Housing and National Democrats

To date, only Booker, Harris, Sanders, and Warren have discussed housing (Booker, Harris, and Warren have published plans). Booker last week added a feature to his–he penalizes cities that zone exclusively for single-family housing (boldface mine):

Under Booker’s proposal, cities that refuse to allow dense forms of housing would become ineligible for federal transportation grants. The policy seeks to address the central conundrum of the housing crisis: America desperately needs more homes, but building them has become almost impossible in most of its major cities….

Only three candidates — Booker, Sen. Kamala Harris (D-Calif.) and Sen. Elizabeth Warren (D-Mass.) — have released housing policies so far. Harris’ plan includes a refundable tax credit for renters but doesn’t aim to increase the construction or permitting of affordable housing. Warren’s plan does attempt to address the supply side of the crisis, but through carrots rather than sticks. It would create a $10 billion “competitive grant program” that would give cities financial incentives to build more homes.

Jenny Schuetz, a housing policy researcher in the Metropolitan Policy Program at the Brookings Institution, said Warren’s is an improvement on Harris’, but might not be enough to tempt cities to drop their restrictive zoning codes.

Throwing more money into demand without increasing supply will just have landlords jacking up rents,” said Schuetz. While support for low-income renters is a crucial aspect of solving the housing crisis, expanding rental assistance without addressing the shortage of affordable homes could result in a vicious cycle. “You’re giving more money to renters, but you’re also allowing cities to keep blocking new housing construction. Over time, that’s just going to make the crisis worse,” she added.

Schuetz also pointed out that cities already have incentives to build housing. Larger populations bring greater tax revenues and more spending from state budgets. “If that’s not enough to tempt wealthy cities to allow more density,” she said, “I don’t know if additional grants will change the calculus.”

The problem is that Booker’s stick–denying transportation funding–really isn’t the big stick he thinks it is:

While Booker’s proposal represents a new approach to solving the housing crisis, it also has severe limitations. His provision would revoke only discretionary transportation spending — only a portion of the funds allocated to cities each year — and would likely be challenged in court. His proposal relies on cities “demonstrating progress towards reducing barriers to affordable housing,” a concept that may allow wealthier, politically connected communities to use loopholes to shirk their responsibilities.

“Beverly Hills has enough roads already,” said William Fischel, a Dartmouth professor and the author of “The Homevoter Hypothesis.” Wealthy enclaves may decide that taxing their own populations for road improvements is a small price to pay for continuing to prevent density. “You can’t assume cities are competing with each other for transportation funding. Some need it more than others,” he said.

In D.C., I’m sure there are plenty of people who live in Takoma or the Palisades who would be more than glad to turn down some transportation funding if it would keep those people out–for them, this is a feature, not a bug. And if budgets have to be cut to make up the shortfall, don’t think for a moment those cuts will affect them (again, feature, not bug). Fortunately, some asshole with a blog has spent far too much time thinking about this problem:

It seems to me that the mortgage interest deduction offers an opportunity here. Simply, any single-family zoned property in a census tract not defined as rural (< 1,000 people/sq. mile) would not receive the mortgage interest tax deduction. This isn’t telling people what to do with their property, and no one is showing up to knock your house down. But there’s no reason why it should be illegal–and why that policy should be subsidized with federal dollars–to build a duplex or a triplex. Do what you what with the property–and buy what you want too–but if you’re contributing to the housing shortage, renters don’t need to subsidize that.

You would likely have to add some additional qualifications to ensure local communities don’t get clever (‘sure, we’ll let you build duplexes, just they can’t be more than thirteen feet high’, etc.), but the basic idea is that if communities don’t want to increase their density, then there housing values should drop. Even if someone has already paid off the mortgage, if or when they attempt to sell it, the price will be lower than if the mortgage interest is deductible since your buyers lose their government subsidies.

The other thing to note is that this can’t just be a ‘city’ policy. It also must include suburbs and exurbs (that are more dense than 1,000 people/sq. mile). Why? Because we are already asking too little area to do too much. Low density zoning in suburbs doesn’t mean people go away. They just sprawl outward and bid up available housing prices. While higher housing prices are not good, global warming is bad, and sprawl contributes to that.

So if you want to increase density through federal policy, make low density hurt those who want it. Otherwise, it’s just talk.

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