Posted Tuesday, March 20, 2012, at 11:26 AM
I wrote yesterday for The Atlantic Cities about the mixed-up ideological politics of urban development, but I know one major element of The Rent Is Too Damn High that people have some dissatisfaction with is its treatment of the nitty-gritty interest group politics and lack of a genius idea to resolve the problems in this space.
One reason I didn't present a genius solution to that is that I don't have one. Another is that I think people tend to overrate interest-group politics over the long haul and underrate sincere persuasion. One reason I think persuasion matters a lot, however, is because it helps shape what interest groups do. Ryan Avent writes that one consequence of land use deregulaton is increased tax revenue for the deregulating jurisdiction. Now normally you think of urban politics as chock-a-block full of constituencies who'd be interested in increased tax revenue. Think of the public sector labor unions who are a major force in almost every big city. If DC adopted an approach to its central business district that was more developer-friendly, there'd be more tax money to go around to fund teachers' salaries and pensions. And if DC adopted an approach to its residential areas that was more developer-friendly, there'd be higher school enrollment and less pressure to close schools. And, of course, teachers throughout the metropolitan area would earn higher real wages if housing costs declined. Now as it happens teachers unions don't lobby for land use deregulation—nor do unions representing cops and firefighters and garbagemen—but that's not because they couldn't, it's because neither the union leaders nor the union members believe my analysis is correct or important. But if they did, they'd put at least a little energy into the agenda and that would change the interest group politics.
By the same token, a lot of homeowners are just confused about the relationship between regulation, housing costs, and returns on their investment. People who own single-family homes in the super-expensive scandalously underdeveloped sprawl zone of Silicon Valley seem to believe that as homeowners they are beneficiaries of the legal framework that keeps housing costs high. But this is a mistake. If you own a single-family home in Silicon Valley the valuable asset you possess is the land not the house and deregulating the use of the land will make your investment more valuable not less. When it comes to oil, people understand this perfectly well. Land with oil under it is valuable because oil is valuable. Regulations that prevent oil drilling make oil more expensive, but they make land-that-has-oil-on-it less valuable because the value is in your ability to get the oil. With houses and building it's just the same. People don't see it that way which makes the politics tricky, but the biggest part of the answer has to be persuading them to look at the issue differently.