Your Editor has been very busy and hither and yon and such, and therefore away from, er, editing. We’re back, and we’ve noticed that “affordable housing” is again in the news in Austin. Or, more precisely, “mandates” that would impose on developers the requirement that they cough up some “affordable housing” in return for permission to build any housing. The motive, which will not achieve its desired result, is to fix the condition that “soaring rents have pushed poorer and minority residents out of the city.” Gentrification in this booming city with a history of segregation being a hot topic.
Let’s get a few things out of the way. Here are some basically irrefutable facts.
Austin has a sad history of segregation, not unlike most cities in the country.
The people who run Austin today had nothing to do with that sad history. Nor are they descendants of such people. Since most people in Austin are fairly recent transplants, few of the people here had anything to do with the old ugliness. They nonetheless feel guilty about it.
The consequence is that Austin’s blacks and Latinos have been concentrated in neighborhoods with historically cheap housing.
The city and its moderately liberal mayor boost the shit out of the city, promoting its coolness and its hot tech-centered economy.
The city has spent a fortune on amenities that appeal to affluent people such as your Editor, including endless “hike and bike” trails, redeveloped parks and event venues, mass transit initiatives, and so forth. This has caused property taxes to soar.
Austin has a very strong economy, with an unemployment rate so low that wages are rising rapidly, especially for “new class” types around the tech economy.
Austin is the fastest growing real city in the United States. Lots of people are moving here, because of the foregoing.
So, in other words, the city has been pursuing policies with the objective of attracting affluent people who can afford Austin. Those policies have been successful, and affluent people are moving here, further driving up the cost of already heavily taxed housing. Quite predictably, the slightly less affluent among the new transplants are buying up the less expensive housing in the historically black and Latino neighborhoods. The result is that the black population of Austin is declining.
This being considered lamentable, the city’s government — or a subset thereof — is hoping to create more “affordable” housing by imposing huge new costs on developers who propose to build… housing.
It is fairly well-established that affordable housing mandates do not actually work. See, for example, this study [Word file] of the many cities in California that have experimented with “inclusionary zoning.” Money shot (emphasis added):
Using panel data and a first difference model, we test how the policy affected the price and quantity of housing in California cities between 1980, 1990, and 2000. Under various specifications we find that cities adopting below-market housing mandates end up with higher prices and fewer homes. Between 1980 and 1990, cities imposing below-market housing mandates end up with 9 percent higher prices and 8 percent fewer homes overall. Between 1990 and 2000 cities imposing below-market housing mandates end up with 20 percent higher prices and 7 percent fewer homes overall. Consistent with Ellickson’s hypothesis, the program may not be about increasing the supply of housing or making it more affordable overall.
Our question is this: Are the liberal flower and chivalry of Austin unaware that their big ticket policies designed to appeal to affluent people have succeeded wildly in both driving up costs and attracting er, affluent people? Or — and this would be the only sane alternative explanation — are our “leaders” cynically dangling a counterproductive “affordable” housing mandate to deflect the rage of the anti-gentrification activists from the politicians and to the real estate developers?
With politicians, it is always hard to know whether “stupid” or “cynical” is the dominant consideration. Given our city council’s terrifyingly poor grip on economics and reflexive preference for more regulation rather than less, we lean toward stupidity.
But we could be wrong.