Progressive Housing Policy and Economic Inequality


Joel Kotkin’s recent article on housing, in NewGeography, is worth a read, but here’s a key point that pops up here and there throughout (emphasis added):

[MIT economist Matthew] Rognlie concluded that much of [the economic inequality resulting from redistribution of housing wealth away from the middle class] was due to land regulation, and suggested the need to expand the housing supply and reexamine the land-use regulation that he associates with the loss of middle-class wealth. Yet in much of the country, housing has become so expensive as to cap upward mobility, forcing many people to give up on buying a house and driving many—particularly young families—to leave high-priced coastal regions for less expensive, usually less regulated markets in the country’s interior.

Homeownership is both a step toward and an indicator of upward mobility, and it is therefore healthiest when there’s a relatively smooth spectrum of options, so families can move up to new levels, if they wish, even if it happens over generations.  In their typical self-serving way, when government officials attempt to solve this problem (mostly, one suspects, to expand their authority and reshape the electorate to their own benefit), they wind up making it worse.

Examining, for example, the maps and plans for RhodeMap RI and its “smart growth,” with its attempt to export bits of the city into every suburban town, the most likely effect will be to create an even greater chasm between the heavily subsidized areas of “affordable housing” in the “urban services” areas and the heavily regulated areas of housing beyond them.  To make the leap from government dependency in a designated, dense housing area to the independence beyond its limits will require something akin to winning the lottery for families that are not already there.

One must also wonder whether families will actually reap the financial, psychological, and social benefits of home ownership when it is beyond dispute that they don’t really own anything at all.  Under the progressive vision for government and housing, we’re all ultimately renters of government property and houses.  The one innovation that stands as a nod toward property rights (giving the illusion thereof, some might argue) is that the renters of government property will have the right to sell their leases to new tenants.

Here’s Kotkin on the consequences:

Following our current path, we can expect our society—particularly in deep blue states—to move ever more toward a kind of feudalism where only a few own property while everyone else devolves into rent serfs. The middle class will have little chance to acquire any assets for their retirement and increasingly few will choose to have children. Imagine, then, a high-tech Middle Ages with vast chasms between the upper classes and the poor, with growing dependence—even among what once would have been middle-class households—on handouts to pay rent. Imagine too, over time, Japanese-style depopulation and an ever more rapidly aging society.

He is wrong on two counts, I believe, that are critical if we’re to avoid these consequences.  Kotkin’s first error is in failing to warn that government can become the landlord under the illusion of individual ownership.  His second error is to imagine that declining birth rates are the result of considered financial decisions that families are making, rather than part of a broader change in social beliefs.

In that regard, being Joel Kotkin, he can’t resist suggesting that Republicans should adjust their policy to accommodate the social liberalism of younger Americans (because social liberalism is one of his irreducible values, it appears).  If homeownership and upward mobility facilitated through housing really affect birthrates (which is a questionable claim, to say the least) it will be because of an enhanced sense of independence and individuals’ position within the universe — from God to family to community.

  • GaryM

    There are many fallacies with the affordable housing arguments, the biggest one being that zoning is racist.

    Zoning is there to protect an investment in property in the same way that patents protect the investment needed to make a widget. People make investment choices when they buy a home, otherwise, they wouldn’t make the purchase.

    Second is the idea that people jump into a “move-in ready” home of their dreams on the first purchase. For most people, home ownership is a slow and painful progression from buying what you can first afford, and putting in years of sweat equity to finally get to a good home “at last”. Unless you are a trust fund baby, the first home has a leaky roof, 100 year old kitchens and baths, and needs paint everywhere.

    What the affordable housing crowd pitch is that those who reach a good home “at last” did so unfairly and with racist motives. Investment motives never entered the decision process. Their premise is that home ownership should begin with a move-in ready home in a perfectly safe neighborhood.

    Anything less and you’ve been exploited by an unfair and racist system.

    Last point: what unfair place did MIT economist Matthew Rognlie choose for his “home “investment”? Was his an unfair and racist decision?

    • GaryM

      To my last point on where does Mr Rognlie call home, it’s likely he hasn’t yet reached a point where he wants to actually own a home.

      He’s a 26-year-old grad student at MIT with broad ideas on how everyone else should run their lives (aka the Brookings love-fest crowd).

      • Rhett Hardwick

        “Zoning is there to protect an investment in property in the same way that patents protect”
        Although I cannot deny that it is used that way, there is no legal basis for doing so. Zoning, by reducing the use of property, is a “taking”. The courts recognize this, but make an exception for the government exercising their “police powers” for the purposes of public safety. The original purpose of “lot sizes” was to avoid contamination of wells by septic, “side yards” were created to prevent the spread of fire. You may note that zoning decisions usually cloak themselves in “safety”. The current favorite is “emergency vehicles will have difficulty because streets will be clogged”. Zoning boards are schooled in this. Zoning is a youngster as far as real estate law goes. Check your local zoning act, it probably dates from the 1950’s. There were “good neighborhoods” before that. In any case, the the government has no legal right to use zoning to protect investments. They do try though. Most states have “anti snob zoning laws”.

        • GaryM

          We can agree that zoning in today’s market has little to do with septic systems.

          The fact is that most municipalities get the bulk of their income from the smaller percentage of upscale housing within the municipality.

          The question is whether that revenue source needs protections to ensure a healthy and stable property tax base. One need only look at Woonsocket to see the outcome when a stable tax base takes second place to laissez-faire growth policies.

          My bet is that Woonsocket will be in bankruptcy before Providence.

          • Rhett Hardwick

            We can agree that both private citizens, and the government, desire higher property values. I also agree that citizens, and governments, will act to protect them. Noticeably, citizens groups, but never governments, will admit their true purpose. Zoning is recognized as a taking and nothing in our legal system permits the government to deprive citizens of property rights to protect investments. Let us assume that the line of two zoning districts falls on a street. Why should homeowners on the left hand side be permitted rental units to offset expenses, while those on the right side are denied that right? I know of some very pricey 2 unit places, so I don’t think it is “values”. I think it is snob.

          • Rhett Hardwick

            Apparently, Lincoln, Mass (very wealthy town, you are lucky to find a house of any substance under $1,000,000) activated the state back in the 60’s, when they “zoned” lot sizes with a minimum of 2 acres. Here is a link, which does not mention the original 2 acre “Snob Zoning”. I think the discussion presented will show the likely outcome of the proposed state wide plan for Rhode Island. Let us not forget the well known, but rarely publicized, positive correlation between subsidized suburban housing and rising crime. The studies show that, basically, suburban “ghettos” are formed.

          • Gary M

            Nobody uses the term “snob” car buying, snob vacation trips, snob clothing, etc. How is zoning “snob” oriented?

            I can agree that those who succeed monetarily in life can afford better everything. But it’s a stretch to say wanting better anything translates to a snob mentality.

            Do minorities who have prospered and seek better surroundings make them “snobs”.

            Take a look at some of the biggest pushers of the idea of snob zoning, and you might be surprised to learn what they’ve carved out for themselves.

            Are the Clinton’s “snobs” because they picked Chappaqua NY for a $1.7 mil home. Is Ira Magaziner (of the Greenhouse Compact) a snob because he has a 50 acre waterfront estate on Poppasquash Point in Bristol? The list is very long.

            Those who have been pushing the idea of “snob zoning” are some of the biggest violators of their own thinking.

          • Rhett Hardwick

            Here is an example from real life. A woman I know grew up on Long Island, living with a divorced mother, money was tight. Neighbors knocked on their door and told them to buy a newer car. Thier’s was an embarrassment to the neighborhood.

          • Rhett Hardwick

            Her uncle used to “babysit” Donald Trump. How’s that for “6 degrees of separation”

          • Mike678

            Not sure why you separate the ‘government’ and private citizens (people). Doesn’t government, in theory, consist of people and serve them? “Zoning is recognized as a taking”; by who? I see it as limiting, not taking–though that may be semantics. Rights are limited, e.g., your rights end where mine begin. Zoning also provides a sense of stability. How’d you like to invest 500K in a home and watch a guy move in next store and open a trailer park? Moreover, zoning boards are local–and consist of local citizens. Decisions are made locally–except in Rhode Map RI where the Feds want to overrule local control. As for overreach, doesn’t the EPA limit what people can do with their ‘private’ land?

            Some (as I) feel that the plan to suburbanize the urban poor is little more than cities realizing they can’t support this demographic–best to spread out the pain. And yes, it is very clear that this demographic uses more services (fire, police), cost more per person in schools (see Woonsocket), raises the local tax rate and so forth.

          • Rhett Hardwick

            678, Zoning has always been recognized as a taking. Here is a brief history. Note that there is a term for it, “Regulatory Taking”

            Search the Constitution, state and federal, for any clause you think gives the government authority to “protect investments”. Wouldn’t that permit a law against declining stock prices?

            “I see it as limiting, not taking–though that may be semantics.” Any deprivation of property rights is a taking. The questions about it circle around whether or not is is compensable. You refer to EPA, there are certainly numerous cases about that being a taking.

            Suppose I have 60,00 sq ft in an area zoned for 12,000 ft lots. I have 5 lots. If zoning is changed to 15,000 ft, I have 4 lots. Why haven’t I suffered a “taking” of 1 lot? Suppose 12,000 ft are declared “Wetlands” and “unbuildable”, why haven’t I suffered a “taking” of 1 lot? No one denies that I have suffered a taking, they simply determine that is is not sufficient to be compensable since there is still “some use” of the property.

          • Mike678

            Funny–I’ve searched the constitution for the right to have healthcare and I can’t find it either :) Laws, by our local or Federal reps are just that–law.

            Again, semantics. The gov’t (the people) haven’t “taken” your land”–they have restricted what you can do with it. Just like free speech. You can’t yell fire in a theater (unless of course…)–is that a “taking?”

            I understand your view on this, but then again, in your example you have a case as per the link above, do you not? It’s amazing to me that some are so concerned about “their rights” that they don’t think about the rights of the guy next to him/her. Again, zoning provides stability–you can can relatively assured the guy next door won’t do something that will negatively impact your investment. You have the right to do what you want on your property as long as it doesn’t negatively–in this case. financially, impact another. To me, zoning is much like neighborhood compacts. And no, I can’t find them listed in the Constitution either….

          • Rhett Hardwick

            Can’t find Neighborhood Compacts in the Constitution, try Article 1: “No State shall … pass….Law impairing the Obligation of Contract” Entering into a contract about property management is a whole other animal from government regulation. Dallas, and most of Texas, does not have Zoning. they seem to get along rather well. “High Value” places like Beacon Hill, Back Bay, Bellevue Avenue, Williamsburg, probably couldn’t be built under zoning (didn’t exist then).Very little is built today without 3-4 zoning, or planning, “variances”. You probably didn’t know that.

          • Mike678

            Yes–there is a lot I don’t know, which is why I ask questions. Questions that often go unanswered by those that feel such questions are an attack requiring an angry, defensive and often cherry-picked response. And no, your wikapedia link didn’t go to waste.

          • Rhett Hardwick

            “your rights end where mine begin”
            Just what rights do you think you should have over my property?

          • Mike678

            Me–not much. But if you do something against the law and it negatively impacts me, I’ll see you in court/jail. It’ll take you a few years to take it to SCOTUS :)

          • Rhett Hardwick

            Fifth Amendment: “nor shall private property be taken for public use, without just compensation.” I hope I didn’t waste my link on “Regulatory Takings”.