Everyone is for “Affordable Housing” so long as the value of their home never goes down

Chuck Marohn, president and founder of Strong Towns, discusses the housing affordability crisis that affects Portland and similar cities with Emily Hamilton of MarketUrbanism.com blog. Lightly edited for clarity.

Strong Towns:  A few weeks back I read an article from Emily Hamilton. She writes at MarketUrbanism.com and I’ve read her stuff before many of you probably have as well. This one was picked up by the Foundation for Economic Education. They’re holding a conference in June 2017. The article, The Hidden War on Affordable Housing was very provocative and had a lot of interesting thoughts and insights behind it. I just liked the thinking and I thought I would love to have a conversation with Emily and so we were able to arrange that.

Let’s talk a little bit about that piece in MarketUrbanism.com. It got picked up because it’s very good. Can you talk about the impetus behind it? What prompted you to write about this? What was the issue you were trying to bring to the fore?

Emily Hamilton:  Absolutely. Watching the movie Brooklyn is what really brought this to top of mind for me, seeing the experience in that movie of recent immigrants from Ireland living in New York City and the struggles that they faced but also the opportunities for housing that they had, which was really portrayed well, I thought. The story is about a group of people who live mostly in boarding houses, and it’s just an opportunity for housing that is no longer legal in most American cities today. But it was the type of housing that was crucial in the lives of many immigrants when they first arrived in this country.

Strong Towns:  I think there’s a sense today, looking back that this was somehow evil, somehow this was exploitative, that these buildings and structures were just unethical today, and that’s why we don’t do them. Is that why we don’t do them? And how would you react to that notion that this is essentially [an] immoral kind of housing?

Hamilton:  I think it’s a mix of reasons why we no longer have that type of housing. It’s certainly fueled, on the one hand, by progressive desire to ensure a minimum living standard for all Americans. But I think there’s also a lot of self-interest, in terms of people within neighborhoods who want to make the minimum level of housing unaffordable to people who would previously have lived in this type of housing when it was legal. So it fits with peoples’ generous desires to make sure that everyone has a certain standard of housing. But at the same time it meets their self-interest to protect the standard of living that they want to see in their neighborhoods.

Strong Towns: My good friend Joe Minicozzi is with Urban 3. I know you’re familiar with Joe’s work. In this talk he gives, he talks about a building that he originally worked on with one of the developers in Asheville, and they wanted to build micro apartments; they wanted to build 250 400 ft2 apartments in this building. They went to the bank and the pushback they got was “Well, we need a market study.” This is not stuff that’s normally done. The city was concerned too are these are these seem really small. They pushed through the process and they got them built. He said they’re the highest least spaces that they ever constructed. There’s huge demand for them. They never go unfilled – when someone moves out, someone moves right in. When we look at a place like New York or San Francisco or one of these really, really hot housing markets, why aren’t we building more of these kind of things? It seems like there’s a massive demand for them.

Hamilton: Definitely, particularly because there aren’t a lot of housing options on the market right now for young single people who are starting out in their careers and may not be able to afford a larger housing unit. These seem like a clear match between demand and supply. That’s often very difficult to build today.

I would point out that one difference between micro apartments today and boarding houses or single room occupancy hotels from the past is that, in the past, this very affordable, minimal-standards housing was usually built by splitting up existing homes into much smaller units. And that’s the way that you can get a really affordable housing. Whereas, when you build brand new construction micro apartments, they still might be out of reach for a lot of people. Obviously, the construction of new micro apartments is the first step to what could become more affordable housing after it’s been around for many years or decades. But it’s not quite the same process as what landowners were able to provide in the past.

Strong Towns: I remember, when I was back in college, I lived in a massive house with 13 other guys and we also had our own rooms and what have you. I went around this house, and I looked at their fireplaces all over and really fancy bannisters. It was a really high quality place. At some point, the highest and best use became not as a one wealthy person living unit but as a bunch of different people, essentially renting their own space and sharing some common facilities. Why doesn’t that happen today? What’s the thing that prevents those kind of things? And maybe not necessarily [renting] to students but to families? Why is that not something we see, particularly in places where you have really hot housing markets?

Hamilton: Yeah, well, it does happen to some degree as you mentioned with students. And here in D.C., there are certainly still lots of group houses that are rented out by groups of roommates, typically young professionals. But land use regulations have made it, generally, illegal to create these slightly nontraditional affordable housing arrangements for families and single people. So when groups of roommates get together to be able to afford housing they’re living in perhaps not ideal situations where you have a lot of people sharing one kitchen and a couple of bathrooms. Whereas if developers were allowed to build for these situations more easily they could have better arrangements to meet their needs, in California in particular. Parking requirements have been a huge obstacle to this more-affordable housing because a certain amount of parking is required for each bedroom rather than for her project as a whole.

Strong Towns: How are we trying to solve this problem? You talk a little bit in your article about the disaster of public housing. Let’s talk a little bit about how the government has tried to solve these [issues] at the federal level, at the local level, and then maybe use that as a springboard into talking about ways we could, in 2017, do this maybe differently.

Hamilton: At the federal level, most of the efforts have been either in the form of building public housing, through urban renewal projects or, more recently, Section 8 housing, which provides vouchers to low income people that are often used in a specified Section 8 developments but can also be used in other types of housing.

And, at the local level, inclusionary zoning is currently the most, perhaps fastest-growing type of housing affordability. And inclusionary zoning requires developers of new, market-based projects to provide a certain percentage of units that will be set aside for low-income renters or homebuyers. I should say not necessarily low income but renters or homebuyers who meet certain income standard.

Strong Towns: The thing that I always struggle with is it seems like in our cities we provide one of two options for people who have lower incomes. One is either substandard and declining housing, housing that other people don’t want, that is of low value, that is going essentially in the wrong direction.

And we sometimes label these [owners as] slumlords and what have you, but it’s stuff that is . . . there’s no market incentive, in a sense, to improve it because you can cash-flow the low rents and you just watch it decline.

The other one is these crazy subsidized ones where I’m very suspect[ious] of the underlying forces that are being marshaled to make those kind of things happen. Do those seem like the two options we pursue, and aren’t they a little extreme?

Hamilton:  Yeah, I certainly agree. On one hand, with the public housing or Section 8 housing, that tends to be very low quality. There’s well-documented problems with the issues of concentrating low income people in substandard housing and creating incentives for them to stay there rather than pursuing opportunities for better housing for their families and what might be a different location that doesn’t have access to the government subsidies.

And then, on the inclusionary zoning side, it just seems really impractical to provide the subsidized housing within new construction buildings where dollars are going to [provide] the least housing for people. And inclusionary zoning has provided just a drop in the bucket of the units that would be necessary to provide housing for all the people who would qualify for it. And one problem with both public housing and inclusionary zoning is that the units that are available typically have long waiting lists.

So if we think about immigrants coming to the US in the 19th or early 20th centuries, they could immediately find housing that they could afford rather than waiting months or years for publicly planned housing that would become available to them.

Strong Towns: I’m often baffled by this because I see those same numbers that you’re describing, where essentially we have this massive backlog of people who need housing and in need of certain price points and then I turn to I look at the market. And I say, “Why is this so crazy?” You live in Washington D.C.?

Hamilton: Arlington, actually.

Strong Towns: We’re bombarded all the time out here in Minnesota with the statistics from places like D.C. and New York, and I get the argument that “OK, if we don’t have to pay for a car and we don’t have to pay for certain other things, we can put more into housing.” But, still, the housing prices are crazy. I’ve seen statistics where people are paying 70-80 percent of their income for housing, not poor people by any stretch either. People of certain means that would have, in other parts of the country, options. The whole housing market to me seems a little bit crazy. Do you share that bewilderment? And I ask that because, to me, trying to solve one segment of it while the rest of it is crazy seems a little futile in itself.

Hamilton: Certainly. I agree, 100 percent. The trend towards building a few buildings worth of micro apartments in some of these expensive cities is great and exciting, but it’s definitely not going to go all the way. And I think that really reforming the institutions that are in place to slow down the development process — where each individual neighborhood gets to weigh in on whether or not a new project will be built near their homes is the root of the problem in D.C. and some of these other cities that just have crazy housing prices, where middle income people are struggling to find someplace that fits within their budget.

Strong Towns: I had someone earlier this week or last week chewed me out on social media; they were cranky with me because we had posted an article about migration and how people are moving, in some cases, from very expensive places to places that are more affordable. To me, I didn’t even think this was controversial. I didn’t realize that I had struck a nerve with people who felt “if you were born here you have like a right to stay here at a submarket price.”

And I had this ongoing conversation, and my Twitter feed just got flooded with people angry about it. And I thought, well, OK, I’ll just listen for a while. Is there anything objectionable to having – let’s say, in this case it was Cambridge, Massachusetts, which is bizarrely affluent and unaffordable – people depart Cambridge and say “I’m frustrated with it, I can’t afford to live here” and end up in a place like Cincinnati, which, in my opinion, is a really great city. It’s a city that is growing and has got a lot of things happening, and a lot of opportunity to get housing at affordable prices and see it appreciate, and see yourself build some wealth and equity even as a starter home at a low end. Is this somehow wrong in 2017, or am I just interacting with someone in a bubble?

Hamilton: Well, I definitely don’t think it’s wrong for people to move away from expensive housing markets to places where their dollars can go further, and definitely it might make sense for plenty of households and individuals to make that choice.

But I think the problem comes when some of the best economic opportunities and highest income growth and most innovative economies are also located in these really expensive cities so that people who don’t already have economic means might not be able to pursue the best job opportunities that are available to them if they can’t afford rent in Cambridge or San Francisco or New York City. So I think that’s the real macroeconomic consequence of gating off these both very expensive and very productive areas to people of a broader income range.

Strong Towns: Wouldn’t that be true though of the tech worker or the professional but not necessarily like the taxi driver or the barista or the person working a truly lower income type of job? Their opportunities aren’t necessarily going to be increased in that Richard Florida kind of way, by being in the big epicenter of technology and change that we’ve seen in some of the coastal cities. Am I saying something crazy? Or is that not true?

Hamilton:  No, I agree that the disparities in income opportunities are greater for workers of higher skills. So it might make sense for a tech worker to pay those crazy San Francisco rents because they can make substantially more money there compared to a lower-productivity city.

But it’s also true that baristas and taxi drivers make more in San Francisco than they would in Cincinnati or Houston or wherever. But it often doesn’t make sense for them to pursue that additional income or job growth potential because their housing cost is greater than the income differential for those lower skilled workers.

Strong Towns: Right. Let me put it this way … There’s a certain part of my question of housing policy, and I will freely admit that I don’t consider myself a policy expert. In graduate school when I had to take the housing classes, they just baffled me, they made no sense to me at all, and it was largely because of this general skepticism I have.

It seems to me like if you’re a very wealthy person in New York City or San Francisco or Boston, you don’t want your neighborhood to change: I don’t want that single family home to be converted into a house for three families at lower price points. I don’t want the micro apartment building up the street because I just don’t want that, that’s not the character my neighborhood is in. The downside of that policy – that essentially you’re not going to have that strata of employee in your neighborhood – you’re going to have to pay extreme amounts for daily services, and a lot of people who don’t find opportunity in your community are going to leave.

The feedback you’re going to get from a market standpoint is your place is going to cease to function, right? Am I delusional, that thinking, or is there something missing?

Hamilton: No, I don’t think you’re missing anything, and that’s why we read stories of teachers or our firefighters going through just insane commutes to be able to work where they’re employed.

And inclusionary zoning seeks to have people of all different income levels living within one specific building. And we talked about the drawbacks to that policy. But, in a free market, I think it’s very likely that we would see buildings that are accessible to people of many different incomes within the same general area. So they might not live exactly at the same address, but it would be much more feasible for service workers or lower income professionals to live near their job, and it would make these neighborhoods function much better, as you say.

Strong Towns:  Now I’m not questioning at all the people who work in affordable housing, which is that battle I got in. It was housing advocates who said “You should come out with me and actually work with people who are struggling.” So I get that there are really good people out there trying to do good work. It seems to me though, a lot of the support or the default – for some of these inclusionary housing and other housing vouchers and what have you is – in part and parcel – the affluent saying “I don’t want my neighborhood to change. And so I’m willing to, essentially, pay to accommodate people in someone else’s neighborhood as opposed to having the painful feedback of having my neighborhood not work.” Am I crazy on that as well” Is that something where am I taking that a step too far?

Hamilton:  No, I don’t think so. And I think that the real problem here comes when people who are higher income people don’t want their neighborhood to change. They’re using the political process to keep their neighborhood as it is rather than bearing the cost themselves of keeping a neighborhood as it is without allowing for new growth. And when we see neighborhoods that just aren’t allowing new housing, the filtering process that leads new housing to become affordable for lower income people over years and decades is prevented from taking place. So it becomes an enclave, where only people of a certain income can afford a place to live.

Strong Towns:  I’m from central Minnesota. We have tons of affordable housing here and lots of job opportunities. We have people trying to hire all the time here and they’re unable to fill up those jobs. Now there’s a lot of people that are unemployed, and there’s a little bit of a skills mismatch.

I have the good fortune of traveling all over the country. I was in Rockford, Illinois, last year. I was in Peoria, Illinois, last year. Both places that have seen layoffs and struggles but also have a lot of job opportunities and a ton of affordable housing. I mentioned Cincinnati earlier. I think “Here’s another place … What if our policy on housing switched from being — one of looking strictly at housing, where in a sense, we’re trying to subsidize and counterbalance what I think are crazy out-of-touch prices – and instead we focused on giving individuals more power and essentially more ability to, if they want to, stay and make it work fine. But if they want to move somewhere else – migrate, which I think is a great American tradition of moving on to better opportunities – what would be the downsides of a of a shift in that direction?

Hamilton: I think that that’s the policy that makes the most sense for ensuring that people have access to not just housing but the range of consumer goods that they need is to subsidize individuals with money that gives them the potential to make their own choices about how best to use it rather than subsidizing housing directly in only locations that are determined by policymakers.

Strong Towns: I feel like the downside would be that some of these wealthy, affluent neighborhoods would actually cease to function well. And, OK, then they would have to make a choice: Do we pay really high, high wages, to keep, essentially, people out that we don’t want, or do we have to start being more accommodating?

I struggle with that side effect of our housing policy. It feels like we are saving . . . .  I mean, I can just look at the neighborhoods here. It feels like we are saving people who don’t want their neighborhood to change from any like painful feedback, [namely] that the neighborhood actually doesn’t work unless it does change.

Hamilton:  Yeah, I think that’s right. And there may come a point at which these neighborhoods realize “Oh, we need to allow more housing construction or we’re not going to have any teachers for our kids or anyone to work in the restaurants that we want to go to.” But, unfortunately for income-mobility consequences, it seems to be that workers are willing to endure very, very long commutes in order to get to jobs that pay a little bit more than what they could make elsewhere. So these higher income people who are preventing new housing construction and their neighborhoods and cities are really causing bad consequences for the people who work in those neighborhoods.

Strong Towns:  Right. I want to ask you a question that might seem unrelated and out of the blue. I want to ask you a question about a basic universal income, and I’m actually intrigued by the idea and think that it might be a way to change some of these crazy distortions that I see in our system. One of the things that I’ve seen put forth is that you would have a different universal income if you lived in, say, San Francisco or Washington D.C. or New York than you would if you lived in say Cincinnati, Ohio, or my little hometown of Brainerd, Minnesota. And the reason would be because it costs more to live in New York than it does in Brainerd. You know, it costs more to live in D.C. than it does in Cincinnati. Not debating whether universal income is a good approach or not, but is that notion that, essentially, let’s just say it’s double if you live in New York, we’ll give you double the amount of money than if you live in Brainerd.

Doesn’t that freeze the inequities or the bad outcomes that we currently have in place and not allow them to be smoothed over? In other words, if you can live really well in a place like Brainerd or Cincinnati but live really poorly in New York on the same amount of money, why wouldn’t we allow people to make that decision? And I think more people would move to places and we’d have more opportunity in places like Cincinnati. Is that a concept that seems foreign, or is that something that maybe make some sense?

Hamilton: I haven’t really thought about universal basic income that would be adjusted for purchasing power before. I think it’s an interesting idea, but I think that you raise an important concern, that we wouldn’t want a case where people can live on universal basic income alone a low-productivity, low-cost part of the country and face an incentive to go somewhere like that, where they might want to live just on their basic income alone without working. Tyler Cowen here at the Mercatus Center has written quite a bit about how work is important, not just for economic growth and productivity but also it’s such an important part of human happiness and the ability to learn and grow in a career. And so I think that that’s one important side effect that should be heavily considered in any sort of UBI policy.

Strong Towns:  I’m getting back to the migration thing. One of our writers, a guy named Johnny Sanphillippo. He writes the blog, GranolaShotgun, which is really out there. I was going to say it’s out in left field but it’s out in right field too, it’s all over the place. The guy has a certain level of brilliance to him that I’ve come to find endearing. He told me once a story about three young people who lived in San Francisco and they couldn’t find their own places what they wound up doing was getting the house together. And he told me how much they pay for rent. I can’t remember. All I know is that it was astounding, it was like each was paying double what I’m paying for my mortgage something along those lines. And they were paying that, they were each paying that for their own room. So they said they didn’t have a house like I have, they have single rooms in an apartment and they were working multiple jobs, very hardworking people, working multiple jobs to try to make ends meet because they like living in San Francisco. I totally get that. There might have been a point in my life when I was in my younger 20s when that that made a lot of sense to me.

But he talked to them and, essentially, counseled them, “Hey, at some point here, you may want something different. And why not move and actually go back to Cincinnati?” Because, I think it was Cincinnati where he had a neighborhood he was looking at, “Why don’t you move here” and they did. And at a much lower burn rate of income, they were able to essentially have a different style of living. It wasn’t a San Francisco-style living, but it was one with a lot less work in terms of labor to make ends meet. It was one with a lot more free time. And, net, a much higher standard of living. Much of our housing policy today, I think, robs people of those kind of choices, or doesn’t present those kind of choices, or presents them as essentially equivalent when maybe they’re not.

Hamilton: Yeah, there’s such a bias, among the people who write about urban policy, to focus on the expensive cities and the housing issues that they face rather than the Cincinnati, where housing is abundant and if there’s a problem with people being able to afford housing there, that’s probably an income problem rather than a housing problem.

But I think that the goal needs to remain to make the cities that are currently unaffordable but are in high demand affordable. Because the reason that they’re in such high demand is because of the economic and growth opportunities that they present. And it’s just, I think, difficult to impossible to replicate a Bay Area or New York City in another part of the country because those cities have such a history of organic economic growth and agglomeration benefits within and across industries that the same economic opportunities can’t be recreated in other parts of the country where housing is more abundant.

Strong Towns:  OK, this is what I want to get at. Now you’re saying something that I think is a good counterargument. Let me restate it and you can tell me if I’m hearing you correctly.

You’re saying that a place like New York is just going to be unaffordable, it’s just going to have really high prices because so many people want to be there. So many people want to be there because of the economic opportunity and you really can’t transfer that economic opportunity to other places. Is that a fair summation of what you just said?

Hamilton: I certainly agree that the economic opportunity of a New York City can’t be transferred to somewhere else. But I don’t think it’s necessary that places with high demand like New York City have to have high housing [costs], or at least not anywhere the prices that they currently have. People have described that single-room occupancy hotels and boarding houses of the past as the lowest rung on the housing ladder. And what’s happened with urban policy is that the lowest rung has been eliminated so that there aren’t affordable opportunities that the least well-off people in a city can access.

Strong Towns: OK, let me let me say something then that might be a little controversial from an economics standpoint: I get the notion that the fire of New York’s economy is burning really hot right now, it’s really strong. Is the national policy, [or] should [it] be, “let’s try to get some more wood on that fire. Let’s try to get that fire going even bigger.” Or should it be “let’s try to get some of that fire transferred over to a place like, I don’t know, Philadelphia, Baltimore. I mean, here’s two cities within – not daily commute [distance] but certainly [close] enough to have a regional back-and-forth economically, where you have massive amounts of economic distress and whole neighborhoods that are in terminal decline. That would be very affordable if you could make some policy changes and have some of that fire burning in those places as well. Is this a situation where too much of a good thing in one place is not healthy?

Hamilton: I don’t think that national economic policy should be focused on either promoting more job growth within currently very productive, very expensive places or moving it necessarily to other places.

I think that the only way to allow for the highest possible economic growth is to allow firms and individuals to decide where it makes sense for them to locate. If we think about industries that are currently situated in one geographic area like, of course, the tech industry tends to locate in the Bay Area, or the entertainment industry tends to locate in Southern California. That’s an organic process that happens over time as certain factors make those areas attractive to certain industries. And I think that government policies that either try to perpetuate that in current areas or try to move economic activity to places that are currently less in demand are going to result in fewer opportunities for economic growth and income and job growth because these cluster economies are based on so many individual decisions that just can’t be replicated by public policy.

Strong Towns:  I hear you, and I agree with you, but let me let me throw this out. What about the fact that we’re making these massive infrastructure investments?

What about the fact that we, at the federal level, subsidize certain types of housing? I get back to the earlier conversation about maybe sometimes these places will burn so hot that they will become unaffordable. And the feedback you get is that things stop working — they can’t get teachers, they can’t get police officers, they can’t get what have you. And that’s one of those natural market feedbacks that suggest “hey, this should be happening more in in Philadelphia and a little bit less in New York.” It seems a little bit like our policies go the opposite direction: In other words, we seem to be fighting this fire at the source? How do we deal with the affordable housing crisis here in D.C.? How do we deal with affordability crisis here in New York? As opposed to looking at it in a broader national framework. Do you have a reaction to that? Because I hear what you’re saying, and I agree with you that firms and individuals should make these decisions.

But we’re also really distorting the marketplace that they’re playing in, are we not?

Hamilton:  Well, I would say that the move toward Section 8 housing, away from public housing provided by the federal government, is a slight move away from directing where affordable housing resources go geographically. And certainly inclusionary zoning efforts are usually run by local governments, so they are local policies addressing local affordability challenges rather than trying to get people to live in places that are already some of the most expensive places.

But to your point that cities face a constraint, after a certain point of becoming too expensive they will cease to function well. I think that that’s absolutely true, and that there is a price of unaffordability at which a Bay Area becomes less desirable than it was because services cease functioning, like schools and service industries and transportation because the people who work in those industries simply cannot afford it.

Strong Towns:  If you look at the Bay Area, which I’m probably more familiar with the infrastructure in Northern California than in the Northeast. If we look at the Bay Area, we see the federal governments investing lots of money in what we call commuter rail, not rail connecting one place to another but rail that is designed to bring people from cheaper neighborhoods on the edge to the more affluent or more productive neighborhoods in the center. To me this is a federal policy that is essentially trying to circumvent the difficult feedback that these San Francisco neighborhoods should be experiencing when they become so unaffordable. Essentially I feel like you’re trying to bring in workers you can pay less instead of having to pay them more, and deal with the consequences or adapt a different housing approach? Is my take on that valid? Or am I seeing something that you’re not? Or am I seeing it wrong?

Hamilton: No, I think you’re right that that federal infrastructure investment distorts housing market policies. But I think that it’s true all across the country, whether we’re talking about investment in rural infrastructure that’s serving a declining and small population or infrastructure in urban areas that’s allowing problematic housing policies to go on. There are plenty of distortions in infrastructure policy to go around, and I’m not sure which effect is larger, if it’s the subsidizing people who live outside of these expensive cities or whether it’s allowing labor markets to grow geographically in these expensive regions.

Strong Towns:  So it’s just that the idea, and I’m with you, I totally agree the notion that you take a place like Silicon Valley, you take a place the Bay Area, and you look at the massive growth that they’ve experienced, and it’s hard not to say great this is excellent for our economy. This is a source of innovation. This is driving all kinds of economic improvements around the country around the world. This is a great thing.

But I also step back and look at the conversation they’re having there on their housing. And it just seems to me to be this bizarre intertwining of distortion after distortion after distortion. In fact I was in. What was that little, that city, I was going to say little, it’s like 200,000 people, little for Northern California size. And they were telling me about how, basically, prices they’ve been going up for years, they’re going to continue to go up. And the mantra was “prices only go up.”

And I said, “Well, didn’t you have prices go down in 2008?”

“Oh, yeah, it was horrible. But by 2010, we were back going up again, and there’s no reason to suspect that prices will ever not go up.” I’m not even exaggerating what they were saying. They were adamant that prices only go in one direction and, therefore, we must be doing all these other things, whether it’s transit investments, or affordable housing subsidies, or inclusionary zoning, or what have you. Because prices only go in one direction.

It just felt to me like I was in a different kind of bubble world, where the actual market feedback would just ceased to work. Maybe I’m just lamenting to you because I don’t get it. I feel like we try to simplify it down to this family can’t afford the house. Therefore, let’s find them a house they can afford or give them money. I almost feel like in a Nassim Taleb “via negative” way, we need to pull out some of the distorting things and see where prices actually end up at the end of the day, because it seems to me like they’d have to be more rational than they are now.

Hamilton: Yeah, as you say, there are so many interconnected issues when we’re talking about housing policy, and an important one is the public policy goal of promoting homeownership as an investment that goes up in value over time. That’s been hugely problematic and created incentives for homeowners to treat their houses a scarce resource that they need to protect from competition and just really misdirected resources toward housing that could better be invested in other industries.

Strong Towns: I want to end up by talking about just the human aspect of this a little bit too. I was in Portland and I was chatting, we were out looking at some transit stops and one of them we had a bunch of neighborhood activists with us, and we were walking around and I was talking with one of the gentlemen in that group and he told me that he was paying $3,000 a month for his rental. I don’t know what he did for a living. He was not a professional. He was doing blue-collar, non-professional work. And maybe he was making a decent living. It didn’t seem like that from my conversation. It feels a lot like the distortions that we have, we can describe them as “people struggling to make ends meet.” But I actually look at it a lot more of this as we are just robbing people’s future from them. We are, in a sense, not allowing them to build their own wealth, their own security, their own safety cushion. Can you talk a little bit about the human side of this and what you see is some of the real human downfalls of our current approach?

Hamilton: Yes, I agree completely that it’s just a sad situation when people, all the way from middle income down to the least well-off person in a city, might be struggling to find housing that fits within their budget.

And that’s if they’re taking the opportunity to pursue a job or whatever else is drawing them to an expensive city, they are then forced to trade off good personal finance, where they could be saving for their futures. I think it’s just a human tragedy. When we think about that the urban policies that we’ve discussed are falling hardest on the least well-off people in a city, who are least able to bear these preferences of higher income people who just want to prevent housing below a certain standard from being built anywhere near their home.

Strong Towns: I see the stories that affordable housing advocates put forward and they’re very compelling. They’re there. They pull on your heartstrings, but I often feel like we’re not getting to the real crux of things. If we find people an affordable place to live, that solves whatever the immediate problem is, but it doesn’t necessarily put them on a path to independence, it doesn’t put them on a path to actually getting their own economic security. It feels a lot like even our best intentions trap people in a place where they’re not able to realize their full potential as humans. I don’t know if you have a thought in those regards.

Hamilton:  I think you’re right. In The Power Broker, Robert Caro has a great section where he talks about a neighborhood and the process that was made up of largely recent Jewish immigrants who had moved from the Lower East Side tenements into this new neighborhood in the Bronx where they had higher housing standards and healthier, safer conditions than they had in the Lower East Side. And this happened within less than a generation, and that income mobility that we see from the market-provided low-income housing is not what we tend to see in government-provided low-income housing, where the problems of intergenerational poverty are well documented.

Strong Towns:                                      I do this sometimes when I’m giving a talk. If we get on the topic of housing I will say to the audience “2001 to 2008 was a housing ____________” and then they’ll fill in “Bubble” and I’ll say, “OK, 2010 to 2017 is a housing ____________” and everybody looks at me like, “What?”

And then someone will sheepishly say “recovery” and I’ll show them the chart. Basically, here’s the bubble and then here’s the recovery, and it’s two different terms for essentially the same distortion, like we are back to where we were, and then some, in 2008. When we look back and say “Well, that was a bubble” and now we are recovered essentially to a bubble.

Do you have, like, existential concerns about housing in this country, and that we really have foundational problems, that maybe we’re dealing with around the edges but thwarting any ability to do good things at the local level?

Hamilton: The macroeconomic areas is out of my area of expertise for sure. But I would say that I find it mind boggling that the federal government has not only perpetuated the policies that facilitated the 2008 housing crisis but created new policies that allow people with minimal assets and minimal credit to purchase homes. And I think that’s all part of this idea that homeownership should be seen as a great investment. Whereas that’s not necessarily true for everyone and shouldn’t be encouraged by a public policy.

Strong Towns:  I feel like we have done everything we can to prop up housing prices. I believe that you’re younger than me I’m 43. I’m going to say this, and I don’t say this as a way to bash Baby Boomers, although that’s fun from time to time. I can I can do that because everybody can bash their elders, right? It feels like we have done everything we can to prop up the housing market while the Baby Boomers find ways to, essentially, cash out and sell and get their nest egg out of their home equity.

But the cost of that has been Millennials and younger people have, and poorer people, people who are trying to get entry level type of home, have experienced much, much higher housing costs than they otherwise would.

I understand the macro policy, but the real effect is that we’re trapping younger people who have all the student loan debt, all the other drags on their upward mobility at the start of their professional careers. Are we hitting them in a double whammy here?

Hamilton:  I think so. The mismatch between housing supply and demand in cities where housing supply stopped being so elastic really took off in the 70s and 80s in a lot of the cities. So people who got in before that time period or shortly after it have had opportunities for huge house price increases. But it has intergenerational consequences for the younger group coming along, who will really struggle to be able to come up with a down payment for a house as prices keep rising.