Public Funding Alone cannot solve a Housing Crisis
A Case for Public Housing Advocates to Think Broader
One of the fascinating trends in California’s housing crisis has been the rise of a group of progressive housing advocates often called the “housing equity” community, or “PHIMBYism.” This movement is generally a group of very progressive activists who recognize that California is in a housing crisis and acknowledge the need for a supply of new housing but are fundamentally suspicious that the market will provide housing to help those in need. The slogan for this movement is “decommodifying housing,” which for them entails ending the practice of having housing be a speculative investment. Instead, housing should be provided through non-market means: public housing, facilitating community land trusts and subsidizing non-profit affordable housing. Of course, all of these efforts would require the government to invest a massive amount of resources into building housing. This movement is not significant regarding the number of adherents but is very influential in the progressive policy world. Here in LA, it's the most politically influential brand of politics in the constellation of progressive non-profits that work in affordable housing, social services, and local community empowerment. John Oliver made this exact argument in the last two minutes of his “rent” episode over the weekend:
(A quick fact check on John Oliver: for the record, we definitely haven’t actually tried letting the private market sort things out in housing in the last 50 years, but more on that later)
If you were wondering, I am not part of this activist community, but I want to acknowledge that this perspective has some valuable points regarding housing policy. First, some segments of the population will always be unable to afford market-rate housing. As Matthew Desmond illustrates in his book Evicted, even in relatively inexpensive cities like Milwaukee, there is always going to be a segment of the population who struggles to afford market-provided housing. As Jenny Schuetz demonstrates in her book “Fixer-Upper,” it is almost impossible for landlords in affordable cities to charge less than 500 dollars a month without letting the unit fall below habitability standards or lose money. Families in poverty (at least 20% of American households) will thus often struggle to fit rent into their budget, especially once they move into more expensive metros. If we want to ensure all families can have housing stability, there is a role for the public sector in helping families struggling to make rent.
Informed advocates will point to places where subsidized housing makes up a significant portion of the housing stock and works quite well. Most notably, in Singapore and Vienna, Austria, the government builds the vars majority of new housing (between 60-80%). These cities both have a robust commitment to government-built housing, often called “social housing” because, unlike public housing in the US, it includes a range of incomes from low-income to middle-class residents. Both cities have genuinely admirable housing markets in that they provide opportunities all along the socioeconomic spectrum, with a mix of relatively affordable housing options. Singapore is more focused on homeownership:
While Vienna is more focused on renting:
On some fundamental level, my work has made me a political pragmatist: I am willing to give anyone of any ideology a chance to demonstrate that it can work. I think this philosophy comes partly from my conversations with my neighbors, many of whom are also political pragmatists. The underlying concern is with improving their livelihood, and secondarily with what ideas underlie said program of improvement. I find some proposals to try to translate these social housing models to California intriguing. One proposal I heard last week from Helmi Hisserich, whose idea is to use publicly owned land in California to scale up modularly constructed apartments that could house multiple tiers of income together under one roof. A similar modal is up before the California state legislature in the form of Alex Lee’s AB 2053. Considering our current crisis, I think these are worth experimenting with and piloting.
I am not yet convinced that this social housing model can work in our context. For one, public housing has a terrible history in the US. Economic research has found that kids whose public housing apartments in Chicago were demolished and were given a section 8 voucher in exchange were much more likely to have good life outcomes than those who stayed in public housing. Talk to people in the Eastside of LA (especially those who live or grew up in public housing), and you will hear lots of horror stories, not just from the past, but about things happening in the present. The issue of deferred maintenance in public housing is one where clearly, public housing agencies are not responsive to the needs on the ground. To adopt a saying of Libertarian economist Bryan Caplan, “let's talk about new public housing once the government shows it can fix the old public housing.”
Part of what ensured mixed-income social housing could work in Vienna and Singapore is that both have powerful government agencies (arguably authoritarian in Singapore) who could coercively compel people to live in the projects. That is not something Americans will tolerate: you must persuade people that social housing will benefit them. I sense that the new wave of activism is generally aware of this history and believes that their policies will solve the problem; what I don’t think is widely understood is how much trust will have to be rebuilt to convince people it will work. Unfortunately, limited idealistic experiments at doing this in the US have largely not realized their vision, a case in point being my hometown of Reston, Virginia. Reston is a lovely place, but most objective observers would agree it is not a genuinely socio-economically integrated community with abundant housing options.
Likewise, California's policy surrounding building subsidized affordable housing seems almost broken. Liam Dillon at the LA Times just released a scathing piece on the immense cost problem building affordable housing in California:
The report found that in the Bay Area, new affordable units are increasingly costing over $1 million per unit to build, far higher than the market-rate units often derided as “luxury units.” And this is not just a Bay Area problem; Measure HHH in LA, which raised $1.2 Billion, has only brought just over 1000 units online. The costs are more reasonable, closer to $600,000 on average, but 14% are costing over 700,000 dollars.
California is currently 3-4 million units behind on housing production, and those units are MOST needed in our highest-cost metro areas (San Francisco and Los Angeles). The realities on the ground make the public housing vision look pretty cost-prohibitive. Without serious process reform, building even half of that need (1.5 to 2 million units) through public dollars would require conservatively financing for at least $1 Trillion in housing construction costs. The 2021-22 budget talked about a “historic investment” in homelessness that cost the state…$12 Billion. The total state budget in 2021-22 was $258 Billion, of which only $72 Billion was discretionary. Federal dollars allocated to California through the LITHC program are only in the hundreds of millions a year. Trying to cobble together all the funding needed to catalyze one trillion dollars in financing would take California ages. This mismatch between the size of the scale of investment needed versus what is currently in the system is massive, and I am skeptical we will get there anytime soon.
The good news is that as you dig into the essential costs, there are quite a few policy choices we can make that will bring down the cost of publicly financed housing and market-rate housing. So when you read recommendations from the Terner Center at Berkley, you end up hitting on the same ideas for housing across the board:
Reforming land-use policies, including zoning, minimum lot sizes, setbacks, FAR, and height limits to make building housing of all types (duplexes, townhomes, apartments) easier.
Ensure that land use reform especially happens around transit, commercial zones, and high-opportunity areas where there is a lot of demand for new housing.
Ending Parking Requirements and letting parking be allocated based on discretion and context.
Requiring cities to approve housing via ministerial approval instead of discretionary approval, shortening time frames before projects can break ground.
Reforming CEQA and Environmental Review to exempt all infill housing.
Legalize building low-cost housing, including micro-units, single-room occupancy housing, and mobile home parks.
Legalize and encourage projects to use cheaper and up-to-code materials, including mass timber and modular housing built off-sight.
Relaxing labor requirements where governments require only credentialed workers (skilled and trained conditions) to work on construction projects and end prevailing wage requirements that drive up housing costs while well-positioned and credentialed workers get paid over six figures.
Some housing equity advocates resist the idea that these should be across-the-board reforms and argue that these provisions should apply to only 100% (or close to 100%) affordable projects. I disagree, though the full explanation will have to wait for another post. But even if you think these should only apply to projects with affordability requirements, serious equity advocates should see that political comprise is possible and necessary to get out of this crisis. Market Urbanists agree with public housing activists that housing shouldn’t be a speculative investment but do not believe in achieving this primarily through government action. Instead, they look to places like Tokyo, where housing is far cheaper than in California, and see a vision for how housing can become a consumer good where producers compete to offer quality products at low prices. Our grocery stores provide essential food products far cheaper than they were 150 years ago. Just because a product is necessary for human survival does not mean the market cannot have a significant role in providing that resource! After all, government and market-provided housing are competing with the status quo far more than competing with one another!
Thus, a housing equity advocate can make common cause with market-oriented housing advocates to compromise and put an end to the bad regulations that drive-up housing costs. Most ambitious housing reform bills in California, like SB 50 in 2019, have already been compromises by the market urbanists. These regulations are lifted in exchange for some level of mandated affordability in new projects. Without a profound change to these regulations, trying to scale any kind of vision for housing abundance will fail to see serious progress.