Tuesday, June 21, 2022

#172 / Fixing Complicated Problems


Pictured above is George W. McCarthy, the President of the Lincoln Institute of Land Policy. McCarthy was previously director of Metropolitan Opportunity at the Ford Foundation. I have quoted McCarthy before, and my posting dated March 19, 2018, "What Seems Right May Not Always Be Right," is still timely and relevant. I invite you to read it. The main point is this (which is a quote from McCarthy):

Our collective failure to solve the affordable housing deficit may stem from wrongheaded analysis of the problem, and the conclusion that market-based solutions can be designed to solve the mismatch between the supply of affordable housing and demand for it.
In the April 2022, edition of Land Lines, the quarterly magazine of the Lincoln Institute, McCarthy discusses "Fixing Complicated Problems." He again confronts the problem of providing much-needed affordable housing, and he makes the following observations: 

  • Market fundamentalists argue that the financial incentives are so powerful that if we make it possible to build two, four, or even twelve units on a parcel that formerly permitted one, we cannot help but solve the housing affordability crisis through increased production. But there is a big difference between permitting the development of multiple units and multiple units being developed. And there is no guarantee that these units will be affordable.
  • Housing represents two very different commodities traded in the same market. Each unit can satisfy the demand for shelter for a family or the demand for yield from hungry investors. Often, but not always, a housing unit can satisfy both—when the owner occupies the unit. But more and more frequently, households find themselves competing for available shelter against investors drowning in liquidity. With the exception of a pathbreaking intervention by the Port of Cincinnati that I will discuss another time, the investors usually win.
  • Who wins when we allow multifamily construction on formerly single-family lots? Landowners who receive windfall increases in land values are among the big winners. This increase in property values puts nearby homeowners at risk, if it raises their tax bills. If zoning changes aren’t designed to be part of a broader strategy to tackle affordability, they could inadvertently usher in displacement.
  • A single zoning reform will not change the way the market works, and nothing will stop global capital from bidding housing in desirable neighborhoods away from families that need shelter unless other actions are taken. We need aggressive inclusionary housing requirements that obligate landowners to build affordable housing when redeveloping former single-family sites. We also need to provide and protect opportunities for historically excluded families to purchase affordable homes and build wealth. Rather than giving away additional development rights to landowners, development rights should be sold. Development rights are traded actively in many private and some public markets in the United States. Municipalities could raise billions of dollars by selling development rights, and the proceeds could be used for affirmative efforts to address the racial wealth gap by, for example, providing generous down payment assistance or property tax relief (emphasis added).
These excerpts from McCarthy's article are only part of what he has to say. His entire article is worth reading. In fact, this entire issue of Land Lines is worth reading
Without putting these specific words into McCarthy's mouth, I think it's fair to say that his analysis demonstrates that what the California Legislature is doing, with bills like SB 9, SB 10 and SB 35 - all "YIMBY" bills that raise land prices in the name of affordable housing - are actually heading us off in exactly the wrong direction!
So, let's pay attention to McCarthy and wise up! We won't solve the complicated affordable housing problems we confront by failing to heed the advice of H.L. Mencken. As Mencken so properly noted, for every difficult issue before us there is a solution that is "clear, simple, and wrong!"

Most of what the Legislature is doing about affordable housing (and most of what the Santa Cruz City Council is doing (Sandy Brown and Justin Cummings excepted), is exactly the thing that Mencken has warned us all not to do!

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