Let’s imagine that a developer is proposing to level some not-so-great ’60s-style townhouses in an urban neighborhood. In their place, the developer is going to build a multi-level apartment complex with a gym, pool on the roof, and ground-floor retail. Perhaps the developer is going to knock down 10 low-quality units and replace them with 50 high-quality units, for a net-gain of 40 housing units.
Even though the number of housing units in the neighborhood goes up, it’s virtually guaranteed that the market rents for those new units are going to be higher than the rents for the old units. So the folks who might have been able to afford one of the ’60s-style townhouses no longer can afford a luxury-apartment in the neighborhood. ..
The truth is that increasing the supply of housing units in a single neighborhood might not have its desired neighborhood-level supply/demand effect, because housing isn’t necessarily a commodity. But city-wide, and metro area-wide, it might actually accomplish something.
Unless a developer is going to replace 10 low-quality units with 50 low-quality units, there’s going to be a change in the structure of the neighborhood housing market that’s different from the impact on the metro area housing market.
Well, sure. But let’s look at this more broadly. If a neighborhood becomes more desireable, AKA, demand goes up, you can respond in three general ways:
- Increase supply
- Decrease supply
- Do nothing
Since #2 is rarely done, usually the choice is between increasing supply or maintaining constant supply. So let’s say 40 more people want to move into Rob’s neighborhood. Either they replace 10 units with 40 new apartments or they don’t. But if they don’t then those 40 people still need somewhere to live! And what is probably going to happen is that other neighborhoods are going to see rent spikes. If you don’t allow new construction around Shaw then houses in LeDroit Park are going to get subdivided and rented out and rather than containing the influx of new residents to transit-oriented clusters you are now seeing the geographic and neighborhood-by-neighborhood impact of "gentrication" spread much much faster.
But I guess what Rob is saying is that he agrees with that, just that he is sympathic to NIMBY’s who don’t want new development near them because while it will stabilize rents city-wide it may increase rents in their neighborhood? But NIMBYs are usually homeowners, and if it "increases rents" it is increasing prices! Usually the arguments of NIMBYs is that if you build big new things in their neighborhood the value of their home will decline.
Is Rob talking about the 10 people who rented in the townhouses who will now not be able to afford the replacement apartments, and therefore may have to relocate? This is why strong tenants-rights laws are a good thing but not actually a reason not to build. Also, if you do build and that does keep rents lower in lots of other neighborhoods then although these 10 people may end up having to move they will probably not have to move somewhere more expensive! Unless you have very strong market-distorting rent controls then if the neighborhood becomes more desireable then their rent will go up even in the old townhouses and they’ll still have to leave! This is happening all over the place in DC because new residents want to live in rowhouses across the street from Metro stations and will pay a lot to do so. If you replaced just some of those rowhouses with much larger apartment buildings you could protect a whole lot of other renters.
This is a utilitarian argument, to be sure, and this is why its important to establish clear, efficient, and fair processes for inevitable displacements. But displacement is inevitable; the status quo is that it is driven by demand shocks and corruption and (often) fucking the poor. If you had a system that was more open to development you could then manage the process by which neighborhoods change.