Comment O’ The Day
I’m not actually sure that a nation of people who own nothing will be as easy to control as the powers that be seem to believe.
Own Nothing and Love It
An unholy alliance of planners, financiers, and leftists wants everyone to live in mass social housing developments.
From the ancient world to modern times, the class of small property owners have constituted the sine qua non of democratic self-government. But today this class is under attack by what Aristotle described as an oligarchia, an unelected power elite that controls the political economy for its own purposes. In contrast, the rise of small holders were critical to the re-emergence and growth of democracy first in the Netherlands, followed by North America, Australia, and much of Europe.
Today the current class of small holders face a threat from two powerful hegemonies, tech and financial interests, and increasingly intrusive bureaucracies. Both favor policies that would force higher population densities, which would likely raise housing costs and lead to lifetime renting for middle income households who would otherwise own their own homes. These forces—one long associated with the right, and the other the left—share a common agenda, though for different reasons.
Financial interests would reap a steady profit stream by creating a “rentership society,” where potential owners are transformed into tenants, guaranteeing the benefits of increasing land values. Today pension funds and Wall Street firms are buying up single family homes, often at prices too high for the average buyer. For their part, the planning clerisy believes that dense urbanism is socially, economically, and environmentally superior; some even favor a return to public housing, which not long ago lost was rejected as a massively failed experiment.
Density Delusions
For much of the recent past, density advocates insisted that the public, particularly the young and educated, wanted out of private single family houses. But in virtually every major country the vast bulk of people have chosen suburban and exurban locations—in the U.S., Canada, UK, Australia, and Western Europe, including London and Paris, as well as Toronto. Even New York City, with its surprising increase since 2010, has gained only 900,000 residents since 1950, while the suburbs have grown more than six million. Some density advocates see high house prices as reflective of economic prowess, but suburbs account for the largest share of new jobs in both Europe and the U.S., where suburbs dominate new patents.
For years, surveys have consistently shown that the majority of Americans of every generation prefer a single-family home with a yard over living in a condo or apartment. Two thirds of millennials, before the pandemic, favored suburbs as their preferred residence, and they overwhelmingly place priority on homeownership, in fact more than earlier generations. Moreover, since 2000 minorities have accounted for roughly 96 percent of suburban and exurban growth.
These preferences have only been strengthened by the pandemic, which generally hit hardest in urban areas with overcrowded housing, stressed transit, as well as entrenched poverty. Realtors report a growing interest in suburbs, leading to strong price increases occurring in the suburbs, and exurbs. This is a global phenomenon, with people heading to the periphery not only in Australia but also in France, Canada, the United Kingdom, and elsewhere. France 24, a government owned international television service produced a program on the pandemic related exodus from Paris. The pandemic has also sparked a surge in prices for less dense parts of Britain.
Work from Anywhere
The rise of remote work suggests this shift may be just starting. Globally, some 80 percent of workers expressed a desire to work from home at least some of the time with nearly one-third of employees would prefer working remotely full time. A poll commissioned by Bloomberg found that 39 percent of employees would consider quitting if “their employers were not flexible about remote work.” Overall, according to a recent Upwork survey, as many as 14 to 23 million remote workers may relocate as a consequence of the pandemic, largely to more affordable, generally less dense places to live.
The conversion of the high-rise office space into what urbanist Richard Florida describes as the “the last relic of the industrial age“ suggests a future more likely dispersed than concentrated. The shift to remote work covers a large part of the workforce which historically filled high-rise offices—media, analysts, programmers, marketers, and designers.
When the pandemic ends, a “residual fear of proximity” and the preference for less commute time will mean that roughly 20 percent or more of all work will be done from home, almost four times the already-growing rate before the pandemic. Another study from the University of Chicago study suggests as many as 34 percent of American workers could do their jobs remotely; in Silicon Valley that number approaches 50 percent.
Overall, it is widely expected that office rents will not recover for at least five years. Things could get ugly as some $2 trillion in commercial real estate debt becomes due by 2025, particularly in the largest transit dependent central business districts, reflecting in part reluctance among commuters to ride public conveyances as well as a preference for hybrid working arrangements.
One would think planners would try to best accommodate these clear trends. Instead, many seem determined to restrain people through urban containment policies that limit peripheral development. These policies drive up costs throughout the developed urban area. Moreover, the impact on affordability is not limited to houses—higher rents are strongly correlated with higher house prices.
Cali Blues
Nowhere is the conflict between urban planning and the market greater than in California. According to the current planning orthodoxy and many politicians, single family houses are an environmental disaster and even racist. Yet minorities (such as Hispanics and African Americans) have been flocking to the state’s suburbs and exurbs, accounting for all suburban and exurban growth between 2010 and 2015-19 in the state’s six largest metropolitan areas.
One would think that meeting minority aspirations would appeal to California’s famously progressive planning establishment. But they and their well-financed YIMBYs (Yes in My Backyard) allies have worked overtime to ban single family zoning and push new development towards the expensive and congested coast, despite the fact that three out of four Californians, according to a poll by former Obama campaign pollster David Binder, do not want such bans imposed.
People in California, like elsewhere, are leaving the dense urban areas. Places like Los Angeles and San Jose have experienced large rates of net domestic outmigration. In contrast, the Inland Empire (Riverside-San Bernardino), just east of Los Angeles and Orange counties, ranked as the biggest destination in 2020 after Phoenix, according to a Wall Street Journal analysis. The big allure of the Inland Empire is single-family houses, which make up 74 percent of the housing stock, compared to 57 percent in Los Angeles. Sixty-four percent of Inland Empire households are homeowners compared to only 48 percent in Los Angeles; rates of homeownership for blacks and Hispanics, who are flocking there, are 20 percentage points higher than adjacent metro Los Angeles, according to data in the American Community Survey.
In their struggle to suppress popular aspirations, the planners have strong support from an unlikely source—Wall Street investors and libertarian policy shops. Though they often claim to oppose all zoning, they have supported efforts to end urban zoning while not opposing efforts to cut off suburban and exurban development, protecting the planners’ right flank.
The case made by the density lobby revolves around the notion that de-regulating markets and promoting density are critical to greater affordability. But studies done in several regions, including Vancouver in Canada, Europe, and the United States reveal that, if anything, dense areas are associated with more expensive housing, not lower prices. California has the highest urban density of any state yet has the worst housing affordability and rents of any state, except Hawaii, as well as the second lowest homeownership rate.
But the happy marriage of pro-density advocates on the right and left seems unlikely to last. As capital markets will not produce affordable apartments under current land costs and regulatory pressure, progressives are turning back to policies like strict rent control and a new emphasis on government-built housing. We see signs of this shift in Berlin, which recently passed legislation to have the city expropriate housing developments owned by large corporations with over 3000 units, some 11 percent of all apartments in the city. Protests against big Wall Street real estate firms have also grown in Spain, including squatting by displaced tenants of properties owned by financial giants and harsh new rent controls. Concerns were raised in the recent election that Canada might implement homeowner equity for renters as a means of reducing inequality.
Such thinking is becoming more commonplace in the United States, too. Rent control is on the upsurge, particularly in places like California, Oregon, and, just this November, in St. Paul, Minnesota. Convinced that the market solutions are failing, many on the American left believe the private housing market needs to be replaced with homes built for people by the state.
It is virtually impossible to imagine where the money to finance massive subsidized housing would come from. But there may be a better way: expand our urban areas to accommodate demand for affordable housing.
Home on the Range
There remains ample land in America, where only 3 percent of the country is urbanized. Census data indicate that as much as 80 percent of our metropolitan areas are rural or unoccupied. In states like Colorado, Arizona, Nevada, and most spectacularly Texas, we see new developments offering affordable, safe, and family friendly communities for middle- and working-class people.
The most potent objections by planners and politicians are environmental—an idée fixe for progressive think tanks like Brookings. Yet there has been little examination of the environmental gains from remote working and the related elimination of the work trip. The latest Urban Mobility Report indicates that, among California’s seven metropolitan areas with more than 1,000,000 residents, there was an average reduction in excess fuel consumed due to traffic congestion during peak periods in 2020.
The environmental impacts of suburbia, even before the rise of remote work, have never been as dire as alarmists insist. A study in Australia a decade ago found that when common areas—elevators, pools, garages—and lifestyle preferences are considered, inhabitants of single-family homes and townhomes actually produce less GHG per capita than denizens of dense urban apartments. Another recent study suggested that actual GHG emission reductions were lower in parts of urban areas with lower density housing, as opposed to denser areas where GHG emissions were driven higher by greater consumption rates and a greater share of single-person households.
Increasingly, it may well be that the key issue is not environmental but one of political economy and the preservation of a large, vigorous middle class. Rather than becoming a “nation of renters,” as an analyst at Bloomberg suggests, we should take advantage of current trends, and helpful new technology, to encourage the development of less expensive, family-friendly housing. This is particularly true at a time when dense urbanization offers little opportunity for working class and middle-class residents, as urban economist Ed Glaeser has recently demonstrated.
In contrast, peripheral development could help rebuild the middle class by expanding home ownership and perhaps reverse the rapid aging and demographic declines—including a dramatic drop in marriages—that threatens our future. As former World Bank principal planner Alain Bertaud suggests, the job of planners and policy makers, as well as savvy investors, is to “keep their ears to the ground,” rather than try to maneuver the public into lifestyle choices most do not share. More than three in four Americans, according to Pew, value being able to choose their lifestyle as their essential way of achieving the American dream, followed by home life, and owning a home.
More important still, small owners who long have been the bulwark of democracy must continue to play that role. The old yeoman class is not out yet, but its survival depends on standing up and demanding a new policy agenda focused on economic opportunity, lower housing costs, and the building of sustainable communities across our vast and bountiful landscape.