Thursday, October 13, 2016

Affordable Housing Crisis

So often in politics, politicians look for easy answers as opposed to searching for real answers to the problem. We are seeing this right now with the Affordable Housing Crisis

I look around my city of Seattle, and except in downtown there is a very obvious height limit of about 5 stories. We are on a narrow isthmus, and if you go too far east you run into mountains. We have built out all the way to the foothills of the Cascades, but this city is booming so much people still come here from around the Pacific Northwest and the entire nation looking for work. This creates a huge surge of demand for housing, which raises the price of housing. There is an apartment building being built right now in West Seattle at the corner of Fauntleroy and Alaska Street, and its height is modest given the amount of housing Seattle needs right now. I am confident that if Seattle allowed taller buildings that new apartment building would be much taller to fit more people inside.

In our basic supply and demand model we know that if you have an inelastic supply curve your price is going to change rapidly but your quantity of the good is not going to change as rapidly. Like many large cities, Seattle has harsh building codes which make it difficult to build tall buildings outside of downtown. They claim this is to preserve the "character" of the city. The issue with this thought process is it has the cost of reducing the supply of housing in the city. Seattle grew by over 15,000 people in 2014 and 2015, and 2016 will be similarly large. This means that demand for housing is growing rapidly. Ads on Craigslist come down as fast as they go up.

Airbnb is a lifeline for millions of families across the country. When I look at places to stay in other cities, Airbnb is the least expensive place for a comfortable and safe place to stay. Before Airbnb traveling was much more expensive making traveling a true luxury. Also, Airbnb provides income to people across the world so that they can pay their bills, many of whom would not be homeowners without the ability to rent out a room. The irony of all of this is that Airbnb helps the same people people like Senator Warren claims it is hurting. 81% of Airbnb rentals are people sharing their homes with other people, many of whom would be renters if they couldn't voluntarily rent their homes. Seattle's vacancy rate has not changed with the introduction of Airbnb, and it has been a lifeline for millions of Americans.

We need to build high occupancy housing. I don't care if it is designed for low income people or not, because it doesn't matter at the end of the day. Building nicer high quality units will see everyone move up into nicer locations as the price of housing drops. If I have a choice between building good quality units or units designed to be as inexpensive as possible I would rather increase the quantity of good quality units. The microeconomic model does not have an input of quality in determining price, only quantity. I would like new units to be as nice as possible and fit as many people as is reasonable for the space, so that they have a longer lifespan of being relatively up to date, which reduces the costs of upgrading and repairs.

Sure, some people will get rich off of increasing the amount of housing in an area, and this is something that will happen because not everyone will go into the industry. I'm not sure if this is an issue first of all, and find the possibility of having sufficient housing for everyone as one of the three top priorities for our city planners, along with mass transit and basic utilities. This is the real issue at stake, and most cities are failing.

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