The Solution to Expensive Housing Is More Housing
Finally, a book by a New York Times reporter who understands the crucial link between restrictions on the supply of housing and the price of housing! Golden Gates, by economics reporter Conor Dougherty, is a tour de force. It’s a rare book that mixes careful, nuanced reporting, painless economics lessons, interesting history of California, and pitch‐perfect humor, but Dougherty has written one.
Dougherty, who was a housing reporter for the Wall Street Journal for a decade, must have learned a lot in that job. He knows and understands the economics literature on the connection between supply and price, as evidenced by his treatment of the pathbreaking work of Harvard’s Ed Glaeser and Wharton’s Joseph Gyourko. (See “Zoning’s Steep Price,” Fall 2002.) Furthermore, Dougherty understands that when more luxury housing is built, that frees up housing that is then sold to people slightly lower on the wealth scale, and on down. He also understands the negative consequences of rent control.
That’s not to say that I agree with everything in the book. In particular, the author underplays both the bad consequences of rent control and the good that would result from massive housing deregulation. But those defects are way more than offset by his understanding of the harm done by restrictions on building.
This is from David R. Henderson, “The Solution to Expensive Housing Is More Housing,” Regulation, Spring 2021. It’s the lead book review, an honor I rarely get.
Early in the book, Dougherty introduces a number of important players. First is a colorful character named Sonja Trauss, a teacher in the East Bay who dropped out of the doctoral economics program at Washington University in St. Louis, emerging with a master’s degree. Trauss started San Francisco Bay Area Renters’ Federation, an organization that favors allowing more housing to be built. She was an early advocate of YIMBY (Yes In My Back Yard), the opposite of NIMBY (Not In My Back Yard). As Dougherty puts it, “Sonja was for anything and everything, so long as it was built tall and fast and had people living in it.” Trauss later became a full‐time activist for the cause of more housing, and Dougherty tracks her movements carefully.
Trauss has a way with words and Dougherty has a keen ear for those words. She understands 19th‐century writer Frederic Bastiat’s point about the unseen consequences of government regulation. At a hearing in the East Bay city of Lafayette, she pointed out that many of the people who would be affected by a decision to allow more housing “don’t know who they are yet” and that some of them are not even born. It’s Bastiat’s seen versus unseen.
One more highlight:
The book also discusses Harvard labor economist Lawrence Katz. Few people probably know — I didn’t — that when he graduated as Berkeley’s top economics undergrad, Katz devoted his whole 1981 commencement speech to one of the main causes of the high price of housing in the Bay Area: restriction of supply. He pointed out something that few of his classmates probably knew: just 10 years earlier, “California house prices were not much greater than the national median.”
A comment by KevinDC below motivated me to add this excerpt from my review:
As someone who, for over 40 years, has advocated cutting high marginal tax rates, I can attest that I have yet to see one of my allies advocate “trickle down” tax cuts. But one area where the term does apply is in housing. Many Californians oppose allowing people to build luxury houses because they think that won’t help people who can’t afford such luxury. They’re wrong. Dougherty quotes a software engineer and Trauss ally, Vincent Woo, who said at a 2016 San Francisco Board of Supervisors hearing:
If we don’t build units for people with money to go into, we all know what’s going to happen. They’re going to compete [for] the existing stock for middle income housing residents, and we know who’s going to win, the people with more money.
Allowing luxury units to be built, by contrast, would free up housing for people with less income. You don’t see a lot of low‐income people driving new Cadillacs, but you do see some of them driving 10‐year‐old Cadillacs.