November 2, 2014

Why More Liberal Cities Have Less Affordable Housing

Derek Thompson of The Atlantic has an interesting article covering some of the reasons why, despite their ideological commitment to helping the disadvantaged, more liberal cities tend to have less affordable housing:
In general, richer cities have less affordable housing.
But there’s a second reason why San Francisco’s problem is emblematic of a national story. Liberal cities seem to have the worst affordability crises, according to Trulia chief economist Jed Kolko.
In a recent article, Kolko divided the largest cities into 32 “red” metros where Romney got more votes than Obama in 2012 (e.g. Houston), 40 “light-blue” markets where Obama won by fewer than 20 points (e.g. Austin), and 28 “dark-blue” metros where Obama won by more than 20 points (e.g. L.A., SF, NYC). Although all three housing groups faced similar declines in the recession and similar bounce-backs in the recovery, affordability remains a bigger problem in the bluest cities.
“Even after adjusting for differences of income, liberal markets tend to have higher income inequality and worse affordability,” Kolko said.
Kolko’s theory isn’t an outlier. There is a deep literature tying liberal residents to illiberal housing policies that create affordability crunches for the middle class. In 2010, UCLA economist Matthew Kahn published a study of California cities, which found that liberal metros issued fewer new housing permits. The correlation held over time: As California cities became more liberal, he said, they built fewer homes.
The high cost of housing in liberal cities is in large part caused by highly restrictive zoning rules, which in recent years have caused many African-Americans and others to move away from major northeastern cities to areas with less restrictive zoning and lower housing prices in the south and southwest.

Why do liberal cities enact policies that often making housing unaffordable for the poor and much of the middle class? The cynical explanation is that “limousine liberal” voters only pretend to care about affordable housing for the poor and the middle class, but in reality adopt zoning restrictions to keep home prices up and prevent the riffraff from living near them. Such motives may be present in some cases. But, on most issues, there is little correlation between political views and measures of narrow self-interest. It is therefore likely that most voters in liberal cities do genuinely care about affordable housing and the interests of the poor.

The virus that plagues our body politic is not selfish voting, but ignorant voting. Like their conservative counterparts, most liberal voters don’t think carefully about the possible negative side effects of their preferred policies. Just as most of them do not realize that rent control diminishes the stock of housing, they also may not realize that zoning restrictions diminish it, and thereby increase housing costs.

Conservative voters have their own characteristic patterns of economic ignorance. Both sides tend to ignore or even blatantly misinterpret evidence that cuts against their preferred views – especially if the evidence or the reasoning behind it is counter-intuitive. To a considerable extent, the high cost of housing in liberal cities is yet another negative effect of widespread political ignorance.

Well-meaning, but ill-informed voters are not exclusively to blame, of course. In many cases, development restrictions are also favored by influential narrow interest groups, such as developers with strong political connections. If it were easy for newcomers to build new housing and office space, these well-connected insiders would lose much of their competitive edge. Unlike ordinary voters, who tend to be rationally ignorant about public policy, small organized interest groups have strong incentives to pay close attention to policies in which they have a major stake.

As is often the case with perverse regulatory policies, excessive zoning is in part the product of a “baptist-bootlegger” coalition. Well-meaning, but badly misguided Baptists supported Prohibition out of genuine moral concern about the harmful effects of alcohol. Meanwhile, bootleggers backed it because it put money in their pockets. Housing policy in liberal cities is influenced by a similar implicit unholy alliance between well-meaning progressive voters and unscrupulous economic interest groups.


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