is costlier than LA, regardless of being smaller. It has extra restrictive zoning. The Boston metro space is costlier than metro DC, regardless of being smaller. Boston has extra restrictive zoning. And you’ll’t say that LA and DC are usually not fascinating markets.
Simply to be clear, our dispute has completely no coverage implications. As an example, I stated:
If constructing extra housing raises its worth, then the argument for extra building is even stronger.
And Alexander responded:
I agree with all this.
That is vital, as a result of his previous post had appeared to point that he thought it was a “drawback” that new building led to larger housing costs. He beforehand stated:
It is a coordination drawback: if each metropolis upzones collectively, they will all get decrease home costs, however every metropolis can reduce its personal costs by refusing to cooperate and hoping everybody else does the exhausting work.
What “exhausting work”?
Within the new publish he makes it very clear that this isn’t a “drawback.” He helps the YIMBY place.
Thus we each assist making it simpler to construct housing in Oakland, though he thinks this is able to elevate costs and I feel it will decrease them. If I’m incorrect, that’s, if extra housing boosted home costs in Oakland, then we each agree that this is able to be an particularly good end result. And I concede that I may be incorrect.
P.S. Barely off subject, it’s price recalling why new homes ought to be “unaffordable” for common Individuals. Consider a steady-state society with solely 100 households, dwelling in 100 homes of various high quality. Assume that every home lasts 100 years. Every year, the worst home is torn down, and a brand new home is constructed. To ensure that the standard of the housing inventory to rise by 1%/yr, the brand new home have to be twice nearly as good as the common current home. Every year, the households all shift over one home, shifting progressively to raised and higher properties. The richest household lives within the newly constructed home, which is (by assumption) unaffordable to the opposite 99 households.
In a extra reasonable mannequin with inhabitants development, not each new home is unaffordable to the underside 99%. However even with inhabitants development, new building in an financial system with rising dwelling requirements will are typically a lot nicer than the present inventory of housing, which signifies that new building will usually be “unaffordable” to the common household. If new housing is reasonably priced to the common household, then society won’t progress.
P.P.S. Alexander describes my earlier publish as follows:
Scott Sumner is an economist and blogger
I don’t see myself as a well-known particular person, however I share his view that I’ve the potential to carry good opinions. So far as the query of whether or not I do really maintain good opinions, I’ll let readers resolve.
In a recent post, Scott Alexander doubled down on his argument that constructing extra housing usually ends in larger housing costs. In his earlier publish, he pointed to the truth that housing is usually costlier in greater cities. I supplied a counterexample, citing Houston and Austin. I additionally argued that large cities are costly for causes unrelated to their giant amount of housing, corresponding to the benefits supplied by agglomeration. Exogenous provide will increase, corresponding to making it simpler to construct new housing, usually cut back housing costs.
Right here’s how Alexander responded to certainly one of my arguments:
I began the publish with a graph of about 50 cities, exhibiting a constructive correlation between density and worth. I’m having bother seeing how Sumner’s level isn’t simply “for those who take away 48 of these cities and cherry-pick two, the connection is unfavorable”.
I feel Alexander misunderstood this argument, so let me return and make the purpose extra rigorously. It will likely be useful to make two separate arguments:
1. You’d count on large cities to be costlier even when constructing housing reduces housing costs.
2. Austin and Houston are usually not the one counterexamples; there are lots of different such anomalies.
Let’s begin with a easy mannequin the place there are zero restrictions on housing building in all cities. Assume that America has 100 cities, every with industries of various productivity. In that mannequin, the most important cities shall be subsequent to the areas of biggest productiveness. (These areas of productiveness had been as soon as linked to pure components corresponding to ports and mineral assets, however are more and more linked to industries with community results like finance, vitality, leisure and tech.) Once more, assume there aren’t any obstacles to constructing, that’s, building of housing is so unconstrained that each single metropolis makes fashionable Houston appear to be a NIMBY stronghold.
Housing costs on this hypothetical financial system shall be larger within the bigger cities, ceteris paribus, regardless that constructing extra housing would possibly effectively depress costs. That’s as a result of in a bigger metropolis, individuals can pay extra for comfort (i.e., an excellent location). That may be true even when these greater cities weren’t extra productive. As an example, individuals would pay additional to cut back commuting prices, or to be near facilities. However the greater cities are (by assumption) additionally extra productive, which supplies one more reason for housing costs to be larger in greater cities—larger wages. This thought experiment means that the empirical relationship Alexander depends upon to make his argument would apply even when his argument weren’t true.
One response is that these industries with community results solely exist in locations like New York as a result of there are many individuals, and which you could’t have plenty of individuals with out plenty of housing. That’s true, however has no bearing on the query of how extra housing impacts costs on the margin. And from the earlier thought experiment, it’s clear that taking a look at easy correlations doesn’t resolve that drawback.
Alexander would possibly fairly reply that my mannequin is overly simplistic. Constructing restrictions differ from one metropolis to a different. In that case, you would possibly count on some exceptions to the iron legislation that greater cities are costlier than smaller cities. And since (he assumes) I discovered just one such anomaly, the correlation among the many remaining cities is simply too sturdy to elucidate by (exogenous) components aside from metropolis measurement.
Really, I cited Austin and Houston merely as one instance, and I picked this instance as a result of they’re positioned in the identical state. The truth is, there are lots of, many examples of bigger cities which can be cheaper than smaller cities. And in just about each single case the reason is that the smaller however costlier cities have extra restrictions on constructing. Within the listing beneath, the metro areas on the left are bigger and cheaper than the metro areas on the best:
Chicago >>> San Francisco Bay Space
Dallas/Forth Price >>> Washington DC
Houston >>> Boston or Seattle
San Antonio >>> Portland
Phoenix >>> San Diego
Colorado Springs >>> Boulder
In every case, the bigger metro space is cheaper than the smaller one. And in every case there are stricter limits on constructing within the costlier metropolis.
That doesn’t show Alexander is incorrect. It’s doable that the rationale for costlier housing within the NIMBY cities has nothing to do with restrictions on constructing. However I doubt it. I believe that if Houston had adopted extreme restrictions on constructing within the Eighties, then individuals would now attribute the ensuing excessive housing costs as being because of all of the oil cash sloshing by means of its financial system. However Houston determined to open its doorways to anybody who wished to maneuver there. In consequence, regardless that Houston is the worldwide vitality capital and is stuffed with effectively paid petroleum engineers, and regardless that vitality is without doubt one of the world’s largest industries, Houston remains to be an affordable place to reside. As an alternative, it received a lot greater. BTW, Houston additionally has effectively paid aerospace engineers, effectively paid enterprise executives and effectively paid medical doctors, and so on. There’s greater than sufficient cash in Houston to drive up housing costs if they’d restricted constructing.
Replace: Emily Hamilton of the Mercatus Heart has a wonderful publish explaining how Houston’s YIMBY insurance policies result in higher housing affordability.
It might seem that Alexander is “Reasoning from a amount change.” In any case, it is mindless to debate the impression of a change in amount on worth, with out understanding why amount modified. If Oakland will get extra housing as a result of it deregulates, costs will in all probability fall. If Oakland will get extra housing as a result of it turns into trendier, then costs will in all probability rise. Alexander appears to know this drawback, and thus not less than implicitly appears to consider that each single issue that may enhance Oakland’s housing provide would have the impact of boosting demand by greater than provide. That’s, he appears to consider that NIMBY insurance policies make cities cheaper. That’s theoretically doable, however appears unlikely most often.
To recap my argument:
1. The correlation Alexander cites proves nothing—you’d count on greater cities to be costlier even when (on the margin) constructing extra housing didn’t elevate costs.
2. Alexander is appropriate that if his mannequin had been incorrect then you definately’d count on some exceptions to the widely constructive relationship between density and worth, because of differential restrictions on constructing. However loads of such exceptions do exist, and virtually all the time in precisely the locations predicted by YIMBY proponents of extra constructing. Elsewhere in his publish he dismisses intercity comparisons between fashionable coastal cities and heartland cities. Nonetheless, the examples I present present that I didn’t simply cherry decide one exception with my Austin/Houston comparability, there are lots of such anomalies. And one can discover such anomalies even inside coastal areas. The Bay Space is costlier than LA, regardless of being smaller. It has extra restrictive zoning. The Boston metro space is costlier than metro DC, regardless of being smaller. Boston has extra restrictive zoning. And you’ll’t say that LA and DC are usually not fascinating markets.
Simply to be clear, our dispute has completely no coverage implications. As an example, I stated:
If constructing extra housing raises its worth, then the argument for extra building is even stronger.
And Alexander responded:
I agree with all this.
That is vital, as a result of his previous post had appeared to point that he thought it was a “drawback” that new building led to larger housing costs. He beforehand stated:
It is a coordination drawback: if each metropolis upzones collectively, they will all get decrease home costs, however every metropolis can reduce its personal costs by refusing to cooperate and hoping everybody else does the exhausting work.
What “exhausting work”?
Within the new publish he makes it very clear that this isn’t a “drawback.” He helps the YIMBY place.
Thus we each assist making it simpler to construct housing in Oakland, though he thinks this is able to elevate costs and I feel it will decrease them. If I’m incorrect, that’s, if extra housing boosted home costs in Oakland, then we each agree that this is able to be an particularly good end result. And I concede that I may be incorrect.
P.S. Barely off subject, it’s price recalling why new homes ought to be “unaffordable” for common Individuals. Consider a steady-state society with solely 100 households, dwelling in 100 homes of various high quality. Assume that every home lasts 100 years. Every year, the worst home is torn down, and a brand new home is constructed. To ensure that the standard of the housing inventory to rise by 1%/yr, the brand new home have to be twice nearly as good as the common current home. Every year, the households all shift over one home, shifting progressively to raised and higher properties. The richest household lives within the newly constructed home, which is (by assumption) unaffordable to the opposite 99 households.
In a extra reasonable mannequin with inhabitants development, not each new home is unaffordable to the underside 99%. However even with inhabitants development, new building in an financial system with rising dwelling requirements will are typically a lot nicer than the present inventory of housing, which signifies that new building will usually be “unaffordable” to the common household. If new housing is reasonably priced to the common household, then society won’t progress.
P.P.S. Alexander describes my earlier publish as follows:
Scott Sumner is an economist and blogger
I don’t see myself as a well-known particular person, however I share his view that I’ve the potential to carry good opinions. So far as the query of whether or not I do really maintain good opinions, I’ll let readers resolve.
In a recent post, Scott Alexander doubled down on his argument that constructing extra housing usually ends in larger housing costs. In his earlier publish, he pointed to the truth that housing is usually costlier in greater cities. I supplied a counterexample, citing Houston and Austin. I additionally argued that large cities are costly for causes unrelated to their giant amount of housing, corresponding to the benefits supplied by agglomeration. Exogenous provide will increase, corresponding to making it simpler to construct new housing, usually cut back housing costs.
Right here’s how Alexander responded to certainly one of my arguments:
I began the publish with a graph of about 50 cities, exhibiting a constructive correlation between density and worth. I’m having bother seeing how Sumner’s level isn’t simply “for those who take away 48 of these cities and cherry-pick two, the connection is unfavorable”.
I feel Alexander misunderstood this argument, so let me return and make the purpose extra rigorously. It will likely be useful to make two separate arguments:
1. You’d count on large cities to be costlier even when constructing housing reduces housing costs.
2. Austin and Houston are usually not the one counterexamples; there are lots of different such anomalies.
Let’s begin with a easy mannequin the place there are zero restrictions on housing building in all cities. Assume that America has 100 cities, every with industries of various productivity. In that mannequin, the most important cities shall be subsequent to the areas of biggest productiveness. (These areas of productiveness had been as soon as linked to pure components corresponding to ports and mineral assets, however are more and more linked to industries with community results like finance, vitality, leisure and tech.) Once more, assume there aren’t any obstacles to constructing, that’s, building of housing is so unconstrained that each single metropolis makes fashionable Houston appear to be a NIMBY stronghold.
Housing costs on this hypothetical financial system shall be larger within the bigger cities, ceteris paribus, regardless that constructing extra housing would possibly effectively depress costs. That’s as a result of in a bigger metropolis, individuals can pay extra for comfort (i.e., an excellent location). That may be true even when these greater cities weren’t extra productive. As an example, individuals would pay additional to cut back commuting prices, or to be near facilities. However the greater cities are (by assumption) additionally extra productive, which supplies one more reason for housing costs to be larger in greater cities—larger wages. This thought experiment means that the empirical relationship Alexander depends upon to make his argument would apply even when his argument weren’t true.
One response is that these industries with community results solely exist in locations like New York as a result of there are many individuals, and which you could’t have plenty of individuals with out plenty of housing. That’s true, however has no bearing on the query of how extra housing impacts costs on the margin. And from the earlier thought experiment, it’s clear that taking a look at easy correlations doesn’t resolve that drawback.
Alexander would possibly fairly reply that my mannequin is overly simplistic. Constructing restrictions differ from one metropolis to a different. In that case, you would possibly count on some exceptions to the iron legislation that greater cities are costlier than smaller cities. And since (he assumes) I discovered just one such anomaly, the correlation among the many remaining cities is simply too sturdy to elucidate by (exogenous) components aside from metropolis measurement.
Really, I cited Austin and Houston merely as one instance, and I picked this instance as a result of they’re positioned in the identical state. The truth is, there are lots of, many examples of bigger cities which can be cheaper than smaller cities. And in just about each single case the reason is that the smaller however costlier cities have extra restrictions on constructing. Within the listing beneath, the metro areas on the left are bigger and cheaper than the metro areas on the best:
Chicago >>> San Francisco Bay Space
Dallas/Forth Price >>> Washington DC
Houston >>> Boston or Seattle
San Antonio >>> Portland
Phoenix >>> San Diego
Colorado Springs >>> Boulder
In every case, the bigger metro space is cheaper than the smaller one. And in every case there are stricter limits on constructing within the costlier metropolis.
That doesn’t show Alexander is incorrect. It’s doable that the rationale for costlier housing within the NIMBY cities has nothing to do with restrictions on constructing. However I doubt it. I believe that if Houston had adopted extreme restrictions on constructing within the Eighties, then individuals would now attribute the ensuing excessive housing costs as being because of all of the oil cash sloshing by means of its financial system. However Houston determined to open its doorways to anybody who wished to maneuver there. In consequence, regardless that Houston is the worldwide vitality capital and is stuffed with effectively paid petroleum engineers, and regardless that vitality is without doubt one of the world’s largest industries, Houston remains to be an affordable place to reside. As an alternative, it received a lot greater. BTW, Houston additionally has effectively paid aerospace engineers, effectively paid enterprise executives and effectively paid medical doctors, and so on. There’s greater than sufficient cash in Houston to drive up housing costs if they’d restricted constructing.
Replace: Emily Hamilton of the Mercatus Heart has a wonderful publish explaining how Houston’s YIMBY insurance policies result in higher housing affordability.
It might seem that Alexander is “Reasoning from a amount change.” In any case, it is mindless to debate the impression of a change in amount on worth, with out understanding why amount modified. If Oakland will get extra housing as a result of it deregulates, costs will in all probability fall. If Oakland will get extra housing as a result of it turns into trendier, then costs will in all probability rise. Alexander appears to know this drawback, and thus not less than implicitly appears to consider that each single issue that may enhance Oakland’s housing provide would have the impact of boosting demand by greater than provide. That’s, he appears to consider that NIMBY insurance policies make cities cheaper. That’s theoretically doable, however appears unlikely most often.
To recap my argument:
1. The correlation Alexander cites proves nothing—you’d count on greater cities to be costlier even when (on the margin) constructing extra housing didn’t elevate costs.
2. Alexander is appropriate that if his mannequin had been incorrect then you definately’d count on some exceptions to the widely constructive relationship between density and worth, because of differential restrictions on constructing. However loads of such exceptions do exist, and virtually all the time in precisely the locations predicted by YIMBY proponents of extra constructing. Elsewhere in his publish he dismisses intercity comparisons between fashionable coastal cities and heartland cities. Nonetheless, the examples I present present that I didn’t simply cherry decide one exception with my Austin/Houston comparability, there are lots of such anomalies. And one can discover such anomalies even inside coastal areas. The Bay Space is costlier than LA, regardless of being smaller. It has extra restrictive zoning. The Boston metro space is costlier than metro DC, regardless of being smaller. Boston has extra restrictive zoning. And you’ll’t say that LA and DC are usually not fascinating markets.
Simply to be clear, our dispute has completely no coverage implications. As an example, I stated:
If constructing extra housing raises its worth, then the argument for extra building is even stronger.
And Alexander responded:
I agree with all this.
That is vital, as a result of his previous post had appeared to point that he thought it was a “drawback” that new building led to larger housing costs. He beforehand stated:
It is a coordination drawback: if each metropolis upzones collectively, they will all get decrease home costs, however every metropolis can reduce its personal costs by refusing to cooperate and hoping everybody else does the exhausting work.
What “exhausting work”?
Within the new publish he makes it very clear that this isn’t a “drawback.” He helps the YIMBY place.
Thus we each assist making it simpler to construct housing in Oakland, though he thinks this is able to elevate costs and I feel it will decrease them. If I’m incorrect, that’s, if extra housing boosted home costs in Oakland, then we each agree that this is able to be an particularly good end result. And I concede that I may be incorrect.
P.S. Barely off subject, it’s price recalling why new homes ought to be “unaffordable” for common Individuals. Consider a steady-state society with solely 100 households, dwelling in 100 homes of various high quality. Assume that every home lasts 100 years. Every year, the worst home is torn down, and a brand new home is constructed. To ensure that the standard of the housing inventory to rise by 1%/yr, the brand new home have to be twice nearly as good as the common current home. Every year, the households all shift over one home, shifting progressively to raised and higher properties. The richest household lives within the newly constructed home, which is (by assumption) unaffordable to the opposite 99 households.
In a extra reasonable mannequin with inhabitants development, not each new home is unaffordable to the underside 99%. However even with inhabitants development, new building in an financial system with rising dwelling requirements will are typically a lot nicer than the present inventory of housing, which signifies that new building will usually be “unaffordable” to the common household. If new housing is reasonably priced to the common household, then society won’t progress.
P.P.S. Alexander describes my earlier publish as follows:
Scott Sumner is an economist and blogger
I don’t see myself as a well-known particular person, however I share his view that I’ve the potential to carry good opinions. So far as the query of whether or not I do really maintain good opinions, I’ll let readers resolve.
In a recent post, Scott Alexander doubled down on his argument that constructing extra housing usually ends in larger housing costs. In his earlier publish, he pointed to the truth that housing is usually costlier in greater cities. I supplied a counterexample, citing Houston and Austin. I additionally argued that large cities are costly for causes unrelated to their giant amount of housing, corresponding to the benefits supplied by agglomeration. Exogenous provide will increase, corresponding to making it simpler to construct new housing, usually cut back housing costs.
Right here’s how Alexander responded to certainly one of my arguments:
I began the publish with a graph of about 50 cities, exhibiting a constructive correlation between density and worth. I’m having bother seeing how Sumner’s level isn’t simply “for those who take away 48 of these cities and cherry-pick two, the connection is unfavorable”.
I feel Alexander misunderstood this argument, so let me return and make the purpose extra rigorously. It will likely be useful to make two separate arguments:
1. You’d count on large cities to be costlier even when constructing housing reduces housing costs.
2. Austin and Houston are usually not the one counterexamples; there are lots of different such anomalies.
Let’s begin with a easy mannequin the place there are zero restrictions on housing building in all cities. Assume that America has 100 cities, every with industries of various productivity. In that mannequin, the most important cities shall be subsequent to the areas of biggest productiveness. (These areas of productiveness had been as soon as linked to pure components corresponding to ports and mineral assets, however are more and more linked to industries with community results like finance, vitality, leisure and tech.) Once more, assume there aren’t any obstacles to constructing, that’s, building of housing is so unconstrained that each single metropolis makes fashionable Houston appear to be a NIMBY stronghold.
Housing costs on this hypothetical financial system shall be larger within the bigger cities, ceteris paribus, regardless that constructing extra housing would possibly effectively depress costs. That’s as a result of in a bigger metropolis, individuals can pay extra for comfort (i.e., an excellent location). That may be true even when these greater cities weren’t extra productive. As an example, individuals would pay additional to cut back commuting prices, or to be near facilities. However the greater cities are (by assumption) additionally extra productive, which supplies one more reason for housing costs to be larger in greater cities—larger wages. This thought experiment means that the empirical relationship Alexander depends upon to make his argument would apply even when his argument weren’t true.
One response is that these industries with community results solely exist in locations like New York as a result of there are many individuals, and which you could’t have plenty of individuals with out plenty of housing. That’s true, however has no bearing on the query of how extra housing impacts costs on the margin. And from the earlier thought experiment, it’s clear that taking a look at easy correlations doesn’t resolve that drawback.
Alexander would possibly fairly reply that my mannequin is overly simplistic. Constructing restrictions differ from one metropolis to a different. In that case, you would possibly count on some exceptions to the iron legislation that greater cities are costlier than smaller cities. And since (he assumes) I discovered just one such anomaly, the correlation among the many remaining cities is simply too sturdy to elucidate by (exogenous) components aside from metropolis measurement.
Really, I cited Austin and Houston merely as one instance, and I picked this instance as a result of they’re positioned in the identical state. The truth is, there are lots of, many examples of bigger cities which can be cheaper than smaller cities. And in just about each single case the reason is that the smaller however costlier cities have extra restrictions on constructing. Within the listing beneath, the metro areas on the left are bigger and cheaper than the metro areas on the best:
Chicago >>> San Francisco Bay Space
Dallas/Forth Price >>> Washington DC
Houston >>> Boston or Seattle
San Antonio >>> Portland
Phoenix >>> San Diego
Colorado Springs >>> Boulder
In every case, the bigger metro space is cheaper than the smaller one. And in every case there are stricter limits on constructing within the costlier metropolis.
That doesn’t show Alexander is incorrect. It’s doable that the rationale for costlier housing within the NIMBY cities has nothing to do with restrictions on constructing. However I doubt it. I believe that if Houston had adopted extreme restrictions on constructing within the Eighties, then individuals would now attribute the ensuing excessive housing costs as being because of all of the oil cash sloshing by means of its financial system. However Houston determined to open its doorways to anybody who wished to maneuver there. In consequence, regardless that Houston is the worldwide vitality capital and is stuffed with effectively paid petroleum engineers, and regardless that vitality is without doubt one of the world’s largest industries, Houston remains to be an affordable place to reside. As an alternative, it received a lot greater. BTW, Houston additionally has effectively paid aerospace engineers, effectively paid enterprise executives and effectively paid medical doctors, and so on. There’s greater than sufficient cash in Houston to drive up housing costs if they’d restricted constructing.
Replace: Emily Hamilton of the Mercatus Heart has a wonderful publish explaining how Houston’s YIMBY insurance policies result in higher housing affordability.
It might seem that Alexander is “Reasoning from a amount change.” In any case, it is mindless to debate the impression of a change in amount on worth, with out understanding why amount modified. If Oakland will get extra housing as a result of it deregulates, costs will in all probability fall. If Oakland will get extra housing as a result of it turns into trendier, then costs will in all probability rise. Alexander appears to know this drawback, and thus not less than implicitly appears to consider that each single issue that may enhance Oakland’s housing provide would have the impact of boosting demand by greater than provide. That’s, he appears to consider that NIMBY insurance policies make cities cheaper. That’s theoretically doable, however appears unlikely most often.
To recap my argument:
1. The correlation Alexander cites proves nothing—you’d count on greater cities to be costlier even when (on the margin) constructing extra housing didn’t elevate costs.
2. Alexander is appropriate that if his mannequin had been incorrect then you definately’d count on some exceptions to the widely constructive relationship between density and worth, because of differential restrictions on constructing. However loads of such exceptions do exist, and virtually all the time in precisely the locations predicted by YIMBY proponents of extra constructing. Elsewhere in his publish he dismisses intercity comparisons between fashionable coastal cities and heartland cities. Nonetheless, the examples I present present that I didn’t simply cherry decide one exception with my Austin/Houston comparability, there are lots of such anomalies. And one can discover such anomalies even inside coastal areas. The Bay Space is costlier than LA, regardless of being smaller. It has extra restrictive zoning. The Boston metro space is costlier than metro DC, regardless of being smaller. Boston has extra restrictive zoning. And you’ll’t say that LA and DC are usually not fascinating markets.
Simply to be clear, our dispute has completely no coverage implications. As an example, I stated:
If constructing extra housing raises its worth, then the argument for extra building is even stronger.
And Alexander responded:
I agree with all this.
That is vital, as a result of his previous post had appeared to point that he thought it was a “drawback” that new building led to larger housing costs. He beforehand stated:
It is a coordination drawback: if each metropolis upzones collectively, they will all get decrease home costs, however every metropolis can reduce its personal costs by refusing to cooperate and hoping everybody else does the exhausting work.
What “exhausting work”?
Within the new publish he makes it very clear that this isn’t a “drawback.” He helps the YIMBY place.
Thus we each assist making it simpler to construct housing in Oakland, though he thinks this is able to elevate costs and I feel it will decrease them. If I’m incorrect, that’s, if extra housing boosted home costs in Oakland, then we each agree that this is able to be an particularly good end result. And I concede that I may be incorrect.
P.S. Barely off subject, it’s price recalling why new homes ought to be “unaffordable” for common Individuals. Consider a steady-state society with solely 100 households, dwelling in 100 homes of various high quality. Assume that every home lasts 100 years. Every year, the worst home is torn down, and a brand new home is constructed. To ensure that the standard of the housing inventory to rise by 1%/yr, the brand new home have to be twice nearly as good as the common current home. Every year, the households all shift over one home, shifting progressively to raised and higher properties. The richest household lives within the newly constructed home, which is (by assumption) unaffordable to the opposite 99 households.
In a extra reasonable mannequin with inhabitants development, not each new home is unaffordable to the underside 99%. However even with inhabitants development, new building in an financial system with rising dwelling requirements will are typically a lot nicer than the present inventory of housing, which signifies that new building will usually be “unaffordable” to the common household. If new housing is reasonably priced to the common household, then society won’t progress.
P.P.S. Alexander describes my earlier publish as follows:
Scott Sumner is an economist and blogger
I don’t see myself as a well-known particular person, however I share his view that I’ve the potential to carry good opinions. So far as the query of whether or not I do really maintain good opinions, I’ll let readers resolve.
In a recent post, Scott Alexander doubled down on his argument that constructing extra housing usually ends in larger housing costs. In his earlier publish, he pointed to the truth that housing is usually costlier in greater cities. I supplied a counterexample, citing Houston and Austin. I additionally argued that large cities are costly for causes unrelated to their giant amount of housing, corresponding to the benefits supplied by agglomeration. Exogenous provide will increase, corresponding to making it simpler to construct new housing, usually cut back housing costs.
Right here’s how Alexander responded to certainly one of my arguments:
I began the publish with a graph of about 50 cities, exhibiting a constructive correlation between density and worth. I’m having bother seeing how Sumner’s level isn’t simply “for those who take away 48 of these cities and cherry-pick two, the connection is unfavorable”.
I feel Alexander misunderstood this argument, so let me return and make the purpose extra rigorously. It will likely be useful to make two separate arguments:
1. You’d count on large cities to be costlier even when constructing housing reduces housing costs.
2. Austin and Houston are usually not the one counterexamples; there are lots of different such anomalies.
Let’s begin with a easy mannequin the place there are zero restrictions on housing building in all cities. Assume that America has 100 cities, every with industries of various productivity. In that mannequin, the most important cities shall be subsequent to the areas of biggest productiveness. (These areas of productiveness had been as soon as linked to pure components corresponding to ports and mineral assets, however are more and more linked to industries with community results like finance, vitality, leisure and tech.) Once more, assume there aren’t any obstacles to constructing, that’s, building of housing is so unconstrained that each single metropolis makes fashionable Houston appear to be a NIMBY stronghold.
Housing costs on this hypothetical financial system shall be larger within the bigger cities, ceteris paribus, regardless that constructing extra housing would possibly effectively depress costs. That’s as a result of in a bigger metropolis, individuals can pay extra for comfort (i.e., an excellent location). That may be true even when these greater cities weren’t extra productive. As an example, individuals would pay additional to cut back commuting prices, or to be near facilities. However the greater cities are (by assumption) additionally extra productive, which supplies one more reason for housing costs to be larger in greater cities—larger wages. This thought experiment means that the empirical relationship Alexander depends upon to make his argument would apply even when his argument weren’t true.
One response is that these industries with community results solely exist in locations like New York as a result of there are many individuals, and which you could’t have plenty of individuals with out plenty of housing. That’s true, however has no bearing on the query of how extra housing impacts costs on the margin. And from the earlier thought experiment, it’s clear that taking a look at easy correlations doesn’t resolve that drawback.
Alexander would possibly fairly reply that my mannequin is overly simplistic. Constructing restrictions differ from one metropolis to a different. In that case, you would possibly count on some exceptions to the iron legislation that greater cities are costlier than smaller cities. And since (he assumes) I discovered just one such anomaly, the correlation among the many remaining cities is simply too sturdy to elucidate by (exogenous) components aside from metropolis measurement.
Really, I cited Austin and Houston merely as one instance, and I picked this instance as a result of they’re positioned in the identical state. The truth is, there are lots of, many examples of bigger cities which can be cheaper than smaller cities. And in just about each single case the reason is that the smaller however costlier cities have extra restrictions on constructing. Within the listing beneath, the metro areas on the left are bigger and cheaper than the metro areas on the best:
Chicago >>> San Francisco Bay Space
Dallas/Forth Price >>> Washington DC
Houston >>> Boston or Seattle
San Antonio >>> Portland
Phoenix >>> San Diego
Colorado Springs >>> Boulder
In every case, the bigger metro space is cheaper than the smaller one. And in every case there are stricter limits on constructing within the costlier metropolis.
That doesn’t show Alexander is incorrect. It’s doable that the rationale for costlier housing within the NIMBY cities has nothing to do with restrictions on constructing. However I doubt it. I believe that if Houston had adopted extreme restrictions on constructing within the Eighties, then individuals would now attribute the ensuing excessive housing costs as being because of all of the oil cash sloshing by means of its financial system. However Houston determined to open its doorways to anybody who wished to maneuver there. In consequence, regardless that Houston is the worldwide vitality capital and is stuffed with effectively paid petroleum engineers, and regardless that vitality is without doubt one of the world’s largest industries, Houston remains to be an affordable place to reside. As an alternative, it received a lot greater. BTW, Houston additionally has effectively paid aerospace engineers, effectively paid enterprise executives and effectively paid medical doctors, and so on. There’s greater than sufficient cash in Houston to drive up housing costs if they’d restricted constructing.
Replace: Emily Hamilton of the Mercatus Heart has a wonderful publish explaining how Houston’s YIMBY insurance policies result in higher housing affordability.
It might seem that Alexander is “Reasoning from a amount change.” In any case, it is mindless to debate the impression of a change in amount on worth, with out understanding why amount modified. If Oakland will get extra housing as a result of it deregulates, costs will in all probability fall. If Oakland will get extra housing as a result of it turns into trendier, then costs will in all probability rise. Alexander appears to know this drawback, and thus not less than implicitly appears to consider that each single issue that may enhance Oakland’s housing provide would have the impact of boosting demand by greater than provide. That’s, he appears to consider that NIMBY insurance policies make cities cheaper. That’s theoretically doable, however appears unlikely most often.
To recap my argument:
1. The correlation Alexander cites proves nothing—you’d count on greater cities to be costlier even when (on the margin) constructing extra housing didn’t elevate costs.
2. Alexander is appropriate that if his mannequin had been incorrect then you definately’d count on some exceptions to the widely constructive relationship between density and worth, because of differential restrictions on constructing. However loads of such exceptions do exist, and virtually all the time in precisely the locations predicted by YIMBY proponents of extra constructing. Elsewhere in his publish he dismisses intercity comparisons between fashionable coastal cities and heartland cities. Nonetheless, the examples I present present that I didn’t simply cherry decide one exception with my Austin/Houston comparability, there are lots of such anomalies. And one can discover such anomalies even inside coastal areas. The Bay Space is costlier than LA, regardless of being smaller. It has extra restrictive zoning. The Boston metro space is costlier than metro DC, regardless of being smaller. Boston has extra restrictive zoning. And you’ll’t say that LA and DC are usually not fascinating markets.
Simply to be clear, our dispute has completely no coverage implications. As an example, I stated:
If constructing extra housing raises its worth, then the argument for extra building is even stronger.
And Alexander responded:
I agree with all this.
That is vital, as a result of his previous post had appeared to point that he thought it was a “drawback” that new building led to larger housing costs. He beforehand stated:
It is a coordination drawback: if each metropolis upzones collectively, they will all get decrease home costs, however every metropolis can reduce its personal costs by refusing to cooperate and hoping everybody else does the exhausting work.
What “exhausting work”?
Within the new publish he makes it very clear that this isn’t a “drawback.” He helps the YIMBY place.
Thus we each assist making it simpler to construct housing in Oakland, though he thinks this is able to elevate costs and I feel it will decrease them. If I’m incorrect, that’s, if extra housing boosted home costs in Oakland, then we each agree that this is able to be an particularly good end result. And I concede that I may be incorrect.
P.S. Barely off subject, it’s price recalling why new homes ought to be “unaffordable” for common Individuals. Consider a steady-state society with solely 100 households, dwelling in 100 homes of various high quality. Assume that every home lasts 100 years. Every year, the worst home is torn down, and a brand new home is constructed. To ensure that the standard of the housing inventory to rise by 1%/yr, the brand new home have to be twice nearly as good as the common current home. Every year, the households all shift over one home, shifting progressively to raised and higher properties. The richest household lives within the newly constructed home, which is (by assumption) unaffordable to the opposite 99 households.
In a extra reasonable mannequin with inhabitants development, not each new home is unaffordable to the underside 99%. However even with inhabitants development, new building in an financial system with rising dwelling requirements will are typically a lot nicer than the present inventory of housing, which signifies that new building will usually be “unaffordable” to the common household. If new housing is reasonably priced to the common household, then society won’t progress.
P.P.S. Alexander describes my earlier publish as follows:
Scott Sumner is an economist and blogger
I don’t see myself as a well-known particular person, however I share his view that I’ve the potential to carry good opinions. So far as the query of whether or not I do really maintain good opinions, I’ll let readers resolve.
In a recent post, Scott Alexander doubled down on his argument that constructing extra housing usually ends in larger housing costs. In his earlier publish, he pointed to the truth that housing is usually costlier in greater cities. I supplied a counterexample, citing Houston and Austin. I additionally argued that large cities are costly for causes unrelated to their giant amount of housing, corresponding to the benefits supplied by agglomeration. Exogenous provide will increase, corresponding to making it simpler to construct new housing, usually cut back housing costs.
Right here’s how Alexander responded to certainly one of my arguments:
I began the publish with a graph of about 50 cities, exhibiting a constructive correlation between density and worth. I’m having bother seeing how Sumner’s level isn’t simply “for those who take away 48 of these cities and cherry-pick two, the connection is unfavorable”.
I feel Alexander misunderstood this argument, so let me return and make the purpose extra rigorously. It will likely be useful to make two separate arguments:
1. You’d count on large cities to be costlier even when constructing housing reduces housing costs.
2. Austin and Houston are usually not the one counterexamples; there are lots of different such anomalies.
Let’s begin with a easy mannequin the place there are zero restrictions on housing building in all cities. Assume that America has 100 cities, every with industries of various productivity. In that mannequin, the most important cities shall be subsequent to the areas of biggest productiveness. (These areas of productiveness had been as soon as linked to pure components corresponding to ports and mineral assets, however are more and more linked to industries with community results like finance, vitality, leisure and tech.) Once more, assume there aren’t any obstacles to constructing, that’s, building of housing is so unconstrained that each single metropolis makes fashionable Houston appear to be a NIMBY stronghold.
Housing costs on this hypothetical financial system shall be larger within the bigger cities, ceteris paribus, regardless that constructing extra housing would possibly effectively depress costs. That’s as a result of in a bigger metropolis, individuals can pay extra for comfort (i.e., an excellent location). That may be true even when these greater cities weren’t extra productive. As an example, individuals would pay additional to cut back commuting prices, or to be near facilities. However the greater cities are (by assumption) additionally extra productive, which supplies one more reason for housing costs to be larger in greater cities—larger wages. This thought experiment means that the empirical relationship Alexander depends upon to make his argument would apply even when his argument weren’t true.
One response is that these industries with community results solely exist in locations like New York as a result of there are many individuals, and which you could’t have plenty of individuals with out plenty of housing. That’s true, however has no bearing on the query of how extra housing impacts costs on the margin. And from the earlier thought experiment, it’s clear that taking a look at easy correlations doesn’t resolve that drawback.
Alexander would possibly fairly reply that my mannequin is overly simplistic. Constructing restrictions differ from one metropolis to a different. In that case, you would possibly count on some exceptions to the iron legislation that greater cities are costlier than smaller cities. And since (he assumes) I discovered just one such anomaly, the correlation among the many remaining cities is simply too sturdy to elucidate by (exogenous) components aside from metropolis measurement.
Really, I cited Austin and Houston merely as one instance, and I picked this instance as a result of they’re positioned in the identical state. The truth is, there are lots of, many examples of bigger cities which can be cheaper than smaller cities. And in just about each single case the reason is that the smaller however costlier cities have extra restrictions on constructing. Within the listing beneath, the metro areas on the left are bigger and cheaper than the metro areas on the best:
Chicago >>> San Francisco Bay Space
Dallas/Forth Price >>> Washington DC
Houston >>> Boston or Seattle
San Antonio >>> Portland
Phoenix >>> San Diego
Colorado Springs >>> Boulder
In every case, the bigger metro space is cheaper than the smaller one. And in every case there are stricter limits on constructing within the costlier metropolis.
That doesn’t show Alexander is incorrect. It’s doable that the rationale for costlier housing within the NIMBY cities has nothing to do with restrictions on constructing. However I doubt it. I believe that if Houston had adopted extreme restrictions on constructing within the Eighties, then individuals would now attribute the ensuing excessive housing costs as being because of all of the oil cash sloshing by means of its financial system. However Houston determined to open its doorways to anybody who wished to maneuver there. In consequence, regardless that Houston is the worldwide vitality capital and is stuffed with effectively paid petroleum engineers, and regardless that vitality is without doubt one of the world’s largest industries, Houston remains to be an affordable place to reside. As an alternative, it received a lot greater. BTW, Houston additionally has effectively paid aerospace engineers, effectively paid enterprise executives and effectively paid medical doctors, and so on. There’s greater than sufficient cash in Houston to drive up housing costs if they’d restricted constructing.
Replace: Emily Hamilton of the Mercatus Heart has a wonderful publish explaining how Houston’s YIMBY insurance policies result in higher housing affordability.
It might seem that Alexander is “Reasoning from a amount change.” In any case, it is mindless to debate the impression of a change in amount on worth, with out understanding why amount modified. If Oakland will get extra housing as a result of it deregulates, costs will in all probability fall. If Oakland will get extra housing as a result of it turns into trendier, then costs will in all probability rise. Alexander appears to know this drawback, and thus not less than implicitly appears to consider that each single issue that may enhance Oakland’s housing provide would have the impact of boosting demand by greater than provide. That’s, he appears to consider that NIMBY insurance policies make cities cheaper. That’s theoretically doable, however appears unlikely most often.
To recap my argument:
1. The correlation Alexander cites proves nothing—you’d count on greater cities to be costlier even when (on the margin) constructing extra housing didn’t elevate costs.
2. Alexander is appropriate that if his mannequin had been incorrect then you definately’d count on some exceptions to the widely constructive relationship between density and worth, because of differential restrictions on constructing. However loads of such exceptions do exist, and virtually all the time in precisely the locations predicted by YIMBY proponents of extra constructing. Elsewhere in his publish he dismisses intercity comparisons between fashionable coastal cities and heartland cities. Nonetheless, the examples I present present that I didn’t simply cherry decide one exception with my Austin/Houston comparability, there are lots of such anomalies. And one can discover such anomalies even inside coastal areas. The Bay Space is costlier than LA, regardless of being smaller. It has extra restrictive zoning. The Boston metro space is costlier than metro DC, regardless of being smaller. Boston has extra restrictive zoning. And you’ll’t say that LA and DC are usually not fascinating markets.
Simply to be clear, our dispute has completely no coverage implications. As an example, I stated:
If constructing extra housing raises its worth, then the argument for extra building is even stronger.
And Alexander responded:
I agree with all this.
That is vital, as a result of his previous post had appeared to point that he thought it was a “drawback” that new building led to larger housing costs. He beforehand stated:
It is a coordination drawback: if each metropolis upzones collectively, they will all get decrease home costs, however every metropolis can reduce its personal costs by refusing to cooperate and hoping everybody else does the exhausting work.
What “exhausting work”?
Within the new publish he makes it very clear that this isn’t a “drawback.” He helps the YIMBY place.
Thus we each assist making it simpler to construct housing in Oakland, though he thinks this is able to elevate costs and I feel it will decrease them. If I’m incorrect, that’s, if extra housing boosted home costs in Oakland, then we each agree that this is able to be an particularly good end result. And I concede that I may be incorrect.
P.S. Barely off subject, it’s price recalling why new homes ought to be “unaffordable” for common Individuals. Consider a steady-state society with solely 100 households, dwelling in 100 homes of various high quality. Assume that every home lasts 100 years. Every year, the worst home is torn down, and a brand new home is constructed. To ensure that the standard of the housing inventory to rise by 1%/yr, the brand new home have to be twice nearly as good as the common current home. Every year, the households all shift over one home, shifting progressively to raised and higher properties. The richest household lives within the newly constructed home, which is (by assumption) unaffordable to the opposite 99 households.
In a extra reasonable mannequin with inhabitants development, not each new home is unaffordable to the underside 99%. However even with inhabitants development, new building in an financial system with rising dwelling requirements will are typically a lot nicer than the present inventory of housing, which signifies that new building will usually be “unaffordable” to the common household. If new housing is reasonably priced to the common household, then society won’t progress.
P.P.S. Alexander describes my earlier publish as follows:
Scott Sumner is an economist and blogger
I don’t see myself as a well-known particular person, however I share his view that I’ve the potential to carry good opinions. So far as the query of whether or not I do really maintain good opinions, I’ll let readers resolve.
In a recent post, Scott Alexander doubled down on his argument that constructing extra housing usually ends in larger housing costs. In his earlier publish, he pointed to the truth that housing is usually costlier in greater cities. I supplied a counterexample, citing Houston and Austin. I additionally argued that large cities are costly for causes unrelated to their giant amount of housing, corresponding to the benefits supplied by agglomeration. Exogenous provide will increase, corresponding to making it simpler to construct new housing, usually cut back housing costs.
Right here’s how Alexander responded to certainly one of my arguments:
I began the publish with a graph of about 50 cities, exhibiting a constructive correlation between density and worth. I’m having bother seeing how Sumner’s level isn’t simply “for those who take away 48 of these cities and cherry-pick two, the connection is unfavorable”.
I feel Alexander misunderstood this argument, so let me return and make the purpose extra rigorously. It will likely be useful to make two separate arguments:
1. You’d count on large cities to be costlier even when constructing housing reduces housing costs.
2. Austin and Houston are usually not the one counterexamples; there are lots of different such anomalies.
Let’s begin with a easy mannequin the place there are zero restrictions on housing building in all cities. Assume that America has 100 cities, every with industries of various productivity. In that mannequin, the most important cities shall be subsequent to the areas of biggest productiveness. (These areas of productiveness had been as soon as linked to pure components corresponding to ports and mineral assets, however are more and more linked to industries with community results like finance, vitality, leisure and tech.) Once more, assume there aren’t any obstacles to constructing, that’s, building of housing is so unconstrained that each single metropolis makes fashionable Houston appear to be a NIMBY stronghold.
Housing costs on this hypothetical financial system shall be larger within the bigger cities, ceteris paribus, regardless that constructing extra housing would possibly effectively depress costs. That’s as a result of in a bigger metropolis, individuals can pay extra for comfort (i.e., an excellent location). That may be true even when these greater cities weren’t extra productive. As an example, individuals would pay additional to cut back commuting prices, or to be near facilities. However the greater cities are (by assumption) additionally extra productive, which supplies one more reason for housing costs to be larger in greater cities—larger wages. This thought experiment means that the empirical relationship Alexander depends upon to make his argument would apply even when his argument weren’t true.
One response is that these industries with community results solely exist in locations like New York as a result of there are many individuals, and which you could’t have plenty of individuals with out plenty of housing. That’s true, however has no bearing on the query of how extra housing impacts costs on the margin. And from the earlier thought experiment, it’s clear that taking a look at easy correlations doesn’t resolve that drawback.
Alexander would possibly fairly reply that my mannequin is overly simplistic. Constructing restrictions differ from one metropolis to a different. In that case, you would possibly count on some exceptions to the iron legislation that greater cities are costlier than smaller cities. And since (he assumes) I discovered just one such anomaly, the correlation among the many remaining cities is simply too sturdy to elucidate by (exogenous) components aside from metropolis measurement.
Really, I cited Austin and Houston merely as one instance, and I picked this instance as a result of they’re positioned in the identical state. The truth is, there are lots of, many examples of bigger cities which can be cheaper than smaller cities. And in just about each single case the reason is that the smaller however costlier cities have extra restrictions on constructing. Within the listing beneath, the metro areas on the left are bigger and cheaper than the metro areas on the best:
Chicago >>> San Francisco Bay Space
Dallas/Forth Price >>> Washington DC
Houston >>> Boston or Seattle
San Antonio >>> Portland
Phoenix >>> San Diego
Colorado Springs >>> Boulder
In every case, the bigger metro space is cheaper than the smaller one. And in every case there are stricter limits on constructing within the costlier metropolis.
That doesn’t show Alexander is incorrect. It’s doable that the rationale for costlier housing within the NIMBY cities has nothing to do with restrictions on constructing. However I doubt it. I believe that if Houston had adopted extreme restrictions on constructing within the Eighties, then individuals would now attribute the ensuing excessive housing costs as being because of all of the oil cash sloshing by means of its financial system. However Houston determined to open its doorways to anybody who wished to maneuver there. In consequence, regardless that Houston is the worldwide vitality capital and is stuffed with effectively paid petroleum engineers, and regardless that vitality is without doubt one of the world’s largest industries, Houston remains to be an affordable place to reside. As an alternative, it received a lot greater. BTW, Houston additionally has effectively paid aerospace engineers, effectively paid enterprise executives and effectively paid medical doctors, and so on. There’s greater than sufficient cash in Houston to drive up housing costs if they’d restricted constructing.
Replace: Emily Hamilton of the Mercatus Heart has a wonderful publish explaining how Houston’s YIMBY insurance policies result in higher housing affordability.
It might seem that Alexander is “Reasoning from a amount change.” In any case, it is mindless to debate the impression of a change in amount on worth, with out understanding why amount modified. If Oakland will get extra housing as a result of it deregulates, costs will in all probability fall. If Oakland will get extra housing as a result of it turns into trendier, then costs will in all probability rise. Alexander appears to know this drawback, and thus not less than implicitly appears to consider that each single issue that may enhance Oakland’s housing provide would have the impact of boosting demand by greater than provide. That’s, he appears to consider that NIMBY insurance policies make cities cheaper. That’s theoretically doable, however appears unlikely most often.
To recap my argument:
1. The correlation Alexander cites proves nothing—you’d count on greater cities to be costlier even when (on the margin) constructing extra housing didn’t elevate costs.
2. Alexander is appropriate that if his mannequin had been incorrect then you definately’d count on some exceptions to the widely constructive relationship between density and worth, because of differential restrictions on constructing. However loads of such exceptions do exist, and virtually all the time in precisely the locations predicted by YIMBY proponents of extra constructing. Elsewhere in his publish he dismisses intercity comparisons between fashionable coastal cities and heartland cities. Nonetheless, the examples I present present that I didn’t simply cherry decide one exception with my Austin/Houston comparability, there are lots of such anomalies. And one can discover such anomalies even inside coastal areas. The Bay Space is costlier than LA, regardless of being smaller. It has extra restrictive zoning. The Boston metro space is costlier than metro DC, regardless of being smaller. Boston has extra restrictive zoning. And you’ll’t say that LA and DC are usually not fascinating markets.
Simply to be clear, our dispute has completely no coverage implications. As an example, I stated:
If constructing extra housing raises its worth, then the argument for extra building is even stronger.
And Alexander responded:
I agree with all this.
That is vital, as a result of his previous post had appeared to point that he thought it was a “drawback” that new building led to larger housing costs. He beforehand stated:
It is a coordination drawback: if each metropolis upzones collectively, they will all get decrease home costs, however every metropolis can reduce its personal costs by refusing to cooperate and hoping everybody else does the exhausting work.
What “exhausting work”?
Within the new publish he makes it very clear that this isn’t a “drawback.” He helps the YIMBY place.
Thus we each assist making it simpler to construct housing in Oakland, though he thinks this is able to elevate costs and I feel it will decrease them. If I’m incorrect, that’s, if extra housing boosted home costs in Oakland, then we each agree that this is able to be an particularly good end result. And I concede that I may be incorrect.
P.S. Barely off subject, it’s price recalling why new homes ought to be “unaffordable” for common Individuals. Consider a steady-state society with solely 100 households, dwelling in 100 homes of various high quality. Assume that every home lasts 100 years. Every year, the worst home is torn down, and a brand new home is constructed. To ensure that the standard of the housing inventory to rise by 1%/yr, the brand new home have to be twice nearly as good as the common current home. Every year, the households all shift over one home, shifting progressively to raised and higher properties. The richest household lives within the newly constructed home, which is (by assumption) unaffordable to the opposite 99 households.
In a extra reasonable mannequin with inhabitants development, not each new home is unaffordable to the underside 99%. However even with inhabitants development, new building in an financial system with rising dwelling requirements will are typically a lot nicer than the present inventory of housing, which signifies that new building will usually be “unaffordable” to the common household. If new housing is reasonably priced to the common household, then society won’t progress.
P.P.S. Alexander describes my earlier publish as follows:
Scott Sumner is an economist and blogger
I don’t see myself as a well-known particular person, however I share his view that I’ve the potential to carry good opinions. So far as the query of whether or not I do really maintain good opinions, I’ll let readers resolve.
In a recent post, Scott Alexander doubled down on his argument that constructing extra housing usually ends in larger housing costs. In his earlier publish, he pointed to the truth that housing is usually costlier in greater cities. I supplied a counterexample, citing Houston and Austin. I additionally argued that large cities are costly for causes unrelated to their giant amount of housing, corresponding to the benefits supplied by agglomeration. Exogenous provide will increase, corresponding to making it simpler to construct new housing, usually cut back housing costs.
Right here’s how Alexander responded to certainly one of my arguments:
I began the publish with a graph of about 50 cities, exhibiting a constructive correlation between density and worth. I’m having bother seeing how Sumner’s level isn’t simply “for those who take away 48 of these cities and cherry-pick two, the connection is unfavorable”.
I feel Alexander misunderstood this argument, so let me return and make the purpose extra rigorously. It will likely be useful to make two separate arguments:
1. You’d count on large cities to be costlier even when constructing housing reduces housing costs.
2. Austin and Houston are usually not the one counterexamples; there are lots of different such anomalies.
Let’s begin with a easy mannequin the place there are zero restrictions on housing building in all cities. Assume that America has 100 cities, every with industries of various productivity. In that mannequin, the most important cities shall be subsequent to the areas of biggest productiveness. (These areas of productiveness had been as soon as linked to pure components corresponding to ports and mineral assets, however are more and more linked to industries with community results like finance, vitality, leisure and tech.) Once more, assume there aren’t any obstacles to constructing, that’s, building of housing is so unconstrained that each single metropolis makes fashionable Houston appear to be a NIMBY stronghold.
Housing costs on this hypothetical financial system shall be larger within the bigger cities, ceteris paribus, regardless that constructing extra housing would possibly effectively depress costs. That’s as a result of in a bigger metropolis, individuals can pay extra for comfort (i.e., an excellent location). That may be true even when these greater cities weren’t extra productive. As an example, individuals would pay additional to cut back commuting prices, or to be near facilities. However the greater cities are (by assumption) additionally extra productive, which supplies one more reason for housing costs to be larger in greater cities—larger wages. This thought experiment means that the empirical relationship Alexander depends upon to make his argument would apply even when his argument weren’t true.
One response is that these industries with community results solely exist in locations like New York as a result of there are many individuals, and which you could’t have plenty of individuals with out plenty of housing. That’s true, however has no bearing on the query of how extra housing impacts costs on the margin. And from the earlier thought experiment, it’s clear that taking a look at easy correlations doesn’t resolve that drawback.
Alexander would possibly fairly reply that my mannequin is overly simplistic. Constructing restrictions differ from one metropolis to a different. In that case, you would possibly count on some exceptions to the iron legislation that greater cities are costlier than smaller cities. And since (he assumes) I discovered just one such anomaly, the correlation among the many remaining cities is simply too sturdy to elucidate by (exogenous) components aside from metropolis measurement.
Really, I cited Austin and Houston merely as one instance, and I picked this instance as a result of they’re positioned in the identical state. The truth is, there are lots of, many examples of bigger cities which can be cheaper than smaller cities. And in just about each single case the reason is that the smaller however costlier cities have extra restrictions on constructing. Within the listing beneath, the metro areas on the left are bigger and cheaper than the metro areas on the best:
Chicago >>> San Francisco Bay Space
Dallas/Forth Price >>> Washington DC
Houston >>> Boston or Seattle
San Antonio >>> Portland
Phoenix >>> San Diego
Colorado Springs >>> Boulder
In every case, the bigger metro space is cheaper than the smaller one. And in every case there are stricter limits on constructing within the costlier metropolis.
That doesn’t show Alexander is incorrect. It’s doable that the rationale for costlier housing within the NIMBY cities has nothing to do with restrictions on constructing. However I doubt it. I believe that if Houston had adopted extreme restrictions on constructing within the Eighties, then individuals would now attribute the ensuing excessive housing costs as being because of all of the oil cash sloshing by means of its financial system. However Houston determined to open its doorways to anybody who wished to maneuver there. In consequence, regardless that Houston is the worldwide vitality capital and is stuffed with effectively paid petroleum engineers, and regardless that vitality is without doubt one of the world’s largest industries, Houston remains to be an affordable place to reside. As an alternative, it received a lot greater. BTW, Houston additionally has effectively paid aerospace engineers, effectively paid enterprise executives and effectively paid medical doctors, and so on. There’s greater than sufficient cash in Houston to drive up housing costs if they’d restricted constructing.
Replace: Emily Hamilton of the Mercatus Heart has a wonderful publish explaining how Houston’s YIMBY insurance policies result in higher housing affordability.
It might seem that Alexander is “Reasoning from a amount change.” In any case, it is mindless to debate the impression of a change in amount on worth, with out understanding why amount modified. If Oakland will get extra housing as a result of it deregulates, costs will in all probability fall. If Oakland will get extra housing as a result of it turns into trendier, then costs will in all probability rise. Alexander appears to know this drawback, and thus not less than implicitly appears to consider that each single issue that may enhance Oakland’s housing provide would have the impact of boosting demand by greater than provide. That’s, he appears to consider that NIMBY insurance policies make cities cheaper. That’s theoretically doable, however appears unlikely most often.
To recap my argument:
1. The correlation Alexander cites proves nothing—you’d count on greater cities to be costlier even when (on the margin) constructing extra housing didn’t elevate costs.
2. Alexander is appropriate that if his mannequin had been incorrect then you definately’d count on some exceptions to the widely constructive relationship between density and worth, because of differential restrictions on constructing. However loads of such exceptions do exist, and virtually all the time in precisely the locations predicted by YIMBY proponents of extra constructing. Elsewhere in his publish he dismisses intercity comparisons between fashionable coastal cities and heartland cities. Nonetheless, the examples I present present that I didn’t simply cherry decide one exception with my Austin/Houston comparability, there are lots of such anomalies. And one can discover such anomalies even inside coastal areas. The Bay Space is costlier than LA, regardless of being smaller. It has extra restrictive zoning. The Boston metro space is costlier than metro DC, regardless of being smaller. Boston has extra restrictive zoning. And you’ll’t say that LA and DC are usually not fascinating markets.
Simply to be clear, our dispute has completely no coverage implications. As an example, I stated:
If constructing extra housing raises its worth, then the argument for extra building is even stronger.
And Alexander responded:
I agree with all this.
That is vital, as a result of his previous post had appeared to point that he thought it was a “drawback” that new building led to larger housing costs. He beforehand stated:
It is a coordination drawback: if each metropolis upzones collectively, they will all get decrease home costs, however every metropolis can reduce its personal costs by refusing to cooperate and hoping everybody else does the exhausting work.
What “exhausting work”?
Within the new publish he makes it very clear that this isn’t a “drawback.” He helps the YIMBY place.
Thus we each assist making it simpler to construct housing in Oakland, though he thinks this is able to elevate costs and I feel it will decrease them. If I’m incorrect, that’s, if extra housing boosted home costs in Oakland, then we each agree that this is able to be an particularly good end result. And I concede that I may be incorrect.
P.S. Barely off subject, it’s price recalling why new homes ought to be “unaffordable” for common Individuals. Consider a steady-state society with solely 100 households, dwelling in 100 homes of various high quality. Assume that every home lasts 100 years. Every year, the worst home is torn down, and a brand new home is constructed. To ensure that the standard of the housing inventory to rise by 1%/yr, the brand new home have to be twice nearly as good as the common current home. Every year, the households all shift over one home, shifting progressively to raised and higher properties. The richest household lives within the newly constructed home, which is (by assumption) unaffordable to the opposite 99 households.
In a extra reasonable mannequin with inhabitants development, not each new home is unaffordable to the underside 99%. However even with inhabitants development, new building in an financial system with rising dwelling requirements will are typically a lot nicer than the present inventory of housing, which signifies that new building will usually be “unaffordable” to the common household. If new housing is reasonably priced to the common household, then society won’t progress.
P.P.S. Alexander describes my earlier publish as follows:
Scott Sumner is an economist and blogger
I don’t see myself as a well-known particular person, however I share his view that I’ve the potential to carry good opinions. So far as the query of whether or not I do really maintain good opinions, I’ll let readers resolve.
In a recent post, Scott Alexander doubled down on his argument that constructing extra housing usually ends in larger housing costs. In his earlier publish, he pointed to the truth that housing is usually costlier in greater cities. I supplied a counterexample, citing Houston and Austin. I additionally argued that large cities are costly for causes unrelated to their giant amount of housing, corresponding to the benefits supplied by agglomeration. Exogenous provide will increase, corresponding to making it simpler to construct new housing, usually cut back housing costs.
Right here’s how Alexander responded to certainly one of my arguments:
I began the publish with a graph of about 50 cities, exhibiting a constructive correlation between density and worth. I’m having bother seeing how Sumner’s level isn’t simply “for those who take away 48 of these cities and cherry-pick two, the connection is unfavorable”.
I feel Alexander misunderstood this argument, so let me return and make the purpose extra rigorously. It will likely be useful to make two separate arguments:
1. You’d count on large cities to be costlier even when constructing housing reduces housing costs.
2. Austin and Houston are usually not the one counterexamples; there are lots of different such anomalies.
Let’s begin with a easy mannequin the place there are zero restrictions on housing building in all cities. Assume that America has 100 cities, every with industries of various productivity. In that mannequin, the most important cities shall be subsequent to the areas of biggest productiveness. (These areas of productiveness had been as soon as linked to pure components corresponding to ports and mineral assets, however are more and more linked to industries with community results like finance, vitality, leisure and tech.) Once more, assume there aren’t any obstacles to constructing, that’s, building of housing is so unconstrained that each single metropolis makes fashionable Houston appear to be a NIMBY stronghold.
Housing costs on this hypothetical financial system shall be larger within the bigger cities, ceteris paribus, regardless that constructing extra housing would possibly effectively depress costs. That’s as a result of in a bigger metropolis, individuals can pay extra for comfort (i.e., an excellent location). That may be true even when these greater cities weren’t extra productive. As an example, individuals would pay additional to cut back commuting prices, or to be near facilities. However the greater cities are (by assumption) additionally extra productive, which supplies one more reason for housing costs to be larger in greater cities—larger wages. This thought experiment means that the empirical relationship Alexander depends upon to make his argument would apply even when his argument weren’t true.
One response is that these industries with community results solely exist in locations like New York as a result of there are many individuals, and which you could’t have plenty of individuals with out plenty of housing. That’s true, however has no bearing on the query of how extra housing impacts costs on the margin. And from the earlier thought experiment, it’s clear that taking a look at easy correlations doesn’t resolve that drawback.
Alexander would possibly fairly reply that my mannequin is overly simplistic. Constructing restrictions differ from one metropolis to a different. In that case, you would possibly count on some exceptions to the iron legislation that greater cities are costlier than smaller cities. And since (he assumes) I discovered just one such anomaly, the correlation among the many remaining cities is simply too sturdy to elucidate by (exogenous) components aside from metropolis measurement.
Really, I cited Austin and Houston merely as one instance, and I picked this instance as a result of they’re positioned in the identical state. The truth is, there are lots of, many examples of bigger cities which can be cheaper than smaller cities. And in just about each single case the reason is that the smaller however costlier cities have extra restrictions on constructing. Within the listing beneath, the metro areas on the left are bigger and cheaper than the metro areas on the best:
Chicago >>> San Francisco Bay Space
Dallas/Forth Price >>> Washington DC
Houston >>> Boston or Seattle
San Antonio >>> Portland
Phoenix >>> San Diego
Colorado Springs >>> Boulder
In every case, the bigger metro space is cheaper than the smaller one. And in every case there are stricter limits on constructing within the costlier metropolis.
That doesn’t show Alexander is incorrect. It’s doable that the rationale for costlier housing within the NIMBY cities has nothing to do with restrictions on constructing. However I doubt it. I believe that if Houston had adopted extreme restrictions on constructing within the Eighties, then individuals would now attribute the ensuing excessive housing costs as being because of all of the oil cash sloshing by means of its financial system. However Houston determined to open its doorways to anybody who wished to maneuver there. In consequence, regardless that Houston is the worldwide vitality capital and is stuffed with effectively paid petroleum engineers, and regardless that vitality is without doubt one of the world’s largest industries, Houston remains to be an affordable place to reside. As an alternative, it received a lot greater. BTW, Houston additionally has effectively paid aerospace engineers, effectively paid enterprise executives and effectively paid medical doctors, and so on. There’s greater than sufficient cash in Houston to drive up housing costs if they’d restricted constructing.
Replace: Emily Hamilton of the Mercatus Heart has a wonderful publish explaining how Houston’s YIMBY insurance policies result in higher housing affordability.
It might seem that Alexander is “Reasoning from a amount change.” In any case, it is mindless to debate the impression of a change in amount on worth, with out understanding why amount modified. If Oakland will get extra housing as a result of it deregulates, costs will in all probability fall. If Oakland will get extra housing as a result of it turns into trendier, then costs will in all probability rise. Alexander appears to know this drawback, and thus not less than implicitly appears to consider that each single issue that may enhance Oakland’s housing provide would have the impact of boosting demand by greater than provide. That’s, he appears to consider that NIMBY insurance policies make cities cheaper. That’s theoretically doable, however appears unlikely most often.
To recap my argument:
1. The correlation Alexander cites proves nothing—you’d count on greater cities to be costlier even when (on the margin) constructing extra housing didn’t elevate costs.
2. Alexander is appropriate that if his mannequin had been incorrect then you definately’d count on some exceptions to the widely constructive relationship between density and worth, because of differential restrictions on constructing. However loads of such exceptions do exist, and virtually all the time in precisely the locations predicted by YIMBY proponents of extra constructing. Elsewhere in his publish he dismisses intercity comparisons between fashionable coastal cities and heartland cities. Nonetheless, the examples I present present that I didn’t simply cherry decide one exception with my Austin/Houston comparability, there are lots of such anomalies. And one can discover such anomalies even inside coastal areas. The Bay Space is costlier than LA, regardless of being smaller. It has extra restrictive zoning. The Boston metro space is costlier than metro DC, regardless of being smaller. Boston has extra restrictive zoning. And you’ll’t say that LA and DC are usually not fascinating markets.
Simply to be clear, our dispute has completely no coverage implications. As an example, I stated:
If constructing extra housing raises its worth, then the argument for extra building is even stronger.
And Alexander responded:
I agree with all this.
That is vital, as a result of his previous post had appeared to point that he thought it was a “drawback” that new building led to larger housing costs. He beforehand stated:
It is a coordination drawback: if each metropolis upzones collectively, they will all get decrease home costs, however every metropolis can reduce its personal costs by refusing to cooperate and hoping everybody else does the exhausting work.
What “exhausting work”?
Within the new publish he makes it very clear that this isn’t a “drawback.” He helps the YIMBY place.
Thus we each assist making it simpler to construct housing in Oakland, though he thinks this is able to elevate costs and I feel it will decrease them. If I’m incorrect, that’s, if extra housing boosted home costs in Oakland, then we each agree that this is able to be an particularly good end result. And I concede that I may be incorrect.
P.S. Barely off subject, it’s price recalling why new homes ought to be “unaffordable” for common Individuals. Consider a steady-state society with solely 100 households, dwelling in 100 homes of various high quality. Assume that every home lasts 100 years. Every year, the worst home is torn down, and a brand new home is constructed. To ensure that the standard of the housing inventory to rise by 1%/yr, the brand new home have to be twice nearly as good as the common current home. Every year, the households all shift over one home, shifting progressively to raised and higher properties. The richest household lives within the newly constructed home, which is (by assumption) unaffordable to the opposite 99 households.
In a extra reasonable mannequin with inhabitants development, not each new home is unaffordable to the underside 99%. However even with inhabitants development, new building in an financial system with rising dwelling requirements will are typically a lot nicer than the present inventory of housing, which signifies that new building will usually be “unaffordable” to the common household. If new housing is reasonably priced to the common household, then society won’t progress.
P.P.S. Alexander describes my earlier publish as follows:
Scott Sumner is an economist and blogger
I don’t see myself as a well-known particular person, however I share his view that I’ve the potential to carry good opinions. So far as the query of whether or not I do really maintain good opinions, I’ll let readers resolve.
In a recent post, Scott Alexander doubled down on his argument that constructing extra housing usually ends in larger housing costs. In his earlier publish, he pointed to the truth that housing is usually costlier in greater cities. I supplied a counterexample, citing Houston and Austin. I additionally argued that large cities are costly for causes unrelated to their giant amount of housing, corresponding to the benefits supplied by agglomeration. Exogenous provide will increase, corresponding to making it simpler to construct new housing, usually cut back housing costs.
Right here’s how Alexander responded to certainly one of my arguments:
I began the publish with a graph of about 50 cities, exhibiting a constructive correlation between density and worth. I’m having bother seeing how Sumner’s level isn’t simply “for those who take away 48 of these cities and cherry-pick two, the connection is unfavorable”.
I feel Alexander misunderstood this argument, so let me return and make the purpose extra rigorously. It will likely be useful to make two separate arguments:
1. You’d count on large cities to be costlier even when constructing housing reduces housing costs.
2. Austin and Houston are usually not the one counterexamples; there are lots of different such anomalies.
Let’s begin with a easy mannequin the place there are zero restrictions on housing building in all cities. Assume that America has 100 cities, every with industries of various productivity. In that mannequin, the most important cities shall be subsequent to the areas of biggest productiveness. (These areas of productiveness had been as soon as linked to pure components corresponding to ports and mineral assets, however are more and more linked to industries with community results like finance, vitality, leisure and tech.) Once more, assume there aren’t any obstacles to constructing, that’s, building of housing is so unconstrained that each single metropolis makes fashionable Houston appear to be a NIMBY stronghold.
Housing costs on this hypothetical financial system shall be larger within the bigger cities, ceteris paribus, regardless that constructing extra housing would possibly effectively depress costs. That’s as a result of in a bigger metropolis, individuals can pay extra for comfort (i.e., an excellent location). That may be true even when these greater cities weren’t extra productive. As an example, individuals would pay additional to cut back commuting prices, or to be near facilities. However the greater cities are (by assumption) additionally extra productive, which supplies one more reason for housing costs to be larger in greater cities—larger wages. This thought experiment means that the empirical relationship Alexander depends upon to make his argument would apply even when his argument weren’t true.
One response is that these industries with community results solely exist in locations like New York as a result of there are many individuals, and which you could’t have plenty of individuals with out plenty of housing. That’s true, however has no bearing on the query of how extra housing impacts costs on the margin. And from the earlier thought experiment, it’s clear that taking a look at easy correlations doesn’t resolve that drawback.
Alexander would possibly fairly reply that my mannequin is overly simplistic. Constructing restrictions differ from one metropolis to a different. In that case, you would possibly count on some exceptions to the iron legislation that greater cities are costlier than smaller cities. And since (he assumes) I discovered just one such anomaly, the correlation among the many remaining cities is simply too sturdy to elucidate by (exogenous) components aside from metropolis measurement.
Really, I cited Austin and Houston merely as one instance, and I picked this instance as a result of they’re positioned in the identical state. The truth is, there are lots of, many examples of bigger cities which can be cheaper than smaller cities. And in just about each single case the reason is that the smaller however costlier cities have extra restrictions on constructing. Within the listing beneath, the metro areas on the left are bigger and cheaper than the metro areas on the best:
Chicago >>> San Francisco Bay Space
Dallas/Forth Price >>> Washington DC
Houston >>> Boston or Seattle
San Antonio >>> Portland
Phoenix >>> San Diego
Colorado Springs >>> Boulder
In every case, the bigger metro space is cheaper than the smaller one. And in every case there are stricter limits on constructing within the costlier metropolis.
That doesn’t show Alexander is incorrect. It’s doable that the rationale for costlier housing within the NIMBY cities has nothing to do with restrictions on constructing. However I doubt it. I believe that if Houston had adopted extreme restrictions on constructing within the Eighties, then individuals would now attribute the ensuing excessive housing costs as being because of all of the oil cash sloshing by means of its financial system. However Houston determined to open its doorways to anybody who wished to maneuver there. In consequence, regardless that Houston is the worldwide vitality capital and is stuffed with effectively paid petroleum engineers, and regardless that vitality is without doubt one of the world’s largest industries, Houston remains to be an affordable place to reside. As an alternative, it received a lot greater. BTW, Houston additionally has effectively paid aerospace engineers, effectively paid enterprise executives and effectively paid medical doctors, and so on. There’s greater than sufficient cash in Houston to drive up housing costs if they’d restricted constructing.
Replace: Emily Hamilton of the Mercatus Heart has a wonderful publish explaining how Houston’s YIMBY insurance policies result in higher housing affordability.
It might seem that Alexander is “Reasoning from a amount change.” In any case, it is mindless to debate the impression of a change in amount on worth, with out understanding why amount modified. If Oakland will get extra housing as a result of it deregulates, costs will in all probability fall. If Oakland will get extra housing as a result of it turns into trendier, then costs will in all probability rise. Alexander appears to know this drawback, and thus not less than implicitly appears to consider that each single issue that may enhance Oakland’s housing provide would have the impact of boosting demand by greater than provide. That’s, he appears to consider that NIMBY insurance policies make cities cheaper. That’s theoretically doable, however appears unlikely most often.
To recap my argument:
1. The correlation Alexander cites proves nothing—you’d count on greater cities to be costlier even when (on the margin) constructing extra housing didn’t elevate costs.
2. Alexander is appropriate that if his mannequin had been incorrect then you definately’d count on some exceptions to the widely constructive relationship between density and worth, because of differential restrictions on constructing. However loads of such exceptions do exist, and virtually all the time in precisely the locations predicted by YIMBY proponents of extra constructing. Elsewhere in his publish he dismisses intercity comparisons between fashionable coastal cities and heartland cities. Nonetheless, the examples I present present that I didn’t simply cherry decide one exception with my Austin/Houston comparability, there are lots of such anomalies. And one can discover such anomalies even inside coastal areas. The Bay Space is costlier than LA, regardless of being smaller. It has extra restrictive zoning. The Boston metro space is costlier than metro DC, regardless of being smaller. Boston has extra restrictive zoning. And you’ll’t say that LA and DC are usually not fascinating markets.
Simply to be clear, our dispute has completely no coverage implications. As an example, I stated:
If constructing extra housing raises its worth, then the argument for extra building is even stronger.
And Alexander responded:
I agree with all this.
That is vital, as a result of his previous post had appeared to point that he thought it was a “drawback” that new building led to larger housing costs. He beforehand stated:
It is a coordination drawback: if each metropolis upzones collectively, they will all get decrease home costs, however every metropolis can reduce its personal costs by refusing to cooperate and hoping everybody else does the exhausting work.
What “exhausting work”?
Within the new publish he makes it very clear that this isn’t a “drawback.” He helps the YIMBY place.
Thus we each assist making it simpler to construct housing in Oakland, though he thinks this is able to elevate costs and I feel it will decrease them. If I’m incorrect, that’s, if extra housing boosted home costs in Oakland, then we each agree that this is able to be an particularly good end result. And I concede that I may be incorrect.
P.S. Barely off subject, it’s price recalling why new homes ought to be “unaffordable” for common Individuals. Consider a steady-state society with solely 100 households, dwelling in 100 homes of various high quality. Assume that every home lasts 100 years. Every year, the worst home is torn down, and a brand new home is constructed. To ensure that the standard of the housing inventory to rise by 1%/yr, the brand new home have to be twice nearly as good as the common current home. Every year, the households all shift over one home, shifting progressively to raised and higher properties. The richest household lives within the newly constructed home, which is (by assumption) unaffordable to the opposite 99 households.
In a extra reasonable mannequin with inhabitants development, not each new home is unaffordable to the underside 99%. However even with inhabitants development, new building in an financial system with rising dwelling requirements will are typically a lot nicer than the present inventory of housing, which signifies that new building will usually be “unaffordable” to the common household. If new housing is reasonably priced to the common household, then society won’t progress.
P.P.S. Alexander describes my earlier publish as follows:
Scott Sumner is an economist and blogger
I don’t see myself as a well-known particular person, however I share his view that I’ve the potential to carry good opinions. So far as the query of whether or not I do really maintain good opinions, I’ll let readers resolve.
In a recent post, Scott Alexander doubled down on his argument that constructing extra housing usually ends in larger housing costs. In his earlier publish, he pointed to the truth that housing is usually costlier in greater cities. I supplied a counterexample, citing Houston and Austin. I additionally argued that large cities are costly for causes unrelated to their giant amount of housing, corresponding to the benefits supplied by agglomeration. Exogenous provide will increase, corresponding to making it simpler to construct new housing, usually cut back housing costs.
Right here’s how Alexander responded to certainly one of my arguments:
I began the publish with a graph of about 50 cities, exhibiting a constructive correlation between density and worth. I’m having bother seeing how Sumner’s level isn’t simply “for those who take away 48 of these cities and cherry-pick two, the connection is unfavorable”.
I feel Alexander misunderstood this argument, so let me return and make the purpose extra rigorously. It will likely be useful to make two separate arguments:
1. You’d count on large cities to be costlier even when constructing housing reduces housing costs.
2. Austin and Houston are usually not the one counterexamples; there are lots of different such anomalies.
Let’s begin with a easy mannequin the place there are zero restrictions on housing building in all cities. Assume that America has 100 cities, every with industries of various productivity. In that mannequin, the most important cities shall be subsequent to the areas of biggest productiveness. (These areas of productiveness had been as soon as linked to pure components corresponding to ports and mineral assets, however are more and more linked to industries with community results like finance, vitality, leisure and tech.) Once more, assume there aren’t any obstacles to constructing, that’s, building of housing is so unconstrained that each single metropolis makes fashionable Houston appear to be a NIMBY stronghold.
Housing costs on this hypothetical financial system shall be larger within the bigger cities, ceteris paribus, regardless that constructing extra housing would possibly effectively depress costs. That’s as a result of in a bigger metropolis, individuals can pay extra for comfort (i.e., an excellent location). That may be true even when these greater cities weren’t extra productive. As an example, individuals would pay additional to cut back commuting prices, or to be near facilities. However the greater cities are (by assumption) additionally extra productive, which supplies one more reason for housing costs to be larger in greater cities—larger wages. This thought experiment means that the empirical relationship Alexander depends upon to make his argument would apply even when his argument weren’t true.
One response is that these industries with community results solely exist in locations like New York as a result of there are many individuals, and which you could’t have plenty of individuals with out plenty of housing. That’s true, however has no bearing on the query of how extra housing impacts costs on the margin. And from the earlier thought experiment, it’s clear that taking a look at easy correlations doesn’t resolve that drawback.
Alexander would possibly fairly reply that my mannequin is overly simplistic. Constructing restrictions differ from one metropolis to a different. In that case, you would possibly count on some exceptions to the iron legislation that greater cities are costlier than smaller cities. And since (he assumes) I discovered just one such anomaly, the correlation among the many remaining cities is simply too sturdy to elucidate by (exogenous) components aside from metropolis measurement.
Really, I cited Austin and Houston merely as one instance, and I picked this instance as a result of they’re positioned in the identical state. The truth is, there are lots of, many examples of bigger cities which can be cheaper than smaller cities. And in just about each single case the reason is that the smaller however costlier cities have extra restrictions on constructing. Within the listing beneath, the metro areas on the left are bigger and cheaper than the metro areas on the best:
Chicago >>> San Francisco Bay Space
Dallas/Forth Price >>> Washington DC
Houston >>> Boston or Seattle
San Antonio >>> Portland
Phoenix >>> San Diego
Colorado Springs >>> Boulder
In every case, the bigger metro space is cheaper than the smaller one. And in every case there are stricter limits on constructing within the costlier metropolis.
That doesn’t show Alexander is incorrect. It’s doable that the rationale for costlier housing within the NIMBY cities has nothing to do with restrictions on constructing. However I doubt it. I believe that if Houston had adopted extreme restrictions on constructing within the Eighties, then individuals would now attribute the ensuing excessive housing costs as being because of all of the oil cash sloshing by means of its financial system. However Houston determined to open its doorways to anybody who wished to maneuver there. In consequence, regardless that Houston is the worldwide vitality capital and is stuffed with effectively paid petroleum engineers, and regardless that vitality is without doubt one of the world’s largest industries, Houston remains to be an affordable place to reside. As an alternative, it received a lot greater. BTW, Houston additionally has effectively paid aerospace engineers, effectively paid enterprise executives and effectively paid medical doctors, and so on. There’s greater than sufficient cash in Houston to drive up housing costs if they’d restricted constructing.
Replace: Emily Hamilton of the Mercatus Heart has a wonderful publish explaining how Houston’s YIMBY insurance policies result in higher housing affordability.
It might seem that Alexander is “Reasoning from a amount change.” In any case, it is mindless to debate the impression of a change in amount on worth, with out understanding why amount modified. If Oakland will get extra housing as a result of it deregulates, costs will in all probability fall. If Oakland will get extra housing as a result of it turns into trendier, then costs will in all probability rise. Alexander appears to know this drawback, and thus not less than implicitly appears to consider that each single issue that may enhance Oakland’s housing provide would have the impact of boosting demand by greater than provide. That’s, he appears to consider that NIMBY insurance policies make cities cheaper. That’s theoretically doable, however appears unlikely most often.
To recap my argument:
1. The correlation Alexander cites proves nothing—you’d count on greater cities to be costlier even when (on the margin) constructing extra housing didn’t elevate costs.
2. Alexander is appropriate that if his mannequin had been incorrect then you definately’d count on some exceptions to the widely constructive relationship between density and worth, because of differential restrictions on constructing. However loads of such exceptions do exist, and virtually all the time in precisely the locations predicted by YIMBY proponents of extra constructing. Elsewhere in his publish he dismisses intercity comparisons between fashionable coastal cities and heartland cities. Nonetheless, the examples I present present that I didn’t simply cherry decide one exception with my Austin/Houston comparability, there are lots of such anomalies. And one can discover such anomalies even inside coastal areas. The Bay Space is costlier than LA, regardless of being smaller. It has extra restrictive zoning. The Boston metro space is costlier than metro DC, regardless of being smaller. Boston has extra restrictive zoning. And you’ll’t say that LA and DC are usually not fascinating markets.
Simply to be clear, our dispute has completely no coverage implications. As an example, I stated:
If constructing extra housing raises its worth, then the argument for extra building is even stronger.
And Alexander responded:
I agree with all this.
That is vital, as a result of his previous post had appeared to point that he thought it was a “drawback” that new building led to larger housing costs. He beforehand stated:
It is a coordination drawback: if each metropolis upzones collectively, they will all get decrease home costs, however every metropolis can reduce its personal costs by refusing to cooperate and hoping everybody else does the exhausting work.
What “exhausting work”?
Within the new publish he makes it very clear that this isn’t a “drawback.” He helps the YIMBY place.
Thus we each assist making it simpler to construct housing in Oakland, though he thinks this is able to elevate costs and I feel it will decrease them. If I’m incorrect, that’s, if extra housing boosted home costs in Oakland, then we each agree that this is able to be an particularly good end result. And I concede that I may be incorrect.
P.S. Barely off subject, it’s price recalling why new homes ought to be “unaffordable” for common Individuals. Consider a steady-state society with solely 100 households, dwelling in 100 homes of various high quality. Assume that every home lasts 100 years. Every year, the worst home is torn down, and a brand new home is constructed. To ensure that the standard of the housing inventory to rise by 1%/yr, the brand new home have to be twice nearly as good as the common current home. Every year, the households all shift over one home, shifting progressively to raised and higher properties. The richest household lives within the newly constructed home, which is (by assumption) unaffordable to the opposite 99 households.
In a extra reasonable mannequin with inhabitants development, not each new home is unaffordable to the underside 99%. However even with inhabitants development, new building in an financial system with rising dwelling requirements will are typically a lot nicer than the present inventory of housing, which signifies that new building will usually be “unaffordable” to the common household. If new housing is reasonably priced to the common household, then society won’t progress.
P.P.S. Alexander describes my earlier publish as follows:
Scott Sumner is an economist and blogger
I don’t see myself as a well-known particular person, however I share his view that I’ve the potential to carry good opinions. So far as the query of whether or not I do really maintain good opinions, I’ll let readers resolve.
In a recent post, Scott Alexander doubled down on his argument that constructing extra housing usually ends in larger housing costs. In his earlier publish, he pointed to the truth that housing is usually costlier in greater cities. I supplied a counterexample, citing Houston and Austin. I additionally argued that large cities are costly for causes unrelated to their giant amount of housing, corresponding to the benefits supplied by agglomeration. Exogenous provide will increase, corresponding to making it simpler to construct new housing, usually cut back housing costs.
Right here’s how Alexander responded to certainly one of my arguments:
I began the publish with a graph of about 50 cities, exhibiting a constructive correlation between density and worth. I’m having bother seeing how Sumner’s level isn’t simply “for those who take away 48 of these cities and cherry-pick two, the connection is unfavorable”.
I feel Alexander misunderstood this argument, so let me return and make the purpose extra rigorously. It will likely be useful to make two separate arguments:
1. You’d count on large cities to be costlier even when constructing housing reduces housing costs.
2. Austin and Houston are usually not the one counterexamples; there are lots of different such anomalies.
Let’s begin with a easy mannequin the place there are zero restrictions on housing building in all cities. Assume that America has 100 cities, every with industries of various productivity. In that mannequin, the most important cities shall be subsequent to the areas of biggest productiveness. (These areas of productiveness had been as soon as linked to pure components corresponding to ports and mineral assets, however are more and more linked to industries with community results like finance, vitality, leisure and tech.) Once more, assume there aren’t any obstacles to constructing, that’s, building of housing is so unconstrained that each single metropolis makes fashionable Houston appear to be a NIMBY stronghold.
Housing costs on this hypothetical financial system shall be larger within the bigger cities, ceteris paribus, regardless that constructing extra housing would possibly effectively depress costs. That’s as a result of in a bigger metropolis, individuals can pay extra for comfort (i.e., an excellent location). That may be true even when these greater cities weren’t extra productive. As an example, individuals would pay additional to cut back commuting prices, or to be near facilities. However the greater cities are (by assumption) additionally extra productive, which supplies one more reason for housing costs to be larger in greater cities—larger wages. This thought experiment means that the empirical relationship Alexander depends upon to make his argument would apply even when his argument weren’t true.
One response is that these industries with community results solely exist in locations like New York as a result of there are many individuals, and which you could’t have plenty of individuals with out plenty of housing. That’s true, however has no bearing on the query of how extra housing impacts costs on the margin. And from the earlier thought experiment, it’s clear that taking a look at easy correlations doesn’t resolve that drawback.
Alexander would possibly fairly reply that my mannequin is overly simplistic. Constructing restrictions differ from one metropolis to a different. In that case, you would possibly count on some exceptions to the iron legislation that greater cities are costlier than smaller cities. And since (he assumes) I discovered just one such anomaly, the correlation among the many remaining cities is simply too sturdy to elucidate by (exogenous) components aside from metropolis measurement.
Really, I cited Austin and Houston merely as one instance, and I picked this instance as a result of they’re positioned in the identical state. The truth is, there are lots of, many examples of bigger cities which can be cheaper than smaller cities. And in just about each single case the reason is that the smaller however costlier cities have extra restrictions on constructing. Within the listing beneath, the metro areas on the left are bigger and cheaper than the metro areas on the best:
Chicago >>> San Francisco Bay Space
Dallas/Forth Price >>> Washington DC
Houston >>> Boston or Seattle
San Antonio >>> Portland
Phoenix >>> San Diego
Colorado Springs >>> Boulder
In every case, the bigger metro space is cheaper than the smaller one. And in every case there are stricter limits on constructing within the costlier metropolis.
That doesn’t show Alexander is incorrect. It’s doable that the rationale for costlier housing within the NIMBY cities has nothing to do with restrictions on constructing. However I doubt it. I believe that if Houston had adopted extreme restrictions on constructing within the Eighties, then individuals would now attribute the ensuing excessive housing costs as being because of all of the oil cash sloshing by means of its financial system. However Houston determined to open its doorways to anybody who wished to maneuver there. In consequence, regardless that Houston is the worldwide vitality capital and is stuffed with effectively paid petroleum engineers, and regardless that vitality is without doubt one of the world’s largest industries, Houston remains to be an affordable place to reside. As an alternative, it received a lot greater. BTW, Houston additionally has effectively paid aerospace engineers, effectively paid enterprise executives and effectively paid medical doctors, and so on. There’s greater than sufficient cash in Houston to drive up housing costs if they’d restricted constructing.
Replace: Emily Hamilton of the Mercatus Heart has a wonderful publish explaining how Houston’s YIMBY insurance policies result in higher housing affordability.
It might seem that Alexander is “Reasoning from a amount change.” In any case, it is mindless to debate the impression of a change in amount on worth, with out understanding why amount modified. If Oakland will get extra housing as a result of it deregulates, costs will in all probability fall. If Oakland will get extra housing as a result of it turns into trendier, then costs will in all probability rise. Alexander appears to know this drawback, and thus not less than implicitly appears to consider that each single issue that may enhance Oakland’s housing provide would have the impact of boosting demand by greater than provide. That’s, he appears to consider that NIMBY insurance policies make cities cheaper. That’s theoretically doable, however appears unlikely most often.
To recap my argument:
1. The correlation Alexander cites proves nothing—you’d count on greater cities to be costlier even when (on the margin) constructing extra housing didn’t elevate costs.
2. Alexander is appropriate that if his mannequin had been incorrect then you definately’d count on some exceptions to the widely constructive relationship between density and worth, because of differential restrictions on constructing. However loads of such exceptions do exist, and virtually all the time in precisely the locations predicted by YIMBY proponents of extra constructing. Elsewhere in his publish he dismisses intercity comparisons between fashionable coastal cities and heartland cities. Nonetheless, the examples I present present that I didn’t simply cherry decide one exception with my Austin/Houston comparability, there are lots of such anomalies. And one can discover such anomalies even inside coastal areas. The Bay Space is costlier than LA, regardless of being smaller. It has extra restrictive zoning. The Boston metro space is costlier than metro DC, regardless of being smaller. Boston has extra restrictive zoning. And you’ll’t say that LA and DC are usually not fascinating markets.
Simply to be clear, our dispute has completely no coverage implications. As an example, I stated:
If constructing extra housing raises its worth, then the argument for extra building is even stronger.
And Alexander responded:
I agree with all this.
That is vital, as a result of his previous post had appeared to point that he thought it was a “drawback” that new building led to larger housing costs. He beforehand stated:
It is a coordination drawback: if each metropolis upzones collectively, they will all get decrease home costs, however every metropolis can reduce its personal costs by refusing to cooperate and hoping everybody else does the exhausting work.
What “exhausting work”?
Within the new publish he makes it very clear that this isn’t a “drawback.” He helps the YIMBY place.
Thus we each assist making it simpler to construct housing in Oakland, though he thinks this is able to elevate costs and I feel it will decrease them. If I’m incorrect, that’s, if extra housing boosted home costs in Oakland, then we each agree that this is able to be an particularly good end result. And I concede that I may be incorrect.
P.S. Barely off subject, it’s price recalling why new homes ought to be “unaffordable” for common Individuals. Consider a steady-state society with solely 100 households, dwelling in 100 homes of various high quality. Assume that every home lasts 100 years. Every year, the worst home is torn down, and a brand new home is constructed. To ensure that the standard of the housing inventory to rise by 1%/yr, the brand new home have to be twice nearly as good as the common current home. Every year, the households all shift over one home, shifting progressively to raised and higher properties. The richest household lives within the newly constructed home, which is (by assumption) unaffordable to the opposite 99 households.
In a extra reasonable mannequin with inhabitants development, not each new home is unaffordable to the underside 99%. However even with inhabitants development, new building in an financial system with rising dwelling requirements will are typically a lot nicer than the present inventory of housing, which signifies that new building will usually be “unaffordable” to the common household. If new housing is reasonably priced to the common household, then society won’t progress.
P.P.S. Alexander describes my earlier publish as follows:
Scott Sumner is an economist and blogger
I don’t see myself as a well-known particular person, however I share his view that I’ve the potential to carry good opinions. So far as the query of whether or not I do really maintain good opinions, I’ll let readers resolve.
In a recent post, Scott Alexander doubled down on his argument that constructing extra housing usually ends in larger housing costs. In his earlier publish, he pointed to the truth that housing is usually costlier in greater cities. I supplied a counterexample, citing Houston and Austin. I additionally argued that large cities are costly for causes unrelated to their giant amount of housing, corresponding to the benefits supplied by agglomeration. Exogenous provide will increase, corresponding to making it simpler to construct new housing, usually cut back housing costs.
Right here’s how Alexander responded to certainly one of my arguments:
I began the publish with a graph of about 50 cities, exhibiting a constructive correlation between density and worth. I’m having bother seeing how Sumner’s level isn’t simply “for those who take away 48 of these cities and cherry-pick two, the connection is unfavorable”.
I feel Alexander misunderstood this argument, so let me return and make the purpose extra rigorously. It will likely be useful to make two separate arguments:
1. You’d count on large cities to be costlier even when constructing housing reduces housing costs.
2. Austin and Houston are usually not the one counterexamples; there are lots of different such anomalies.
Let’s begin with a easy mannequin the place there are zero restrictions on housing building in all cities. Assume that America has 100 cities, every with industries of various productivity. In that mannequin, the most important cities shall be subsequent to the areas of biggest productiveness. (These areas of productiveness had been as soon as linked to pure components corresponding to ports and mineral assets, however are more and more linked to industries with community results like finance, vitality, leisure and tech.) Once more, assume there aren’t any obstacles to constructing, that’s, building of housing is so unconstrained that each single metropolis makes fashionable Houston appear to be a NIMBY stronghold.
Housing costs on this hypothetical financial system shall be larger within the bigger cities, ceteris paribus, regardless that constructing extra housing would possibly effectively depress costs. That’s as a result of in a bigger metropolis, individuals can pay extra for comfort (i.e., an excellent location). That may be true even when these greater cities weren’t extra productive. As an example, individuals would pay additional to cut back commuting prices, or to be near facilities. However the greater cities are (by assumption) additionally extra productive, which supplies one more reason for housing costs to be larger in greater cities—larger wages. This thought experiment means that the empirical relationship Alexander depends upon to make his argument would apply even when his argument weren’t true.
One response is that these industries with community results solely exist in locations like New York as a result of there are many individuals, and which you could’t have plenty of individuals with out plenty of housing. That’s true, however has no bearing on the query of how extra housing impacts costs on the margin. And from the earlier thought experiment, it’s clear that taking a look at easy correlations doesn’t resolve that drawback.
Alexander would possibly fairly reply that my mannequin is overly simplistic. Constructing restrictions differ from one metropolis to a different. In that case, you would possibly count on some exceptions to the iron legislation that greater cities are costlier than smaller cities. And since (he assumes) I discovered just one such anomaly, the correlation among the many remaining cities is simply too sturdy to elucidate by (exogenous) components aside from metropolis measurement.
Really, I cited Austin and Houston merely as one instance, and I picked this instance as a result of they’re positioned in the identical state. The truth is, there are lots of, many examples of bigger cities which can be cheaper than smaller cities. And in just about each single case the reason is that the smaller however costlier cities have extra restrictions on constructing. Within the listing beneath, the metro areas on the left are bigger and cheaper than the metro areas on the best:
Chicago >>> San Francisco Bay Space
Dallas/Forth Price >>> Washington DC
Houston >>> Boston or Seattle
San Antonio >>> Portland
Phoenix >>> San Diego
Colorado Springs >>> Boulder
In every case, the bigger metro space is cheaper than the smaller one. And in every case there are stricter limits on constructing within the costlier metropolis.
That doesn’t show Alexander is incorrect. It’s doable that the rationale for costlier housing within the NIMBY cities has nothing to do with restrictions on constructing. However I doubt it. I believe that if Houston had adopted extreme restrictions on constructing within the Eighties, then individuals would now attribute the ensuing excessive housing costs as being because of all of the oil cash sloshing by means of its financial system. However Houston determined to open its doorways to anybody who wished to maneuver there. In consequence, regardless that Houston is the worldwide vitality capital and is stuffed with effectively paid petroleum engineers, and regardless that vitality is without doubt one of the world’s largest industries, Houston remains to be an affordable place to reside. As an alternative, it received a lot greater. BTW, Houston additionally has effectively paid aerospace engineers, effectively paid enterprise executives and effectively paid medical doctors, and so on. There’s greater than sufficient cash in Houston to drive up housing costs if they’d restricted constructing.
Replace: Emily Hamilton of the Mercatus Heart has a wonderful publish explaining how Houston’s YIMBY insurance policies result in higher housing affordability.
It might seem that Alexander is “Reasoning from a amount change.” In any case, it is mindless to debate the impression of a change in amount on worth, with out understanding why amount modified. If Oakland will get extra housing as a result of it deregulates, costs will in all probability fall. If Oakland will get extra housing as a result of it turns into trendier, then costs will in all probability rise. Alexander appears to know this drawback, and thus not less than implicitly appears to consider that each single issue that may enhance Oakland’s housing provide would have the impact of boosting demand by greater than provide. That’s, he appears to consider that NIMBY insurance policies make cities cheaper. That’s theoretically doable, however appears unlikely most often.
To recap my argument:
1. The correlation Alexander cites proves nothing—you’d count on greater cities to be costlier even when (on the margin) constructing extra housing didn’t elevate costs.
2. Alexander is appropriate that if his mannequin had been incorrect then you definately’d count on some exceptions to the widely constructive relationship between density and worth, because of differential restrictions on constructing. However loads of such exceptions do exist, and virtually all the time in precisely the locations predicted by YIMBY proponents of extra constructing. Elsewhere in his publish he dismisses intercity comparisons between fashionable coastal cities and heartland cities. Nonetheless, the examples I present present that I didn’t simply cherry decide one exception with my Austin/Houston comparability, there are lots of such anomalies. And one can discover such anomalies even inside coastal areas. The Bay Space is costlier than LA, regardless of being smaller. It has extra restrictive zoning. The Boston metro space is costlier than metro DC, regardless of being smaller. Boston has extra restrictive zoning. And you’ll’t say that LA and DC are usually not fascinating markets.
Simply to be clear, our dispute has completely no coverage implications. As an example, I stated:
If constructing extra housing raises its worth, then the argument for extra building is even stronger.
And Alexander responded:
I agree with all this.
That is vital, as a result of his previous post had appeared to point that he thought it was a “drawback” that new building led to larger housing costs. He beforehand stated:
It is a coordination drawback: if each metropolis upzones collectively, they will all get decrease home costs, however every metropolis can reduce its personal costs by refusing to cooperate and hoping everybody else does the exhausting work.
What “exhausting work”?
Within the new publish he makes it very clear that this isn’t a “drawback.” He helps the YIMBY place.
Thus we each assist making it simpler to construct housing in Oakland, though he thinks this is able to elevate costs and I feel it will decrease them. If I’m incorrect, that’s, if extra housing boosted home costs in Oakland, then we each agree that this is able to be an particularly good end result. And I concede that I may be incorrect.
P.S. Barely off subject, it’s price recalling why new homes ought to be “unaffordable” for common Individuals. Consider a steady-state society with solely 100 households, dwelling in 100 homes of various high quality. Assume that every home lasts 100 years. Every year, the worst home is torn down, and a brand new home is constructed. To ensure that the standard of the housing inventory to rise by 1%/yr, the brand new home have to be twice nearly as good as the common current home. Every year, the households all shift over one home, shifting progressively to raised and higher properties. The richest household lives within the newly constructed home, which is (by assumption) unaffordable to the opposite 99 households.
In a extra reasonable mannequin with inhabitants development, not each new home is unaffordable to the underside 99%. However even with inhabitants development, new building in an financial system with rising dwelling requirements will are typically a lot nicer than the present inventory of housing, which signifies that new building will usually be “unaffordable” to the common household. If new housing is reasonably priced to the common household, then society won’t progress.
P.P.S. Alexander describes my earlier publish as follows:
Scott Sumner is an economist and blogger
I don’t see myself as a well-known particular person, however I share his view that I’ve the potential to carry good opinions. So far as the query of whether or not I do really maintain good opinions, I’ll let readers resolve.
In a recent post, Scott Alexander doubled down on his argument that constructing extra housing usually ends in larger housing costs. In his earlier publish, he pointed to the truth that housing is usually costlier in greater cities. I supplied a counterexample, citing Houston and Austin. I additionally argued that large cities are costly for causes unrelated to their giant amount of housing, corresponding to the benefits supplied by agglomeration. Exogenous provide will increase, corresponding to making it simpler to construct new housing, usually cut back housing costs.
Right here’s how Alexander responded to certainly one of my arguments:
I began the publish with a graph of about 50 cities, exhibiting a constructive correlation between density and worth. I’m having bother seeing how Sumner’s level isn’t simply “for those who take away 48 of these cities and cherry-pick two, the connection is unfavorable”.
I feel Alexander misunderstood this argument, so let me return and make the purpose extra rigorously. It will likely be useful to make two separate arguments:
1. You’d count on large cities to be costlier even when constructing housing reduces housing costs.
2. Austin and Houston are usually not the one counterexamples; there are lots of different such anomalies.
Let’s begin with a easy mannequin the place there are zero restrictions on housing building in all cities. Assume that America has 100 cities, every with industries of various productivity. In that mannequin, the most important cities shall be subsequent to the areas of biggest productiveness. (These areas of productiveness had been as soon as linked to pure components corresponding to ports and mineral assets, however are more and more linked to industries with community results like finance, vitality, leisure and tech.) Once more, assume there aren’t any obstacles to constructing, that’s, building of housing is so unconstrained that each single metropolis makes fashionable Houston appear to be a NIMBY stronghold.
Housing costs on this hypothetical financial system shall be larger within the bigger cities, ceteris paribus, regardless that constructing extra housing would possibly effectively depress costs. That’s as a result of in a bigger metropolis, individuals can pay extra for comfort (i.e., an excellent location). That may be true even when these greater cities weren’t extra productive. As an example, individuals would pay additional to cut back commuting prices, or to be near facilities. However the greater cities are (by assumption) additionally extra productive, which supplies one more reason for housing costs to be larger in greater cities—larger wages. This thought experiment means that the empirical relationship Alexander depends upon to make his argument would apply even when his argument weren’t true.
One response is that these industries with community results solely exist in locations like New York as a result of there are many individuals, and which you could’t have plenty of individuals with out plenty of housing. That’s true, however has no bearing on the query of how extra housing impacts costs on the margin. And from the earlier thought experiment, it’s clear that taking a look at easy correlations doesn’t resolve that drawback.
Alexander would possibly fairly reply that my mannequin is overly simplistic. Constructing restrictions differ from one metropolis to a different. In that case, you would possibly count on some exceptions to the iron legislation that greater cities are costlier than smaller cities. And since (he assumes) I discovered just one such anomaly, the correlation among the many remaining cities is simply too sturdy to elucidate by (exogenous) components aside from metropolis measurement.
Really, I cited Austin and Houston merely as one instance, and I picked this instance as a result of they’re positioned in the identical state. The truth is, there are lots of, many examples of bigger cities which can be cheaper than smaller cities. And in just about each single case the reason is that the smaller however costlier cities have extra restrictions on constructing. Within the listing beneath, the metro areas on the left are bigger and cheaper than the metro areas on the best:
Chicago >>> San Francisco Bay Space
Dallas/Forth Price >>> Washington DC
Houston >>> Boston or Seattle
San Antonio >>> Portland
Phoenix >>> San Diego
Colorado Springs >>> Boulder
In every case, the bigger metro space is cheaper than the smaller one. And in every case there are stricter limits on constructing within the costlier metropolis.
That doesn’t show Alexander is incorrect. It’s doable that the rationale for costlier housing within the NIMBY cities has nothing to do with restrictions on constructing. However I doubt it. I believe that if Houston had adopted extreme restrictions on constructing within the Eighties, then individuals would now attribute the ensuing excessive housing costs as being because of all of the oil cash sloshing by means of its financial system. However Houston determined to open its doorways to anybody who wished to maneuver there. In consequence, regardless that Houston is the worldwide vitality capital and is stuffed with effectively paid petroleum engineers, and regardless that vitality is without doubt one of the world’s largest industries, Houston remains to be an affordable place to reside. As an alternative, it received a lot greater. BTW, Houston additionally has effectively paid aerospace engineers, effectively paid enterprise executives and effectively paid medical doctors, and so on. There’s greater than sufficient cash in Houston to drive up housing costs if they’d restricted constructing.
Replace: Emily Hamilton of the Mercatus Heart has a wonderful publish explaining how Houston’s YIMBY insurance policies result in higher housing affordability.
It might seem that Alexander is “Reasoning from a amount change.” In any case, it is mindless to debate the impression of a change in amount on worth, with out understanding why amount modified. If Oakland will get extra housing as a result of it deregulates, costs will in all probability fall. If Oakland will get extra housing as a result of it turns into trendier, then costs will in all probability rise. Alexander appears to know this drawback, and thus not less than implicitly appears to consider that each single issue that may enhance Oakland’s housing provide would have the impact of boosting demand by greater than provide. That’s, he appears to consider that NIMBY insurance policies make cities cheaper. That’s theoretically doable, however appears unlikely most often.
To recap my argument:
1. The correlation Alexander cites proves nothing—you’d count on greater cities to be costlier even when (on the margin) constructing extra housing didn’t elevate costs.
2. Alexander is appropriate that if his mannequin had been incorrect then you definately’d count on some exceptions to the widely constructive relationship between density and worth, because of differential restrictions on constructing. However loads of such exceptions do exist, and virtually all the time in precisely the locations predicted by YIMBY proponents of extra constructing. Elsewhere in his publish he dismisses intercity comparisons between fashionable coastal cities and heartland cities. Nonetheless, the examples I present present that I didn’t simply cherry decide one exception with my Austin/Houston comparability, there are lots of such anomalies. And one can discover such anomalies even inside coastal areas. The Bay Space is costlier than LA, regardless of being smaller. It has extra restrictive zoning. The Boston metro space is costlier than metro DC, regardless of being smaller. Boston has extra restrictive zoning. And you’ll’t say that LA and DC are usually not fascinating markets.
Simply to be clear, our dispute has completely no coverage implications. As an example, I stated:
If constructing extra housing raises its worth, then the argument for extra building is even stronger.
And Alexander responded:
I agree with all this.
That is vital, as a result of his previous post had appeared to point that he thought it was a “drawback” that new building led to larger housing costs. He beforehand stated:
It is a coordination drawback: if each metropolis upzones collectively, they will all get decrease home costs, however every metropolis can reduce its personal costs by refusing to cooperate and hoping everybody else does the exhausting work.
What “exhausting work”?
Within the new publish he makes it very clear that this isn’t a “drawback.” He helps the YIMBY place.
Thus we each assist making it simpler to construct housing in Oakland, though he thinks this is able to elevate costs and I feel it will decrease them. If I’m incorrect, that’s, if extra housing boosted home costs in Oakland, then we each agree that this is able to be an particularly good end result. And I concede that I may be incorrect.
P.S. Barely off subject, it’s price recalling why new homes ought to be “unaffordable” for common Individuals. Consider a steady-state society with solely 100 households, dwelling in 100 homes of various high quality. Assume that every home lasts 100 years. Every year, the worst home is torn down, and a brand new home is constructed. To ensure that the standard of the housing inventory to rise by 1%/yr, the brand new home have to be twice nearly as good as the common current home. Every year, the households all shift over one home, shifting progressively to raised and higher properties. The richest household lives within the newly constructed home, which is (by assumption) unaffordable to the opposite 99 households.
In a extra reasonable mannequin with inhabitants development, not each new home is unaffordable to the underside 99%. However even with inhabitants development, new building in an financial system with rising dwelling requirements will are typically a lot nicer than the present inventory of housing, which signifies that new building will usually be “unaffordable” to the common household. If new housing is reasonably priced to the common household, then society won’t progress.
P.P.S. Alexander describes my earlier publish as follows:
Scott Sumner is an economist and blogger
I don’t see myself as a well-known particular person, however I share his view that I’ve the potential to carry good opinions. So far as the query of whether or not I do really maintain good opinions, I’ll let readers resolve.
In a recent post, Scott Alexander doubled down on his argument that constructing extra housing usually ends in larger housing costs. In his earlier publish, he pointed to the truth that housing is usually costlier in greater cities. I supplied a counterexample, citing Houston and Austin. I additionally argued that large cities are costly for causes unrelated to their giant amount of housing, corresponding to the benefits supplied by agglomeration. Exogenous provide will increase, corresponding to making it simpler to construct new housing, usually cut back housing costs.
Right here’s how Alexander responded to certainly one of my arguments:
I began the publish with a graph of about 50 cities, exhibiting a constructive correlation between density and worth. I’m having bother seeing how Sumner’s level isn’t simply “for those who take away 48 of these cities and cherry-pick two, the connection is unfavorable”.
I feel Alexander misunderstood this argument, so let me return and make the purpose extra rigorously. It will likely be useful to make two separate arguments:
1. You’d count on large cities to be costlier even when constructing housing reduces housing costs.
2. Austin and Houston are usually not the one counterexamples; there are lots of different such anomalies.
Let’s begin with a easy mannequin the place there are zero restrictions on housing building in all cities. Assume that America has 100 cities, every with industries of various productivity. In that mannequin, the most important cities shall be subsequent to the areas of biggest productiveness. (These areas of productiveness had been as soon as linked to pure components corresponding to ports and mineral assets, however are more and more linked to industries with community results like finance, vitality, leisure and tech.) Once more, assume there aren’t any obstacles to constructing, that’s, building of housing is so unconstrained that each single metropolis makes fashionable Houston appear to be a NIMBY stronghold.
Housing costs on this hypothetical financial system shall be larger within the bigger cities, ceteris paribus, regardless that constructing extra housing would possibly effectively depress costs. That’s as a result of in a bigger metropolis, individuals can pay extra for comfort (i.e., an excellent location). That may be true even when these greater cities weren’t extra productive. As an example, individuals would pay additional to cut back commuting prices, or to be near facilities. However the greater cities are (by assumption) additionally extra productive, which supplies one more reason for housing costs to be larger in greater cities—larger wages. This thought experiment means that the empirical relationship Alexander depends upon to make his argument would apply even when his argument weren’t true.
One response is that these industries with community results solely exist in locations like New York as a result of there are many individuals, and which you could’t have plenty of individuals with out plenty of housing. That’s true, however has no bearing on the query of how extra housing impacts costs on the margin. And from the earlier thought experiment, it’s clear that taking a look at easy correlations doesn’t resolve that drawback.
Alexander would possibly fairly reply that my mannequin is overly simplistic. Constructing restrictions differ from one metropolis to a different. In that case, you would possibly count on some exceptions to the iron legislation that greater cities are costlier than smaller cities. And since (he assumes) I discovered just one such anomaly, the correlation among the many remaining cities is simply too sturdy to elucidate by (exogenous) components aside from metropolis measurement.
Really, I cited Austin and Houston merely as one instance, and I picked this instance as a result of they’re positioned in the identical state. The truth is, there are lots of, many examples of bigger cities which can be cheaper than smaller cities. And in just about each single case the reason is that the smaller however costlier cities have extra restrictions on constructing. Within the listing beneath, the metro areas on the left are bigger and cheaper than the metro areas on the best:
Chicago >>> San Francisco Bay Space
Dallas/Forth Price >>> Washington DC
Houston >>> Boston or Seattle
San Antonio >>> Portland
Phoenix >>> San Diego
Colorado Springs >>> Boulder
In every case, the bigger metro space is cheaper than the smaller one. And in every case there are stricter limits on constructing within the costlier metropolis.
That doesn’t show Alexander is incorrect. It’s doable that the rationale for costlier housing within the NIMBY cities has nothing to do with restrictions on constructing. However I doubt it. I believe that if Houston had adopted extreme restrictions on constructing within the Eighties, then individuals would now attribute the ensuing excessive housing costs as being because of all of the oil cash sloshing by means of its financial system. However Houston determined to open its doorways to anybody who wished to maneuver there. In consequence, regardless that Houston is the worldwide vitality capital and is stuffed with effectively paid petroleum engineers, and regardless that vitality is without doubt one of the world’s largest industries, Houston remains to be an affordable place to reside. As an alternative, it received a lot greater. BTW, Houston additionally has effectively paid aerospace engineers, effectively paid enterprise executives and effectively paid medical doctors, and so on. There’s greater than sufficient cash in Houston to drive up housing costs if they’d restricted constructing.
Replace: Emily Hamilton of the Mercatus Heart has a wonderful publish explaining how Houston’s YIMBY insurance policies result in higher housing affordability.
It might seem that Alexander is “Reasoning from a amount change.” In any case, it is mindless to debate the impression of a change in amount on worth, with out understanding why amount modified. If Oakland will get extra housing as a result of it deregulates, costs will in all probability fall. If Oakland will get extra housing as a result of it turns into trendier, then costs will in all probability rise. Alexander appears to know this drawback, and thus not less than implicitly appears to consider that each single issue that may enhance Oakland’s housing provide would have the impact of boosting demand by greater than provide. That’s, he appears to consider that NIMBY insurance policies make cities cheaper. That’s theoretically doable, however appears unlikely most often.
To recap my argument:
1. The correlation Alexander cites proves nothing—you’d count on greater cities to be costlier even when (on the margin) constructing extra housing didn’t elevate costs.
2. Alexander is appropriate that if his mannequin had been incorrect then you definately’d count on some exceptions to the widely constructive relationship between density and worth, because of differential restrictions on constructing. However loads of such exceptions do exist, and virtually all the time in precisely the locations predicted by YIMBY proponents of extra constructing. Elsewhere in his publish he dismisses intercity comparisons between fashionable coastal cities and heartland cities. Nonetheless, the examples I present present that I didn’t simply cherry decide one exception with my Austin/Houston comparability, there are lots of such anomalies. And one can discover such anomalies even inside coastal areas. The Bay Space is costlier than LA, regardless of being smaller. It has extra restrictive zoning. The Boston metro space is costlier than metro DC, regardless of being smaller. Boston has extra restrictive zoning. And you’ll’t say that LA and DC are usually not fascinating markets.
Simply to be clear, our dispute has completely no coverage implications. As an example, I stated:
If constructing extra housing raises its worth, then the argument for extra building is even stronger.
And Alexander responded:
I agree with all this.
That is vital, as a result of his previous post had appeared to point that he thought it was a “drawback” that new building led to larger housing costs. He beforehand stated:
It is a coordination drawback: if each metropolis upzones collectively, they will all get decrease home costs, however every metropolis can reduce its personal costs by refusing to cooperate and hoping everybody else does the exhausting work.
What “exhausting work”?
Within the new publish he makes it very clear that this isn’t a “drawback.” He helps the YIMBY place.
Thus we each assist making it simpler to construct housing in Oakland, though he thinks this is able to elevate costs and I feel it will decrease them. If I’m incorrect, that’s, if extra housing boosted home costs in Oakland, then we each agree that this is able to be an particularly good end result. And I concede that I may be incorrect.
P.S. Barely off subject, it’s price recalling why new homes ought to be “unaffordable” for common Individuals. Consider a steady-state society with solely 100 households, dwelling in 100 homes of various high quality. Assume that every home lasts 100 years. Every year, the worst home is torn down, and a brand new home is constructed. To ensure that the standard of the housing inventory to rise by 1%/yr, the brand new home have to be twice nearly as good as the common current home. Every year, the households all shift over one home, shifting progressively to raised and higher properties. The richest household lives within the newly constructed home, which is (by assumption) unaffordable to the opposite 99 households.
In a extra reasonable mannequin with inhabitants development, not each new home is unaffordable to the underside 99%. However even with inhabitants development, new building in an financial system with rising dwelling requirements will are typically a lot nicer than the present inventory of housing, which signifies that new building will usually be “unaffordable” to the common household. If new housing is reasonably priced to the common household, then society won’t progress.
P.P.S. Alexander describes my earlier publish as follows:
Scott Sumner is an economist and blogger
I don’t see myself as a well-known particular person, however I share his view that I’ve the potential to carry good opinions. So far as the query of whether or not I do really maintain good opinions, I’ll let readers resolve.
In a recent post, Scott Alexander doubled down on his argument that constructing extra housing usually ends in larger housing costs. In his earlier publish, he pointed to the truth that housing is usually costlier in greater cities. I supplied a counterexample, citing Houston and Austin. I additionally argued that large cities are costly for causes unrelated to their giant amount of housing, corresponding to the benefits supplied by agglomeration. Exogenous provide will increase, corresponding to making it simpler to construct new housing, usually cut back housing costs.
Right here’s how Alexander responded to certainly one of my arguments:
I began the publish with a graph of about 50 cities, exhibiting a constructive correlation between density and worth. I’m having bother seeing how Sumner’s level isn’t simply “for those who take away 48 of these cities and cherry-pick two, the connection is unfavorable”.
I feel Alexander misunderstood this argument, so let me return and make the purpose extra rigorously. It will likely be useful to make two separate arguments:
1. You’d count on large cities to be costlier even when constructing housing reduces housing costs.
2. Austin and Houston are usually not the one counterexamples; there are lots of different such anomalies.
Let’s begin with a easy mannequin the place there are zero restrictions on housing building in all cities. Assume that America has 100 cities, every with industries of various productivity. In that mannequin, the most important cities shall be subsequent to the areas of biggest productiveness. (These areas of productiveness had been as soon as linked to pure components corresponding to ports and mineral assets, however are more and more linked to industries with community results like finance, vitality, leisure and tech.) Once more, assume there aren’t any obstacles to constructing, that’s, building of housing is so unconstrained that each single metropolis makes fashionable Houston appear to be a NIMBY stronghold.
Housing costs on this hypothetical financial system shall be larger within the bigger cities, ceteris paribus, regardless that constructing extra housing would possibly effectively depress costs. That’s as a result of in a bigger metropolis, individuals can pay extra for comfort (i.e., an excellent location). That may be true even when these greater cities weren’t extra productive. As an example, individuals would pay additional to cut back commuting prices, or to be near facilities. However the greater cities are (by assumption) additionally extra productive, which supplies one more reason for housing costs to be larger in greater cities—larger wages. This thought experiment means that the empirical relationship Alexander depends upon to make his argument would apply even when his argument weren’t true.
One response is that these industries with community results solely exist in locations like New York as a result of there are many individuals, and which you could’t have plenty of individuals with out plenty of housing. That’s true, however has no bearing on the query of how extra housing impacts costs on the margin. And from the earlier thought experiment, it’s clear that taking a look at easy correlations doesn’t resolve that drawback.
Alexander would possibly fairly reply that my mannequin is overly simplistic. Constructing restrictions differ from one metropolis to a different. In that case, you would possibly count on some exceptions to the iron legislation that greater cities are costlier than smaller cities. And since (he assumes) I discovered just one such anomaly, the correlation among the many remaining cities is simply too sturdy to elucidate by (exogenous) components aside from metropolis measurement.
Really, I cited Austin and Houston merely as one instance, and I picked this instance as a result of they’re positioned in the identical state. The truth is, there are lots of, many examples of bigger cities which can be cheaper than smaller cities. And in just about each single case the reason is that the smaller however costlier cities have extra restrictions on constructing. Within the listing beneath, the metro areas on the left are bigger and cheaper than the metro areas on the best:
Chicago >>> San Francisco Bay Space
Dallas/Forth Price >>> Washington DC
Houston >>> Boston or Seattle
San Antonio >>> Portland
Phoenix >>> San Diego
Colorado Springs >>> Boulder
In every case, the bigger metro space is cheaper than the smaller one. And in every case there are stricter limits on constructing within the costlier metropolis.
That doesn’t show Alexander is incorrect. It’s doable that the rationale for costlier housing within the NIMBY cities has nothing to do with restrictions on constructing. However I doubt it. I believe that if Houston had adopted extreme restrictions on constructing within the Eighties, then individuals would now attribute the ensuing excessive housing costs as being because of all of the oil cash sloshing by means of its financial system. However Houston determined to open its doorways to anybody who wished to maneuver there. In consequence, regardless that Houston is the worldwide vitality capital and is stuffed with effectively paid petroleum engineers, and regardless that vitality is without doubt one of the world’s largest industries, Houston remains to be an affordable place to reside. As an alternative, it received a lot greater. BTW, Houston additionally has effectively paid aerospace engineers, effectively paid enterprise executives and effectively paid medical doctors, and so on. There’s greater than sufficient cash in Houston to drive up housing costs if they’d restricted constructing.
Replace: Emily Hamilton of the Mercatus Heart has a wonderful publish explaining how Houston’s YIMBY insurance policies result in higher housing affordability.
It might seem that Alexander is “Reasoning from a amount change.” In any case, it is mindless to debate the impression of a change in amount on worth, with out understanding why amount modified. If Oakland will get extra housing as a result of it deregulates, costs will in all probability fall. If Oakland will get extra housing as a result of it turns into trendier, then costs will in all probability rise. Alexander appears to know this drawback, and thus not less than implicitly appears to consider that each single issue that may enhance Oakland’s housing provide would have the impact of boosting demand by greater than provide. That’s, he appears to consider that NIMBY insurance policies make cities cheaper. That’s theoretically doable, however appears unlikely most often.
To recap my argument:
1. The correlation Alexander cites proves nothing—you’d count on greater cities to be costlier even when (on the margin) constructing extra housing didn’t elevate costs.
2. Alexander is appropriate that if his mannequin had been incorrect then you definately’d count on some exceptions to the widely constructive relationship between density and worth, because of differential restrictions on constructing. However loads of such exceptions do exist, and virtually all the time in precisely the locations predicted by YIMBY proponents of extra constructing. Elsewhere in his publish he dismisses intercity comparisons between fashionable coastal cities and heartland cities. Nonetheless, the examples I present present that I didn’t simply cherry decide one exception with my Austin/Houston comparability, there are lots of such anomalies. And one can discover such anomalies even inside coastal areas. The Bay Space is costlier than LA, regardless of being smaller. It has extra restrictive zoning. The Boston metro space is costlier than metro DC, regardless of being smaller. Boston has extra restrictive zoning. And you’ll’t say that LA and DC are usually not fascinating markets.
Simply to be clear, our dispute has completely no coverage implications. As an example, I stated:
If constructing extra housing raises its worth, then the argument for extra building is even stronger.
And Alexander responded:
I agree with all this.
That is vital, as a result of his previous post had appeared to point that he thought it was a “drawback” that new building led to larger housing costs. He beforehand stated:
It is a coordination drawback: if each metropolis upzones collectively, they will all get decrease home costs, however every metropolis can reduce its personal costs by refusing to cooperate and hoping everybody else does the exhausting work.
What “exhausting work”?
Within the new publish he makes it very clear that this isn’t a “drawback.” He helps the YIMBY place.
Thus we each assist making it simpler to construct housing in Oakland, though he thinks this is able to elevate costs and I feel it will decrease them. If I’m incorrect, that’s, if extra housing boosted home costs in Oakland, then we each agree that this is able to be an particularly good end result. And I concede that I may be incorrect.
P.S. Barely off subject, it’s price recalling why new homes ought to be “unaffordable” for common Individuals. Consider a steady-state society with solely 100 households, dwelling in 100 homes of various high quality. Assume that every home lasts 100 years. Every year, the worst home is torn down, and a brand new home is constructed. To ensure that the standard of the housing inventory to rise by 1%/yr, the brand new home have to be twice nearly as good as the common current home. Every year, the households all shift over one home, shifting progressively to raised and higher properties. The richest household lives within the newly constructed home, which is (by assumption) unaffordable to the opposite 99 households.
In a extra reasonable mannequin with inhabitants development, not each new home is unaffordable to the underside 99%. However even with inhabitants development, new building in an financial system with rising dwelling requirements will are typically a lot nicer than the present inventory of housing, which signifies that new building will usually be “unaffordable” to the common household. If new housing is reasonably priced to the common household, then society won’t progress.
P.P.S. Alexander describes my earlier publish as follows:
Scott Sumner is an economist and blogger
I don’t see myself as a well-known particular person, however I share his view that I’ve the potential to carry good opinions. So far as the query of whether or not I do really maintain good opinions, I’ll let readers resolve.
In a recent post, Scott Alexander doubled down on his argument that constructing extra housing usually ends in larger housing costs. In his earlier publish, he pointed to the truth that housing is usually costlier in greater cities. I supplied a counterexample, citing Houston and Austin. I additionally argued that large cities are costly for causes unrelated to their giant amount of housing, corresponding to the benefits supplied by agglomeration. Exogenous provide will increase, corresponding to making it simpler to construct new housing, usually cut back housing costs.
Right here’s how Alexander responded to certainly one of my arguments:
I began the publish with a graph of about 50 cities, exhibiting a constructive correlation between density and worth. I’m having bother seeing how Sumner’s level isn’t simply “for those who take away 48 of these cities and cherry-pick two, the connection is unfavorable”.
I feel Alexander misunderstood this argument, so let me return and make the purpose extra rigorously. It will likely be useful to make two separate arguments:
1. You’d count on large cities to be costlier even when constructing housing reduces housing costs.
2. Austin and Houston are usually not the one counterexamples; there are lots of different such anomalies.
Let’s begin with a easy mannequin the place there are zero restrictions on housing building in all cities. Assume that America has 100 cities, every with industries of various productivity. In that mannequin, the most important cities shall be subsequent to the areas of biggest productiveness. (These areas of productiveness had been as soon as linked to pure components corresponding to ports and mineral assets, however are more and more linked to industries with community results like finance, vitality, leisure and tech.) Once more, assume there aren’t any obstacles to constructing, that’s, building of housing is so unconstrained that each single metropolis makes fashionable Houston appear to be a NIMBY stronghold.
Housing costs on this hypothetical financial system shall be larger within the bigger cities, ceteris paribus, regardless that constructing extra housing would possibly effectively depress costs. That’s as a result of in a bigger metropolis, individuals can pay extra for comfort (i.e., an excellent location). That may be true even when these greater cities weren’t extra productive. As an example, individuals would pay additional to cut back commuting prices, or to be near facilities. However the greater cities are (by assumption) additionally extra productive, which supplies one more reason for housing costs to be larger in greater cities—larger wages. This thought experiment means that the empirical relationship Alexander depends upon to make his argument would apply even when his argument weren’t true.
One response is that these industries with community results solely exist in locations like New York as a result of there are many individuals, and which you could’t have plenty of individuals with out plenty of housing. That’s true, however has no bearing on the query of how extra housing impacts costs on the margin. And from the earlier thought experiment, it’s clear that taking a look at easy correlations doesn’t resolve that drawback.
Alexander would possibly fairly reply that my mannequin is overly simplistic. Constructing restrictions differ from one metropolis to a different. In that case, you would possibly count on some exceptions to the iron legislation that greater cities are costlier than smaller cities. And since (he assumes) I discovered just one such anomaly, the correlation among the many remaining cities is simply too sturdy to elucidate by (exogenous) components aside from metropolis measurement.
Really, I cited Austin and Houston merely as one instance, and I picked this instance as a result of they’re positioned in the identical state. The truth is, there are lots of, many examples of bigger cities which can be cheaper than smaller cities. And in just about each single case the reason is that the smaller however costlier cities have extra restrictions on constructing. Within the listing beneath, the metro areas on the left are bigger and cheaper than the metro areas on the best:
Chicago >>> San Francisco Bay Space
Dallas/Forth Price >>> Washington DC
Houston >>> Boston or Seattle
San Antonio >>> Portland
Phoenix >>> San Diego
Colorado Springs >>> Boulder
In every case, the bigger metro space is cheaper than the smaller one. And in every case there are stricter limits on constructing within the costlier metropolis.
That doesn’t show Alexander is incorrect. It’s doable that the rationale for costlier housing within the NIMBY cities has nothing to do with restrictions on constructing. However I doubt it. I believe that if Houston had adopted extreme restrictions on constructing within the Eighties, then individuals would now attribute the ensuing excessive housing costs as being because of all of the oil cash sloshing by means of its financial system. However Houston determined to open its doorways to anybody who wished to maneuver there. In consequence, regardless that Houston is the worldwide vitality capital and is stuffed with effectively paid petroleum engineers, and regardless that vitality is without doubt one of the world’s largest industries, Houston remains to be an affordable place to reside. As an alternative, it received a lot greater. BTW, Houston additionally has effectively paid aerospace engineers, effectively paid enterprise executives and effectively paid medical doctors, and so on. There’s greater than sufficient cash in Houston to drive up housing costs if they’d restricted constructing.
Replace: Emily Hamilton of the Mercatus Heart has a wonderful publish explaining how Houston’s YIMBY insurance policies result in higher housing affordability.
It might seem that Alexander is “Reasoning from a amount change.” In any case, it is mindless to debate the impression of a change in amount on worth, with out understanding why amount modified. If Oakland will get extra housing as a result of it deregulates, costs will in all probability fall. If Oakland will get extra housing as a result of it turns into trendier, then costs will in all probability rise. Alexander appears to know this drawback, and thus not less than implicitly appears to consider that each single issue that may enhance Oakland’s housing provide would have the impact of boosting demand by greater than provide. That’s, he appears to consider that NIMBY insurance policies make cities cheaper. That’s theoretically doable, however appears unlikely most often.
To recap my argument:
1. The correlation Alexander cites proves nothing—you’d count on greater cities to be costlier even when (on the margin) constructing extra housing didn’t elevate costs.
2. Alexander is appropriate that if his mannequin had been incorrect then you definately’d count on some exceptions to the widely constructive relationship between density and worth, because of differential restrictions on constructing. However loads of such exceptions do exist, and virtually all the time in precisely the locations predicted by YIMBY proponents of extra constructing. Elsewhere in his publish he dismisses intercity comparisons between fashionable coastal cities and heartland cities. Nonetheless, the examples I present present that I didn’t simply cherry decide one exception with my Austin/Houston comparability, there are lots of such anomalies. And one can discover such anomalies even inside coastal areas. The Bay Space is costlier than LA, regardless of being smaller. It has extra restrictive zoning. The Boston metro space is costlier than metro DC, regardless of being smaller. Boston has extra restrictive zoning. And you’ll’t say that LA and DC are usually not fascinating markets.
Simply to be clear, our dispute has completely no coverage implications. As an example, I stated:
If constructing extra housing raises its worth, then the argument for extra building is even stronger.
And Alexander responded:
I agree with all this.
That is vital, as a result of his previous post had appeared to point that he thought it was a “drawback” that new building led to larger housing costs. He beforehand stated:
It is a coordination drawback: if each metropolis upzones collectively, they will all get decrease home costs, however every metropolis can reduce its personal costs by refusing to cooperate and hoping everybody else does the exhausting work.
What “exhausting work”?
Within the new publish he makes it very clear that this isn’t a “drawback.” He helps the YIMBY place.
Thus we each assist making it simpler to construct housing in Oakland, though he thinks this is able to elevate costs and I feel it will decrease them. If I’m incorrect, that’s, if extra housing boosted home costs in Oakland, then we each agree that this is able to be an particularly good end result. And I concede that I may be incorrect.
P.S. Barely off subject, it’s price recalling why new homes ought to be “unaffordable” for common Individuals. Consider a steady-state society with solely 100 households, dwelling in 100 homes of various high quality. Assume that every home lasts 100 years. Every year, the worst home is torn down, and a brand new home is constructed. To ensure that the standard of the housing inventory to rise by 1%/yr, the brand new home have to be twice nearly as good as the common current home. Every year, the households all shift over one home, shifting progressively to raised and higher properties. The richest household lives within the newly constructed home, which is (by assumption) unaffordable to the opposite 99 households.
In a extra reasonable mannequin with inhabitants development, not each new home is unaffordable to the underside 99%. However even with inhabitants development, new building in an financial system with rising dwelling requirements will are typically a lot nicer than the present inventory of housing, which signifies that new building will usually be “unaffordable” to the common household. If new housing is reasonably priced to the common household, then society won’t progress.
P.P.S. Alexander describes my earlier publish as follows:
Scott Sumner is an economist and blogger
I don’t see myself as a well-known particular person, however I share his view that I’ve the potential to carry good opinions. So far as the query of whether or not I do really maintain good opinions, I’ll let readers resolve.
In a recent post, Scott Alexander doubled down on his argument that constructing extra housing usually ends in larger housing costs. In his earlier publish, he pointed to the truth that housing is usually costlier in greater cities. I supplied a counterexample, citing Houston and Austin. I additionally argued that large cities are costly for causes unrelated to their giant amount of housing, corresponding to the benefits supplied by agglomeration. Exogenous provide will increase, corresponding to making it simpler to construct new housing, usually cut back housing costs.
Right here’s how Alexander responded to certainly one of my arguments:
I began the publish with a graph of about 50 cities, exhibiting a constructive correlation between density and worth. I’m having bother seeing how Sumner’s level isn’t simply “for those who take away 48 of these cities and cherry-pick two, the connection is unfavorable”.
I feel Alexander misunderstood this argument, so let me return and make the purpose extra rigorously. It will likely be useful to make two separate arguments:
1. You’d count on large cities to be costlier even when constructing housing reduces housing costs.
2. Austin and Houston are usually not the one counterexamples; there are lots of different such anomalies.
Let’s begin with a easy mannequin the place there are zero restrictions on housing building in all cities. Assume that America has 100 cities, every with industries of various productivity. In that mannequin, the most important cities shall be subsequent to the areas of biggest productiveness. (These areas of productiveness had been as soon as linked to pure components corresponding to ports and mineral assets, however are more and more linked to industries with community results like finance, vitality, leisure and tech.) Once more, assume there aren’t any obstacles to constructing, that’s, building of housing is so unconstrained that each single metropolis makes fashionable Houston appear to be a NIMBY stronghold.
Housing costs on this hypothetical financial system shall be larger within the bigger cities, ceteris paribus, regardless that constructing extra housing would possibly effectively depress costs. That’s as a result of in a bigger metropolis, individuals can pay extra for comfort (i.e., an excellent location). That may be true even when these greater cities weren’t extra productive. As an example, individuals would pay additional to cut back commuting prices, or to be near facilities. However the greater cities are (by assumption) additionally extra productive, which supplies one more reason for housing costs to be larger in greater cities—larger wages. This thought experiment means that the empirical relationship Alexander depends upon to make his argument would apply even when his argument weren’t true.
One response is that these industries with community results solely exist in locations like New York as a result of there are many individuals, and which you could’t have plenty of individuals with out plenty of housing. That’s true, however has no bearing on the query of how extra housing impacts costs on the margin. And from the earlier thought experiment, it’s clear that taking a look at easy correlations doesn’t resolve that drawback.
Alexander would possibly fairly reply that my mannequin is overly simplistic. Constructing restrictions differ from one metropolis to a different. In that case, you would possibly count on some exceptions to the iron legislation that greater cities are costlier than smaller cities. And since (he assumes) I discovered just one such anomaly, the correlation among the many remaining cities is simply too sturdy to elucidate by (exogenous) components aside from metropolis measurement.
Really, I cited Austin and Houston merely as one instance, and I picked this instance as a result of they’re positioned in the identical state. The truth is, there are lots of, many examples of bigger cities which can be cheaper than smaller cities. And in just about each single case the reason is that the smaller however costlier cities have extra restrictions on constructing. Within the listing beneath, the metro areas on the left are bigger and cheaper than the metro areas on the best:
Chicago >>> San Francisco Bay Space
Dallas/Forth Price >>> Washington DC
Houston >>> Boston or Seattle
San Antonio >>> Portland
Phoenix >>> San Diego
Colorado Springs >>> Boulder
In every case, the bigger metro space is cheaper than the smaller one. And in every case there are stricter limits on constructing within the costlier metropolis.
That doesn’t show Alexander is incorrect. It’s doable that the rationale for costlier housing within the NIMBY cities has nothing to do with restrictions on constructing. However I doubt it. I believe that if Houston had adopted extreme restrictions on constructing within the Eighties, then individuals would now attribute the ensuing excessive housing costs as being because of all of the oil cash sloshing by means of its financial system. However Houston determined to open its doorways to anybody who wished to maneuver there. In consequence, regardless that Houston is the worldwide vitality capital and is stuffed with effectively paid petroleum engineers, and regardless that vitality is without doubt one of the world’s largest industries, Houston remains to be an affordable place to reside. As an alternative, it received a lot greater. BTW, Houston additionally has effectively paid aerospace engineers, effectively paid enterprise executives and effectively paid medical doctors, and so on. There’s greater than sufficient cash in Houston to drive up housing costs if they’d restricted constructing.
Replace: Emily Hamilton of the Mercatus Heart has a wonderful publish explaining how Houston’s YIMBY insurance policies result in higher housing affordability.
It might seem that Alexander is “Reasoning from a amount change.” In any case, it is mindless to debate the impression of a change in amount on worth, with out understanding why amount modified. If Oakland will get extra housing as a result of it deregulates, costs will in all probability fall. If Oakland will get extra housing as a result of it turns into trendier, then costs will in all probability rise. Alexander appears to know this drawback, and thus not less than implicitly appears to consider that each single issue that may enhance Oakland’s housing provide would have the impact of boosting demand by greater than provide. That’s, he appears to consider that NIMBY insurance policies make cities cheaper. That’s theoretically doable, however appears unlikely most often.
To recap my argument:
1. The correlation Alexander cites proves nothing—you’d count on greater cities to be costlier even when (on the margin) constructing extra housing didn’t elevate costs.
2. Alexander is appropriate that if his mannequin had been incorrect then you definately’d count on some exceptions to the widely constructive relationship between density and worth, because of differential restrictions on constructing. However loads of such exceptions do exist, and virtually all the time in precisely the locations predicted by YIMBY proponents of extra constructing. Elsewhere in his publish he dismisses intercity comparisons between fashionable coastal cities and heartland cities. Nonetheless, the examples I present present that I didn’t simply cherry decide one exception with my Austin/Houston comparability, there are lots of such anomalies. And one can discover such anomalies even inside coastal areas. The Bay Space is costlier than LA, regardless of being smaller. It has extra restrictive zoning. The Boston metro space is costlier than metro DC, regardless of being smaller. Boston has extra restrictive zoning. And you’ll’t say that LA and DC are usually not fascinating markets.
Simply to be clear, our dispute has completely no coverage implications. As an example, I stated:
If constructing extra housing raises its worth, then the argument for extra building is even stronger.
And Alexander responded:
I agree with all this.
That is vital, as a result of his previous post had appeared to point that he thought it was a “drawback” that new building led to larger housing costs. He beforehand stated:
It is a coordination drawback: if each metropolis upzones collectively, they will all get decrease home costs, however every metropolis can reduce its personal costs by refusing to cooperate and hoping everybody else does the exhausting work.
What “exhausting work”?
Within the new publish he makes it very clear that this isn’t a “drawback.” He helps the YIMBY place.
Thus we each assist making it simpler to construct housing in Oakland, though he thinks this is able to elevate costs and I feel it will decrease them. If I’m incorrect, that’s, if extra housing boosted home costs in Oakland, then we each agree that this is able to be an particularly good end result. And I concede that I may be incorrect.
P.S. Barely off subject, it’s price recalling why new homes ought to be “unaffordable” for common Individuals. Consider a steady-state society with solely 100 households, dwelling in 100 homes of various high quality. Assume that every home lasts 100 years. Every year, the worst home is torn down, and a brand new home is constructed. To ensure that the standard of the housing inventory to rise by 1%/yr, the brand new home have to be twice nearly as good as the common current home. Every year, the households all shift over one home, shifting progressively to raised and higher properties. The richest household lives within the newly constructed home, which is (by assumption) unaffordable to the opposite 99 households.
In a extra reasonable mannequin with inhabitants development, not each new home is unaffordable to the underside 99%. However even with inhabitants development, new building in an financial system with rising dwelling requirements will are typically a lot nicer than the present inventory of housing, which signifies that new building will usually be “unaffordable” to the common household. If new housing is reasonably priced to the common household, then society won’t progress.
P.P.S. Alexander describes my earlier publish as follows:
Scott Sumner is an economist and blogger
I don’t see myself as a well-known particular person, however I share his view that I’ve the potential to carry good opinions. So far as the query of whether or not I do really maintain good opinions, I’ll let readers resolve.
In a recent post, Scott Alexander doubled down on his argument that constructing extra housing usually ends in larger housing costs. In his earlier publish, he pointed to the truth that housing is usually costlier in greater cities. I supplied a counterexample, citing Houston and Austin. I additionally argued that large cities are costly for causes unrelated to their giant amount of housing, corresponding to the benefits supplied by agglomeration. Exogenous provide will increase, corresponding to making it simpler to construct new housing, usually cut back housing costs.
Right here’s how Alexander responded to certainly one of my arguments:
I began the publish with a graph of about 50 cities, exhibiting a constructive correlation between density and worth. I’m having bother seeing how Sumner’s level isn’t simply “for those who take away 48 of these cities and cherry-pick two, the connection is unfavorable”.
I feel Alexander misunderstood this argument, so let me return and make the purpose extra rigorously. It will likely be useful to make two separate arguments:
1. You’d count on large cities to be costlier even when constructing housing reduces housing costs.
2. Austin and Houston are usually not the one counterexamples; there are lots of different such anomalies.
Let’s begin with a easy mannequin the place there are zero restrictions on housing building in all cities. Assume that America has 100 cities, every with industries of various productivity. In that mannequin, the most important cities shall be subsequent to the areas of biggest productiveness. (These areas of productiveness had been as soon as linked to pure components corresponding to ports and mineral assets, however are more and more linked to industries with community results like finance, vitality, leisure and tech.) Once more, assume there aren’t any obstacles to constructing, that’s, building of housing is so unconstrained that each single metropolis makes fashionable Houston appear to be a NIMBY stronghold.
Housing costs on this hypothetical financial system shall be larger within the bigger cities, ceteris paribus, regardless that constructing extra housing would possibly effectively depress costs. That’s as a result of in a bigger metropolis, individuals can pay extra for comfort (i.e., an excellent location). That may be true even when these greater cities weren’t extra productive. As an example, individuals would pay additional to cut back commuting prices, or to be near facilities. However the greater cities are (by assumption) additionally extra productive, which supplies one more reason for housing costs to be larger in greater cities—larger wages. This thought experiment means that the empirical relationship Alexander depends upon to make his argument would apply even when his argument weren’t true.
One response is that these industries with community results solely exist in locations like New York as a result of there are many individuals, and which you could’t have plenty of individuals with out plenty of housing. That’s true, however has no bearing on the query of how extra housing impacts costs on the margin. And from the earlier thought experiment, it’s clear that taking a look at easy correlations doesn’t resolve that drawback.
Alexander would possibly fairly reply that my mannequin is overly simplistic. Constructing restrictions differ from one metropolis to a different. In that case, you would possibly count on some exceptions to the iron legislation that greater cities are costlier than smaller cities. And since (he assumes) I discovered just one such anomaly, the correlation among the many remaining cities is simply too sturdy to elucidate by (exogenous) components aside from metropolis measurement.
Really, I cited Austin and Houston merely as one instance, and I picked this instance as a result of they’re positioned in the identical state. The truth is, there are lots of, many examples of bigger cities which can be cheaper than smaller cities. And in just about each single case the reason is that the smaller however costlier cities have extra restrictions on constructing. Within the listing beneath, the metro areas on the left are bigger and cheaper than the metro areas on the best:
Chicago >>> San Francisco Bay Space
Dallas/Forth Price >>> Washington DC
Houston >>> Boston or Seattle
San Antonio >>> Portland
Phoenix >>> San Diego
Colorado Springs >>> Boulder
In every case, the bigger metro space is cheaper than the smaller one. And in every case there are stricter limits on constructing within the costlier metropolis.
That doesn’t show Alexander is incorrect. It’s doable that the rationale for costlier housing within the NIMBY cities has nothing to do with restrictions on constructing. However I doubt it. I believe that if Houston had adopted extreme restrictions on constructing within the Eighties, then individuals would now attribute the ensuing excessive housing costs as being because of all of the oil cash sloshing by means of its financial system. However Houston determined to open its doorways to anybody who wished to maneuver there. In consequence, regardless that Houston is the worldwide vitality capital and is stuffed with effectively paid petroleum engineers, and regardless that vitality is without doubt one of the world’s largest industries, Houston remains to be an affordable place to reside. As an alternative, it received a lot greater. BTW, Houston additionally has effectively paid aerospace engineers, effectively paid enterprise executives and effectively paid medical doctors, and so on. There’s greater than sufficient cash in Houston to drive up housing costs if they’d restricted constructing.
Replace: Emily Hamilton of the Mercatus Heart has a wonderful publish explaining how Houston’s YIMBY insurance policies result in higher housing affordability.
It might seem that Alexander is “Reasoning from a amount change.” In any case, it is mindless to debate the impression of a change in amount on worth, with out understanding why amount modified. If Oakland will get extra housing as a result of it deregulates, costs will in all probability fall. If Oakland will get extra housing as a result of it turns into trendier, then costs will in all probability rise. Alexander appears to know this drawback, and thus not less than implicitly appears to consider that each single issue that may enhance Oakland’s housing provide would have the impact of boosting demand by greater than provide. That’s, he appears to consider that NIMBY insurance policies make cities cheaper. That’s theoretically doable, however appears unlikely most often.
To recap my argument:
1. The correlation Alexander cites proves nothing—you’d count on greater cities to be costlier even when (on the margin) constructing extra housing didn’t elevate costs.
2. Alexander is appropriate that if his mannequin had been incorrect then you definately’d count on some exceptions to the widely constructive relationship between density and worth, because of differential restrictions on constructing. However loads of such exceptions do exist, and virtually all the time in precisely the locations predicted by YIMBY proponents of extra constructing. Elsewhere in his publish he dismisses intercity comparisons between fashionable coastal cities and heartland cities. Nonetheless, the examples I present present that I didn’t simply cherry decide one exception with my Austin/Houston comparability, there are lots of such anomalies. And one can discover such anomalies even inside coastal areas. The Bay Space is costlier than LA, regardless of being smaller. It has extra restrictive zoning. The Boston metro space is costlier than metro DC, regardless of being smaller. Boston has extra restrictive zoning. And you’ll’t say that LA and DC are usually not fascinating markets.
Simply to be clear, our dispute has completely no coverage implications. As an example, I stated:
If constructing extra housing raises its worth, then the argument for extra building is even stronger.
And Alexander responded:
I agree with all this.
That is vital, as a result of his previous post had appeared to point that he thought it was a “drawback” that new building led to larger housing costs. He beforehand stated:
It is a coordination drawback: if each metropolis upzones collectively, they will all get decrease home costs, however every metropolis can reduce its personal costs by refusing to cooperate and hoping everybody else does the exhausting work.
What “exhausting work”?
Within the new publish he makes it very clear that this isn’t a “drawback.” He helps the YIMBY place.
Thus we each assist making it simpler to construct housing in Oakland, though he thinks this is able to elevate costs and I feel it will decrease them. If I’m incorrect, that’s, if extra housing boosted home costs in Oakland, then we each agree that this is able to be an particularly good end result. And I concede that I may be incorrect.
P.S. Barely off subject, it’s price recalling why new homes ought to be “unaffordable” for common Individuals. Consider a steady-state society with solely 100 households, dwelling in 100 homes of various high quality. Assume that every home lasts 100 years. Every year, the worst home is torn down, and a brand new home is constructed. To ensure that the standard of the housing inventory to rise by 1%/yr, the brand new home have to be twice nearly as good as the common current home. Every year, the households all shift over one home, shifting progressively to raised and higher properties. The richest household lives within the newly constructed home, which is (by assumption) unaffordable to the opposite 99 households.
In a extra reasonable mannequin with inhabitants development, not each new home is unaffordable to the underside 99%. However even with inhabitants development, new building in an financial system with rising dwelling requirements will are typically a lot nicer than the present inventory of housing, which signifies that new building will usually be “unaffordable” to the common household. If new housing is reasonably priced to the common household, then society won’t progress.
P.P.S. Alexander describes my earlier publish as follows:
Scott Sumner is an economist and blogger
I don’t see myself as a well-known particular person, however I share his view that I’ve the potential to carry good opinions. So far as the query of whether or not I do really maintain good opinions, I’ll let readers resolve.
In a recent post, Scott Alexander doubled down on his argument that constructing extra housing usually ends in larger housing costs. In his earlier publish, he pointed to the truth that housing is usually costlier in greater cities. I supplied a counterexample, citing Houston and Austin. I additionally argued that large cities are costly for causes unrelated to their giant amount of housing, corresponding to the benefits supplied by agglomeration. Exogenous provide will increase, corresponding to making it simpler to construct new housing, usually cut back housing costs.
Right here’s how Alexander responded to certainly one of my arguments:
I began the publish with a graph of about 50 cities, exhibiting a constructive correlation between density and worth. I’m having bother seeing how Sumner’s level isn’t simply “for those who take away 48 of these cities and cherry-pick two, the connection is unfavorable”.
I feel Alexander misunderstood this argument, so let me return and make the purpose extra rigorously. It will likely be useful to make two separate arguments:
1. You’d count on large cities to be costlier even when constructing housing reduces housing costs.
2. Austin and Houston are usually not the one counterexamples; there are lots of different such anomalies.
Let’s begin with a easy mannequin the place there are zero restrictions on housing building in all cities. Assume that America has 100 cities, every with industries of various productivity. In that mannequin, the most important cities shall be subsequent to the areas of biggest productiveness. (These areas of productiveness had been as soon as linked to pure components corresponding to ports and mineral assets, however are more and more linked to industries with community results like finance, vitality, leisure and tech.) Once more, assume there aren’t any obstacles to constructing, that’s, building of housing is so unconstrained that each single metropolis makes fashionable Houston appear to be a NIMBY stronghold.
Housing costs on this hypothetical financial system shall be larger within the bigger cities, ceteris paribus, regardless that constructing extra housing would possibly effectively depress costs. That’s as a result of in a bigger metropolis, individuals can pay extra for comfort (i.e., an excellent location). That may be true even when these greater cities weren’t extra productive. As an example, individuals would pay additional to cut back commuting prices, or to be near facilities. However the greater cities are (by assumption) additionally extra productive, which supplies one more reason for housing costs to be larger in greater cities—larger wages. This thought experiment means that the empirical relationship Alexander depends upon to make his argument would apply even when his argument weren’t true.
One response is that these industries with community results solely exist in locations like New York as a result of there are many individuals, and which you could’t have plenty of individuals with out plenty of housing. That’s true, however has no bearing on the query of how extra housing impacts costs on the margin. And from the earlier thought experiment, it’s clear that taking a look at easy correlations doesn’t resolve that drawback.
Alexander would possibly fairly reply that my mannequin is overly simplistic. Constructing restrictions differ from one metropolis to a different. In that case, you would possibly count on some exceptions to the iron legislation that greater cities are costlier than smaller cities. And since (he assumes) I discovered just one such anomaly, the correlation among the many remaining cities is simply too sturdy to elucidate by (exogenous) components aside from metropolis measurement.
Really, I cited Austin and Houston merely as one instance, and I picked this instance as a result of they’re positioned in the identical state. The truth is, there are lots of, many examples of bigger cities which can be cheaper than smaller cities. And in just about each single case the reason is that the smaller however costlier cities have extra restrictions on constructing. Within the listing beneath, the metro areas on the left are bigger and cheaper than the metro areas on the best:
Chicago >>> San Francisco Bay Space
Dallas/Forth Price >>> Washington DC
Houston >>> Boston or Seattle
San Antonio >>> Portland
Phoenix >>> San Diego
Colorado Springs >>> Boulder
In every case, the bigger metro space is cheaper than the smaller one. And in every case there are stricter limits on constructing within the costlier metropolis.
That doesn’t show Alexander is incorrect. It’s doable that the rationale for costlier housing within the NIMBY cities has nothing to do with restrictions on constructing. However I doubt it. I believe that if Houston had adopted extreme restrictions on constructing within the Eighties, then individuals would now attribute the ensuing excessive housing costs as being because of all of the oil cash sloshing by means of its financial system. However Houston determined to open its doorways to anybody who wished to maneuver there. In consequence, regardless that Houston is the worldwide vitality capital and is stuffed with effectively paid petroleum engineers, and regardless that vitality is without doubt one of the world’s largest industries, Houston remains to be an affordable place to reside. As an alternative, it received a lot greater. BTW, Houston additionally has effectively paid aerospace engineers, effectively paid enterprise executives and effectively paid medical doctors, and so on. There’s greater than sufficient cash in Houston to drive up housing costs if they’d restricted constructing.
Replace: Emily Hamilton of the Mercatus Heart has a wonderful publish explaining how Houston’s YIMBY insurance policies result in higher housing affordability.
It might seem that Alexander is “Reasoning from a amount change.” In any case, it is mindless to debate the impression of a change in amount on worth, with out understanding why amount modified. If Oakland will get extra housing as a result of it deregulates, costs will in all probability fall. If Oakland will get extra housing as a result of it turns into trendier, then costs will in all probability rise. Alexander appears to know this drawback, and thus not less than implicitly appears to consider that each single issue that may enhance Oakland’s housing provide would have the impact of boosting demand by greater than provide. That’s, he appears to consider that NIMBY insurance policies make cities cheaper. That’s theoretically doable, however appears unlikely most often.
To recap my argument:
1. The correlation Alexander cites proves nothing—you’d count on greater cities to be costlier even when (on the margin) constructing extra housing didn’t elevate costs.
2. Alexander is appropriate that if his mannequin had been incorrect then you definately’d count on some exceptions to the widely constructive relationship between density and worth, because of differential restrictions on constructing. However loads of such exceptions do exist, and virtually all the time in precisely the locations predicted by YIMBY proponents of extra constructing. Elsewhere in his publish he dismisses intercity comparisons between fashionable coastal cities and heartland cities. Nonetheless, the examples I present present that I didn’t simply cherry decide one exception with my Austin/Houston comparability, there are lots of such anomalies. And one can discover such anomalies even inside coastal areas. The Bay Space is costlier than LA, regardless of being smaller. It has extra restrictive zoning. The Boston metro space is costlier than metro DC, regardless of being smaller. Boston has extra restrictive zoning. And you’ll’t say that LA and DC are usually not fascinating markets.
Simply to be clear, our dispute has completely no coverage implications. As an example, I stated:
If constructing extra housing raises its worth, then the argument for extra building is even stronger.
And Alexander responded:
I agree with all this.
That is vital, as a result of his previous post had appeared to point that he thought it was a “drawback” that new building led to larger housing costs. He beforehand stated:
It is a coordination drawback: if each metropolis upzones collectively, they will all get decrease home costs, however every metropolis can reduce its personal costs by refusing to cooperate and hoping everybody else does the exhausting work.
What “exhausting work”?
Within the new publish he makes it very clear that this isn’t a “drawback.” He helps the YIMBY place.
Thus we each assist making it simpler to construct housing in Oakland, though he thinks this is able to elevate costs and I feel it will decrease them. If I’m incorrect, that’s, if extra housing boosted home costs in Oakland, then we each agree that this is able to be an particularly good end result. And I concede that I may be incorrect.
P.S. Barely off subject, it’s price recalling why new homes ought to be “unaffordable” for common Individuals. Consider a steady-state society with solely 100 households, dwelling in 100 homes of various high quality. Assume that every home lasts 100 years. Every year, the worst home is torn down, and a brand new home is constructed. To ensure that the standard of the housing inventory to rise by 1%/yr, the brand new home have to be twice nearly as good as the common current home. Every year, the households all shift over one home, shifting progressively to raised and higher properties. The richest household lives within the newly constructed home, which is (by assumption) unaffordable to the opposite 99 households.
In a extra reasonable mannequin with inhabitants development, not each new home is unaffordable to the underside 99%. However even with inhabitants development, new building in an financial system with rising dwelling requirements will are typically a lot nicer than the present inventory of housing, which signifies that new building will usually be “unaffordable” to the common household. If new housing is reasonably priced to the common household, then society won’t progress.
P.P.S. Alexander describes my earlier publish as follows:
Scott Sumner is an economist and blogger
I don’t see myself as a well-known particular person, however I share his view that I’ve the potential to carry good opinions. So far as the query of whether or not I do really maintain good opinions, I’ll let readers resolve.
In a recent post, Scott Alexander doubled down on his argument that constructing extra housing usually ends in larger housing costs. In his earlier publish, he pointed to the truth that housing is usually costlier in greater cities. I supplied a counterexample, citing Houston and Austin. I additionally argued that large cities are costly for causes unrelated to their giant amount of housing, corresponding to the benefits supplied by agglomeration. Exogenous provide will increase, corresponding to making it simpler to construct new housing, usually cut back housing costs.
Right here’s how Alexander responded to certainly one of my arguments:
I began the publish with a graph of about 50 cities, exhibiting a constructive correlation between density and worth. I’m having bother seeing how Sumner’s level isn’t simply “for those who take away 48 of these cities and cherry-pick two, the connection is unfavorable”.
I feel Alexander misunderstood this argument, so let me return and make the purpose extra rigorously. It will likely be useful to make two separate arguments:
1. You’d count on large cities to be costlier even when constructing housing reduces housing costs.
2. Austin and Houston are usually not the one counterexamples; there are lots of different such anomalies.
Let’s begin with a easy mannequin the place there are zero restrictions on housing building in all cities. Assume that America has 100 cities, every with industries of various productivity. In that mannequin, the most important cities shall be subsequent to the areas of biggest productiveness. (These areas of productiveness had been as soon as linked to pure components corresponding to ports and mineral assets, however are more and more linked to industries with community results like finance, vitality, leisure and tech.) Once more, assume there aren’t any obstacles to constructing, that’s, building of housing is so unconstrained that each single metropolis makes fashionable Houston appear to be a NIMBY stronghold.
Housing costs on this hypothetical financial system shall be larger within the bigger cities, ceteris paribus, regardless that constructing extra housing would possibly effectively depress costs. That’s as a result of in a bigger metropolis, individuals can pay extra for comfort (i.e., an excellent location). That may be true even when these greater cities weren’t extra productive. As an example, individuals would pay additional to cut back commuting prices, or to be near facilities. However the greater cities are (by assumption) additionally extra productive, which supplies one more reason for housing costs to be larger in greater cities—larger wages. This thought experiment means that the empirical relationship Alexander depends upon to make his argument would apply even when his argument weren’t true.
One response is that these industries with community results solely exist in locations like New York as a result of there are many individuals, and which you could’t have plenty of individuals with out plenty of housing. That’s true, however has no bearing on the query of how extra housing impacts costs on the margin. And from the earlier thought experiment, it’s clear that taking a look at easy correlations doesn’t resolve that drawback.
Alexander would possibly fairly reply that my mannequin is overly simplistic. Constructing restrictions differ from one metropolis to a different. In that case, you would possibly count on some exceptions to the iron legislation that greater cities are costlier than smaller cities. And since (he assumes) I discovered just one such anomaly, the correlation among the many remaining cities is simply too sturdy to elucidate by (exogenous) components aside from metropolis measurement.
Really, I cited Austin and Houston merely as one instance, and I picked this instance as a result of they’re positioned in the identical state. The truth is, there are lots of, many examples of bigger cities which can be cheaper than smaller cities. And in just about each single case the reason is that the smaller however costlier cities have extra restrictions on constructing. Within the listing beneath, the metro areas on the left are bigger and cheaper than the metro areas on the best:
Chicago >>> San Francisco Bay Space
Dallas/Forth Price >>> Washington DC
Houston >>> Boston or Seattle
San Antonio >>> Portland
Phoenix >>> San Diego
Colorado Springs >>> Boulder
In every case, the bigger metro space is cheaper than the smaller one. And in every case there are stricter limits on constructing within the costlier metropolis.
That doesn’t show Alexander is incorrect. It’s doable that the rationale for costlier housing within the NIMBY cities has nothing to do with restrictions on constructing. However I doubt it. I believe that if Houston had adopted extreme restrictions on constructing within the Eighties, then individuals would now attribute the ensuing excessive housing costs as being because of all of the oil cash sloshing by means of its financial system. However Houston determined to open its doorways to anybody who wished to maneuver there. In consequence, regardless that Houston is the worldwide vitality capital and is stuffed with effectively paid petroleum engineers, and regardless that vitality is without doubt one of the world’s largest industries, Houston remains to be an affordable place to reside. As an alternative, it received a lot greater. BTW, Houston additionally has effectively paid aerospace engineers, effectively paid enterprise executives and effectively paid medical doctors, and so on. There’s greater than sufficient cash in Houston to drive up housing costs if they’d restricted constructing.
Replace: Emily Hamilton of the Mercatus Heart has a wonderful publish explaining how Houston’s YIMBY insurance policies result in higher housing affordability.
It might seem that Alexander is “Reasoning from a amount change.” In any case, it is mindless to debate the impression of a change in amount on worth, with out understanding why amount modified. If Oakland will get extra housing as a result of it deregulates, costs will in all probability fall. If Oakland will get extra housing as a result of it turns into trendier, then costs will in all probability rise. Alexander appears to know this drawback, and thus not less than implicitly appears to consider that each single issue that may enhance Oakland’s housing provide would have the impact of boosting demand by greater than provide. That’s, he appears to consider that NIMBY insurance policies make cities cheaper. That’s theoretically doable, however appears unlikely most often.
To recap my argument:
1. The correlation Alexander cites proves nothing—you’d count on greater cities to be costlier even when (on the margin) constructing extra housing didn’t elevate costs.
2. Alexander is appropriate that if his mannequin had been incorrect then you definately’d count on some exceptions to the widely constructive relationship between density and worth, because of differential restrictions on constructing. However loads of such exceptions do exist, and virtually all the time in precisely the locations predicted by YIMBY proponents of extra constructing. Elsewhere in his publish he dismisses intercity comparisons between fashionable coastal cities and heartland cities. Nonetheless, the examples I present present that I didn’t simply cherry decide one exception with my Austin/Houston comparability, there are lots of such anomalies. And one can discover such anomalies even inside coastal areas. The Bay Space is costlier than LA, regardless of being smaller. It has extra restrictive zoning. The Boston metro space is costlier than metro DC, regardless of being smaller. Boston has extra restrictive zoning. And you’ll’t say that LA and DC are usually not fascinating markets.
Simply to be clear, our dispute has completely no coverage implications. As an example, I stated:
If constructing extra housing raises its worth, then the argument for extra building is even stronger.
And Alexander responded:
I agree with all this.
That is vital, as a result of his previous post had appeared to point that he thought it was a “drawback” that new building led to larger housing costs. He beforehand stated:
It is a coordination drawback: if each metropolis upzones collectively, they will all get decrease home costs, however every metropolis can reduce its personal costs by refusing to cooperate and hoping everybody else does the exhausting work.
What “exhausting work”?
Within the new publish he makes it very clear that this isn’t a “drawback.” He helps the YIMBY place.
Thus we each assist making it simpler to construct housing in Oakland, though he thinks this is able to elevate costs and I feel it will decrease them. If I’m incorrect, that’s, if extra housing boosted home costs in Oakland, then we each agree that this is able to be an particularly good end result. And I concede that I may be incorrect.
P.S. Barely off subject, it’s price recalling why new homes ought to be “unaffordable” for common Individuals. Consider a steady-state society with solely 100 households, dwelling in 100 homes of various high quality. Assume that every home lasts 100 years. Every year, the worst home is torn down, and a brand new home is constructed. To ensure that the standard of the housing inventory to rise by 1%/yr, the brand new home have to be twice nearly as good as the common current home. Every year, the households all shift over one home, shifting progressively to raised and higher properties. The richest household lives within the newly constructed home, which is (by assumption) unaffordable to the opposite 99 households.
In a extra reasonable mannequin with inhabitants development, not each new home is unaffordable to the underside 99%. However even with inhabitants development, new building in an financial system with rising dwelling requirements will are typically a lot nicer than the present inventory of housing, which signifies that new building will usually be “unaffordable” to the common household. If new housing is reasonably priced to the common household, then society won’t progress.
P.P.S. Alexander describes my earlier publish as follows:
Scott Sumner is an economist and blogger
I don’t see myself as a well-known particular person, however I share his view that I’ve the potential to carry good opinions. So far as the query of whether or not I do really maintain good opinions, I’ll let readers resolve.
In a recent post, Scott Alexander doubled down on his argument that constructing extra housing usually ends in larger housing costs. In his earlier publish, he pointed to the truth that housing is usually costlier in greater cities. I supplied a counterexample, citing Houston and Austin. I additionally argued that large cities are costly for causes unrelated to their giant amount of housing, corresponding to the benefits supplied by agglomeration. Exogenous provide will increase, corresponding to making it simpler to construct new housing, usually cut back housing costs.
Right here’s how Alexander responded to certainly one of my arguments:
I began the publish with a graph of about 50 cities, exhibiting a constructive correlation between density and worth. I’m having bother seeing how Sumner’s level isn’t simply “for those who take away 48 of these cities and cherry-pick two, the connection is unfavorable”.
I feel Alexander misunderstood this argument, so let me return and make the purpose extra rigorously. It will likely be useful to make two separate arguments:
1. You’d count on large cities to be costlier even when constructing housing reduces housing costs.
2. Austin and Houston are usually not the one counterexamples; there are lots of different such anomalies.
Let’s begin with a easy mannequin the place there are zero restrictions on housing building in all cities. Assume that America has 100 cities, every with industries of various productivity. In that mannequin, the most important cities shall be subsequent to the areas of biggest productiveness. (These areas of productiveness had been as soon as linked to pure components corresponding to ports and mineral assets, however are more and more linked to industries with community results like finance, vitality, leisure and tech.) Once more, assume there aren’t any obstacles to constructing, that’s, building of housing is so unconstrained that each single metropolis makes fashionable Houston appear to be a NIMBY stronghold.
Housing costs on this hypothetical financial system shall be larger within the bigger cities, ceteris paribus, regardless that constructing extra housing would possibly effectively depress costs. That’s as a result of in a bigger metropolis, individuals can pay extra for comfort (i.e., an excellent location). That may be true even when these greater cities weren’t extra productive. As an example, individuals would pay additional to cut back commuting prices, or to be near facilities. However the greater cities are (by assumption) additionally extra productive, which supplies one more reason for housing costs to be larger in greater cities—larger wages. This thought experiment means that the empirical relationship Alexander depends upon to make his argument would apply even when his argument weren’t true.
One response is that these industries with community results solely exist in locations like New York as a result of there are many individuals, and which you could’t have plenty of individuals with out plenty of housing. That’s true, however has no bearing on the query of how extra housing impacts costs on the margin. And from the earlier thought experiment, it’s clear that taking a look at easy correlations doesn’t resolve that drawback.
Alexander would possibly fairly reply that my mannequin is overly simplistic. Constructing restrictions differ from one metropolis to a different. In that case, you would possibly count on some exceptions to the iron legislation that greater cities are costlier than smaller cities. And since (he assumes) I discovered just one such anomaly, the correlation among the many remaining cities is simply too sturdy to elucidate by (exogenous) components aside from metropolis measurement.
Really, I cited Austin and Houston merely as one instance, and I picked this instance as a result of they’re positioned in the identical state. The truth is, there are lots of, many examples of bigger cities which can be cheaper than smaller cities. And in just about each single case the reason is that the smaller however costlier cities have extra restrictions on constructing. Within the listing beneath, the metro areas on the left are bigger and cheaper than the metro areas on the best:
Chicago >>> San Francisco Bay Space
Dallas/Forth Price >>> Washington DC
Houston >>> Boston or Seattle
San Antonio >>> Portland
Phoenix >>> San Diego
Colorado Springs >>> Boulder
In every case, the bigger metro space is cheaper than the smaller one. And in every case there are stricter limits on constructing within the costlier metropolis.
That doesn’t show Alexander is incorrect. It’s doable that the rationale for costlier housing within the NIMBY cities has nothing to do with restrictions on constructing. However I doubt it. I believe that if Houston had adopted extreme restrictions on constructing within the Eighties, then individuals would now attribute the ensuing excessive housing costs as being because of all of the oil cash sloshing by means of its financial system. However Houston determined to open its doorways to anybody who wished to maneuver there. In consequence, regardless that Houston is the worldwide vitality capital and is stuffed with effectively paid petroleum engineers, and regardless that vitality is without doubt one of the world’s largest industries, Houston remains to be an affordable place to reside. As an alternative, it received a lot greater. BTW, Houston additionally has effectively paid aerospace engineers, effectively paid enterprise executives and effectively paid medical doctors, and so on. There’s greater than sufficient cash in Houston to drive up housing costs if they’d restricted constructing.
Replace: Emily Hamilton of the Mercatus Heart has a wonderful publish explaining how Houston’s YIMBY insurance policies result in higher housing affordability.
It might seem that Alexander is “Reasoning from a amount change.” In any case, it is mindless to debate the impression of a change in amount on worth, with out understanding why amount modified. If Oakland will get extra housing as a result of it deregulates, costs will in all probability fall. If Oakland will get extra housing as a result of it turns into trendier, then costs will in all probability rise. Alexander appears to know this drawback, and thus not less than implicitly appears to consider that each single issue that may enhance Oakland’s housing provide would have the impact of boosting demand by greater than provide. That’s, he appears to consider that NIMBY insurance policies make cities cheaper. That’s theoretically doable, however appears unlikely most often.
To recap my argument:
1. The correlation Alexander cites proves nothing—you’d count on greater cities to be costlier even when (on the margin) constructing extra housing didn’t elevate costs.
2. Alexander is appropriate that if his mannequin had been incorrect then you definately’d count on some exceptions to the widely constructive relationship between density and worth, because of differential restrictions on constructing. However loads of such exceptions do exist, and virtually all the time in precisely the locations predicted by YIMBY proponents of extra constructing. Elsewhere in his publish he dismisses intercity comparisons between fashionable coastal cities and heartland cities. Nonetheless, the examples I present present that I didn’t simply cherry decide one exception with my Austin/Houston comparability, there are lots of such anomalies. And one can discover such anomalies even inside coastal areas. The Bay Space is costlier than LA, regardless of being smaller. It has extra restrictive zoning. The Boston metro space is costlier than metro DC, regardless of being smaller. Boston has extra restrictive zoning. And you’ll’t say that LA and DC are usually not fascinating markets.
Simply to be clear, our dispute has completely no coverage implications. As an example, I stated:
If constructing extra housing raises its worth, then the argument for extra building is even stronger.
And Alexander responded:
I agree with all this.
That is vital, as a result of his previous post had appeared to point that he thought it was a “drawback” that new building led to larger housing costs. He beforehand stated:
It is a coordination drawback: if each metropolis upzones collectively, they will all get decrease home costs, however every metropolis can reduce its personal costs by refusing to cooperate and hoping everybody else does the exhausting work.
What “exhausting work”?
Within the new publish he makes it very clear that this isn’t a “drawback.” He helps the YIMBY place.
Thus we each assist making it simpler to construct housing in Oakland, though he thinks this is able to elevate costs and I feel it will decrease them. If I’m incorrect, that’s, if extra housing boosted home costs in Oakland, then we each agree that this is able to be an particularly good end result. And I concede that I may be incorrect.
P.S. Barely off subject, it’s price recalling why new homes ought to be “unaffordable” for common Individuals. Consider a steady-state society with solely 100 households, dwelling in 100 homes of various high quality. Assume that every home lasts 100 years. Every year, the worst home is torn down, and a brand new home is constructed. To ensure that the standard of the housing inventory to rise by 1%/yr, the brand new home have to be twice nearly as good as the common current home. Every year, the households all shift over one home, shifting progressively to raised and higher properties. The richest household lives within the newly constructed home, which is (by assumption) unaffordable to the opposite 99 households.
In a extra reasonable mannequin with inhabitants development, not each new home is unaffordable to the underside 99%. However even with inhabitants development, new building in an financial system with rising dwelling requirements will are typically a lot nicer than the present inventory of housing, which signifies that new building will usually be “unaffordable” to the common household. If new housing is reasonably priced to the common household, then society won’t progress.
P.P.S. Alexander describes my earlier publish as follows:
Scott Sumner is an economist and blogger
I don’t see myself as a well-known particular person, however I share his view that I’ve the potential to carry good opinions. So far as the query of whether or not I do really maintain good opinions, I’ll let readers resolve.
In a recent post, Scott Alexander doubled down on his argument that constructing extra housing usually ends in larger housing costs. In his earlier publish, he pointed to the truth that housing is usually costlier in greater cities. I supplied a counterexample, citing Houston and Austin. I additionally argued that large cities are costly for causes unrelated to their giant amount of housing, corresponding to the benefits supplied by agglomeration. Exogenous provide will increase, corresponding to making it simpler to construct new housing, usually cut back housing costs.
Right here’s how Alexander responded to certainly one of my arguments:
I began the publish with a graph of about 50 cities, exhibiting a constructive correlation between density and worth. I’m having bother seeing how Sumner’s level isn’t simply “for those who take away 48 of these cities and cherry-pick two, the connection is unfavorable”.
I feel Alexander misunderstood this argument, so let me return and make the purpose extra rigorously. It will likely be useful to make two separate arguments:
1. You’d count on large cities to be costlier even when constructing housing reduces housing costs.
2. Austin and Houston are usually not the one counterexamples; there are lots of different such anomalies.
Let’s begin with a easy mannequin the place there are zero restrictions on housing building in all cities. Assume that America has 100 cities, every with industries of various productivity. In that mannequin, the most important cities shall be subsequent to the areas of biggest productiveness. (These areas of productiveness had been as soon as linked to pure components corresponding to ports and mineral assets, however are more and more linked to industries with community results like finance, vitality, leisure and tech.) Once more, assume there aren’t any obstacles to constructing, that’s, building of housing is so unconstrained that each single metropolis makes fashionable Houston appear to be a NIMBY stronghold.
Housing costs on this hypothetical financial system shall be larger within the bigger cities, ceteris paribus, regardless that constructing extra housing would possibly effectively depress costs. That’s as a result of in a bigger metropolis, individuals can pay extra for comfort (i.e., an excellent location). That may be true even when these greater cities weren’t extra productive. As an example, individuals would pay additional to cut back commuting prices, or to be near facilities. However the greater cities are (by assumption) additionally extra productive, which supplies one more reason for housing costs to be larger in greater cities—larger wages. This thought experiment means that the empirical relationship Alexander depends upon to make his argument would apply even when his argument weren’t true.
One response is that these industries with community results solely exist in locations like New York as a result of there are many individuals, and which you could’t have plenty of individuals with out plenty of housing. That’s true, however has no bearing on the query of how extra housing impacts costs on the margin. And from the earlier thought experiment, it’s clear that taking a look at easy correlations doesn’t resolve that drawback.
Alexander would possibly fairly reply that my mannequin is overly simplistic. Constructing restrictions differ from one metropolis to a different. In that case, you would possibly count on some exceptions to the iron legislation that greater cities are costlier than smaller cities. And since (he assumes) I discovered just one such anomaly, the correlation among the many remaining cities is simply too sturdy to elucidate by (exogenous) components aside from metropolis measurement.
Really, I cited Austin and Houston merely as one instance, and I picked this instance as a result of they’re positioned in the identical state. The truth is, there are lots of, many examples of bigger cities which can be cheaper than smaller cities. And in just about each single case the reason is that the smaller however costlier cities have extra restrictions on constructing. Within the listing beneath, the metro areas on the left are bigger and cheaper than the metro areas on the best:
Chicago >>> San Francisco Bay Space
Dallas/Forth Price >>> Washington DC
Houston >>> Boston or Seattle
San Antonio >>> Portland
Phoenix >>> San Diego
Colorado Springs >>> Boulder
In every case, the bigger metro space is cheaper than the smaller one. And in every case there are stricter limits on constructing within the costlier metropolis.
That doesn’t show Alexander is incorrect. It’s doable that the rationale for costlier housing within the NIMBY cities has nothing to do with restrictions on constructing. However I doubt it. I believe that if Houston had adopted extreme restrictions on constructing within the Eighties, then individuals would now attribute the ensuing excessive housing costs as being because of all of the oil cash sloshing by means of its financial system. However Houston determined to open its doorways to anybody who wished to maneuver there. In consequence, regardless that Houston is the worldwide vitality capital and is stuffed with effectively paid petroleum engineers, and regardless that vitality is without doubt one of the world’s largest industries, Houston remains to be an affordable place to reside. As an alternative, it received a lot greater. BTW, Houston additionally has effectively paid aerospace engineers, effectively paid enterprise executives and effectively paid medical doctors, and so on. There’s greater than sufficient cash in Houston to drive up housing costs if they’d restricted constructing.
Replace: Emily Hamilton of the Mercatus Heart has a wonderful publish explaining how Houston’s YIMBY insurance policies result in higher housing affordability.
It might seem that Alexander is “Reasoning from a amount change.” In any case, it is mindless to debate the impression of a change in amount on worth, with out understanding why amount modified. If Oakland will get extra housing as a result of it deregulates, costs will in all probability fall. If Oakland will get extra housing as a result of it turns into trendier, then costs will in all probability rise. Alexander appears to know this drawback, and thus not less than implicitly appears to consider that each single issue that may enhance Oakland’s housing provide would have the impact of boosting demand by greater than provide. That’s, he appears to consider that NIMBY insurance policies make cities cheaper. That’s theoretically doable, however appears unlikely most often.
To recap my argument:
1. The correlation Alexander cites proves nothing—you’d count on greater cities to be costlier even when (on the margin) constructing extra housing didn’t elevate costs.
2. Alexander is appropriate that if his mannequin had been incorrect then you definately’d count on some exceptions to the widely constructive relationship between density and worth, because of differential restrictions on constructing. However loads of such exceptions do exist, and virtually all the time in precisely the locations predicted by YIMBY proponents of extra constructing. Elsewhere in his publish he dismisses intercity comparisons between fashionable coastal cities and heartland cities. Nonetheless, the examples I present present that I didn’t simply cherry decide one exception with my Austin/Houston comparability, there are lots of such anomalies. And one can discover such anomalies even inside coastal areas. The Bay Space is costlier than LA, regardless of being smaller. It has extra restrictive zoning. The Boston metro space is costlier than metro DC, regardless of being smaller. Boston has extra restrictive zoning. And you’ll’t say that LA and DC are usually not fascinating markets.
Simply to be clear, our dispute has completely no coverage implications. As an example, I stated:
If constructing extra housing raises its worth, then the argument for extra building is even stronger.
And Alexander responded:
I agree with all this.
That is vital, as a result of his previous post had appeared to point that he thought it was a “drawback” that new building led to larger housing costs. He beforehand stated:
It is a coordination drawback: if each metropolis upzones collectively, they will all get decrease home costs, however every metropolis can reduce its personal costs by refusing to cooperate and hoping everybody else does the exhausting work.
What “exhausting work”?
Within the new publish he makes it very clear that this isn’t a “drawback.” He helps the YIMBY place.
Thus we each assist making it simpler to construct housing in Oakland, though he thinks this is able to elevate costs and I feel it will decrease them. If I’m incorrect, that’s, if extra housing boosted home costs in Oakland, then we each agree that this is able to be an particularly good end result. And I concede that I may be incorrect.
P.S. Barely off subject, it’s price recalling why new homes ought to be “unaffordable” for common Individuals. Consider a steady-state society with solely 100 households, dwelling in 100 homes of various high quality. Assume that every home lasts 100 years. Every year, the worst home is torn down, and a brand new home is constructed. To ensure that the standard of the housing inventory to rise by 1%/yr, the brand new home have to be twice nearly as good as the common current home. Every year, the households all shift over one home, shifting progressively to raised and higher properties. The richest household lives within the newly constructed home, which is (by assumption) unaffordable to the opposite 99 households.
In a extra reasonable mannequin with inhabitants development, not each new home is unaffordable to the underside 99%. However even with inhabitants development, new building in an financial system with rising dwelling requirements will are typically a lot nicer than the present inventory of housing, which signifies that new building will usually be “unaffordable” to the common household. If new housing is reasonably priced to the common household, then society won’t progress.
P.P.S. Alexander describes my earlier publish as follows:
Scott Sumner is an economist and blogger
I don’t see myself as a well-known particular person, however I share his view that I’ve the potential to carry good opinions. So far as the query of whether or not I do really maintain good opinions, I’ll let readers resolve.
In a recent post, Scott Alexander doubled down on his argument that constructing extra housing usually ends in larger housing costs. In his earlier publish, he pointed to the truth that housing is usually costlier in greater cities. I supplied a counterexample, citing Houston and Austin. I additionally argued that large cities are costly for causes unrelated to their giant amount of housing, corresponding to the benefits supplied by agglomeration. Exogenous provide will increase, corresponding to making it simpler to construct new housing, usually cut back housing costs.
Right here’s how Alexander responded to certainly one of my arguments:
I began the publish with a graph of about 50 cities, exhibiting a constructive correlation between density and worth. I’m having bother seeing how Sumner’s level isn’t simply “for those who take away 48 of these cities and cherry-pick two, the connection is unfavorable”.
I feel Alexander misunderstood this argument, so let me return and make the purpose extra rigorously. It will likely be useful to make two separate arguments:
1. You’d count on large cities to be costlier even when constructing housing reduces housing costs.
2. Austin and Houston are usually not the one counterexamples; there are lots of different such anomalies.
Let’s begin with a easy mannequin the place there are zero restrictions on housing building in all cities. Assume that America has 100 cities, every with industries of various productivity. In that mannequin, the most important cities shall be subsequent to the areas of biggest productiveness. (These areas of productiveness had been as soon as linked to pure components corresponding to ports and mineral assets, however are more and more linked to industries with community results like finance, vitality, leisure and tech.) Once more, assume there aren’t any obstacles to constructing, that’s, building of housing is so unconstrained that each single metropolis makes fashionable Houston appear to be a NIMBY stronghold.
Housing costs on this hypothetical financial system shall be larger within the bigger cities, ceteris paribus, regardless that constructing extra housing would possibly effectively depress costs. That’s as a result of in a bigger metropolis, individuals can pay extra for comfort (i.e., an excellent location). That may be true even when these greater cities weren’t extra productive. As an example, individuals would pay additional to cut back commuting prices, or to be near facilities. However the greater cities are (by assumption) additionally extra productive, which supplies one more reason for housing costs to be larger in greater cities—larger wages. This thought experiment means that the empirical relationship Alexander depends upon to make his argument would apply even when his argument weren’t true.
One response is that these industries with community results solely exist in locations like New York as a result of there are many individuals, and which you could’t have plenty of individuals with out plenty of housing. That’s true, however has no bearing on the query of how extra housing impacts costs on the margin. And from the earlier thought experiment, it’s clear that taking a look at easy correlations doesn’t resolve that drawback.
Alexander would possibly fairly reply that my mannequin is overly simplistic. Constructing restrictions differ from one metropolis to a different. In that case, you would possibly count on some exceptions to the iron legislation that greater cities are costlier than smaller cities. And since (he assumes) I discovered just one such anomaly, the correlation among the many remaining cities is simply too sturdy to elucidate by (exogenous) components aside from metropolis measurement.
Really, I cited Austin and Houston merely as one instance, and I picked this instance as a result of they’re positioned in the identical state. The truth is, there are lots of, many examples of bigger cities which can be cheaper than smaller cities. And in just about each single case the reason is that the smaller however costlier cities have extra restrictions on constructing. Within the listing beneath, the metro areas on the left are bigger and cheaper than the metro areas on the best:
Chicago >>> San Francisco Bay Space
Dallas/Forth Price >>> Washington DC
Houston >>> Boston or Seattle
San Antonio >>> Portland
Phoenix >>> San Diego
Colorado Springs >>> Boulder
In every case, the bigger metro space is cheaper than the smaller one. And in every case there are stricter limits on constructing within the costlier metropolis.
That doesn’t show Alexander is incorrect. It’s doable that the rationale for costlier housing within the NIMBY cities has nothing to do with restrictions on constructing. However I doubt it. I believe that if Houston had adopted extreme restrictions on constructing within the Eighties, then individuals would now attribute the ensuing excessive housing costs as being because of all of the oil cash sloshing by means of its financial system. However Houston determined to open its doorways to anybody who wished to maneuver there. In consequence, regardless that Houston is the worldwide vitality capital and is stuffed with effectively paid petroleum engineers, and regardless that vitality is without doubt one of the world’s largest industries, Houston remains to be an affordable place to reside. As an alternative, it received a lot greater. BTW, Houston additionally has effectively paid aerospace engineers, effectively paid enterprise executives and effectively paid medical doctors, and so on. There’s greater than sufficient cash in Houston to drive up housing costs if they’d restricted constructing.
Replace: Emily Hamilton of the Mercatus Heart has a wonderful publish explaining how Houston’s YIMBY insurance policies result in higher housing affordability.
It might seem that Alexander is “Reasoning from a amount change.” In any case, it is mindless to debate the impression of a change in amount on worth, with out understanding why amount modified. If Oakland will get extra housing as a result of it deregulates, costs will in all probability fall. If Oakland will get extra housing as a result of it turns into trendier, then costs will in all probability rise. Alexander appears to know this drawback, and thus not less than implicitly appears to consider that each single issue that may enhance Oakland’s housing provide would have the impact of boosting demand by greater than provide. That’s, he appears to consider that NIMBY insurance policies make cities cheaper. That’s theoretically doable, however appears unlikely most often.
To recap my argument:
1. The correlation Alexander cites proves nothing—you’d count on greater cities to be costlier even when (on the margin) constructing extra housing didn’t elevate costs.
2. Alexander is appropriate that if his mannequin had been incorrect then you definately’d count on some exceptions to the widely constructive relationship between density and worth, because of differential restrictions on constructing. However loads of such exceptions do exist, and virtually all the time in precisely the locations predicted by YIMBY proponents of extra constructing. Elsewhere in his publish he dismisses intercity comparisons between fashionable coastal cities and heartland cities. Nonetheless, the examples I present present that I didn’t simply cherry decide one exception with my Austin/Houston comparability, there are lots of such anomalies. And one can discover such anomalies even inside coastal areas. The Bay Space is costlier than LA, regardless of being smaller. It has extra restrictive zoning. The Boston metro space is costlier than metro DC, regardless of being smaller. Boston has extra restrictive zoning. And you’ll’t say that LA and DC are usually not fascinating markets.
Simply to be clear, our dispute has completely no coverage implications. As an example, I stated:
If constructing extra housing raises its worth, then the argument for extra building is even stronger.
And Alexander responded:
I agree with all this.
That is vital, as a result of his previous post had appeared to point that he thought it was a “drawback” that new building led to larger housing costs. He beforehand stated:
It is a coordination drawback: if each metropolis upzones collectively, they will all get decrease home costs, however every metropolis can reduce its personal costs by refusing to cooperate and hoping everybody else does the exhausting work.
What “exhausting work”?
Within the new publish he makes it very clear that this isn’t a “drawback.” He helps the YIMBY place.
Thus we each assist making it simpler to construct housing in Oakland, though he thinks this is able to elevate costs and I feel it will decrease them. If I’m incorrect, that’s, if extra housing boosted home costs in Oakland, then we each agree that this is able to be an particularly good end result. And I concede that I may be incorrect.
P.S. Barely off subject, it’s price recalling why new homes ought to be “unaffordable” for common Individuals. Consider a steady-state society with solely 100 households, dwelling in 100 homes of various high quality. Assume that every home lasts 100 years. Every year, the worst home is torn down, and a brand new home is constructed. To ensure that the standard of the housing inventory to rise by 1%/yr, the brand new home have to be twice nearly as good as the common current home. Every year, the households all shift over one home, shifting progressively to raised and higher properties. The richest household lives within the newly constructed home, which is (by assumption) unaffordable to the opposite 99 households.
In a extra reasonable mannequin with inhabitants development, not each new home is unaffordable to the underside 99%. However even with inhabitants development, new building in an financial system with rising dwelling requirements will are typically a lot nicer than the present inventory of housing, which signifies that new building will usually be “unaffordable” to the common household. If new housing is reasonably priced to the common household, then society won’t progress.
P.P.S. Alexander describes my earlier publish as follows:
Scott Sumner is an economist and blogger
I don’t see myself as a well-known particular person, however I share his view that I’ve the potential to carry good opinions. So far as the query of whether or not I do really maintain good opinions, I’ll let readers resolve.
In a recent post, Scott Alexander doubled down on his argument that constructing extra housing usually ends in larger housing costs. In his earlier publish, he pointed to the truth that housing is usually costlier in greater cities. I supplied a counterexample, citing Houston and Austin. I additionally argued that large cities are costly for causes unrelated to their giant amount of housing, corresponding to the benefits supplied by agglomeration. Exogenous provide will increase, corresponding to making it simpler to construct new housing, usually cut back housing costs.
Right here’s how Alexander responded to certainly one of my arguments:
I began the publish with a graph of about 50 cities, exhibiting a constructive correlation between density and worth. I’m having bother seeing how Sumner’s level isn’t simply “for those who take away 48 of these cities and cherry-pick two, the connection is unfavorable”.
I feel Alexander misunderstood this argument, so let me return and make the purpose extra rigorously. It will likely be useful to make two separate arguments:
1. You’d count on large cities to be costlier even when constructing housing reduces housing costs.
2. Austin and Houston are usually not the one counterexamples; there are lots of different such anomalies.
Let’s begin with a easy mannequin the place there are zero restrictions on housing building in all cities. Assume that America has 100 cities, every with industries of various productivity. In that mannequin, the most important cities shall be subsequent to the areas of biggest productiveness. (These areas of productiveness had been as soon as linked to pure components corresponding to ports and mineral assets, however are more and more linked to industries with community results like finance, vitality, leisure and tech.) Once more, assume there aren’t any obstacles to constructing, that’s, building of housing is so unconstrained that each single metropolis makes fashionable Houston appear to be a NIMBY stronghold.
Housing costs on this hypothetical financial system shall be larger within the bigger cities, ceteris paribus, regardless that constructing extra housing would possibly effectively depress costs. That’s as a result of in a bigger metropolis, individuals can pay extra for comfort (i.e., an excellent location). That may be true even when these greater cities weren’t extra productive. As an example, individuals would pay additional to cut back commuting prices, or to be near facilities. However the greater cities are (by assumption) additionally extra productive, which supplies one more reason for housing costs to be larger in greater cities—larger wages. This thought experiment means that the empirical relationship Alexander depends upon to make his argument would apply even when his argument weren’t true.
One response is that these industries with community results solely exist in locations like New York as a result of there are many individuals, and which you could’t have plenty of individuals with out plenty of housing. That’s true, however has no bearing on the query of how extra housing impacts costs on the margin. And from the earlier thought experiment, it’s clear that taking a look at easy correlations doesn’t resolve that drawback.
Alexander would possibly fairly reply that my mannequin is overly simplistic. Constructing restrictions differ from one metropolis to a different. In that case, you would possibly count on some exceptions to the iron legislation that greater cities are costlier than smaller cities. And since (he assumes) I discovered just one such anomaly, the correlation among the many remaining cities is simply too sturdy to elucidate by (exogenous) components aside from metropolis measurement.
Really, I cited Austin and Houston merely as one instance, and I picked this instance as a result of they’re positioned in the identical state. The truth is, there are lots of, many examples of bigger cities which can be cheaper than smaller cities. And in just about each single case the reason is that the smaller however costlier cities have extra restrictions on constructing. Within the listing beneath, the metro areas on the left are bigger and cheaper than the metro areas on the best:
Chicago >>> San Francisco Bay Space
Dallas/Forth Price >>> Washington DC
Houston >>> Boston or Seattle
San Antonio >>> Portland
Phoenix >>> San Diego
Colorado Springs >>> Boulder
In every case, the bigger metro space is cheaper than the smaller one. And in every case there are stricter limits on constructing within the costlier metropolis.
That doesn’t show Alexander is incorrect. It’s doable that the rationale for costlier housing within the NIMBY cities has nothing to do with restrictions on constructing. However I doubt it. I believe that if Houston had adopted extreme restrictions on constructing within the Eighties, then individuals would now attribute the ensuing excessive housing costs as being because of all of the oil cash sloshing by means of its financial system. However Houston determined to open its doorways to anybody who wished to maneuver there. In consequence, regardless that Houston is the worldwide vitality capital and is stuffed with effectively paid petroleum engineers, and regardless that vitality is without doubt one of the world’s largest industries, Houston remains to be an affordable place to reside. As an alternative, it received a lot greater. BTW, Houston additionally has effectively paid aerospace engineers, effectively paid enterprise executives and effectively paid medical doctors, and so on. There’s greater than sufficient cash in Houston to drive up housing costs if they’d restricted constructing.
Replace: Emily Hamilton of the Mercatus Heart has a wonderful publish explaining how Houston’s YIMBY insurance policies result in higher housing affordability.
It might seem that Alexander is “Reasoning from a amount change.” In any case, it is mindless to debate the impression of a change in amount on worth, with out understanding why amount modified. If Oakland will get extra housing as a result of it deregulates, costs will in all probability fall. If Oakland will get extra housing as a result of it turns into trendier, then costs will in all probability rise. Alexander appears to know this drawback, and thus not less than implicitly appears to consider that each single issue that may enhance Oakland’s housing provide would have the impact of boosting demand by greater than provide. That’s, he appears to consider that NIMBY insurance policies make cities cheaper. That’s theoretically doable, however appears unlikely most often.
To recap my argument:
1. The correlation Alexander cites proves nothing—you’d count on greater cities to be costlier even when (on the margin) constructing extra housing didn’t elevate costs.
2. Alexander is appropriate that if his mannequin had been incorrect then you definately’d count on some exceptions to the widely constructive relationship between density and worth, because of differential restrictions on constructing. However loads of such exceptions do exist, and virtually all the time in precisely the locations predicted by YIMBY proponents of extra constructing. Elsewhere in his publish he dismisses intercity comparisons between fashionable coastal cities and heartland cities. Nonetheless, the examples I present present that I didn’t simply cherry decide one exception with my Austin/Houston comparability, there are lots of such anomalies. And one can discover such anomalies even inside coastal areas. The Bay Space is costlier than LA, regardless of being smaller. It has extra restrictive zoning. The Boston metro space is costlier than metro DC, regardless of being smaller. Boston has extra restrictive zoning. And you’ll’t say that LA and DC are usually not fascinating markets.
Simply to be clear, our dispute has completely no coverage implications. As an example, I stated:
If constructing extra housing raises its worth, then the argument for extra building is even stronger.
And Alexander responded:
I agree with all this.
That is vital, as a result of his previous post had appeared to point that he thought it was a “drawback” that new building led to larger housing costs. He beforehand stated:
It is a coordination drawback: if each metropolis upzones collectively, they will all get decrease home costs, however every metropolis can reduce its personal costs by refusing to cooperate and hoping everybody else does the exhausting work.
What “exhausting work”?
Within the new publish he makes it very clear that this isn’t a “drawback.” He helps the YIMBY place.
Thus we each assist making it simpler to construct housing in Oakland, though he thinks this is able to elevate costs and I feel it will decrease them. If I’m incorrect, that’s, if extra housing boosted home costs in Oakland, then we each agree that this is able to be an particularly good end result. And I concede that I may be incorrect.
P.S. Barely off subject, it’s price recalling why new homes ought to be “unaffordable” for common Individuals. Consider a steady-state society with solely 100 households, dwelling in 100 homes of various high quality. Assume that every home lasts 100 years. Every year, the worst home is torn down, and a brand new home is constructed. To ensure that the standard of the housing inventory to rise by 1%/yr, the brand new home have to be twice nearly as good as the common current home. Every year, the households all shift over one home, shifting progressively to raised and higher properties. The richest household lives within the newly constructed home, which is (by assumption) unaffordable to the opposite 99 households.
In a extra reasonable mannequin with inhabitants development, not each new home is unaffordable to the underside 99%. However even with inhabitants development, new building in an financial system with rising dwelling requirements will are typically a lot nicer than the present inventory of housing, which signifies that new building will usually be “unaffordable” to the common household. If new housing is reasonably priced to the common household, then society won’t progress.
P.P.S. Alexander describes my earlier publish as follows:
Scott Sumner is an economist and blogger
I don’t see myself as a well-known particular person, however I share his view that I’ve the potential to carry good opinions. So far as the query of whether or not I do really maintain good opinions, I’ll let readers resolve.
In a recent post, Scott Alexander doubled down on his argument that constructing extra housing usually ends in larger housing costs. In his earlier publish, he pointed to the truth that housing is usually costlier in greater cities. I supplied a counterexample, citing Houston and Austin. I additionally argued that large cities are costly for causes unrelated to their giant amount of housing, corresponding to the benefits supplied by agglomeration. Exogenous provide will increase, corresponding to making it simpler to construct new housing, usually cut back housing costs.
Right here’s how Alexander responded to certainly one of my arguments:
I began the publish with a graph of about 50 cities, exhibiting a constructive correlation between density and worth. I’m having bother seeing how Sumner’s level isn’t simply “for those who take away 48 of these cities and cherry-pick two, the connection is unfavorable”.
I feel Alexander misunderstood this argument, so let me return and make the purpose extra rigorously. It will likely be useful to make two separate arguments:
1. You’d count on large cities to be costlier even when constructing housing reduces housing costs.
2. Austin and Houston are usually not the one counterexamples; there are lots of different such anomalies.
Let’s begin with a easy mannequin the place there are zero restrictions on housing building in all cities. Assume that America has 100 cities, every with industries of various productivity. In that mannequin, the most important cities shall be subsequent to the areas of biggest productiveness. (These areas of productiveness had been as soon as linked to pure components corresponding to ports and mineral assets, however are more and more linked to industries with community results like finance, vitality, leisure and tech.) Once more, assume there aren’t any obstacles to constructing, that’s, building of housing is so unconstrained that each single metropolis makes fashionable Houston appear to be a NIMBY stronghold.
Housing costs on this hypothetical financial system shall be larger within the bigger cities, ceteris paribus, regardless that constructing extra housing would possibly effectively depress costs. That’s as a result of in a bigger metropolis, individuals can pay extra for comfort (i.e., an excellent location). That may be true even when these greater cities weren’t extra productive. As an example, individuals would pay additional to cut back commuting prices, or to be near facilities. However the greater cities are (by assumption) additionally extra productive, which supplies one more reason for housing costs to be larger in greater cities—larger wages. This thought experiment means that the empirical relationship Alexander depends upon to make his argument would apply even when his argument weren’t true.
One response is that these industries with community results solely exist in locations like New York as a result of there are many individuals, and which you could’t have plenty of individuals with out plenty of housing. That’s true, however has no bearing on the query of how extra housing impacts costs on the margin. And from the earlier thought experiment, it’s clear that taking a look at easy correlations doesn’t resolve that drawback.
Alexander would possibly fairly reply that my mannequin is overly simplistic. Constructing restrictions differ from one metropolis to a different. In that case, you would possibly count on some exceptions to the iron legislation that greater cities are costlier than smaller cities. And since (he assumes) I discovered just one such anomaly, the correlation among the many remaining cities is simply too sturdy to elucidate by (exogenous) components aside from metropolis measurement.
Really, I cited Austin and Houston merely as one instance, and I picked this instance as a result of they’re positioned in the identical state. The truth is, there are lots of, many examples of bigger cities which can be cheaper than smaller cities. And in just about each single case the reason is that the smaller however costlier cities have extra restrictions on constructing. Within the listing beneath, the metro areas on the left are bigger and cheaper than the metro areas on the best:
Chicago >>> San Francisco Bay Space
Dallas/Forth Price >>> Washington DC
Houston >>> Boston or Seattle
San Antonio >>> Portland
Phoenix >>> San Diego
Colorado Springs >>> Boulder
In every case, the bigger metro space is cheaper than the smaller one. And in every case there are stricter limits on constructing within the costlier metropolis.
That doesn’t show Alexander is incorrect. It’s doable that the rationale for costlier housing within the NIMBY cities has nothing to do with restrictions on constructing. However I doubt it. I believe that if Houston had adopted extreme restrictions on constructing within the Eighties, then individuals would now attribute the ensuing excessive housing costs as being because of all of the oil cash sloshing by means of its financial system. However Houston determined to open its doorways to anybody who wished to maneuver there. In consequence, regardless that Houston is the worldwide vitality capital and is stuffed with effectively paid petroleum engineers, and regardless that vitality is without doubt one of the world’s largest industries, Houston remains to be an affordable place to reside. As an alternative, it received a lot greater. BTW, Houston additionally has effectively paid aerospace engineers, effectively paid enterprise executives and effectively paid medical doctors, and so on. There’s greater than sufficient cash in Houston to drive up housing costs if they’d restricted constructing.
Replace: Emily Hamilton of the Mercatus Heart has a wonderful publish explaining how Houston’s YIMBY insurance policies result in higher housing affordability.
It might seem that Alexander is “Reasoning from a amount change.” In any case, it is mindless to debate the impression of a change in amount on worth, with out understanding why amount modified. If Oakland will get extra housing as a result of it deregulates, costs will in all probability fall. If Oakland will get extra housing as a result of it turns into trendier, then costs will in all probability rise. Alexander appears to know this drawback, and thus not less than implicitly appears to consider that each single issue that may enhance Oakland’s housing provide would have the impact of boosting demand by greater than provide. That’s, he appears to consider that NIMBY insurance policies make cities cheaper. That’s theoretically doable, however appears unlikely most often.
To recap my argument:
1. The correlation Alexander cites proves nothing—you’d count on greater cities to be costlier even when (on the margin) constructing extra housing didn’t elevate costs.
2. Alexander is appropriate that if his mannequin had been incorrect then you definately’d count on some exceptions to the widely constructive relationship between density and worth, because of differential restrictions on constructing. However loads of such exceptions do exist, and virtually all the time in precisely the locations predicted by YIMBY proponents of extra constructing. Elsewhere in his publish he dismisses intercity comparisons between fashionable coastal cities and heartland cities. Nonetheless, the examples I present present that I didn’t simply cherry decide one exception with my Austin/Houston comparability, there are lots of such anomalies. And one can discover such anomalies even inside coastal areas. The Bay Space is costlier than LA, regardless of being smaller. It has extra restrictive zoning. The Boston metro space is costlier than metro DC, regardless of being smaller. Boston has extra restrictive zoning. And you’ll’t say that LA and DC are usually not fascinating markets.
Simply to be clear, our dispute has completely no coverage implications. As an example, I stated:
If constructing extra housing raises its worth, then the argument for extra building is even stronger.
And Alexander responded:
I agree with all this.
That is vital, as a result of his previous post had appeared to point that he thought it was a “drawback” that new building led to larger housing costs. He beforehand stated:
It is a coordination drawback: if each metropolis upzones collectively, they will all get decrease home costs, however every metropolis can reduce its personal costs by refusing to cooperate and hoping everybody else does the exhausting work.
What “exhausting work”?
Within the new publish he makes it very clear that this isn’t a “drawback.” He helps the YIMBY place.
Thus we each assist making it simpler to construct housing in Oakland, though he thinks this is able to elevate costs and I feel it will decrease them. If I’m incorrect, that’s, if extra housing boosted home costs in Oakland, then we each agree that this is able to be an particularly good end result. And I concede that I may be incorrect.
P.S. Barely off subject, it’s price recalling why new homes ought to be “unaffordable” for common Individuals. Consider a steady-state society with solely 100 households, dwelling in 100 homes of various high quality. Assume that every home lasts 100 years. Every year, the worst home is torn down, and a brand new home is constructed. To ensure that the standard of the housing inventory to rise by 1%/yr, the brand new home have to be twice nearly as good as the common current home. Every year, the households all shift over one home, shifting progressively to raised and higher properties. The richest household lives within the newly constructed home, which is (by assumption) unaffordable to the opposite 99 households.
In a extra reasonable mannequin with inhabitants development, not each new home is unaffordable to the underside 99%. However even with inhabitants development, new building in an financial system with rising dwelling requirements will are typically a lot nicer than the present inventory of housing, which signifies that new building will usually be “unaffordable” to the common household. If new housing is reasonably priced to the common household, then society won’t progress.
P.P.S. Alexander describes my earlier publish as follows:
Scott Sumner is an economist and blogger
I don’t see myself as a well-known particular person, however I share his view that I’ve the potential to carry good opinions. So far as the query of whether or not I do really maintain good opinions, I’ll let readers resolve.
