Two Perspectives On The Housing Crisis: Affordable Housing vs Housing Affordability

The battlefield of the urban housing crisis is a confusing place to find oneself these days. At a time when American politics are as starkly divided as they have been in a century, housing politics do not fit comfortably into the familiar right-left narrative. Among a variety of constituencies, from older homeowning liberals to younger renting progressives, from free-market-loving developers to free-market-hating socialists, and every combination of identities in between, there are unique positions and perspectives.

What seems to unify all of these groups is a common desired outcome. Unlike seemingly every other public policy issue, virtually everyone says they want to see the housing crisis addressed. With the exception of the current HUD secretary, there is no overtly pro-high rents position. There is no broad political constituency that explicitly argues for higher rent (more on the broad political constituency that implicitly argues for higher rent at the end), and no elite intellectual tradition pushing for housing prices to rise inexorably out of reach.

But if this is so, then why do we disagree about housing policy? It’s because this broad agreement is often illusory. In reality, we don’t agree as much as we think, and these disagreements rarely are recognized. When we cannot honestly chart the contours of our disagreement, it makes it difficult to communicate and make progress. The miscommunication starts early on. Embedded in the language we use to describe and debate the very fundamentals of the problem are the roots of the discord.

Affordable Housing vs Housing Affordability

How would you describe the root of the urban housing crisis? Many people might describe the issue as a “lack affordable housing.” Others might say that “housing isn’t affordable.” Many people might use both phrasings interchangeably. But these two statements are not saying the same thing. The first statement treats “affordable” as a discrete category of housing, and diagnoses that there is not enough of it. The second statement applies to all housing, and diagnoses that it is all too expensive.

That small difference matters, because it can have significant consequences in how people see the issue and potential solutions. If you view the issue as being a “lack of affordable housing,” the obvious solution is to build more affordable housing—however you define it. You are also less likely to see the construction of more expensive housing as part of the solution, and you may see policies like loosening local zoning laws as municipal governments unilaterally disarming themselves of their best tool to coerce developers to build affordable units. In contrast, if you think the issue is that “housing isn’t affordable,” the obvious solution is to incentivize and legalize the construction of more housing of all shapes and sizes, broadly driving down rents through oversupply. You are also less likely to support policies like rent control and inclusionary zoning which are likely to lead to less housing overall.

Consider a hypothetical proposed 100 unit market rate apartment in a trendy part of town. The project has been given a dumb, abstract name, and the apartments will be advertised as “luxury” (here’s why you shouldn’t pay too much attention to marketing terms like “luxury”). If your view of the housing crisis is that there is not enough affordable housing, you might take a dim view of this proposal, which reserves no units for people of lower income. If your view of the housing crisis is that housing isn’t affordable, you might strongly support this proposal, believing that it will supply housing for over a hundred people who might otherwise have been forced to outbid incumbent residents for their housing somewhere else.

In governments at all levels across the United States, this debate is taking place constantly, and it makes some odd political bedfellows. Famously in California, leftist groups joined in a coalition with wealthy suburbs in opposition to a state bill that would have massively reformed local zoning laws to allow for much more housing construction. On a small scale, the same argument plays out week after week as towns and city boards debate individual projects and plans. Just a couple weeks ago, for example, a 44 unit housing project in the ostensibly progressive city of Berkeley was killed, in part because of a lack of affordable units. The site is currently home to a gas station.

Minneapolis-St. Paul is no exception. A recent letter written in opposition to the Minneapolis2040 Comprehensive Plan questioned whether the plan’s push for upzoning would lead to more affordable housing (and simultaneously worried about the plan reducing his property values). A recent Star Tribune article asked the same question. This confusion is understandable, and these concerns are not necessarily wrong as they are expressed. A policy of upzoning Minneapolis would not directly create any legally mandated units of “affordable housing.” But this is the miss the forest for the trees, because upzoning would improve housing affordability citywide by allowing the market to use many more forms of housing to meet demand than is currently permitted.

Perhaps the most succinct single example of the confusion surrounding the give-and-take of affordable housing and housing affordability was last year’s debate on the future zoning of the Ford Site in St. Paul. At the final vote, Councilman Dai Thao successfully passed an amendment to the zoning plan that would mandate higher inclusionary zoning percentages. He then voted against that same zoning plan—which included his amendment—because it called for too much density.


What Is Affordable Housing Anyway?

Before we can attempt to reconcile these two viewpoints, we ought to be on the same page about what they mean and what they accomplish. There are few terms that have as many meanings as the one that is most central to the discussion; “affordable housing.” What is an affordable home? What does it look like? Where is it located? What does it cost?

There may not be easy answers. Every household is different, with different incomes, different expenses, different needs and wants. To boil these down across a population to something discrete and definable as “affordable housing” is probably an impossible task. It’s blindingly obvious that what is affordable for Minnesota Timberwolves owner Glenn Taylor is not affordable for me. It’s easy to be pedantic about this, but the point is that what counts as “affordable” is completely unique to every household and their circumstances.

It’s difficult to define affordable housing by superficial characteristics. Affordable housing does not come in a recognizable architectural style (sometimes, people mistake affordable housing for more expensive housing), although some styles of building are cheaper than others.  Affordable housing can exist in any city and any neighborhood, although the particulars of any given location (is a car required to get there? what are the utility costs? etc.) can make a big difference to the overall cost of living at that location.

Most commonly, when people use the words “affordable housing” they mean “subsidized housing.” This might mean housing units that are targeted at people who earn less than the metro area’s median income, as mandated by an inclusionary zoning law or by an agreement made along with the sale of the property, where the developer provides the subsidy (or more realistically, passes it on to the other tenants) or acquires the land for below market value with the stipulation that those savings be passed to the tenants. Or it might mean homes financed with low income housing tax credits (LIHTC) or rents paid partially with Section 8 vouchers, which are government programs. But not all “affordable housing” is subsidized. In some urban areas, new market rate housing might be available to people with below-average incomes because that’s simply where the market is. In many places you can find “naturally occurring affordable housing” (NOAH), which is perfectly serviceable market rate housing that is widely affordable because it happens to be old or in an out-of-fashion style.

Of course, ultimately any definition of “affordable housing” must come down to cost. Can we settle upon a definition for “affordable housing” that is both true to the experiences of all people who struggle paying their housing costs, and also fine grained enough so that it becomes useful as a measure of policy and analysis?

The broadest point of agreement is probably to say that “affordable housing” is best defined as housing that people can rent for less than 30% of a below-median income. But that’s a definition that in and of itself doesn’t seem too helpful, because that still encompasses a massive number of people with very different needs. Much of what a median single earner can afford is not affordable for a family earning far below the median. This is a definition of “affordable housing” that is all-encompassing and truest to the problem. But it is so unspecific as to be unhelpful from the perspective of making policy.

The most precise way to describe “affordable housing” is to explain exactly what income range it’s for. Most housing that is subsidized in some way is described in terms of “area median income” or AMI, which is calculated as a single number across a metropolitan region (there’s a strong argument being made that AMI should be calculated at the zip code level). A developer might promise, for instance, to reserve twenty percent of units in a new building for tenants making 60% AMI, for a period of thirty years. This is a highly specific definition that can be useful for making policy. But what we gain in specificity, we lose in wide applicability for public policy. There is a broad range of people who struggle with paying the rent or the mortgage, who span a broad range of incomes and family situations, and it’s hard to tune a policy around AMI to meet all of these specific needs.

The difficulty in establishing a true and useful definition of “affordable housing” should clue us in to the difficulty of establishing any kind of policy regime that treats it as a discrete category of housing. To more clearly communicate in discussions and advocacy about affordable housing, we should be more precise about exactly what kind of housing is being discussed, where it is, and what it costs.


Who Is Housing Affordability For Anyway?

Housing comes in all shapes, sizes, and locations, and at any number of different price points. Almost all housing in any given metro area exists on this spectrum, and because even the wealthiest households usually occupy just a single unit of housing in that metro (there are exceptions), increases in supply will not be to be horded and kept out of the market by the wealthy. It makes sense that “supply-side” policies will lead to reductions in price for everyone.

But a focus on housing affordability alone misses other aspects of the housing crisis that are important.

A recent chart presented to the Minneapolis City Council demonstrated the numbers of people in the city at various income levels who are cost burdened (spend 30% of their income on housing) and extremely cost burdened (spend over 50% of their income on housing). Unsurprisingly, the majority of households making below 30% AMI—about 20,000 households making just $28,300 a year for a family of four—are extremely cost burdened by their housing. Another six thousand or so are simply cost burdened. This is a problem that is immediate. For these thousands of households the lesser problem is a housing market that is distorted, the larger problem is deep poverty.

Easing the local housing market will help these households in an indirect way, but direct help is also needed. There are a variety of “demand-side” policies such as vouchers for rental assistance, housing navigation and counselling agencies to help tenants find or keep units, and one time rental assistance for security deposits, first and last month’s rent, that could help these households.

Complicating the supply versus demand needs further are fundamental challenges such as discrimination and predatory behaviors. Legal measures are essential to protect these vulnerable residents from eviction or mistreatment by property owners. No matter the method of assistance, housing for very low income households is nearly certain to require government subsidy and government oversight. For households in deep poverty, it’s not just a matter of housing not being affordable, there really is a lack of affordable housing.

It also matters a great deal where affordable housing is located. In cities across the country housing is deeply segregated along racial lines. This is a deliberate consequence of housing policies pursued at federal, state, and local levels since the Civil War, but with the most breadth in the middle of the last century. African-Americans were systematically prevented from building generational wealth through homeownership, and concentrated into inner-city ghettos as a matter of public policy. These racially concentrated areas of poverty have historically received inadequate city services, from hostile policing to poor schools. Undoing this shameful legacy will require a similarly strong and intentional reaction from public policy.

One of the key strategies for reversing residential segregation must be to build or acquire affordable housing in higher income, segregated areas. Policies that undo exclusionary zoning and allow cheaper multi-family development in exclusive, predominantly white single family home neighborhoods are welcome. But deliberate siting of subsidized affordable housing in these neighborhoods is also important. This has to be an explicit goal of these subsidies, because in cities across the county (Washington DC provides a stark example in the tweet above), affordable housing is usually built in already poor or mixed income areas. Here too is another area in which what matters is not just broad-based housing affordability, but direct policy intervention devoted to affordable housing.


Producing Affordable Housing and Allowing for Housing Affordability Should Be Complimentary Goals

Above, I’ve tried to show how how both perspectives on the urban housing crisis are valuable. To solve such an enormous and multi-faceted problem, both affordable housing and housing affordability are needed, and they are needed everywhere. But reconciling the two should not simply be a matter of reluctant compromise. Instead, we need to recognize the ways in which both strategies are important to achieving the goals of the other.

For one, funds for producing affordable housing are scarce. Even with large budget increases for affordable housing, the amount allocated is not commensurate with the problem (this building alone cost $54 million). That leaves two options—find ways to throw even more money at the problem, or find ways to reduce the size of the problem. That’s where measures to improve housing affordability come in. If the cheapest end of new market-rate housing is affordable to households making 60% AMI, than fewer households earning that amount will need assistance, and that frees up more dedicated affordable housing money to be spent on households who need the help more. Not to mention that more market rate development means more money for the city, some of which can be used to support affordable housing initiatives.

Producing affordable housing also can make housing more affordable overall. Households with very low incomes are especially vulnerable because the housing market produces few options for them. That lack of choice can lock these households into predatory situations, for instance where landlords raise rents and defer maintenance, knowing that their tenants have few options to move away, and may not be able to afford a move anyway. From the second half of the twentieth century and continuing even to the present day, African-Americans homeowners and renters on average paid significantly more for their homes or in rent than did whites for similar properties, because they simply had far less choice. But increases in governmental assistance and governmental enforcement (a “public option,” if you will) can provide new, better options for very low income households. That increased competition and oversight would make it significantly harder for landlords to take advantage of very low income tenants, because those tenants would have newfound power to pack up and leave for better options.

Policies that aim to produce affordable housing and policies that aim to improve housing affordability can work symbiotically to achieve each other’s goals. But not all policies work along both tracks. Rent control is one such policy. While it may lock in affordable housing for a select set of incumbents, it makes housing less affordable for everyone else. Badly designed inclusionary zoning policies may have a similar effect. On the flip side, unfettered housing markets can have destructive effects on lower income neighborhoods that are not prepared for them. While building new housing improves housing affordability on a regional level, there is some evidence that it may increase prices locally, as a previously unattractive neighborhood becomes more attractive. These concerns are not irrelevant, nor are concerns about shifting power dynamics in high growth neighborhoods. Policies that engage incumbent residents on the question of how (as opposed to whether) the neighborhood develops are the best way to work through this tension.


A Better Coalition

In the present day, housing advocates on both sides of this debate have to understand that they stand a better chance of achieving progress by working together. Although there is no expressly high rent advocacy group, high rents are nonetheless winning in a rout. Funds for subsidized housing are incredibly small, and housing supply is incredibly limited. That’s because there is a de facto high rent advocacy group made up of single family homeowners and some large developers, who benefit from high priced housing. The rhetorical battle between affordable housing and housing affordability often gives these groups cover, whether they are arguing in bad faith or a lack of understanding, they benefit from the stasis. One benefit of clearer communication and stronger alliances between affordable housing and housing affordability advocates is that it ought to clarify exactly who stands where, and more clearly illuminate the tradeoffs and sacrifices of local housing policy. If affordable housing and housing affordability advocates obstruct each other, little is likely to change. But if both causes become linked—you cannot support affordable housing without supporting housing affordability and visa versa—a better, more effective coalition will emerge.

This alternative approach must begin with clear speaking about our priorities. Recognizing the differences between “affordable housing” and “housing affordability” and educating the public and policy makers about the multiple sides of the issue is essential. Only from a shared understanding can we create a coalition that works on policies that advance both goals—more funds for affordable housing, new tenant protections, inclusionary zoning in areas that can support it, inclusionary zoning with density bonuses or permitting advantages, upzoning for mid-rise buildings, upzoning for low-cost multifamily buildings like fourplexes, abolishing parking minimums, and others—ultimately building a city with more room and more opportunity for everyone.

Alex Schieferdecker

About Alex Schieferdecker

Alex Schieferdecker is from New York City, lived in Minnesota for six years, and now lives in Philadelphia. He is still unhealthily invested in Twin Cities politics and development. Please help. His twitter handle is @alexschief.

31 thoughts on “Two Perspectives On The Housing Crisis: Affordable Housing vs Housing Affordability

  1. jeffk

    This is great. I do have one point: I think it’s generous to assume everyone wants the housing crisis addressed. Addressing it means that home ownership may be less of a tool for wealth building, because that goal is fundamentally opposite of addressing housing affordability. And I suspect that most Americans still want their home to be a tool for wealth building.

    1. Adam MillerAdam Miller

      Don’t disagree, except that if the housing bubble taught us anything, you’d think it would be that slow and steady house appreciation is great for homeowners while frothiness can turn out to be devastating.

      Having bought a condo in 2005 and had to sell at a loss in 2010, I’m perfectly fine with much closer to historical rates of appreciation.

    2. pdxmom

      You can still build a whole lot of wealth even if your home never appreciates. You stay 30 years, and you have no mortgage, you have equity equal to the price of your home, and all that money you were paying towards the mortgage then goes to savings or whatever you want.
      Of course, you never own your home because of property taxes, but that is another discussion.

    3. Daniel HartigDaniel Hartig

      Housing is a tool for wealth building for two reasons: mortgage risk is carried by the federal government, not the lender; and mortgage interest is tax deductible.

      Without these two things, housing value appreciation would drop. Instead of 4% interest on your next house, you would have to pay 6%; this costs you $4800 per year on a $300k loan. Meanwhile, at a 25% tax rate, the ~$1000 per year in interest paid on a new $300k (at 6%) loan works out to $2400 more than you would have to pay in taxes per year.

      Without those two advantages, people would not be able to use borrowed money to bid up the price of housing. But it would also go a long way to reducing income inequality. Anyone in a position to get a mortgage on a house for $300k is also in a position to get $7200 a year in tax cuts. If homes as a wealth building tool is the price we have to pay to reduce income inequality, I say we should pay that price.

  2. Christa MChris Moseng

    I’m all for trying to clear up the semantic confusion that people play at to keep market rate housing from being built, but something tells me the people who benefit from the confusion just won’t be interested. They’re playing a rhetorical shell game.

    As stated, “lack of affordable housing” is a symptom of income inequality—just like with how we fund education, solutions that only address symptoms of inequality are always going to be insufficient. Paying low end wage earners more is the great equalizer, and direct subsidization with refundable tax credits as a viable substitute. Neither of these are viable *municipal level* policies, though.

    That said, I think we need to find ways to (1) decouple housing subsidies from specific properties in specific locations and (2) broaden the mechanisms by which housing subsidies are delivered. Section 8 seems to be controlled by landlord beneficence… It shouldn’t be up to a property owner, or even detectable, whether they get paid with cash or a subsidy. Once again, the easiest way to do this is to straight up give poor people cash.

    For some reason we’re allergic to this, though, and instead need to come up with elaborate hoop jumping courses with massive cracks for people to fall through.

  3. Brian

    If subsidized affordable housing is sprinkled into high end predominantly white housing areas the result is a number of families will simply move elsewhere where they don’t have to live near affordable housing.

  4. Philip Hayward

    The annual Housing Affordability reports from Demographia are very helpful, and the argument made in them from the evidence, is convincing. Urban-area housing markets either tend to be systemically affordable with a median multiple around 3; or they have both a much higher median multiple and cyclical volatility. But the median multiple as a measure, tends to conceal the full extent of the advantage of the median-multiple-3 city. As already implied, one advantage is cyclical stability; in the market cycle, the multiple tends to fluctuate in a range between 3.8 and 2.5. This results in much less severe “negative equity” in the busts. In contrast, some cities with median multiples that inflate as high as 12 in the booms, collapse to below 5 in the busts; this represents literally hundreds of thousands of dollars of negative equity in all homes bought since a certain point in the boom.

    But another reality that is extremely important to “housing affordability” is that the city with its median house price at around 3 times its median household income, also tends to have a wide and balanced distribution of house prices around that median. If the median house price is some figure like $250,000, one can typically find $1,000,000. Upzoning contributes to the land-price inflation pressures, as development potential capitalizes immediately into land values, which value is captured by incumbent site owners and must be paid upfront by developers purchasing sites. Ironically the increased cost and risk to developers tends to result in sub-optimal rates of actual redevelopment, but the inflation in land prices has pushed all existing homes higher in price. Upzoning then, tends to result in inflation in the price of the many existing dwellings swamping any provision of “affordable” (i.e. higher density) housing by way of redevelopment.

    Demographia’s argument is incontrovertible from the evidence: elastic supply of ex-fringe suburban housing on non-rationed land supply, is what disciplines land prices throughout the urban area and keeps the median multiple down to around 3, and more stable. The outbreak of affordability and cyclical stability issues all over the world, always coincides with the adoption of central-planning regulatory rationing of the supply of land, allegedly to “reduce sprawl” or reduce the costs of infrastructure provision or suchlike. Only in the USA is there some “proxies” that have the same unintended consequence without it actually being explicit centrally planned rationing; for example, municipalities around the outside of an existing urban area having their own zoning powers that restrict development in the same way as a planned growth boundary.

  5. SSP

    This author makes a complicated binary semantic argument that comes down to a false premise – zoning can solve affordibility problems:

    “Easing the local housing market will help [housing burdened] households in an indirect way”


    “Policies that undo exclusionary zoning and allow cheaper multi-family development in exclusive, predominantly white single family home neighborhoods are welcome. ”

    As I have posted before, there is no evidence that this is true. Call it what you want, but without funding for affordable housing or housing affordability, the hope that developers will build affordable housing in “exclusive” Minneapolis neighborhoods is pure wishful thinking.

    They will build high price housing. And as recent articles have detailed, even if you build enough high-price housing to lower rents for that “luxury” market , rents for affordable units will continue to go up. That makes perfect sense: if you eliminate affordable units to produce more luxury units then the supply of luxury units goes up and the supply of affordable units goes down.

    Several recent articles describe this:–but-rise-for-the-poor/2018/08/05/a16e5962-96a4-11e8-80e1-00e80e1fdf43_story.html?utm_term=.f18452e282a9

    1. Scott Merth

      It seems the financials are skewed in your scheme where affordable housing is (finally) funded but it’s supposed to be built without upzoning. It would be inefficient to build affordable SFHs rather than affordable apartments/condos, hence a need for upzoning. What happens to affordability when no additional housing gets built because of the current underzoning?

      Your last point about reducing tear downs of affordable housing is being incorporated into the 2040 plan:

  6. SSP


    I’ve never said don’t build more housing. As I have posted many times before we need a more pragmatic and honest discussion that acknowledges addressing the need for additional (market rate) housing to meet the need of additional high wage residents is a different problem than addressing the need for affordable housing in Minneapolis. But most people posting here pretend that using market incentives (in the form of zoning changes) to address the first issue will also address the second.

    The goal you point to in the 2040 plan is way too vague particularly where it is effectively contradicted by the remaining goals and thrust of the plan. So, we will get less density at nodes (which would allow less cars) to allow greater developer profit because people believe those profit incentives will result in overbuilding and resulting lower rents. That is not how it is going to play out.

    1. Adam MillerAdam Miller

      Yeah, I don’t think anyone has claimed that addressing the first issue will also address the second. Meanwhile, lots of people have insisted that the first issue is no issue at all, and thus the plan’s attempt to address are unnecessary.

    2. Scott Merth

      Well, this is only the initial draft plan, so obviously there is more to be done in filling in the details on both direct funding of new affordable housing and preservation of existing affordable housing (not to mention refinement of the zoning proposals). Reading through the full text of the link shows that this is only the policy goal which lays out actionable future steps in the next phase.

      In that this is a comprehensive plan, it must address both issues (upzoning and preservation) to be effective, because of course any proposal item will have positive and negative effects towards a certain goal. As you mention, there is a risk of developers tearing down current affordable housing, hence the need for language about preservation. The point is that in the end, the combination of both the zoning policy and preservation will start to shift the balance in favor affordability.

      Affordable housing preservation without allowing for increased growth is like bolstering a dam that is trying to hold back a rising lake. Over time, more and more funding will be needed to keep the same housing units affordable. I believe it would be better to relieve some of this pressure by allowing the lake to start draining.

      How would you propose the city work to keep housing costs affordable? Are there any other approaches to take other than only increasing funding for affordable housing? What about people who fall between those able to live in subsidized housing and those able to afford luxury housing?

  7. SSP

    Adam, here is your comment from 7/21 which seems to say exactly what you now claim no one is saying:

    “The anti-plan groups regularly proclaim that adding new housing won’t mean adding affordable housing. When they do this, they are either intentionally or not conflating two things: subsidized housing and market rate housing (i.e. Housing that’s not subsidized and whose price is set only by the market).

    Loosening zoning regulations to allow more housing in our neighborhoods (as was allowed when they were originally built) does not create subsidized housing. It can, however, put downward pressure on market rate housing by increasing supply. Two $200,000 units in a duplex are more affordable than a $350,000 house (or for SW numbers, two $400,00 units in a duplex are more affordable than a $600,00 house), for an example with entirely made up numbers.”

  8. Philip Hayward

    Systemically affordable housing markets, i.e. a median multiple of around 3, are produced by having true rural-cost land being developed by developers in competition to each other, and neither land owners nor developers are holding out for significantly higher bids before they will sell. This results in new McMansions for around 3 times annual household income (at least in some developments) which disciplines the price of all housing in the market.

    If this factor is absent, it is impossible to create affordability in the market, because upzoning is affected by a rule that “site values are elastic to allowed density”. All the evidence points in this direction. No city that is dense because it has not been allowed to sprawl, is affordable. Its housing can be smaller and tighter and more stacked up, but it is always more expensive, not less expensive. Hong Kong has 66,000 people per square mile, and its median multiple is over 15.

    1. Adam MillerAdam Miller

      It’s very hard to think clearly about housing costs if you leave time and distance out of the equation, and yet, it’s a grand American tradition to completely ignore them and conclude that a house in the exurbs that requires multiple family vehicles and hours each day spent commuting is “cheap.”

      Anyway, it was interesting to me that neither your link nor the underlying blog post mention Tokyo, which I understand has relatively reasonable housing costs and is very dense.

      1. Philip Hayward

        How about dispersion of employment? No data set shows any correlation between density and average commute time, other than that ALL the outlier-high commute times are in the densest cities. Most average commute times fall in the main part of a bell-curve distribution of data; and there are low-density cities comparing to all the best higher-density cities. In fact the “best” higher-density cities tend to be ones where there is an economic disaster, such as in Spain; equivalent rust=belt cities in the USA also have low commute times.

        The higher and spikier land rents in denser cities result in much more severe “pricing out” effects – people forced to live in inefficient locations. in contrast, anyone in a median-multiple-3 city with a long commute, is doing this by choice because of other aspects of their housing location (eg proximity to relatives). Homes nearer their workplace are never as unaffordable as would be the case in a median-multiple-6+ city.

        It is also against basic economics to claim that “housing plus transport costs” are higher when people have been guided by market pricing in the first place. Urban property markets “price in” location premiums which reflect the potential transport cost savings. I have seen indexes which purport to “prove” that people are living more cheaply at denser central locations and doing without one or more cars, but these indexes never assess the reality for people in a given set of circumstances making a location choice right now. Of course incumbents at some locations might be living cheaply right now, but the cost to most others of buying a home at that location would make it a more expensive option than their suburban choice.

        The statistical mistake that is being made is relying on “cross sectional” analysis and analysis “within a single city” when what is needed is “time series” analyses, and analyses across large data sets of cities. It would be impossible to “live cheaper” by moving to a dense city when its effective median multiple is two to three times as high. No transport cost savings could compensate for this.

        Sure, some households spend a lot on fuel, but a lot of this is entirely discretionary; they don’t need to own a V8 just because they live in the suburbs, and they don’t need to drive to destinations close enough to walk or cycle to. They choose to do so because they can afford to do so. Much of the “car independence” claimed for denser cities is more a case of “so little discretionary income after housing costs that we can’t afford a car”, especially when the hundreds-of-times-more-expensive land costs feed into the cost of a parking space.

        I am used to the argument from Tokyo, which is the exception, not the rule. I would agree very much with advocacy of imitation of Tokyo’s institutional arrangements which have such positive outcomes. All the advocacy, however, is looking at the positive outcomes and the “urban form” and assuming, like primitive cargo-cultists, that copying the urban form is all that is needed.

  9. Mary Vogel

    My letter-to-editor, submitted on July 4 to coincide with the July 10 Portland Planning and Sustainability Commission meeting, finally appeared in the Portland Tribune, July 31–a day after your far longer article was published. ( I didn’t mean to seem confrontational–as I’m a big supporter of “affordable housing” too–especially when it is in a Community Land Trust.) Don’t be surprised by the title–mine is second. . . It’s short so I’ll leave the whole thing here for those who don’t follow links.

    Housing affordability v. affordable housing
    While the media has offered many articles on Portland’s housing situation, I’ve seen few articles that make the crucial distinction between building for housing affordability and building “affordable housing.” The latter takes packaging together a variety of subsidy programs — often the work of a specialist whose full-time job it is to do so. It takes another specialist whose full-time job it is to “qualify” the applicant.

    Housing affordability requires building differently than we have since we passed exclusionary single-family zoning in 1959.

    It takes returning to what’s now called “missing middle” housing: duplexes, triplexes, fourplexes, cottage clusters. In the current Portland residential market, only fourplexes (and perhaps cottage clusters) can achieve housing affordability for the average Portland worker seeking to buy a home.

    If all the units of a fourplex are affordable to someone making median family income, why should small developers — and those who purchase the other three units — have to subsidize an “affordable housing” unit, as is the current direction of the zoning changes in the Residential Infill Project?

    As I think about many of my young friends who would love to purchase, but don’t qualify for “affordable housing” programs or market rate single-family homes and the evolution of our American Dream, I urge you to let your planning commissioners and city councilors know that a fourplex should be a use-by-right in a residential zone.

    One should not have to subsidize a unit — and make the other units in a fourplex less affordable. We need housing affordability as well as affordable housing to solve our housing crisis.

    1. Philip Hayward

      Yes, there is an important distinction between “affordable housing” and “housing affordability”. But the reality is that upzoning and building denser, does not create housing affordability in a market that has a problem. Housing affordability, in terms of a median multiple of around 3, exists in dozens of US cities that have a large, not a small, average housing-unit footprint.

      Understanding the complexities of urban land economics is essential. The process by which land prices are derived, is either “differential” or “extractive”. “Differential” means “relative to other options”. The cheapest option is rural land, and this usually costs around $10,000 per acre. In a city with housing affordability, the cause always is that development of rural land to urban uses is so competitive, that the finished housing incorporates very little “non-value-added profit” for anyone. There is the cost of development, the cost of building, and then the cost of the raw land incorporated into the “lot” can be found to be not significantly increased. This is why brand new McMansions on generous separate lots can be below $300,000.

      Then the cost of all the land in the city is derived “differentially” to this cheap fringe land; transport cost and time savings, and local amenity and clustering economies, capitalize into premium values “by location”, but these are always an “add-on” to the very low starting price at the fringe. And these “add-ons” are always related to income levels, so that households of all income levels are generally “sorted” into locations where their own home cost around 3 times their income.

      In contrast, all hell breaks loose with land prices when some factor disrupts the competitive development of cheap rural land. The cost of land incorporated in housing units, can be found to be tens, hundreds, or even thousands of times higher than it “should be”, and this profit gouge has always mostly fallen to the initial seller of the land. Developers costs are exponentially higher and their margins pared down, by the fact that the price of the land squeezes out the value that can be “built into the structure”. This cost of land is so high that new “fringe” housing units on 1/20 of an acre each in a UK city end up costing 3 times as much as housing units on 1/4 acre each in a US median-multiple-3 city. The cost of the land is literally hundreds of times higher.

      In Hong Kong, there are 66,000 people per square mile, and the median multiple is over 15. The cost of land is literally thousands of times higher. The rule is “site values are elastic to allowed density”, and this elasticity runs in the direction that the tighter that people can be crammed in, the higher the price that can be gouged out of them for a housing unit. This is the opposite to the assumption that dividing the land up between more units, reduces the per-unit cost of land. In the big picture, the opposite is true. We can easily hypothesize that if we wanted to “save on food costs” by reducing the supply of food per person but then letting the suppliers who have the quotas, charge what they like, of course the cost of food to individuals would get higher and higher, the further the supply is reduced by regulators. The same applies to housing.

      In the example of cities “in transition”, such as Vancouver, Melbourne and Auckland, where they have mostly separate family homes but are planning and zoning for density as a significant source of new supply, none of the new dense housing, no matter how small, is as affordable as a McMansion in a median-multiple-3 city. The price of sites inflates faster than the theoretical “increased housing supply” can reduce pressures on the market. And the city’s median multiple remains stubbornly up around 9+

      In ironic contrast, the cities with “differential” land prices and a median multiple of 3, do not suffer from this “site values elastic to allowed density” effect, and the cost of land can indeed be divided up between more units, by a developer who wishes to do so. So when you already have “housing affordability”, it is easy to build housing of higher density that is “even more affordable”. This is why, in cities that already have “housing affordability”, upzoning has the positive results intended. Issi Romem’s research shows that the fastest rates of “intensification” are happening in the cities that also have the fastest “sprawl” development of fringe McMansions. The overall elasticity of housing supply is ten times stronger than in a city where intensification is intended by the planners to be the main means of housing supply, inside a growth boundary intended to restrict sprawl.

      There is a years-out-of-date paper on “Building a Crisis: Long-Term Housing Under-Supply in England” by John Stewart, that makes depressing reading: Plan after Plan, decade after decade, has only resulted in worsening shortages of new housing. The situation has only worsened again since that paper. It is extraordinary that actual decades-long experiments in planning for “intensification” as a main means of housing supply, are so little studied and learned from by today’s “experts”.

      1. Adam MillerAdam Miller

        I don’t really mean to belittle what you’ve said, but “sprawly places where people don’t want to live have cheap housing” covers the same material a lot more quickly.

        And yes, I know you’re suggesting supply effects separate from demand effects, but I’m not sure there’s really a distinction there.

        1. Philip Hayward

          There is plenty of evidence that runs in both directions, to prove that supply of land is the decider. There are no cities in the UK that are cheap “because they are undesirable” – and some of them have lost population, employment and industry at the same rate as US rust belt cities. The climate is certainly not California. The evidence now from Australia and New Zealand as well as the UK, is that every city inflates in price as soon as some kind of constraint on sprawl is introduced, even “undesirable” cities; and this price inflation spills over to regional rural towns that themselves have prescriptive planning regimes.

          For example, the towns of Huntly, 2 hours drive from Auckland; and Levin, 90 minutes drive from Wellington (in New Zealand) have housing that is twice the price of that in Plainfield, New Jersey – even though Plainfield is within commuting distance of the world’s most famous city. In fact these rural towns have more expensive housing than some US cities with 6 million population.

          Then there are the US examples of Phoenix and Las Vegas, which were held to be undesirable sprawly cities; and yet from 2003 to 2006 their price inflation was the record-fastest anywhere. Why? Constraints on the supply of land – not planning ones, but BLM land, Defence Department land, National Park land etc forming a proxy for a planning boundary.

          Furthermore, Californian cities spent at least two decades growing much faster than they now are, and yet sustaining median multiples close to 3. This was the era of their sprawl. The climate did not miraculously become more pleasant to inflate their house prices. In fact California’s cities have become less pleasant, with the traffic congestion, crime, skid rows, etc.

          Really undesirable cities lose population, like Detroit or Liverpool. It is a bit of an oxymoron to describe as “undesirable”, the fastest-growing cities in the entire first world today; the affordable ones in the US South and Heartland.

          The case for constraints on land supply causing affordability problems, is a slam dunk. The historical record of urban land price trends is also powerful evidence. Automobility is what democratized home ownership and improved living conditions. Every city in the “developing” world today that has a chronic problem with illegal slum housing and social injustice in housing, is a replica of “first world” cities back in the Victorian, pre-automobile era. Even though automobiles exist, the process of competitive sprawl has been disabled by bad government in those cities before it even started.

          “The History of Urban Land Rent and Cyclical Volatility: The Elephant in the Macro-Economic Room”

          1. Adam MillerAdam Miller

            Which California cities have become less pleasant due to recent spikes in crime?

            Of course constraints on land supply decrease affordability. But even were the “cheapest” possible housing the only policy goal, subsidizing exurban and semi-rural development (e.g., via road building) is an unattractive way to achieve it, in particular given the massive externalities involved.

            1. Philip Hayward

              I thought rising crime in CA was common knowledge. Google searching brings up too many choices to pick from.

              The way to deal with externalities, is fees and pricing, not prescriptive planning. There is nothing inherently wrong with lower-density living, there are numerous aspects that lend themselves to sustainability. The results of myriads of people adjusting their behavior in ways unique to each of them, is far superior to central planners deeming a “one size fits all” mandatory approach to living. We should have learned that from 20th-century political history.

              Yes, America has the world’s most absurdly excessive sprawl thanks to bad incentives. But everywhere in the world, people spread out when given the opportunity. Even if governments don’t build highways. Shlomo Angel et al are chronicling these trends; some cities in the developing world have expanded their footprints tenfold in the last 3 decades, mostly with illegal slum development, with no roads or infrastructure properly planned. Motor scooters are the proxy for automobility here.

              Roads are already there to a great extent, for rural purposes. Is this bad? The rural sector getting “subsidized roads”? Urban land rent was flattened before the US Interstate Highway Program even started, Henry Ford knew the Model T needed what we would call “semi-off-road” capability. As Frank Lloyd Wright said: “sprawl is going to happen anyway. why not plan for it”? Shlomo Angel et al are arguing the same thing today, to the governments of developing nations.

              Wright, correctly in my opinion, opposed massive radial-pattern urban highways, favoring intense grids of surface arterials that would better serve the dispersed-activity metropolis that he also correctly foresaw. Radial-pattern urban transport infrastructure, whether highways or transit, perpetuates the primacy of the CBD and is a vested-interest tool of these rent-seekers. One of the least appropriate wealth transfers in the world today, is Federal subsidies going to Transit to get workers to Manhattan, the last place “in need of external subsidies”. Targeted land taxes in Manhattan should pay for it.

              1. Adam MillerAdam Miller

                It’s not common knowledge. Give me a link or two that shows that crime in CA, like everywhere, isn’t way down from its 1990s highs, much less that there’s any correlation between density and crime in that period.

                And there is something inherently wrong with low density living: the externalities are not only unpriced, it’s highly subsidized.

                1. Philip Hayward

                  Sure. I hoped you would just use Google too and see how many search results there are.


                  I didn’t refer to “since 1990”; I was referring to the era when CA had the lowest house prices and the lowest crime of all – the 1950’s and 60’s. I did not claim any correlation between urban planning and crime, my point was merely that the “attractiveness” of CA that allegedly is responsible for high house prices, is possibly less now than it was when the house prices were low. Don’t try and read any more into it than that.

                  You misunderstand my point about there being nothing inherently wrong with low urban density. The problem is with the lack of “pricing”. With correct pricing and an absence of subsidies, it is still perfectly feasible that some people will choose low density living. Off-grid, self-sustainable, using on-site solar and wind power, etc etc. And using an economical means of personal transportation.

                  By the way, transit is subsidized much more heavily than automobility. At least drivers of automobiles pay for their own vehicle, fuel, repairs, etc. Transit fares barely cover any of the equivalent costs. “Roads” versus “transit” is a false comparison, because “transit” is a whole system, whereas “roads” are a tiny fraction of the system of automobility, most of the costs of which are paid for by users. Roads are a big one-off capital expenditure that over the centuries, have costs amortized over so much travel on them that this “subsidy” ends up only a fraction of a cent per mile of travel. In contrast, the operating costs and regular rolling stock replacement costs of transit, swallow subsidies of 30 cents to $2 per person-mile. And there is no way that “externalities” of automobility are of such an extent, not to mention that society as a whole is perfectly happy to tolerate those externalities in conjunction with “having automobility”. They do not get equivalent value from taxes paid to subsidize transit. The biggest positive-externality to automobility that has been forgotten about, is the way it created and sustains housing markets with systemic affordability.

                  Re Manhattan (I will reply here), yes, no doubt it contributes significantly to Federal tax revenue. But the FIRE sector which Manhattan exists on, essentially creates no added value in the economy, but captures a zero-sum share of the wealth created by productive sectors. It certainly should be paying a lot more share of taxation than it is, and not expecting subsidies back in return in any form.

                  And when it comes to Manhattan property owners, who are the principal beneficiaries of the transit subsidies, I would dispute very much whether they pay their fair share of the zero-sum profits they reap in capital gains and rising rents.

                  Far too much tax burden falls on the sectors that actually create wealth, and from this point of view, the fact that workforces in sprawling “industrial” cities get their roads subsidized, this is a perfectly fair quid quo pro to the taxes that they and their employers pay. The economy actually cannot exist on wealth-transferring and consumption sectors, so it is perfectly logical to target government spending at infrastructure that supports the wealth-creating sectors, from farming, resource extraction and forestry, to “industry”-intensive urban locations, which predominantly means “suburbs”.

                1. Philip Hayward

                  I have made a long reply to the first comment and it has not appeared: do you have a moderation filter?

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