Montreal, June 15, 2012 • No 301

 

Larry Deck is a librarian who lives in Montreal.
 

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The Housing Hustle: A Review of Matthew Yglesias's The Rent Is Too Damn High
 

by Larry Deck
 

          If you’re like me and have a strong, perhaps unhealthy, interest in American politics, you may remember an entertaining sideline to the 2010 gubernatorial election in New York State. The organizers of the televised debates decided to let minor parties participate, with the result that the Republican and Democrat were joined by a Green, a Libertarian, and several others including Jimmy McMillan, the leader and probably sole member of the Rent Is Too Damn High Party.
 

          McMillan, a “sixty-four-year-old martial arts instructor, former mailman and self-proclaimed ‘Black Hulk Hogan’,” was a big hit on YouTube and his riveting debate performance was parodied on Saturday Night Live.

          McMillan’s message was simple and poignant:

People workin' 8 hours a and day 40 hours a week and some a third job. Women can't afford to take care of their children, feed their children breakfast lunch and dinner. My main job is provide a roof over your head, food on the table and money in your pocket. […] Listen! Someone's stomach child stomach just growled, did you hear it? Gotta listen like me. Let's talk about the issue! People can't afford to pay the rent are starving. Rent is too damn high.

          Matthew Yglesias, a liberal blogger who currently writes for Slate.com, thinks McMillan’s message needs to be taken more seriously than most people were willing to take it, and has written a brisk and engaging ebook arguing that the scarcity and consequent high price of rental housing in the US is a major problem for the country’s economy. His argument is straightforward and, to me, convincing, and it applies equally well to the Canadian situation.

Why the Rent Is So Damn High

          Yglesias agrees with McMillan that the rent is too damn high, but he does not agree with McMillan’s proposed solution, which is rent control. Yglesias makes short work of the idea that rent control is a good policy for those who want the poor to be able to afford the rent or indeed for anyone else. Simply put, rent control works to the advantage of those who are already renting and to the disadvantage of everyone else. It reduces or in some cases entirely eliminates the incentive to build new rental housing and also reduces the incentive landlords have for maintaining existing rental properties. The resulting shortage makes it harder for would-be residents to find a place to live, and often creates a black market where existing tenants profit by subletting their artificially cheap dwellings at the real market price. Therefore, new tenants end up paying more for worse and more dilapidated housing.

          If we want to lower the rent in places where more people currently want to live, we need to reduce demand or increase supply. Presumably we don’t want to reduce demand if it means making those places any less attractive. (Frankly, some anti-gentrification proposals sound like proposals to make city neighbourhoods less attractive.) That leaves the alternative of increasing supply. The question is: given that rents are relatively high in many places, why hasn’t the supply of rental housing increased to take advantage of it? There is no technological impediment to building taller buildings. So why doesn’t the available density of habitation increase to meet the demand? “The answer,” says Yglesias, “overwhelmingly, is regulation.”

          He goes on to express a sentiment that should ring true for many long-suffering libertarians: “The United States of America conceives itself as a country in love with the free market. And in some ways we are. But there’s nothing ‘free market’ about land use in the land of the free.” The zoning ordinances that in most places run to several hundred pages mandate everything from the maximum height of buildings to the amount of unbuilt land that must surround any land with a structure on it. They mandate how much parking must be associated with each new residence, creating a very strict upper limit on housing in areas where underground parking is hard to construct. Cities regulate everything down to what architectural styles are permitted. Over the years most jurisdictions have added and added to the point where building new high-density housing has been rendered legally—which is to say, artificially—impossible.
 

"As Jane Jacobs and many others have shown in their accounts of city life, the simple presence of many people in close proximity generates economic opportunity and economic activity. The more potential customers you have in an area, the more likely you are to make a go of it providing them with goods and services."


The Bipartisan Opposition to Deregulating Land Use

          And of course, environmental regulations have begun to multiply faster than any natural species. Ironically in this age of “green,” the environmental advantages of high-density living don’t seem to impress many people. (High-rises take much less to heat per unit than single-family dwellings. Tiny houses are adorable but they’re not “green.”) Instead, Yglesias points out, what we find is a strange bipartisan consensus against development. On the left we have pressure for rent-control and anti-gentrification campaigns to preserve the putative character of favoured inner-city neighbourhoods and a will to expand environmental controls. On the right, we have people like Toronto’s mayor Rob Ford who see city life in terms of a war between decent car-owning suburbanites and smelly city-dwelling hippies, who insist that above all else the city must be made passable to motor traffic. Caught in the middle are all the people who don’t yet live in the city but would like to, if only they could afford it.

          And here’s where the economic consequences of the artificial scarcity of housing come in. As Jane Jacobs and many others have shown in their accounts of city life, the simple presence of many people in close proximity generates economic opportunity and economic activity. The more potential customers you have in an area, the more likely you are to make a go of it providing them with goods and services. Why prevent all that good market activity?

          To that question, Yglesias does not really offer any answers. He himself clearly prefers dynamic high-density inner-city neighbourhoods as much as I do, and he doesn’t waste any of the 64 pages of his little ebook considering why anyone would not prefer them, or why anyone would opt for rent-control for the sake of stability, for instance. I can see why they might, but I have to agree with Yglesias that their reasons are not enough to justify preventing people who do want to live in high-density environments from creating them.

          Some people have taken Yglesias to task for presenting gentrification as a straightforward market-driven process whereas in many places it is the result of heavy-handed state intervention for the benefit of crony capitalists, involving often grotesque eminent domain abuses (as in the notorious Kelo v. City of New London). He also has nothing much to say about public housing, which might simply reflect the fact that most jurisdictions in the US are coming around to the realization that high-density public housing has been a disaster.

          Other people have been nonplussed to find that Yglesias does not wrap up with a rousing call to action. Apart from recommending that we scrap restrictions on new construction to the extent possible, Yglesias does not have much to say about “what is to be done.” But if he’s right about the bipartisan consensus against development (which in most parts of Canada is a veritable multiparty consensus), it goes without saying that any action will have to be indirectly governmental (by way of influencing an existing party to take a more pro-development position) or directly nongovernmental (by peacefully ignoring or resisting regulation). In the meantime, Yglesias calmly offers reasons for change.

          Yglesias is not a libertarian; if anything, he’s a proud Keynesian statist. He generally favours any number of paternalistic and interventionist policies. But on housing and some other issues (like the barriers to entry created by occupational licensing and the rent-seeking associated with “intellectual property” monopolies) he is genuinely progressive and worth reading. The Rent Is Too Damn High does not present a comprehensive history or detailed analysis of the housing problem in the US, but it does give a short and sweet argument in favour of removing restrictions on new housing development, and for that it deserves my wholehearted recommendation.