The one thing that makes assumptions about free market forces miss the mark is the fact that ideal markets don’t exist in the real world.
I case of housing, in the US, we’re as far from free market as possible. So making assumptions about what will happen if we build more based on a naive supply and demand model isn’t going to work.
A paradigm shift is to think in terms of power distribution and policy incentives. Why would a homeowner support zoning reforms? Even if they become a minority, will they be able to get the others to not vote or vote against their own interests?
The housing market in the US is extremely competitive. Major cities have hundreds of thousands if not millions of competing landlords and a similar number of owner-occupied units.
The supply constraint isn't that Comcast and AT&T each own half of the land and you can only get it from one of them, it's that the government effectively prohibits building more, so all the competing construction companies who want to increase supply because that's what makes them money are unable to do it because it's prohibited by law.
> Why would a homeowner support zoning reforms?
Because zoning reforms that allow higher density may lower the value of the house but increase the value of the land, and homeowners of single-family homes have a high ratio of land to house. And because they lower cost of living and lower crime and they like paying less for things and not getting robbed.
Or because they have a small house but need a bigger house, and then higher prices hurt them. Or because they have a bigger house and need a smaller house, in which case they're about to sell it and it's better for them to add a bunch of developers to the bidding who want to build more on the lot and then cash out before the new developments come onto the market. Or because they live in city B and want to move to city A where housing is more expensive, and then they would support state or national-level policies to reduce housing scarcity for the same reason as the person who needs a bigger house.
It’s a magical policy under that makes better off both the owner of a small house who needs a bigger house and the owner of a large house who needs a smaller house.
If the owner of the large house would be better off by the presence of bids by developers, wouldn’t that tend (strongly) to work against the interests of the owner of the small house seeking a larger house?
It might work to help the owner of a small house who wants to move into a larger apartment or condominium.
> It’s a magical policy under that makes better off both the owner of a small house who needs a bigger house and the owner of a large house who needs a smaller house.
Because the person who needs a smaller house sells the bigger house immediately, the developer turns it into ten bigger houses (or condos), and that increases the supply of bigger units for the person who needs a bigger unit.
> If the owner of the large house would be better off by the presence of bids by developers, wouldn’t that tend (strongly) to work against the interests of the owner of the small house seeking a larger house?
The developer doesn't care about the size of the existing structure because they're going to knock it down and build a taller one, so then the smaller house increases in value by as much as the bigger one because a developer would pay that much more for that one too since what they really want is the land. In which case what happens is that the developer buys the smaller house and then that person has the extra money to outbid some other developer for the bigger house and they both win.
> It might work to help the owner of a small house who wants to move into a larger apartment or condominium.
It works even if they prefer a bigger house, because there are others who have no preference and only want a bigger space, and then some of the demand for larger units gets satisfied by the new condos and frees up houses to the people who specifically want a house.
Notice that if you're turning one house into 10 or 20 condos, the supply of houses is only going down by 1 but the unsatisfied demand for the remaining stock is going down by 10 or 20.
> It works even if they prefer a bigger house, because there are others who have no preference and only want a bigger space
People looking to open a new office might fall into this category, but I have serious doubts that enough people fall into the category you describe to leave the owner of the smaller house better off because how larger houses are too-low priced.
Housing in higher-density areas currently has a higher cost per square foot than it does in the suburbs, implying that unmet demand for it is currently higher than demand for suburban real estate. You'd have to build enough to make that not the case before anyone who doesn't want to live in a condo would have any reason to choose it over a similarly-sized house. And if you actually managed that then it would be from building enough condos to make them more affordable, which would start attracting some people with only a weak preference for a house and still make them better off because they'd get lower housing costs. Meanwhile the people with a strong preference for a house would just pay the extra money for a house, which in the long term would still be less than they're paying now because there wouldn't be so much housing scarcity.
> less than they're paying now because there wouldn't be so much housing scarcity
And now we’ve circled back to where the owner of a big house looking to downside isn’t made better off.
Housing policy is complex and tied up in economics and emotions. Arguing (as you seem to be) that all users of housing are made better off by a policy change that’s so simple and obvious that no one has tried it is going to leave many people more skeptical of your idea, not less. Arguing “these users are made better off at the expense of these other users is probably more accurate and more persuasive”; if you can’t find anyone made worse off, it’s possible you’ve cracked a problem facing society for well over a century, but it’s more likely that you just have thought/looked hard enough.
This effect is quite broken in many US markets. Developers are, for various reasons, building higher-density developments consisting almost exclusively of studios and 1-bedroom units.
Developers build what's profitable, i.e. what's in demand. And they don't have to build the thing you want to make more of it available to you. You want a big house, someone who currently has a big house just wants a place to live, so if someone builds them a 1-bedroom then they take your money, pay a fraction of that for the 1-bedroom and pocket the difference. They get the new unit and a pile of money and you get the existing bigger house.
That continues until demand for bigger units starts to outstrip demand for smaller units, at which point developers start building something else.
> Developers build what's profitable, i.e. what's in demand.
This is only true to the extent that regulations don’t constrain the developers. As I understand it, in much of the US, regulations make it very difficult to build high density family housing.
There is plenty of opportunity to build high density family housing legally, even despite current regulations.
What’s not as easy is to build it as quickly and profitably as high-margin single families for end-users in the suburbs. High-density buildings for landlords are sold to relative experts in real estate who know their numbers. Low-density luxury-appearing houses can be sold to end users who don’t know their numbers as well and who are spending partly on their dreams and emotions.
(I say this as someone who bought two houses as an end-user and I mean no disrespect to end-user, non-expert buyers.)
They are competing, but not for the customer but for the land, which appreciates. Remember, there are different forms of competition.
The "supply constraint" is that the landowners don’t want to change zoning laws, and that space around big cities is limited. The government doesn’t act of it’s own initiative, it represents people.
If your logic held, it should be the homeowners pushing for density. Real world disagrees with your assessment, but you seem to be doubling down on it.
> The "supply constraint" is that the landowners don’t want to change zoning laws
The only ones who are acting in their own interest are the ones who own land that already contains a tall building and who either don't live in the area or are so rich they aren't affected by local cost of living, and they're quite outnumbered by everyone else.
> If your logic held, it should be the homeowners pushing for density.
It's possible and even common for people to be misinformed about the effects of a policy and then vote against their own interests.
So let's say for a moment that you're right and such a policy would be beneficial to the landowners.
I'm sure you'll appreciate that it's a great concession — after all, it assumes that they don't have non-financial motivations (like living in a non-crowded area, or preferring the burbs), and that the economics of building high will work out (individual flats will be multiple times more affordable than the current houses, but the land will be more expensive than it is now). There won't be traffic issues because of more people commuting from the same area. The quality of life will stay the same. This frees you from having to argue against all homeowners in the country and labeling them as irrational.
It still doesn't matter if they're wrong or right. They have the power, and given the environment they're in, this is what they'll decide. The government can't do anything here to relax the laws.
> it assumes that they don't have non-financial motivations (like living in a non-crowded area, or preferring the burbs)
Why wouldn't the people who prefer this just take the developer's money, buy another house somewhere that hasn't been rezoned and pocket thousands of dollars?
> that the economics of building high will work out (individual flats will be multiple times more affordable than the current houses, but the land will be more expensive than it is now)
Individual flats will be somewhat more affordable than they are now because supply will increase. They don't have to be "multiple times more affordable" to cost some double-digit percentage less than they do now. Land will be worth more than it is now because you can build taller buildings on it so there will be new demand for land from the people increasing the supply of housing.
> There won't be traffic issues because of more people commuting from the same area.
Higher density areas allow mass transit to become viable, which reduces car traffic.
> They have the power, and given the environment they're in, this is what they'll decide. The government can't do anything here to relax the laws.
To begin with, if you convince them then they vote for something else.
Moreover, the status quo is self-destructive. As prices go up, fewer people can afford a home, and then if it's homeowners voting for the status quo, they become a minority and get overruled by the growing number of people who can't afford housing.
> Why wouldn't the people who prefer this just take the developer's money, buy another house somewhere that hasn't been rezoned and pocket thousands of dollars?
This one is obvious - they want to live close to where they've lived so far, and they want to stay in their house. Rezoning will inflate the house prices in the vicinity (because of the effect that you're describing of people moving close) so the residents won't feel confident that they can keep affording that area, and won't be pushed out into the countryside.
> Individual flats will be somewhat more affordable than they are now because supply will increase.
This works if the supply will overwhelmingly (in the scale of the entire metro), exceed demand. Here multiple things can happen. One is that demand increases with supply, prices of the apartments go up and match the prices of houses, and prices of houses will grow like you predict. The other one is that people don't want to live in a mixed zone neighborhood, the developer won't make money, so they'll build cheap slum housing instead of normal housing, and the value of the houses in the neighborhood decreases with the new construction. This really depends on the real world situation, and can't be accurately predicted with a supply and demand model.
> Higher density areas allow mass transit to become viable, which reduces car traffic.
People from the burbs don't want to take the bus, so they won't vote for that.
> To begin with, if you convince them then they vote for something else.
Good luck with that, but if you look back in 10 years, we'll be in the same spot.
> Moreover, the status quo is self-destructive. As prices go up, fewer people can afford a home, and then if it's homeowners voting for the status quo, they become a minority and get overruled by the growing number of people who can't afford housing.
This assumes the majority will vote according to their interests. They likely won't. The power to manufacture consent is still with the owning class.
> Because zoning reforms that allow higher density may lower the value of the house
For most detached single family homes in in-demand areas where housing (and thus sustainable population) are constrained by the supply of housing units, they probably won't do that, either; not only will they increase the land value, the fact that they increases population while decreasing the supply of ainglet-family homes will drive up the price of existing single family homes.
What it does, though, is reduce the use value (experienced utility of use) for current owner-residents for whom the particular local character is a factor in enjoyment, and make alternative replacements with the quality that is now missing from the current home that are in the same area (and thus compatible with existing jobs, etc.) harder to find, as well.
> What it does, though, is reduce the use value (experienced utility of use) for current owner-residents for whom the particular local character is a factor in enjoyment, and make alternative replacements with the quality that is now missing from the current home that are in the same area (and thus compatible with existing jobs, etc.) harder to find, as well.
Which is apparently something which is currently in oversupply since housing in the suburbs costs less per square foot than it does in even the higher density areas that are within the same commuting radius.
I case of housing, in the US, we’re as far from free market as possible. So making assumptions about what will happen if we build more based on a naive supply and demand model isn’t going to work.
A paradigm shift is to think in terms of power distribution and policy incentives. Why would a homeowner support zoning reforms? Even if they become a minority, will they be able to get the others to not vote or vote against their own interests?
The system caps its own growth.