What Does the Market Want

 

 

Growing up in the suburbs and now living in a city, I follow the YIMBY conversation on social media quite a bit. YIMBY stands for “Yes in My Backyard,” and was formed in response to what people called NIMBYism (“Not in My Backyard”), namely that anything new proposed in your community was often knee-jerk opposed. 

You can understand the sentiment, whether or not you think it is right or not. We make location choices based on that location’s characteristics, so we are naturally leery about things that may fundamentally alter those characteristics. 

As a capitalist and economist, I take particular interest in one sub-strand of this NIMBY/YIMBY debate, which is “what does the market want”: 

* NIMBYs consider YIMBYs to be elitist urban social engineers, that the typical American wants a single-family detached home in the suburbs and it’s the other side who think they’re so smart that they should be able to impose their preferences for density and transit. In this telling, if we leave housing up to “the marketplace,” the demand is for suburban product and the supply will follow. 

* YIMBYs counter that the suburbs are entirely a man-made creation, and one with explicitly racist and classist intentions, namely that things like zoning classifications and minimum lot sizes have been created to ensure segregation of neighborhoods, to the detriment of low-income families and households of color. A market-based solution would free us of these artificial constraints, and more dense, multi-family product would follow. 

There’s more I could say to set this topic up but I’ll leave it at that. Another market dynamic I want to make sure is accounted for in this discussion is that, in a perfect world, we have priced energy appropriately, such that for example the significant social and environmental costs that driving imposes on all of us would be reflected in things like gas prices and access to parking. 

Complaining about how much it costs to gas up our cars or find a spot to park them is a near-universal human activity, but one can credibly argue that the problem is actually the exact opposite: it is way to cheap to own, run, and store a car, and if all of those things were properly priced, the market would adjust accordingly, preferencing locations that didn’t require a car and punishing locations that were auto-dependent. 

Realistically, I’m not sure there’s a path to that future scenario. And so we’re left with a marketplace defined by a certain portfolio of housing product (which, while durable, does depreciate over time), and an ever-evolving demographic of households seeking places to live (which, in general, are skewing more non-white and urban). What does this mean for what housing policies make sense, which either activate or supplement the market forces that govern the demand for housing and the supply of housing? That, to me, is the big question of the day.