In liberal Seattle, almost everyone agrees that affordable housing is important, although people are as not as quick to speak well of its cousin, reduced housing prices. Meanwhile, new, dense development is both accused of eliminating affordable housing and being the ultimate source to provide it. I think both sides end up talking past each other because both positions contain a caricature of the segmentation (or lack thereof) of the market.
On my side, there’s a very heavy reliance on the law of supply and demand. Build more units and prices should go down. The dynamic turns up again and again in human endeavor and carries a strong presumption of truth. But if we view the real estate market not as a single pile of commodities but as a series of smaller markets segmented by taste, demographics, and income, the situation gets more complicated and obscures the debate sufficiently to allow people to believe many different things in good faith.
For one thing, even a higher mean unit price may not indicate that housing has become less affordable. In an economically marginal neighborhood, replacing a parking lot with a luxury condo tower will almost certainly increase the mean cost of a housing unit in the neighborhood. However, the impact on the actual existing stock of “affordable” housing is less clear. There is certainly more supply for people who especially want to live there, driving prices down; however, an influx of wealthier people will bring objective improvements in some senses, particularly in nearby retail property value, local school performance, and so on. As a density guy, I’m inclined to applaud objective improvements in quality of life; I’m not worried about “gentrification” per se, but displacement.
Secondly, “affordable” is often appropriated to mean “whatever I and my peer group can afford,” but in fact the right prescription is different for the bottom and the middle of the income spectrum. A robust free market will never provide housing for the very weakest among us; in the absence of subsidy, destroying low-income housing for a new building is simply destroying low-income housing for good. However, meaningful middle class housing subsidies don’t plausibly scale, partly because they will eventually be built into the price. Anyone concerned about a middle class remaining in the city must accept a large scale plan to make expansion of housing economic. Approve a trickle of projects, and only the most profitable ones (i.e. those targeting high incomes) will move forward.
Lastly, there are long-standing prejudices in favor of home ownership and single-family homes in some segments of society. If these are non-negotiable for you, as they are for many people, bulldozing a row of single-family homes for apartments is a pure loss, a reduction of the supply of the lifestyle you desire. That said, the market is not nearly perfectly segmented, and many single-family dwellers would be equally happy in an apartment or townhome, or would gladly accept something else if it meant more cash in their pockets. Furthermore, the city shouldn’t be obligated to enforce anyone’s personal aesthetic preferences; there are much more important policy objectives to fulfill.
Unfortunately, we’re unlikely to get the properly controlled experiment that removes all doubt about the complete range of impacts. I think the short term effects on housing costs are murky enough that government finesse in managing the market is worthwhile. But aside from nonprofit efforts, in the long term today’s affordable housing comes from yesterday’s luxury flats, and cutting off the supply of the latter will deny our children the former in the absence of massive, unsustainable public subsidy.