Anik Joshi: Addressing the housing crisis

Wednesday, May 8, 2019 - 5:58pm

Today, a number of places suffer from a lack of housing being built. My home, the Bay Area, and my adopted home, Ann Arbor, have seen increases in the demand for affordable housing without a corresponding increase in the supply. What has happened as a result is unsustainable. MLive reports that from 2015 to July 2018, “Ann Arbor has added 50 new affordable housing units. The goal was to have 420 new units by the end of the year.” The lack of housing in Ann Arbor also has another effect, which is that Ypsilanti ends up being the de facto housing bank. This will not work in the long-term, as Ypsilanti will eventually run out of housing as well, and then what? Policy that could be utilized to address this issue is building more housing while radically “up-zoning” much of Washtenaw County.

Most students have enrolled in some kind of introductory economics course and/or understand that the downward sloping demand line will meet the upward sloping supply line at a certain point, what we in the biz call “equilibrium.” This specific case of disequilibrium represents an excess demand, and the easiest way to rectify this would be to simply build more housing — especially affordable housing. However, there is a bit of a catch-22.

While this would be an easy way to address the problem in theory, in practice it gets much harder. Building housing does not tend to be terrifically popular with those who already own property in the area, because they assume that more housing would drop their property values. A fundamental issue is that everyone feels they must have a backyard and picket fence, and this only happens via exclusionary zoning that favors single-family homes.

When cities had less people, that idea worked because fewer people needed housing; today, that is not the case. Ann Arbor’s choice to downzone neighborhoods while suffering from a lack of affordable housing represents a rare policy that both looks bad now and will age poorly — truly a parable for our times. In fact, the exact opposite of this should and needs to be done. People cannot all live in single-family homes. However, there is nothing wrong with much more liberalized regulations on housing. Japan did it and ended up with incredibly affordable cities. As a result, Tokyo is a great place to live.

Japan’s policies also offer a bit of a cautionary tale about how much local government can really do. According to Market Urbanism, there are three main reasons that Japan was able to create the housing market they have today. First, housing was less of an investment in Japan. Second, public services are not administered at the local level in Japan. And third, the review process to build housing in the U.S. is different than it is in Japan, as deference is given to local special interests. All of these explanations point in one direction, and it is not a positive one for fans of incredibly localized government. It demonstrates that cities will not be able to act alone to address this crisis and there needs to be federal policies put into place to ease the pressure of housing. In the U.S., a house is the biggest asset many people own. From this point of view, it makes sense they would fight attempts to lower that value, but that does not mean it is sound policy. In addition to this, where students live determines what school they can go to from kindergarten through 12th grade, and this is usually funded by property taxes. By building more housing, it is likely that there would be more students, something that should generate more support than it has.

This illustrates that there is a limit to local control. If there is continued demonstration of an inability to solve this problem by slashing more zoning regulations or using tax credits, then there is no choice but for higher levels of government to step in and take a more active role. This should not be a first choice, but at a certain point if the local government is unable to address the problem, something must be done.

Anik Joshi can be reached at anikj@umich.edu.