It occurs to me that renters e.g. in places like Manhattan and San Francisco can be just as NIMBY as homeowners in the suburbs. Both groups resist change in and of itself, while one group has an additional reason to oppose development (real estate prices), but it’s not clear to me that the absence of the latter consideration makes renters any more favorable to new development. Or am I missing something?
This is an interesting question. To be honest I was not aware that renters in high-cost cities exhibit the same degree of aversion to new construction as home/landowners. I can see an argument against new development changing the character of the neighborhood, particularly if they've lived there a very long time. I guess you would call this an argument from gentrification, which is largely just new construction driving up rents and displacing long term residents.
Here's some speculation on why this might be the case. The gentrification argument may still be driven by an underlying system of zero-sum land value, with the twist that those in the neighborhood opposing the development are mistaken about the effect of new housing. I think this is pretty common because the cost-reducing effects of new housing take several years to kick in, while in the short to medium term up-zoning or denser construction can raise land values (and thus rents) in an area. It can take 3-5 years for a new housing project to go all the way from conception to lease up and for its effect on supply to be fully felt. By that time the increased rents may have already driven many residents out since apartment leases typically renew annually.
In their minds: new housing -> more demand to live there -> higher neighborhood rents where really it's more demand to live there -> higher neighborhood rents -> new housing -> lower or not increasing rents.
It's still caused by a fundamental misalignment between landowners and renters (landowners want higher land values which is fundamentally at odds with lower rents), with the caveat that the renters misunderstand the mechanism at work. Or to put it more fairly, the mechanism to bring housing costs down acts on time scales too long for it to matter for neighborhood residents - by the time new supply has stabilized rents many of them have already been priced out. Again, all speculation, but I can see this being at least part of the equation.
I like this take and set up. Usually the way I think about this problem is that it is a representation problem. Future generations are not a part of the decision making process. Or there is no way to implement a Rawlsian "veil of ignorance" in a zoning board, city council, etc. But I like your angle that it's an incentive problem and looking forward to part 2!
Thank you so much Nicholas! I agree with your point too. It's widely acknowledged that the political system encourages fairly short term thinking with the structure of its term lengths and election cycle. What I argue here is that the structure of land ownership leads to similarly narrow thinking by nearly all property/land owners.
My hypothesis is that changing the policy without changing the underlying incentives will just mean a new means gets created to accomplish the same thing (preserving housing scarcity and therefore high land values)
It occurs to me that renters e.g. in places like Manhattan and San Francisco can be just as NIMBY as homeowners in the suburbs. Both groups resist change in and of itself, while one group has an additional reason to oppose development (real estate prices), but it’s not clear to me that the absence of the latter consideration makes renters any more favorable to new development. Or am I missing something?
This is an interesting question. To be honest I was not aware that renters in high-cost cities exhibit the same degree of aversion to new construction as home/landowners. I can see an argument against new development changing the character of the neighborhood, particularly if they've lived there a very long time. I guess you would call this an argument from gentrification, which is largely just new construction driving up rents and displacing long term residents.
Here's some speculation on why this might be the case. The gentrification argument may still be driven by an underlying system of zero-sum land value, with the twist that those in the neighborhood opposing the development are mistaken about the effect of new housing. I think this is pretty common because the cost-reducing effects of new housing take several years to kick in, while in the short to medium term up-zoning or denser construction can raise land values (and thus rents) in an area. It can take 3-5 years for a new housing project to go all the way from conception to lease up and for its effect on supply to be fully felt. By that time the increased rents may have already driven many residents out since apartment leases typically renew annually.
In their minds: new housing -> more demand to live there -> higher neighborhood rents where really it's more demand to live there -> higher neighborhood rents -> new housing -> lower or not increasing rents.
It's still caused by a fundamental misalignment between landowners and renters (landowners want higher land values which is fundamentally at odds with lower rents), with the caveat that the renters misunderstand the mechanism at work. Or to put it more fairly, the mechanism to bring housing costs down acts on time scales too long for it to matter for neighborhood residents - by the time new supply has stabilized rents many of them have already been priced out. Again, all speculation, but I can see this being at least part of the equation.
I like this take and set up. Usually the way I think about this problem is that it is a representation problem. Future generations are not a part of the decision making process. Or there is no way to implement a Rawlsian "veil of ignorance" in a zoning board, city council, etc. But I like your angle that it's an incentive problem and looking forward to part 2!
Thank you so much Nicholas! I agree with your point too. It's widely acknowledged that the political system encourages fairly short term thinking with the structure of its term lengths and election cycle. What I argue here is that the structure of land ownership leads to similarly narrow thinking by nearly all property/land owners.
My hypothesis is that changing the policy without changing the underlying incentives will just mean a new means gets created to accomplish the same thing (preserving housing scarcity and therefore high land values)