By Mat Wahlström
It is the mantra of pro-developer pundits who describe themselves as “YIMBY” or “Yes in my back yard”, that anyone who opposes their program of total land use deregulation as a precondition for creating affordable housing simply does not. understand “supply and demand” – or, as they say, “economics 101”.
If the problem is that people need affordable housing, we simply need to allow a ‘free market’, unconstrained by regulation, to provide the housing it wants in order to meet that demand. Then at the convergence of the lines on the resulting magic graph, we will have reached it.
But this is a fundamental misrepresentation of the housing market and development in general, and the provision of affordable housing in particular.
This presupposes that any unregulated market produces something that is “affordable” that does not pay for its production and earns enough profit to be considered worthwhile.
And after all the millions in taxpayer subsidies our elected officials keep throwing at developers to “incentivize” them to produce affordable housing with ever-diminishing returns, it should be clear that the market is not the solution.
Or at least not a market one can understand if they stop at Econ 101.
Because, as Ray Kroc of McDonald’s found out, he wasn’t in the hamburger business—he was in the real estate business: “The only reason we’re selling fifteen-cent hamburgers, this is because they are the biggest generator of revenue, from which our tenants can pay us our rent.
Let’s go back a bit.
The developers and their associated real estate investment trusts, management companies, private equity funds and financial underwriters are businesses; and like any business, their business is to produce capital. It only looks like they produce housing, because that’s what you see on the land around you and where you pay to live.
But as far as they are concerned, whether a physical parcel of land contains X number of actual houses or apartments per acre or whether it is allowed to be built on is literally irrelevant. For them, a plot is nothing but a chain of rights, acts, debts and rents, substantial or speculative.
And that’s what developers build, buy and sell: abstract financial instruments nominally tethered to the earth.
This is why if there is existing housing on a parcel that is naturally affordable or historic but does not offer the “highest and best utilization” i.e. return on investment , he’s bulldozed for something that makes him or lets him rot until he can.
This is why those who have kept a neglected neighborhood alive are moved once it becomes sufficiently “opportunity-rich” for “urban renewal”.
Or the rent for an apartment in an unimproved decades-old building is increased when a new high-rise moves in nearby or in the area it is in for more density. And why do the apartments in this new high-rise, if built under an affordable housing density bonus, include no more than the absolute minimum number of units needed for it to be “calculated”? .
He explains how in all of San Diego between 2010 and 2020, only 37 new units were built by the market for those earning between 80% and 150% of the area’s median income – and why these same market representatives responsible for solving this problem won’t. .
It even impacts those who own their homes – through the elimination of single-family zoning, short-term vacation rentals, ADUs, transit-oriented development and other programs aimed at extracting ever more capital at the expense of the community.
This is the real “housing” market: car parks for capital and not housing for people. And as George Carlin said, “It’s a big club, and you’re not in it.”
Back to the McDonald’s example: they provide a product for their franchisees to pay their rent, along with shared standards, corporate support, and integration into the community – such as it is. Sure, it’s paternalistic and problematic, but at least there’s a vested interest in the success of their restaurants – a “win-win” situation, if you will.
But housing provision is not like that. If McDonald’s threw their burgers and everything on the sidewalk, they would be no different from any other owner. Developers don’t care how “our tenants can pay us our rent”, which is why we see the carnage of precariousness, displacement and homelessness growing all around us.
In other words, these are the YIMBYs who either don’t understand economics or intentionally misrepresent the real relationships that a market system such as “housing” involves in order to increase the returns on developers’ investments in their organizations.
As in any industry, each deregulation of the housing market has led to a worsening of the housing crisis.
Two weeks ago today, Mayor Todd wrote an op-ed for Cal Matters in favor of Assembly Bill 2097, which would mandate the same statewide elimination of parking requirements for new developments that the City of San Diego implemented in 2019.
The horse trade on providing affordable housing instead of parking was a clumsy but reliable way to ensure that new multi-family projects included affordable units. But after 2019, there was no longer any reason to include either. And worse, it did so without any obligation to pass the cost savings – which it estimated at $30,000 to $90,000 per booth – straight into the pockets of the developers.
The results have been a decrease in the production of affordable housing compared to high-end housing and an increase in misery for the 86% of San Diego residents who do not or cannot walk, bike or use the public transport to get around.
And the mayor had the nerve to justify this by repeating YIMBY’s divisive and false argument that you have to choose between people or parking, ignoring that it’s the people who drive the cars, so it’s the people who need to park.
We need to elect leaders who respond to the demands of voters, not their donors. This is Political Economy 101.