Housing Prices, Inflation and Aesthetics
A cute little video from The School of Life does a basic yet incomplete job of explaining why housing prices are so high, does an excellent job of showing why government policies to assist home ownership have merely made prices higher (a lesson for other domains such as health care and education) and then veers into a bizarre theory on housing aesthetics being the cause of NIMBYism.
Have a look.
Why Housing Prices are so High
To be fair, the title of the video is "One Reason Homes Cost So Much" and, while there are many reasons, I respect the notion that one reason — perhaps the main reason — is supply and demand. I called the explanation "basic" because it overlooked the entire aspect of how we build housing — all at once to a finished state in a few select places as opposed to incrementally over time across a broad area — but it's a six minute video, not a two hour documentary. The video does make land value increases out to be the boogeyman, however, which is unfortunate since (a) it's not true and (b) it reinforces the suburban commuter mindset that all we need to build affordable homes is cheaper land.
Why Government Policies Make Prices Higher
I think the entire section on government policy being inflationary (see 1:49) is the highlight of this video. If we could cut that part out and just run it on its own, it would be a must-watch video. People who own property want the values to be high, not low. Local governments who extract this wealth to run their cities want values to be high, not low. There is really only a small subset of people who want housing prices to be low and those people rapidly shift into the other camp once they buy a house.
Here's your quote of the week, from the video: "If you ease credit without increasing supply, you just stoke house inflation."
Look at DOW 25,000 and the massive share buybacks cheap money and bad corporate governance has induced and you'll understand why many of us see a stock market bubble instead of a robust U.S. economy. Same thinking in our housing market.
What Does Aesthetics Have to do With it?
Finally, on the bizarre shift into a conversation on aesthetics.... That was a plot twist to the video I didn't see coming. The narrator explains, "We have society-wide fears of new housing and one large reason, above all others, is because almost all new housing developments are very, very ugly." What?
I started to realize that the video had to have been influenced by either an architect (professional myopia) or by someone (or a committee of someones) who live in an urban neighborhood and believe that everything not like their neighborhood is ugly. Or worse, that the people out there living in such an ugly landscape are doing so under some type of oppression — their expression of preference being a form of Stockholm Syndrome. Friends, get out of your bubble.
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Most people who live in suburbia think it is beautiful. They actually believe that your urban neighborhood is congested, dirty and ugly. Public policy proposals predicated on aesthetics are not only (rightfully) going nowhere, they run the risk of further exasperating the cultural divides between urban and rural areas. You're ugly. No, you're ugly. No, you're ugly! Good grief.
So aesthetics are not the core reason that residents fear new housing. A better explanation for this NIMBYism is found in a piece I wrote last year, "The Party Analogy." Historically, as towns grew, the more people that moved in, the better; those new residents would help build roads and schools, found businesses, and contribute to the tax base of the community. Like a good party, more guests made for a more enjoyable experience. As I wrote,
The new residents not only improved the capacity of the community to do helpful things, the pattern of development meant that growth renewed and refreshed every neighborhood. Each development stage was a new plateau of success, and it was difficult to fall back from it. The city was adaptable, resilient and financially productive and only became more so with each new resident. Open the doors wide and let everyone in.
Today, in a more suburbanized world, we have an entirely different situation — one where more guests make the party worse:
The contrast with the suburban experiment is overwhelming. First, the obvious: there is generally no discernible benefit to additional residents in a community of the Suburban Experiment. All modern neighborhoods are built with sewer and water systems. All have police protection and fire departments. Nearly all have libraries, parks and other modern amenities. I’m not suggesting these things are bad or that we are unworthy of them, but like trust fund babies, we didn’t have to work for any of it. It all was just given to us.
If we want to overcome NIMBYism, we need to turn our bad party back into a good party, one where the benefits of incremental growth accrue to the people currently resisting the evolution of our neighborhoods. Use growth to make people's lives better and they are going to be less resistant to it. Continue to make growth a win/lose scenario for local residents and NIMBYs will flourish.
The Strong Towns approach is about making incremental investments to improve the financial health of our neighborhoods while making life better for the people already living there.
