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I stumbled upon an article on (yawn) "The Economics of Exclusionary Zoning and Affordable Housing".
This article included a short piece of fiction analagous to the so-called "affordable housing crisis".
In the Affordable Socks Crisis, manufacturers collude to implode the output of new socks. This causes retailers to bid up prices for the minuscule output, leading a jump in retail prices from $5 to $50 per pair of socks.
Retailers begged, to no avail, to manufacturers for increased sock production. Newspapers railed against retailers for selling socks only to the rich, and affordable socks advocates demanded government intervention. After heated and protracted debate, Congress passed the Socks Availability Act, setting in motion government action on three fronts.
Government provided $45 subsidies for people who were too poor to buy $50 socks. Government extended tax credits to retailers for selling socks at affordable prices, And congress created the Federal Socks Authority to mnufacture cheap socks for the poor. The crisis was resolved, and affordable socks advocates, along with newspapers, declared victory.
According to the article, this is analogous to the affordable housing problem, substituting "socks" for "housing", "retailers" for "developers", and "clothing manufacturers" for "suburban communities".
In this example, the Socks Availability Act was misguided government policy because it assumed that the market was working efficiently and that $50 wwas the proper market clearing price for a pair of socks. Instead of considering WHY the price of socks had climbed from $5 to $50, Congress tried to resolve the problem by helping people afford $50 socks.
Similarly, government errs in housing policy when instead of asking WHY housing is unaffordable for many, government tries (and fails epically) to resolve the problem by subsidizing (some of) the poor so that they can afford overly-pricey housing, subsidizing developers so that they can afford the artificially inflated costs of building new affordable housing (e.g. Low Income Housing Tax Credits), and government building public housing for (some of) the poor.
The article proposes that artificial costs be reduced through reducing exclusionary zoning regulations, as exclusionary zoning imposes negative externalities on other communities and the residents thereof.
Should NIMBY communities be allowed to continued imposing negative externalities (costs) on neighboring communities, or should they be required to bear the costs themselves?
There is nothing inherently wrong with government subsidized housing provided they are handled properly. Government programs for low-income housing have existed for decades at the federal, state and local levels. Those loans were serviced in-house and not sold as mortgage-backed securities. It was the housing bubble spurred on by the subprime lending made in 2004-2006; which securitized mortgages were sold by the banks on the financial markets that precipitated the crash.
I stumbled upon an article on (yawn) "The Economics of Exclusionary Zoning and Affordable Housing".
This article included a short piece of fiction analagous to the so-called "affordable housing crisis".
In the Affordable Socks Crisis, manufacturers collude to implode the output of new socks. This causes retailers to bid up prices for the minuscule output, leading a jump in retail prices from $5 to $50 per pair of socks.
Retailers begged, to no avail, to manufacturers for increased sock production. Newspapers railed against retailers for selling socks only to the rich, and affordable socks advocates demanded government intervention. After heated and protracted debate, Congress passed the Socks Availability Act, setting in motion government action on three fronts.
Government provided $45 subsidies for people who were too poor to buy $50 socks. Government extended tax credits to retailers for selling socks at affordable prices, And congress created the Federal Socks Authority to mnufacture cheap socks for the poor. The crisis was resolved, and affordable socks advocates, along with newspapers, declared victory.
According to the article, this is analogous to the affordable housing problem, substituting "socks" for "housing", "retailers" for "developers", and "clothing manufacturers" for "suburban communities".
In this example, the Socks Availability Act was misguided government policy because it assumed that the market was working efficiently and that $50 wwas the proper market clearing price for a pair of socks. Instead of considering WHY the price of socks had climbed from $5 to $50, Congress tried to resolve the problem by helping people afford $50 socks.
Similarly, government errs in housing policy when instead of asking WHY housing is unaffordable for many, government tries (and fails epically) to resolve the problem by subsidizing (some of) the poor so that they can afford overly-pricey housing, subsidizing developers so that they can afford the artificially inflated costs of building new affordable housing (e.g. Low Income Housing Tax Credits), and government building public housing for (some of) the poor.
The article proposes that artificial costs be reduced through reducing exclusionary zoning regulations, as exclusionary zoning imposes negative externalities on other communities and the residents thereof.
Should NIMBY communities be allowed to continued imposing negative externalities (costs) on neighboring communities, or should they be required to bear the costs themselves?
Interesting take. What examples did the article give of negative costs and how would one community bear the costs when most of the neighboring communities have similar zoning codes?
The most the government should do is use anti-trust law to break up the colluding sock manufacturers. I see this as more of an analogy to the petroleum industry than to housing. We need the government to break up the energy industry oligopoly first then we can takel the rest of the market manipulators.
In the housing industry the local governments become the source of the collusion by restricting the land available for house construction thus controlling the price. The high prices them provide the social exclusivity demanded by the suburban population already in place. Unfortunately anti-trust law does not have a provision for local government market manipulation. Maybe it should.
Interesting take. What examples did the article give of negative costs and how would one community bear the costs when most of the neighboring communities have similar zoning codes?
Off the top of my head, i recall their reasoning is that zoning out low-income housing prices out the poor, who thus move with their feet to other communities, thereby increasing municipal costs (e.g. schools, police, fire, etc) and rental demand (and, consequently, rents) elsewhere. The surrounding communities, in turn, have an incentive to respond by tightening their zoning and development policies, potentially pricing the poor out of an area.
I remember reading some reports from New England in the '90s of employers providing or subsidizing transportation for their workers, who couldn't afford to live close to their jobs.
I think that initially, communities tend to develop their zoning and development policies independently and uniquely (although things like building codes are largely standardized, e.g. many communities incorporate by reference BOCA standards, so that when BOCA tweaks something, the community automatically follows it)...and that as people sort themselves into an area's various communities - in response to existing local policies, amenities, costs, etc - those policies change (to some extent) dynamically; i.e. to some extent, communities react to impacts experienced as a result of policies in neighboring communities.
Basically, communities have a disincentive to have zoning and development policies more conducive to the poor than the policies of neighboring communities.
I stumbled upon an article on (yawn) "The Economics of Exclusionary Zoning and Affordable Housing".
This article included a short piece of fiction analagous to the so-called "affordable housing crisis".
In the Affordable Socks Crisis, manufacturers collude to implode the output of new socks. This causes retailers to bid up prices for the minuscule output, leading a jump in retail prices from $5 to $50 per pair of socks.
Retailers begged, to no avail, to manufacturers for increased sock production. Newspapers railed against retailers for selling socks only to the rich, and affordable socks advocates demanded government intervention. After heated and protracted debate, Congress passed the Socks Availability Act, setting in motion government action on three fronts.
Government provided $45 subsidies for people who were too poor to buy $50 socks. Government extended tax credits to retailers for selling socks at affordable prices, And congress created the Federal Socks Authority to mnufacture cheap socks for the poor. The crisis was resolved, and affordable socks advocates, along with newspapers, declared victory.
According to the article, this is analogous to the affordable housing problem, substituting "socks" for "housing", "retailers" for "developers", and "clothing manufacturers" for "suburban communities".
In this example, the Socks Availability Act was misguided government policy because it assumed that the market was working efficiently and that $50 wwas the proper market clearing price for a pair of socks. Instead of considering WHY the price of socks had climbed from $5 to $50, Congress tried to resolve the problem by helping people afford $50 socks.
Similarly, government errs in housing policy when instead of asking WHY housing is unaffordable for many, government tries (and fails epically) to resolve the problem by subsidizing (some of) the poor so that they can afford overly-pricey housing, subsidizing developers so that they can afford the artificially inflated costs of building new affordable housing (e.g. Low Income Housing Tax Credits), and government building public housing for (some of) the poor.
The article proposes that artificial costs be reduced through reducing exclusionary zoning regulations, as exclusionary zoning imposes negative externalities on other communities and the residents thereof.
Should NIMBY communities be allowed to continued imposing negative externalities (costs) on neighboring communities, or should they be required to bear the costs themselves?
Is the "poor' the only only group you analysis takes into consderation? Is there more to the mandate than subsidized housing?
I thought the curx of the mandate was that municipalities would not be able to covenant lower income[ but able to afford a home] people from buying in their communities.
Municipal covennants, I thought, were the focus of this HUD mandate.
People should have the right to keep "the poor" out of their neighborhoods if they want. The only legal way is by price. I have seen the pricing also go the other way. Some apartment communities have "income restrictions" which prevent people with high incomes from renting apartments.
People should have the right to keep "the poor" out of their neighborhoods if they want. The only legal way is by price. I have seen the pricing also go the other way. Some apartment communities have "income restrictions" which prevent people with high incomes from renting apartments.
And the way to jack up the price to the desired exclusionary level is for government to restrict and regulate the supply. (Private covenants, HOA, etc can help, and I don't find them objectionable.)
Please explain how using government to price out the poor is NOT class warfare.
I stumbled upon an article on (yawn) "The Economics of Exclusionary Zoning and Affordable Housing".
This article included a short piece of fiction analagous to the so-called "affordable housing crisis".
Quote:
Originally Posted by freemkt
Off the top of my head, i recall their reasoning is that zoning out low-income housing prices out the poor, who thus move with their feet to other communities, thereby increasing municipal costs (e.g. schools, police, fire, etc) and rental demand (and, consequently, rents) elsewhere. The surrounding communities, in turn, have an incentive to respond by tightening their zoning and development policies, potentially pricing the poor out of an area.
All we have now is your recollections, and for all I know they could have waved a duck over low income housing rules (anywhere it crapped was a bad policy) to come up with their ideas.
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