Yesterday afternoon, NEXT NC hosted a discussion with Dr. Jenny Schuetz, a Senior Fellow at Brookings Metro and the author of Fixer-Upper: How to Repair America’s Broken Housing Systems. In an hour-long, wide-ranging conversation, she discussed everything from aligning transportation spending with housing to ideas for how one might respond to common myths around housing.
Here are eight things about housing we learned:
The “housing market” is a misnomer.
In the title of her book, Schuetz refers to housing “systems” not “markets,” because, as she noted yesterday, housing is one of the most regulated spheres of the economy.
Federal, state, and local governments regulate and subsidize all housing. As she notes:
In order to get permission to build new housing, a local government has to provide approval. The funding comes mostly from agencies that are regulated by the federal government. I think it’s important to start off not assuming that what we’re observing [in the existing market] is the market doing its thing and doing it badly, but we have created many layers of policies and regulations, taxes, and subsidies, many of which are actually are not helpful to housing affordability and impede the market from producing better outcomes.
It’s important for us to get housing right — and getting housing right involves understanding which policies are distorting outcomes and/or getting bad outcomes.
We aren’t building enough homes where people want to live.
Schuetz points out that most economists believe that when the demand for a good or service increases, then the supply will respond. (If people want to buy more blue cars, the industry will produce more blue cars.)
This is one of the obvious ways that housing markets don’t work. We observe a lot of neighborhoods and even entire metro areas (Ed note: Like the Triangle) where there’s clearly demand for more housing where people want to live.
These are places that have great jobs, great public schools, and lots of economic opportunity. Lots of people want to live in these areas and they’re just not building that much housing.
This is one of our biggest problems: we just don’t build enough houses where people want to live.
Zoning rules can stop us from building the right kind of housing where people want to live.
Schuetz points out that there are only so many people who want to purchase million dollar single family homes — and there are a lot of people who want to live in smaller homes. (One of the fastest growing population segments is people who live in one-person households.) There are studios for one person and big houses for families — but there are often zoning rules in place that prevent flexibility: For instance, it’s tough to subdivide a large home into individual units (even if there’s demand for those units).
Single-family exclusive zoning prohibits the ability to build different structures and types of different houses, and that can create a less diverse community than you otherwise would have.
We get a healthier community and a healthier environment when everyone has a decent place to live.
A market where there are people who are living on the streets isn’t something that the market will address on it’s own — because there will always be some subset of people who cannot afford the operating cost of housing.
That’s a place where government — state and local — can step in and provide housing. When everyone has a decent, safe place to live, communities become healthier for everyone.
The time to complete a project matters for the cost of a project.
We see this a lot in Chapel Hill: People who want to build housing go through a gauntlet of advisory boards and meetings and negotiations. That drives up costs –which then drive up rents. Having more clear and rules-based development regulations will bring down the cost of new housing and get housing built faster.
Housing policy is climate policy.
In our conversations, we tend to think about the climate as one bucket of issues and housing as another bucket. Schuetz reminded us that climate and housing are in the same bucket. In many states, including North Carolina, transportation is the single-biggest contributor to climate change. We need to build housing close to where people work, shop, and go to school so they don’t have to drive as far to get to where they need to go.
Using conditional zoning to provide affordable housing can do more harm than good.
Many communities address the lack of affordable housing by requiring developers to subsidize it. In Chapel Hill, the town often uses conditional zoning—giving developers an exemption from zoning rules if they do other things the Council wants—to create affordable housing. Dr. Schuetz said that towns that use this process end up creating less housing, and less affordable housing, than those that make it easier to build housing in the first place. She argues that towns should use tax revenue, not its regulatory power, to support the subsidy of affordable housing.
We’ve known how to fix housing policy for a long time.
In 2006, Dr. Schuetz wrote her dissertation on housing policy in the Boston suburbs (Here’s one paper that came out of that work). Even then, economists knew that zoning and other regulations around land use made it difficult to build housing, but since it only affected a few high-cost areas, it wasn’t a big issue. Policy prescriptions haven’t changed, but the politics around zoning have, in part because housing has become unaffordable all over the country, not just in major cities.