Housing Is The Economy

Nothing gets better until we build more housing.

Greatest city in the world. (Photo: Getty)

There is a long-running debate among pundits about why surveys show that American voters believe that the economy is bad when objective statistical measures show that the economy is, by historic standards, good. I do not recommend getting involved in this debate directly, unless you enjoy endless arguments with hyper-niche internet thinkfluencers, none of which will be read by the regular people who keep telling pollsters that the economy is bad. (The arguments to amount to “Actually people don’t know shit,” which is true, versus “Actually lots of people are still having a hard time,” which is also true. Pick your poison.)

Instead of injecting myself into this intellectual morass, I want to make a much simpler point here about where our attention should be directed. Outside of professional economists and those whose job is to pay attention to them, “the economy” is a term that means nothing. Does a higher GDP mean anything to the average person? No. Their own bank account does. As with many policy questions, consumer sentiment is driven less by statistics than by the psychology of millions of people who are maybe working two jobs and are maybe trading crypto and are maybe watching people yell on CNBC and are all comparing today to various times in the past that vary person to person and who hate losing money more than they love making money and who suffer from all of the various biases that Daniel Kahneman described that make humans poor judges of abstract things like “the state of the economy.” Getting mad about the fact that regular people are not giving enough credit to the president for the economy is like getting mad that people haven’t abandoned religion in order to follow quantum physics. Even the experts barely understand what’s happening, and most of the loudest voices are just making stuff up. And meanwhile everyone else has to wake up early and go to work.

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The best way to fix the US economy would be to bring about socialism. Probably not happening for a while. In the meantime, where should politicians direct their energy so that it hits the sweet spot between “truly improves people’s economic lives” and “is not so inscrutable that the angry public thinks they haven’t done anything and votes them out of office?” Here is my answer: housing.

Housing is everything. Well it’s not everything, but if you were to pick a single aspect of the economy that has the biggest effect on people’s lives and that drives their perception of the economy more than anything else, the answer would be: housing. Housing is the biggest expense most people have. It is the most inviting target for the government to make people’s lives more affordable. And it is an area that we, collectively, have really fucked up in recent decades, in a way that is crying for a political solution.

A few basic dynamics in this country contribute to our broken housing market. Mainly, we have a huge housing shortage—experts say that the US needs something like five million new housing units, give or take a couple million. We have not been building enough housing to keep up with demand for many decades. Why? Primarily because of the fact that once people own a home, they don’t want stuff built in their neighborhoods, and therefore they act politically to restrict housing construction on local levels, and that multiplied by an entire nation equals a multimillion-unit housing shortage. This process, which has unfolded over generations, has been exhaustively documented by all of America’s best housing reporters and if you don’t believe it, please go read them.

America has, unfortunately, created an unhealthy economic system in which most homeowners’ biggest financial asset is their own home. Therefore they are extremely invested in the project of protecting their own property value. The main way that they do this is by maintaining single-family zoning and other policies that suppress construction and keep their own neighborhoods exclusive. Homeowners, the single most influential political class at the municipal level of politics, want higher home values. (A new study shows that homeowners are more likely to vote against incumbent politicians if their home values are not rising.) You may notice that increasing home values, and a lack of adequate new housing construction, directly conflict with the goals of another class of people: Non-homeowners. They would like to buy houses, but they can’t, because houses are too expensive. Since they can’t buy houses, they stay in the rental market, which is also restricted by the lack of new housing construction, and rents skyrocket as well. In cities where many people want to live, but which fail to build enough new housing every year to keep up with demand, housing prices rapidly reach levels only affordable to the rich. The middle class leaves the expensive cities. They move to less expensive cities, where they constitute an influx of new residents, and they are resented by the existing residents of those cities, who see their own housing prices rise as a result of the influx. Instead of rapidly building a lot of new housing to account for the influx, residents typically channel their resentment into a determination to keep everything as it is, which means a continuing lack of adequate new housing construction, which only serves to drive up rents and home prices further. And the cycle continues, from one city to the next to the next. People leave San Francisco because it’s too expensive and they move to Denver and then they make Denver too expensive and then those people move to Boise and make Boise too expensive and then those people move to your small town. Uh oh! You will teach them a lesson, by organizing your neighbors to fight against the damn new luxury condo building they want to build downtown. Eventually your town will become too expensive as well.

We need to build more housing. If your city is too expensive it is because there is not enough housing to meet the demand. Build more housing. Stop being selfish.

This child is now homeless because of single family zoning.

At the end of this chain of dominoes are the poorest people, who, when the lowest-priced housing options get too expensive, become homeless. Homelessness is a housing problem. You may be thinking to yourself, “I bet I see all these homeless people on the streets these days because of drug addiction or poor work ethic or because they all move here because the weather is nice.” No. You are objectively wrong. Homelessness is correlated most strongly with a lack of affordable housing. Places that have high poverty rates but also have low rents have low levels of homelessness. Which is itself driven by a lack of adequate housing supply, which raises rents as everyone scrambles for whatever they can afford, and inevitably the poorest people get dumped off the edge of the housing market and end up on the streets. If you dislike homelessness, agitate for more housing construction in your city. Yes, there should be shelters and emergency housing and more public housing to get people off the streets in the meantime. But in the long run, if we do not build enough housing to meet demand, the prices will never stop rising, and we will just be doing this bullshit forever.

Over the past decade or two, the understanding of this dynamic has become more widespread. First it was understood by housing policy experts, and then it become more understood by politically engaged people who started the YIMBY movement, and by now it has become well understood by politicians who genuinely want to tackle this issue, and by labor unions and other social groups who have concluded that the unaffordable housing that plagues their members will never be fixed without a massive increase in new housing construction. Speaking as someone who has been casually writing about this issue for years, and monitoring the set of angry internet comments that always come in response, I would say that a baseline understanding of how this all works has not yet fully filtered down to the general public, who are right now composing in their head angry comments about how the greedy developers built a new building on their block and yet the rents are still high, so how about that, smart guy? But we’re making progress, slowly.

Because it took us decades to achieve our current housing shortage, it will likely take decades to build our way out of it as well, even in the most optimistic scenario. This presents a political problem: Most politicians are cowards who want to get reelected, and therefore are less enthusiastic about taking on issues that will get them yelled at by rooms full of red-faced 65-year-old homeowners right now and may not show visible results for many years. This means that we often get political actions like Joe Biden’s recently announced proposal for a $400-a-month mortgage tax credit for homebuyers. Sounds great, except for the fact that in a situation of inadequate supply, all this will do is push prices up further. It amounts to a free subsidy for existing homeowners, who would be able to soak desperate home buyers for an additional $400 per month.

To be fair, the Biden administration has also announced a plan to increase housing supply. This is both the correct policy priority, and a political recognition that the inflation that voters keep screaming about in polls is driven most strongly not by $5 cartons of eggs but by $2500-per-month one bedroom apartments. To give you an inkling of the scale of our need for affordable housing, more than 400,000 people have applied just to get on the 200,000-person long wait list for subsidized Section 8 housing in New York City—a wait list that has not been opened for the past 15 years. And most people won’t even get on that! And this is just in New York City! And if your response to that is “hey let’s just build public housing units for all 400,000 people,” that sure sounds nice, but brother I am here to tell you that there are only 177,000 total NYC public housing units right now, and that represents the sum total of all that have been produced in the city’s history, and they don’t even fund the ones that exist adequately right now. So practically speaking, saying “just build public housing” is the equivalent of saying “just give everyone magical castles.” It is a nice goal but it ain’t happening any time soon and in the meantime, everyone needs affordable housing. To reiterate: the only long term path to bringing housing prices down to an affordable level is by building enough housing supply to meet total demand. Build more. Much more.

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There is much to be done. For those of us who consider ourselves progressives, a straightforward thing that we can do is to vocally lend our political support to policies that will increase the housing supply. There are only so many politicians who genuinely care about this issue in the first place. We very much need to strengthen their ranks. We still live in a world where the easy political move, particularly at the local level where many housing policies are still made, is just to give in to the room full of angry homeowners who don’t want stuff built around them. We can encourage the less brave politicians to stand up to them by solidifying the idea that affordable housing is a basic progressive value and failing to build adequate housing supply is a contradiction of that value. In New York City, plenty of lefty politicians have already come around to this view—and they know that more market rate housing construction can be paired with other progressive solutions like social housing and all of us will help us get a little closer to the goal.

On the national level, because it’s hard to produce overnight results on this issue, politicians need to make a point of educating the public on how this all works, as they push the policies that will make it happen. Donald Trump is the ultimate NIMBY, the bloated idiot who screams about “Protecting Our Suburbs” while promising to give the very same wealthy homeowners who caused this problem more power to continue perpetuating it. If you despise Donald Trump, yet find yourself on the same side as him when it comes to the question of whether people should be allowed to build new apartment buildings in your neighborhood, you need to reconsider your understanding of this issue.

There are lots of economic issues but housing costs are the biggest one for most people. The only real way to improve this is to build a whole lot of new housing. Understand that this is a necessary part of being a progressive. Every day more people are born and they will all need places to live and if we ignore the need to continually build all of those places then everything gets fucked up, as it is now.

Related: Housing Is a Labor Issue

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• You may have heard that I wrote a book about the labor movement called “The Hammer,” which you can buy right now wherever books are sold. As you can see from the attractive flier above, I have a book event on Thursday, June 20 in Rochester, NY, where I’ll be in conversation with the righteous union organizer Richard Bensinger. If you live within 100 miles of Rochester I highly recommend you come on out and talk to us about the labor movement. This is how we build, baby.

• Also this week, I wrote a piece in Flaming Hydra detailing a new dessert that I believe will likely go down in the “food history books.” If you are not reading Flaming Hydra, I suspect that you are not really the gourmand that you claim to be.

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