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The City Planner’s Guide to Tragedies and Trade-Offs

A new book is full of ideas on housing that progressives and conservatives can both like.

A general view of high rise and new construction as seen from Flatbush Avenue in downtown Brooklyn - the area has seen a significant increase in new residential development in recent years. (Photo by Epics/Getty Images)

The Affordable City: Strategies for Putting Housing Within Reach (and Keeping it There), Shane Phillips, Island Press, 280 pages

The Ancient Greeks knew that tragedy was the art form most intimately connected with the realities of politics. In political life, we often run up against what Dr. Michael Shires, a professor of mine in graduate school, calls “competing good things.” The competing good things are those irreconcilable competing claims and terrible tradeoffs that cannot be avoided but must somehow be endured. At the heart of Shane Phillips’ new book The Affordable City is one such tragic reality: it is impossible to simultaneously expand affordable housing and affordable rent while also pushing for houses to be the primary means by which the middle class builds wealth. Phillips states the situation with bluntness: “either home values grow faster than inflation, thus making them increasingly unaffordable, or they grow slower than (or equal to) inflation, thus making housing more affordable but also a less attractive vehicle for investment.” Of these two outcomes, we are thus forced to choose one.

Thankfully not every tradeoff rises to the level of tragedy. And Phillips’ book is filled with concrete policy proposals that allow policymakers to balance what he calls the Three Ss of Housing: supply, stability, and subsidies. Supply is about dramatically increasing housing production, stability is about rent controls and ways of development that don’t price people out, and subsidies is about ensuring housing for low-income households that need assistance. 

But even when seeking to pursue a healthy mix of the three Ss, Phillips is helpfully clear that we will need to balance competing claims and interests, in order to achieve policy outcomes that can, hopefully, benefit everyone. He explains that on the one hand, “without the support of tenant protections and public subsidies, unfettered development may keep prices from rising but also may raise concerns about displacement and community disruption.” But on the other hand, “without supply to stave off scarcity and public funds to support those with the greatest need, the benefits of tenant protections and rental housing preservation will be unnecessarily constrained…[and] public funding will mostly be absorbed into higher rents and construction costs.” Achieving the right balance is context-specific, but Phillips offers both general principles and concrete policy to help aid in finding that balance.

Before I jump into some of the specific ideas of the book, let me comment briefly on the political background of this book. Phillips is coming at these issues from the perspective of the progressive Left. And that means that some of his goals, as well as some of his proposals, will be immediately non-starters for more conservative readers (including myself.) While I can certainly sign onto his goal of “more affordable housing for all, stability and protection for those who desire it, and abundant resources to assist the most vulnerable among us,” some of his other outlined goals lose me. In particular, his long-term vision in which the United States becomes “a nation in which renters, not landlords, wield the most power in the market—and where public and nonprofit-owned housing is so abundant that private property owners must keep their rents affordable in order to compete.” (How abundant? At one point he recommends public housing should constitute 50% of the total housing market!) Likewise, I am not particularly enthused by some of his heavy-handed administrative-state suggestions such as mandated hours of training for any would-be landlord, and regulating Airbnb and other short-term rentals in ways that make it harder for property owners to monetize their own property. 

Nevertheless, despite these objections, this is a helpful book for both progressive and conservative policymakers. There is much here to challenge everyone, and in particular Phillips does a nice job of flagging moments where our political ideologies might impede our ability to appreciate good research and policy proposals. Generally speaking, conservatives tend to be interested in supply-side solutions, particularly those that emphasize deregulation; they tend to be much more hostile to both stability-side solutions (particularly policies like rent control) and subsidies. Progressives tend to be the exact inverse. It’s helpful to be aware of these tendencies, and the book provides plenty of policy proposals that run counter to these tendencies in very productive ways.

Now onto the fun stuff. Here are what I consider to be some of Phillips’ best policy proposals, organized thematically, and with an eye to implicit trade-offs.

 

Supply

Upzone many places at once: Upzoning can often improve overall land value, but the more important thing it does is lower costs (value divided by greater number of units). This is an important point to underscore to get broader coalitions of owners, developers, and city officials on board. But upzoning that is too neighborhood-specific leads almost immediately to gentrification, a problem solved by upzoning widely across a city. Phillips explains: “by enacting more geographically distributed upzons, either simultaneously or in quick succession, the impact on any given community can be diluted, with development happening in more modest quantities all across a city.” Importantly this runs counter to “corridor-based upzoning” in which density is only increased on the main streets that constitute major commercial hubs. This isn’t a knock against mixed-use zoning, which the author advocates for, but rather the recognition that “mixed-use zoning along arterial corridors is perfectly acceptable as one component of a broader housing plan” (emphasis added.)

Eliminate density limits: It is not enough to simply propose that we should abolish single-family zoning, though we absolutely should! If the building code is too burdensome, then even when zoning is more inclusive, developers are unduly constrained and unit prices remain steep. Phillips thus argues that “eliminating density limits while maintaining restrictions on building size is a smart compromise for integrating ‘gentle density’ or ‘missing middle’ housing.” He notes that you can keep other development standards like maximum building heights, setbacks, and maximum floor area ratio, which allows for “creating more homes—and a greater diversity of homes and households—without significantly changing the physical character of a neighborhood.” The end result is that “the buildings look essentially the same, but they offer a wider range of prices and serve a wider range of household arrangements and phases in people’s lives.”

Implement by-right development: When developers (including your average homeowner who wants to turn his garage into an Accessory Dwelling Unit) want to seek permission for their development projects, they typically have to clear a variety of red-tape hurdles which include a fairly subjective discretionary approval hearing. To spur more development at reduced building cost (and thus reduced prices), cities should try to adopt by-right ordinances. These by-right ordinances allow for any proposed development that conforms to clear, public rules and regulations to be automatically approved rather than being subject to the lengthy and arbitrary discretionary approval process. Also, it’s not enough to simply implement by-right development; you also need to make sure that the turnaround time for reviewing and approving projects is as quick as possible. If developers are forced to wait six months or even longer, even with by-right zoning, the economic and opportunity costs will still significantly weigh on the final price of the units. 

Stability

Introduce rent stabilization (and/or rent control) paired with expanded housing construction: Phillips observes that “supply helps moderate prices at the city and regional levels, but only tenant protections will provide adequate security at the neighborhood and household level.” Some will argue that new development alone can solve the issue of rising rent (more renters, less individual market power, lower rates) but this doesn’t hold up to additional scrutiny. As Phillips explains, “this claim ignores the delay between increased demand and the construction of new homes, the role of income inequality and jobs-housing imbalances.” In terms of rent stabilization, we’re talking about policies that would, for example, prevent gouging by constraining rent increases to a maximum of 7%-10% per year (with hardship-based exemption for clearly delineated special circumstances). While supply enthusiasts will likely be adverse to rent control policy, Phillips is clear that there are ways to prevent unintended disincentives for new development, such as explicitly crafting rent control policy to apply to units that are older than ten years (an approach known as rolling rent control.) And in defense of supply enthusiasts, Phillips also warns that implementing rent controls when housing supply is severely limited typically leads to loss of profitability in renting, which leads to less housing (or deterioration in housing upkeep), creating a vicious reinforcing feedback loop. Thus it’s best to pair rent stabilization measures with policy that encourages development.

Implement Just-Cause Eviction and Right To Counsel: By narrowing the conditions in which landlords can force evictions, and by ensuring that tenants have access to legal counsel, we can push back on unscrupulous and exploitative landlords and bolster protection for the most vulnerable renters. Phillips notes that there is an important loophole unscrupulous landlords often use where they “go out of business” with rent-stabilized units (whether by moving themselves or a family member in, recasting the property as a condominium, or other such strategies) which allow them to evict current tenants and collect various windfall profits. Phillips describes this process as “the corporate looting practices of the private equity industry applied to the housing sector.” Implementing these two policies can go a long way in discouraging that kind of bad behavior and offering buffers when it occurs. Another policy proposal to disincentivize bad behavior is to require all eviction notices to be submitted to a public database managed by the city with key variables included such as reason for eviction.

Use Inclusionary Zoning Mandates and Density Bonuses: This is a standard carrot-and-stick style policy reform. The mandates dictate aspects of development to ensure that a certain number of units are being set aside for affordable housing. The bonuses attract developers to much the same end. Phillips’ key insight regarding when to use each centers on the context and goal: “incentives are best when we want to make a good thing better. Mandates are best when we want to discourage or prohibit something we consider bad.”

Subsidy 

Levy Progressive Taxes On Home Sales Using a Marginal Rate: Phillips’ main argument here is that we already have a progressive tax system for income tax, so why not implement something similar for profits generated from house sales? It’s obviously a controversial idea, but one major point in its favor is the recognition that by making it marginal, the appreciation value wouldn’t take any significant hits. At least in theory. I’m somewhat skeptical of this approach, but it’s still worth considering. Much more compelling to me is Phillips’ adjacent argument regarding raising tax rates for flipping houses. The thing about flipping houses is that by very definition, the profits from this enterprise come explicitly from transforming already existing houses into less affordable units without providing any new additional affordable housing to take its place. Higher taxes on house-flipping can both help to limit how much affordable housing stock is lost, and provide additional revenues to local and state governments (which, in an ideal world, can be invested back into housing affordability policy.)

Use A Hybrid Mix of Land Value Tax and Vacancy Tax To Encourage Development and Usage: Land-value taxation, which bases property taxes on the value of land not the structures on that land, encourages greater density and upzoning, as well as larger development projects that provide more bang for the buck. While Phillips advises against a full switch to LVT, he suggests that a hybrid approach that uses aspects of LVT in combination with standard property tax might do the trick (for example, adopting a 50-50 ratio.) Along similar lines, a modest vacancy tax (for example a 1 percent tax) can also help incentivize landowners to make full usage of their property, hopefully incentivizing more development of housing units.

Reduce Impact Fees As Much As Possible: Cities often use impact fees on new development to fund various public services and facilities. But this practice negatively affects housing prices, as developers either face reduced development value in the land leading them to develop less land, which indirectly raises prices, or developers pass the fees onto tenants and buyers directly. Either way, impact fees reduce housing affordability. Beyond that, there is a question of equity here, as Phillips writes, “shouldn’t that burden [of paying for public services] be determined according to people’s ability to pay rather than when they arrived or the age of their home?”

 

In the end, Phillips’ book is a welcome addition to the city-planning canon. While every city needs to determine for itself what mix of policy options will best fit the various needs of its community members, The Affordable City is a helpful guide for thinking about how to balance various interests and claims in a way that leads to a flourishing city where everyone can participate in that flourishing. Given the uphill battles against those of the NIMBY persuasion, Phillips’ book is also a helpful guide to broad coalition-building that skillfully uses the language and value systems of various major points on the political spectrum.

Anthony M. Barr is a recent graduate of the Templeton Honors College at Eastern University, and a recent Fellow at the Hertog Foundation in DC. He is currently pursuing his MPP at Pepperdine University. Anthony has done research on political theory, education policy, and civic and moral virtue for various nonprofits, businesses, and independent publishing companies.

This New Urbanism series is supported by the Richard H. Driehaus Foundation. Follow New Urbs on Twitter for a feed dedicated to TAC’s coverage of cities, urbanism, and place.

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