In a previous post we established a few important points. First, the housing market isn’t a solution to be accepted or thrown out but rather a tool we get to design. In many cities, the market is designed very poorly, including in Seattle. The best way to approach how the housing market should work is to first establish goals.

Make Housing Costs Our Most Important Priority

Most cities have development goals. Goals are a reflection of community input and are value statements. Seattle has many goals but one of the most prominent is maintaining neighborhood character. Seattle’s comprehensive plan explicitly endorses the value of maintaining neighborhood character, putting this on a pedestal compared to other needs. Most people would agree that this seems like an important goal but this isn’t most residents’ top priority. In fact, for many residents this is completely unimportant. The Urbanist strongly believes housing cost should be the most important priority when considering development in residential zones. This goal benefits nearly everyone, directly addresses a real crisis and can be measured. Furthermore, all city policies should be examined to determine whether they increase or decrease the cost of housing.

Understanding A Housing Price Problem Versus an Income Crisis

To begin talking about the housing cost problem, it is necessary to point out that we are really tackling two separate but connected issues.

1. Sufficient income to pay for housing
2. Prices that reflect the cost of providing housing

To illustrate the difference, imagine someone with no income. Even if rent were minimal, maybe $10 dollars a month, they still wouldn’t be able to afford it. Instead of approaching builders, owners or developers to reduce their price, we would likely provide income or subsidies for the housing.

Conversely, if everyone in the city had enough income to pay for housing but we all paid $10,000 a month in rent, while the cost of providing that housing was only $10 a month, we would have a price problem. In this situation, we would seek to understand why the price was so high and what we could do to bring that down.

It has become a common refrain among anyone paying attention to housing costs that the market simply doesn’t work. Many legitimate and important concerns motivate this observation, including rising costs, homelessness, displacement and inequity. Often though, the conversation about housing turns to complaints about the failures of the unfettered free market. It seems that many people see the failures of the housing market as an indictment of free market capitalism. I’m not writing to push for deregulation but it’s inaccurate to use the housing market as an example of unfettered, free market capitalism.

In most cities, the housing market is highly regulated. Regulations include zoning for density, caps on total housing, complicated taxes, safety regulations, parking requirements, controls on rent and much more. Some of these regulations are important and some are questionable. When we equate the failures of the housing market to the failures of capitalism we mislead ourselves, preventing a constructive conversation about the actual regulations. If we are serious about solving most of our housing problems, I encourage us to stop speaking with rhetoric. Rather than dismissing the housing market, let’s examine and formulate a more useful assertion than ‘the market doesn’t work.’ To move beyond the misleading comments, it’s necessary to point out nearly everyone agrees with these two points:

1.  Some regulation is required and good. The government should require buildings to survive earthquakes and prevent fires. In other words, there will always be government intervention in the housing market.
2. If the market is not producing the outcome we want, it’s not the existence of the market that’s the problem, it’s our poor design. We can’t remove markets anymore than we can make them completely ‘free.’ Even if all housing in the city were paid for by the government, there would still be a housing market; it would just be designed differently from what we have now. In other words, we can’t blame the market as if it were an interest group to be attacked.

Now that we agree we can’t have a completely free market anymore than we can banish the market, let’s talk about specific regulations. In Seattle, we do a lot of good things for housing but not enough. We also have a lot of really bad regulations. For example, our market is designed to:

• prioritize aesthetic characteristics over supply
• require minimum parking
• limit density

This design prevents people from living in the neighborhoods they wish, decreases mobility, puts power in the hands of landlords and increases costs. We should get our priorities straight and address the specific regulations that are hurting us. Let’s design a market that works.