The Millennial Housing Shortage Fallacy

Scene from Chicago’s Lincoln Park neighborhood.  I love it, and would love to see more of it.  In more parts of Chicago.

There is no shortage of housing in most U.S. metro areas.  There is a shortage of housing in the areas most attractive to today’s young and affluent urban pioneers.  Their efforts to increase supply in cities, in the most desirable areas, is misguided and could ultimately cause more harm than good.

There is a spreading meme that the dominance of single-family zoning districts in major cities is artificially reducing housing supply.  Economists like Harvard professor Edward Glaeser have been stating for some time that super-tight regulation of land use in large metro areas has depressed housing construction, through a complex mix of zoning districts, air rights, historic preservation districts or byzantine permitting approvals and NIMBY-oriented residents  Others, like Matt Yglesias, have made the same point, and it’s becoming increasingly common among a growing group of young urbanists seeking to address their most pertinent concerns.

Admittedly, there is a shred of truth to this in many coastal metros, and in a select group of interior metros like Chicago.  They are, in fact, not adding new housing supply relative to the demand for housing.  Yglesias showed this in a recent article in which he suggests that the lack of recovery in the housing industry is a drain on the national economy.  He uses two charts to make the claim; he compares the number of housing permits authorized between Houston and the San Francisco Bay Area:

and for Atlanta and Boston:

True enough, Houston adds more units than the Bay Area, and Atlanta adds more than Boston.  But there are other factors contributing to that besides land use regulations:

  • Geography.  Boston and the Bay Area, among other coastal metros, are some of the most geographically constrained metros in the nation.  Water and terrain limit the amount of buildable land in the most desirable coastal metros.  This puts a bigger cap on the amount of development than anything the regulatory environment can do.
  • Old vs. New.  It’s not entirely fair to compare metros that may now be of comparable size, but come from entirely different places over the last 60-70 years.  The Bay Area’s metro population in 1950? It was 2.5 million.  Houston’s was just 920,000.  Boston’s metro area population in 1950 was 3.5 million, while Atlanta’s was just 727,000.  Even though all are relatively comparable in size today, they certainly did not start from the same base.  
  • Redevelopment vs. Development.  Developers who specialize in redevelopment — dealing with numerous owners to slowly packaging multiple parcels of land over time, dealing with demolition and cleanup costs, and obstructive NIMBY residents — have an entirely different playing field than those who specialize in conventional greenfield or large parcel development.  Even in today’s shifting development landscape, we have an abundance of developers who specialize in the latter, and relatively few who are competent in the former.
However, in answering his own question in a recent blog post, blogger Daniel Kay Hertz sheds some light on the thought process behind the growing meme:

“Why are there no apartment buildings in your standard affluent single-family-home neighborhood, common in metro areas from Chicago to Kansas City to New York to Memphis? Not because people don’t want to live in them. Not because you couldn’t make money by building them. They don’t exist because they’re illegal.”

The emphasis is added because it highlights the salient point, which can be reduced to this: “why isn’t there more housing where I want it?” Because there are plenty of apartment buildings with plenty of vacancies in other parts of the city.  Let’s fill those up, and then talk.

If young urbanists are serious about moving back to the city, maybe they ought to consider more of the city to live in.  For every highly desirable attractive urban neighborhood, even in the most in-demand metro areas, there are just as many languishing neighborhoods that aren’t even part of the conversation.  For every Lincoln Park or Lakeview in Chicago that lacks affordable housing, there is a Garfield Park or Woodlawn with tons of it.

Let’s dig deeper into Chicago.  I recently wrote a post where I tried to define the differences between the most in-demand parts of Chicago with the rest of the city.  In it, I identified what I called “Global Core Chicago”:

The area highlighted in green corresponds roughly to the ten Chicago Community Areas (Chicago’s officially designated neighborhoods) that make up Global Core Chicago.  Let’s see how it compares with the balance of the city, which could be called Rust Belt Chicago, on a few data points:

The data is from the 2012 Census American Community Survey.  You know what I see?  I see a “Global Core Chicago” that, in terms of density alone, already looks very similar to the most desirable urban areas in the nation, like New York, Boston, Washington, DC and San Francisco.  Not only does this core have 55% more people per square mile than the remaining parts of the city, it already has 2.2 times more dwelling units than the rest of the city.  A big factor in this disparity is the difference in household size — households in the global core are only two-thirds the size of those in the rest of the city.  And this makes no mention of the income and wealth differences between the two parts of the city.

I don’t believe we should be talking about expanding the global core at its margins.  We should be talking about expanding development throughout the city.  If young affluents are serious about returning to cities, they should consider Austin, Bronzeville, Woodlawn and South Shore, and not just Wicker Park and Logan Square. The same applies to every metro area in the nation.

We haven’t learned.  This push for more affordable housing in affluent city neighborhoods, because we like it there, is akin to the push for more suburban housing at the urban outskirts 60 years ago.  “The demand is there!  Accommodate our needs!”  And that led directly to a disinvestment in cities from which we are only now beginning to recover from.

We must be really careful in what we ask for in the development of our cities.  Simply requesting relaxed land use regulations so that more units will be built could result in serious unintended consequences.  Doing so in Chicago, and in many cities around the nation, would result in a spurt of housing growth in the most desirable areas — and in the most desirable areas only.  The global core would add far more units relative to the rest of the city.  It would not reduce residential and economic segregation, it would increase it, and contribute to one of the most vexing problems of our cities today — the exploding bifurcation of our cities by race, class and opportunity.

Doing so would result in cities made up of contiguous enclaves of affluent, dense, walkable and self-sufficient communities.  They would be beautiful, and they would be made up of the kind of development that is most preferable to me.  Yet they would be adjacent to yet wholly disconnected from half-empty expanses of impoverished, working class and middle class neighborhoods.  I can’t reconcile that in my mind.

Do we really want that?  Can’t we do better than that?

3 thoughts on “The Millennial Housing Shortage Fallacy

  1. I think the main idea of Daniel Hertz and other writers is to fight gentrification and more generally economic segregation, not to make the already desirable areas of the city even more desirable. By restricting housing supply in areas where wealthy people want to live, it creates a housing shortage which artificially raises prices. As a result, only the wealthy can afford to live in these areas, which results in the creation of exclusively wealthy neighborhoods such as Lincoln Park. Furthermore, since the wealthy are able to segregate themselves, all the other neighborhoods are poorer on average. Therefore, dense construction in wealthy neighborhoods could reduce the number of poor neighborhoods even if it does not directly help the poor neighborhoods.

    However, I definitely agree with you that encouraging density alone is not sufficient to fight racial or economic segregation, particularly because there are so many neighborhoods that already have high poverty rates and high levels of disinvestment. Even if more people who currently live in Austin were able to move to Lincoln Park, the result would be bad for people who had a good reason to remain in Austin, whether it be homeownership, family connections, or a sense of pride in the community. Furthermore, requiring people to move in order to live in a better neighborhood is still deeply unequal. Finally, if more wealthy people moved to Austin and similar neighborhoods, it would reduce pressure on already gentrifying neighborhoods and would counteract the formation of wealthy neighborhoods as well as poor ones.

    I think the reason that most urbanist writers tend to focus more on fighting gentrification in “desirable” areas instead of revitalizing “undesirable” areas is that they live in the “desirable” areas and are separated from the most “undesirable areas.” As seen on the map, Global City Chicago is surrounded mostly by gentrifying neighborhoods or stable immigrant neighborhoods. Furthermore, many of them might think of the most impoverished segregated neighborhoods as a lost cause and may not be aware of middle-class black neighborhoods such as Chatham that are struggling yet still viable. Admittedly, it is difficult to convince young people (particularly if they are white or middle-class) to move to these neighborhoods, and it would be interesting to talk about possible ways to attract them.

    In conclusion, I think that encouraging density in wealthy or gentrifying neighborhoods and encouraging investment in low-income minority neighborhoods can take place at the same time, and that no attempt to fight racial and economic segregation is incomplete without both of them. If only the first one takes place, the result is many relatively diverse upper-middle class neighborhoods and a few extremely poor neighborhoods. If only the second one takes place, the result is a few extremely wealthy neighborhoods and many relatively poor neighborhoods. Furthermore, the relative importance of the first versus the second varies by city to city. In New York, the poor have mostly been pushed to the outer boroughs with worse access to jobs, and building low-income housing close to the city center would not result in the depopulation of the outer boroughs. In contrast, gentrification in Detroit has only reached a small section of downtown, and encouraging wealthy residents to move to the other neighborhoods would help the current residents and would not result in displacement because of the abundance of vacant land.


  2. You completely misread Daniel Hertz and others if you think they're arguing for upzoning in only already affluent, desirable areas of the city.

    The logic that upzoning would lead to increased economic segregation is baffling. Most of the economic segregation we see in US cities stems from a history of restrictive, exclusive zoning in desirable areas. More housing development would _decrease_ market rents in those most desirable areas.

    And as usual, we have to distinguish between people who could afford housing costs if they were brought down near the cost of construction (>75% of the population) and people who would have difficulty paying for housing even at that level (the genuinely poor in the bottom quartile). Solutions for these two groups are very different: broad deregulation of development for the former, and direct housing subsidies for the latter. The beauty is that if you do the first, the second becomes cheaper and easier
    1. because the city is getting far more revenue from new development, and
    2. housing subsidies (e.g. Section 8) don't have to be as large in absolute value, because “market rate” isn't as high.


  3. I don't have statistics on hand, but is this a fair portrayal of the issue in other urban areas? It seems to me that the Bay Area has the problem that nearly every city has the same sorts of restrictions on building. It's not just San Francisco where it's tough to build new tall buildings – it's just as true throughout Oakland and Berkeley, and even more so down the Peninsula. It's conceivable that Fremont, Union City, Dublin/Pleasanton, Castro Valley, Concord, etc. are more permissive of moderately dense construction near the BART stations, but I'm fairly sure that they're not (except maybe Castro Valley, which I believe is unincorporated). But otherwise, most of the transportation infrastructure just is concentrated in the desirable locations that the discussion has focused on (including much of Silicon Valley).


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