How does a growing, prospering city stay affordable for all kinds of people? At the most basic level, when there aren’t enough homes, prices will keep rising. And when there are plenty of homes, it helps prices stay down.
It’s like a huge game of musical chairs. If there aren’t enough chairs when the music stops, someone is left out. When there aren’t enough homes for people who live and work in a city, everybody has to compete for what’s available, and rents go up until people get priced out. In the housing market, instead of being fast, you just need to be rich to stay in the game.
To fix it, we need more homes in all shapes and sizes. That means more cottages, apartments, duplexes, triplexes, condos, and mother-in-law units. More homes allows more people to stay and thrive in their communities. It means more people can afford to live near jobs, great schools, and transit.
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Encouraging a variety of homes that fit a variety of people’s needs isn’t the only solution to keep rent and home prices down, but it’s an essential foundation for affordability. It’s the necessary building block on which all kinds of other community protections, anti-displacement measures, affordable housing investments, and neighborhood improvements are built.
Our new explainer video gives a simple illustration to think about how building more homes helps keep prices down. You can also view an infographic version of the video here. Enjoy! And please spread the word and share the video on Facebook and Twitter.
Want to get involved? Find your local YIMBY (yes in my backyard) group here.
You can also check out our housing and urbanism research here. I’ve selected a few of our top articles below:
Many thanks to our friend and prolific blog commenter Matt Gangemi for coming up with the musical chairs analogy way back 2012!
Thanks also to Sonja Trauss whose quick and dirty sketch linked below heavily influenced the video.
How about ‘we have too many people’? Wouldn’t dialing back overbreeding help with housing and other quality of life issues? Why does that never seem to be addressed, just cramming more people into less space, as if that were somehow virtuous.
That is already happening. We are actually having fewer babies and from what I have read it’s not just our country. http://www.latimes.com/science/sciencenow/la-sci-sn-us-birth-rate-20170630-htmlstory.html
there is plenty of space for people
RIP is a front for developers coming into our neighborhoods and cities to tear modest homes down and rebuilding large, much higher priced homes. It’s all for profit. They hide behind slogans that say they want to increase availability of homes to those that are needing them, but it’s a fallacy.
exactly . take a drive in the city look at the building empty that could be remodified less cost more homes . it is all about the dollar
The bottom line is greed. There is no rational reason for the higher rents other than the owners can charge what they want because there is not enough inventory. Even though Seattle has been building like crazy the rents keep going up. This is what happens when we commodify a basic right for a roof over ours heads. Perhaps we need to rethink this.
Matt the Engineer
We’ve been adding about twice the number of jobs as homes.
We can add as many units as we have newcomers, and as long as they have the ability to pay more, prices will keep rising.
Supply is only one side of the equation, and not all demand is equal.
Matt the Engineer
In a market of limited supply, the lowest rent is set by the marginal household (the family that can just outbid the household that got displaced). Add the same number of new units as new households, and that marginal family stays the same. Add one fewer unit and that family is outbid and displaced, and the cheapest rent goes up. Add one more unit, and that family and the one they outbid can stay, and the lowest rent goes down.
This musical chairs only applies to relatively closed markets. Here in Boise you should amend to have big new house purchased by a new arrival with a fat wallet from [take your pick of Seattle, Portland, Bay Area, Los Angeles, Salt Lake, etc] and the same families standing by watching.
And in the final scene, you need to have not just Boise, but all the people playing musical chairs, with the sprawl refugees driving the costs. Game won’t be over for Boise until we supply cheaper housing for the rest of the mobile country. And then of course, nobody will want to live here.
On the other hand, this strategy might work in the expensive markets like the Bay Area. Have at it.
It’s true that newcomers can arrive from outside to take new homes. However, even so, building new homes is still better than not building them. People who want to move to Boise won’t change their minds and go to some other city just because there are no new homes. They’ll bid up prices on the limited supply existing homes, and people without as much money will be forced out.
That strikes me as rather too simple — if all one has is a hammer, everything looks like a nail (or more to the point, if all one is a developer, every farm looks like a ‘land pipeline’). A recent anecdote is that out of a new development of 54 ‘luxury’ houses in the foothills, only 4 were bought by locals. Now, in order to understand the context, our foothills are beloved by almost all not because they are fodder for McMansions, but because they provide ample public open space for wildlife and trails. But the developer dollar has serious political clout here in both political parties, so they typically get their way around zoning or other speed bumps. Nonetheless, rent and housing continues to skyrocket.
All this building to solve other state’s problems comes with serious externalized costs — not just the loss of our open spaces, historic and ecological context, but terrible inversions from traffic in the winter (indeed we often have some of the worst air in the nation, already), and in general a declining quality of life and the loss of the ability of our neighborhoods to have some control their own destiny. We don’t want to be Houston, but we are sprawling across our ‘Treasure Valley’ of farmlands at an explosive pace. By degrading our own neighborhoods we may be providing some relief for other cities housing problems, but I think the cost too high.
Even worse, the demand dynamics are becoming highly nonlinear — a high percentage of those moving here are now employed either in the building or real estate industry, which of course generates positive feedback, which of course leads to instability and poof — boom goes to bust. And then all those people who want to move to Boise will change their minds.
There are some positive things building could do: I would like to see us follow Portland’s lead of allowing tiny houses in urban and suburban areas, and regulate AirBnB and other investments that take houses off the rental market. And I would like to see infill. These types of projects would more directly solve the local housing crisis. Instead we seem to want to pay costs for a big new sports arena downtown when we already have one nearby…
This video should be renamed “Failures of the Housing Market.” The problem is simply that there aren’t enough homes for people who aren’t interested in being in the housing market, but rather be in a home. We can’t build our way out of the speculative market.
How do you propose we deal with the reality that more people want to live in places like Seattle than there are homes available?
ask for wage increase
This is a great little piece and well produced. But it over simplifies the housing market and becomes another propaganda tool. The fact of the matter demand for housing generates supply, but the availability of labor, land and liquidity creates the supply. In most markets labor isn’t a huge factor, but can slow the creation of new housing. Land can be difficult in bigger cities because moving from lower density housing to higher density requires home owners willing to sell the house and land they already occupy. The most important factor (IMHO) is liquidity.
In the age of Big Data, banks and lenders know what’s being built, where and for how much. They calculate the risk of lending to builders creating more supply and work hard to avoid creating over supply. In Austin, Texas over the past 15 years our population has grown by 20% and housing stock by 19.8%. To a bank that’s a healthy market. A market where demand out weight supply, just a little, so that the value of your investment has the best chance of going up rather then down.
Unless lenders begin ignoring the data (which is everywhere these days) we’re unlikely to see supply of housing exceed demand, and thus a lower of housing costs. Could government subsidy accomplish this? Maybe. But we may want to ask is over supply good for us, the economy or even the environment? 15-years ago the green building movement was printing bumper stickers pushing for 100% occupancy. Waste not, Want not was the theme.
I’m certain that this article and so many others like it don’t want to create depreciation in housing values or want over supply to hurt the economics of housing in general. But, I’d ask that you all take a moment to stop shouting about the Supply/Demand curve and start thinking about the drivers of supply that limit affordability and how we build our cities.
Agreed that the market won’t produce housing at a loss when demands drops too low. But isn’t it still better that to build as many homes as the market will support building?
We’ve written a ton about limits on supply. In addition to the links in at the bottom of this article, see:
Why don’t you just say that ‘everyone’ wants to live here?
Only it doesn’t quite work that way. In Austin, TX we are getting more and more dense, building up… our newest will 120 stories residential. It’s getting MORE expensive to live in these dense populace areas. Rent on a tiny condo downtown is more than my mortgage, insurance and taxes on our 2500sqft house just north of the city. It’s not people with lower incomes at all.
The biggest problem for the average family is cost to buy all these big homes that are being built. We need to go back to the simple smaller affordable homes people lived in 40 years ago. Everything is ” bigger and better, granite counter tops, 3 car garages” lets go back to living a more simple stress free life and make home ownership possible by building homes people can afford.
I am a person that sacrificed, was frugal and skipped 15 years of vacations to buy a couple of small rental homes to help myself be above average as I retire. But.. I rent at a decent price and treat my renters with respect and thus keep great renters.