It's fairly well established by now that the most significant drivers of housing unaffordability is the preponderance of zoning regulations that restrict the supply of new housing construction.
When recently the mechanized industries, particularly in metal, entered the housing field with the production of “prefabricated houses”, they were met by the resistance of property holders, especially of the banks, who hold mortgages on about 58 percent of all 1933 value of all urban real estate, and who fear that an influx of cheap modern dwellings would subtract substantially from the market value of existing structures. These banks and loan companies have been unwilling to finance prefabricated houses except in rare exceptions and then on a limited basis. Lumber companies and manufacturers of other materials which are being displaced in the production of prefabricated houses, have sought to prevent their construction through building-code restrictions and by organizing boycotts by dealers and building crafts. Moral and ethical rationalizations have been used against prefabricated houses....
Planned public housing projects such as slum clearance which afford the most efficient methods of utilizing advanced technologies in the building industry, crash against the wall of vested private-property interest. They meet the combined opposition of the owners of obsolete buildings, that nonetheless are still profitable, of landowners who demand prohibitive prices, of holders of mortgages who fear a depreciation of housing values through the increase in available homes. Achievements in building technology lie sterile in the face of the opposition of these interests.
Bernhard J. Stern, "Resistances to the Adoption of Technological Innovations", 1937.
This little-known work detail instances and dynamics in which opposition to innovation occurs. As the author notes: "The most potent of the cultural factors are clearly economic: Efforts to maintain economic advantage and hegemony over competing classes, and over competitors in the same industry and rivals in the same market in allied fields."[1]
In the case of housing, it is both a financialised asset, of value to present property owners, landlords, banks and financial institutions; and a mode of social and political control, directed against class, race, and ethnic interests: the working class, poor, blacks, immigrants, non-WASPs, etc. The mechanism vary but may include zoning, redlining, availability of mortgages or insurance, restrictive covenants, building codes, leasing limitations, and more.[2] Even non-housing aspects such as transit service, walkability, and bikability impact on this.
Housing densities in the US are exceptionally low by European and global standards, even (or especially) within major cities. Unmet need could be met not by creating tower forests but simply through low-rise multi-family dwellings. San Francisco is overwhelmingly three floors or less, with large tracts single or two-storey construction, ground floor often garage. Five-floor structures could readily double available housing. Similar dynamics exist throughout the country.
The result is resisted by entrenched economic interests capable of exerting influence, which is to say, suppliers with a capability to restrict supply of a price-inelastic good, and thus, disrupting an otherwise "free market". The perversion is that it's the very mechanisms of markets, property, profit, and accumulation, whichend up distorting them. "Wealth, as Mr Hobbes says, is power", wrote Adam Smith.
"Markets" in this case eat themselves.
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Notes:
1. I'd learned of this through the graduate student who'd done literary research on the article, and went on to speak and write about it occasionally, including premising some of his own fictional works off the same principle of resistances to innovation: Isaac Asimov.
2. Regulation and governance mechanisms are not inherently bad. But they're extraordinarily prone to capture.
Being able to pass local regulations is a perversion of the term "markets". By that logic, the entire world is a free market, even those countries where national governments have been "captured" to suffocate markets like Cuba and North Korea.
Either that, or we need to then come up with a term to describe "property rights free of any regulation". One of my links even describes it as "laissez faire" land use policy, which is what we mean when we say "markets".
The solution to the problem is to actually strengthen property rights: by allowing property owners to build whatever they please on their land without the permission of their local community. We already do that for life and speech — you can't vote to kill somebody, nor can you vote to prevent someone from publishing something. Why then can you vote to prevent someone from building an apartment building?
Smith's opus is often read as a critique of Communism. That's anachronistic: Das Capital was a critique of Smith, or at least what emerged in his name.
Smith was a critique not only of mercantilism, as is commonly acknowledged, but what we would now call capture and monopoly.
In any case — it's a huge stretch to suggest that allowing other property owners to dictate what you can and can't build on your own property constitutes "property rights".
No rights are absolute, and most uss of land carry some externality. I'm not willing to entertain that no consideration be given these.
That's also spectacularly missing the main point that price-inelastic goods and services (those affording economic rents) increase in price where supply can be constrained by some means, setting up an intrinsic and wholly market-consistent dynamic of increasing prices and decreasing supply relative to demand.
The same dynamic is present for most of the price-inflated goods on Collison's list, and goes a long way to explaining the behaviour he ponders.
> No rights are absolute, and most uss of land carry some externality. I'm not willing to entertain that no consideration be given these.
This is a bit of a deflection, since it’s entirely reasonable to enforce some property regulations based around reducing externalities (eg. you can’t construct a building that will collapse onto the sidewalk and injure/kill a passerby), while preserving general property rights. The US’s speech rights are pretty close to absolute, with some notable exceptions (imminent lawless action). The argument is to get our property rights to look the same.
> That’s also spectacularly missing the main point that price-inelastic goods and services (those affording economic rents) increase in price where supply can be constrained by some means
Nobody denies this, and it is entirely orthogonal to the question at hand: “does zoning regulation constitute a market-based regime?”. The answer to that question is, resoundingly “No”. If you think that this is “the market” at work, then we need to come up with a new term to describe “system that allows free enterprise, property, and trade free from regulation”. Whatever term we agree upon: that’s what we’re pushing for.
