Bread and apartments

(and the radical notion that they aren’t that different)

A lot of people are upset at Jerry Brown, the governor of California, for being stingy with affordable housing funding, but he has a point: if cities severely limit how much housing can be built, and the state increases subsidies to organizations trying to build it, that’s mostly just a handout to landowners. Let me try to explain why.

Suppose you are the mayor of a city of a million where, by ordinance, only 100,000 loaves of bread can be baked every day, and you’re concerned that bread is getting awfully expensive. So you tell the bakers that for every loaf of bread they bake, the city will pay them $1. But you will keep the ordinance about only baking 100,000 loaves a day. After a month, you ask your friendly city economist to evaluate the policy, and you are told that people are still paying too much for bread, but the bakers seem to have decided they’re going to sponsor your campaign for re-election.

You can instead give $1 a loaf to the consumer instead of the producer, but all that changes is that bakers immediately increase the price of bread by $1. You can have the city take over the bakery and distribute the 100,000 loaves to those citizens you consider most worthy, rather than those willing to pay the most, but even that doesn’t fundamentally solve the bread problem: there’s still going to be a lot of people that have trouble getting hold of the bread they want, for no other reason than that ordinance we started with. You just changed which people are able to afford bread, not how many.

What I am trying to argue here is simply that affordable housing works the same way. If cities are limiting the amount of affordable housing being built by limiting what parcels it can be built on, and you give higher subsidies for affordable housing, you’re just going to increase property values for whoever owns those parcels. That’s true even if the city itself owns them.

That’s why the governor, and others in the state government like Scott Wiener, are trying to introduce a new fundamental principle in California land use law: that cities should continue to control where housing gets built, but they cannot arbitrarily decide whether it gets built.

Nobody is trying to argue with the need for local governments to direct development toward the most suitable places. It probably makes sense, in built-out cities, to target neighborhoods that have the best transit access to major employment centers, for example, so that new housing creates the least possible additional traffic. Or maybe a particular city doesn’t like that criterion at all and wants additional housing spread out over the city as much as possible. There’s not really any compelling reason cities cannot control that locally.

But what doesn’t make sense is for every city in California to shut down every housing development simply because it might cause some amount of traffic, or shadows, or, well, change. At the end of the day, people have to live somewhere.