Supply Isn’t A Four Letter Word Anymore

Something amazing is happening in the discussion about housing and affordability in Seattle: people are starting to talk about how building more housing can lower housing prices. Supply, a word seemingly reserved only for the Master Builders Association, is beginning to be used in polite Seattle company–well, at least on popular blogs and on Facebook. I started embracing supply at least as far back as 2011 when I wrote this:

When it comes to housing my question goes something like this, “if Seattle has a housing affordability problem shouldn’t we increase supply? See, since this economics thing says that when supply goes up, it will eventually exceed demand, and when it does, BOOM, price comes down, right?”

Comments like these were usually greeted with derision. I didn’t understand, people would say, that housing is different. Housing price isn’t affected by housing supply, the way, say, hot dogs might be. I was called a libertarian, lost in a Hayekian reverie. One snarky guy on Facebook invited me to join him in his graduate level economics class so I could learn that I was wrong, supply doesn’t positively affect housing price. But I stuck to my guns.

Now, over at Citytank, David Moser wrote these words that sound, to me, like poetry.

The only way to slow [poor people leaving the city] is to build enough housing to meet the demand, preferably near transit. Incumbent property owners who seek to limit development and additional housing in their neighborhoods are therefore also supporting the de-facto eviction of the poor from the city.  They are the “haves” excluding the “have-nots” once again.  Though their intentions are not evil, the consequences of their actions are. And opportunistic politicians who position themselves as populist defenders of “neighborhood character” must be defeated. We must intensify our efforts to build this city. It is a just cause.

All stuff I’ve said before with much criticism from people with planning degrees and with a progressive bent. Today, we’re seeing a shift toward supply talk. Not only that, but Moser is tying this to politics, suggesting we replace politicians who don’t get that we need to build more housing and reduce the costs of production by having fewer rules.

We tried the political accountability route back in 2010 with an effort called the Party of the Future. The Party of the Future efforts fizzled because nobody really wanted to challenge Councilmembers politically and publicly, even though, in private, they were livid about Council decisions on land use and density.

I am not claiming credit for anything, especially credit for being the first to argue that increased supply will lower price. I’m sure it’s been argued and suggested before in Seattle, but I don’t think it had much effect. I believe that’s changing.

Here’s a revised version a comment I left on Citytank in response to Moser.

Thank you for this, especially your point about supply.

There almost isn’t a day that goes by when I am not talking about housing supply. I just finished a rant about it a little while ago.

We live in a city that is full of progressives who desperately want to help poor people by making housing more “affordable” by lowering housing price.

Price and affordability are not the same thing; affordability is a relationship to price. If we want housing prices to go down or stabilize we must increase supply.

However, ideology –the myth of the “greedy” developer– tends to trump common sense.

We’re making progress. Gradually I am beginning to hear closet doors creak open and I am hearing the sweet sound of “supply! supply! supply!”

That’s how we fix price. Living outside the city will likely always be “cheaper” than living in it, especially since the costs of living elsewhere are largely externalized.

Part of the solution to this last problem is redefining “affordability” into something that is more comprehensive and reflects all the costs and benefits of living in the city.

Today we talk about “affordability” and mean something, usually, more than simply housing price. Once we bust the iron grip of liberal progressive ideological language and bigotry against private profit, we can start to take our foot off supply by lowering regulatory barriers and, also, incentivizing development rather than taxing it and penalizing the private sector while subsidizing more expensive “affordable” housing.

These things together, increasing supply and developing a broader concept of affordable city living, can lead us to an outcome we want: more people living more sustainably in the city.

And, yes, we still need subsidies for housing, especially for populations who can’t pay enough rent to cover the debt and operating costs of new housing. But that’s another post. For now, let’s keep using that word, supply, as much as possible when the topic of affordable housing is brought up.