Illusion of Local: Why Zoning for Greater Density Will Fail to Make Housing More Affordable

[flamingdem]

http://www.psmag.com/navigation/business-economics/illusion-local-zoning-greater-density-will-fail-make-housing-affordable-85313/

We keep fudging the facts in order to maintain the preferred narrative.

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Gentrification is an urban policy problem in need of a theory. Instead of theory, we have the geographic illusion of local: The current landscape is the result of community decisions. Gentrifiers, outsiders who move into a neighborhood, cause real estate prices to appreciate and displace more tenured residents. One way to make housing more affordable is to increase supply in the gentrifying neighborhood. Rising demand is a market signal to build. To make the market model more sophisticated, we can consider household income. The quantity of people seeking to live in a certain neighborhood isn’t appreciably greater than previous years. But the quality of income migrating into a neighborhood may be much greater than most residents earn. Regardless, supply and demand is still local. Conceivably, poorer residents could access better paying jobs in order to compete with newcomers for housing.

What if the demand wasn’t local? To date, I’ve discussed how wages untethered from regional job markets can wreak havoc on neighborhoods in shrinking cities with tons of excess supply. If an employer offers work in a growing (i.e. economically diverging) tradable sector of the economy, then a global labor market sets the wage. Local supply and demand is irrelevant. The same logic applies to the housing market. Geographer David Ley explains Vancouver’s housing affordability problem:

The data that Ley collected over decades shows Metro Vancouver has become similar to other Pacific Rim “gateway” cities in the way housing costs have been fueled by high immigration-driven population growth and foreign investors.

As he works on extensive new studies of housing prices in Metro Vancouver, Hong Kong, Singapore, London and Sydney, Ley says, “In every one of these cities the market is being driven by something other than owner-occupiers. Not just new immigrants, but investors, including offshore investment.”