If the solutions were simple, there wouldn’t be problems.
This column is a companion to the WSBS (860AM, 94.1FM) radio show, It’s Not That Simple, on the air every other Friday at 9:05 a.m. Listen to the podcast here.
This is a review of a so-far five-part series of columns examining the housing shortage in Great Barrington. Future columns will look into possible remedies that have been suggested here in the Berkshires and in the rest of the country, as well as other ideas suggested by readers.
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The housing shortage is not just a Great Barrington problem and is not just caused by wealthy out-of-towners outbidding locals for housing. It’s a national problem with an estimated shortage of 3.8 million homes. As a nation, we aren’t building enough homes and the ones we are building are too expensive for most people. Nationwide, housing production decreased by half in the last decade as compared to 2000–2010.
When we started talking about housing in Great Barrington, we knew it would have to be a series of columns. It’s Not That Simple has tackled housing before, by looking at some of the organizations that build and manage affordable housing, but this time we wanted to get at the causes of the problem — some say crisis — and, fingers crossed, suggest some solutions.
Mission half accomplished. While we have hinted at possible ways to ease the problem, at least a little, so far we have focused primarily on causes. Our next column will look at some specific programs that can be implemented locally to make a difference. Before we do that, we want to review what we’ve found out so far in this series.
We began last November by looking at our housing history in a column called Why Can’t My Children Afford to Live Here? We asked local historian Bernard Drew where our housing stock came from and why it is that most of our homes were built before 1950. The answer to both questions is that many of our homes were built by the mills that once provided most of the employment here.
Facing a labor shortage, mill owners built housing to attract workers, creating whole neighborhoods in Great Barrington and Housatonic. As the mills began to decline beginning in the 1930s, the homes were sold off. New construction slowed down and pretty much stopped by the 1950s. Most of these homes still stand today and much of our total housing stock is the result. The mills are gone, replaced by the service industry, which does not build housing. In effect, we have been coasting on the housing built by the mills for decades.
But shouldn’t the free market provide housing? If there’s a need, “the market” is supposed to fill it. In a column titled “Can The Free Market House Us All?” we interviewed Assistant Professor of Economics at Bard College at Simon’s Rock, Dr. Daniel H. Neilson.
As Dr. Neilson put it, “No practicing professional economist will make the argument that markets always work everywhere. There are limitations to what makes a market work well.” And the limitations in the housing market are significant.
We explained the laws of supply and demand, how they are supposed to give people what they want at a price they are willing to pay. Supply and demand are supposed to be “elastic,” reacting to one another. But every market has failures that hamper the free movement of supply and demand. In the case of housing, those failures are significant, so the supply doesn’t increase and demand doesn’t decrease.
If something is expensive and profitable, more people should create and sell it, increasing the supply and lowering the price. But land is scarce and we can’t create more of it. That limits the supply side of the equation. So when demand is high, if supply doesn’t increase, prices will.
On the demand side there are also several factors limiting elasticity. People need homes. If beef is too expensive you can switch to chicken, or give up meat altogether. But people need homes and can’t opt out of the market. Also, someone looking for a home in the Berkshires isn’t going to move to Iowa because houses are cheaper there.
Some other factors that have increased demand:
- Older people stay in their homes longer, due to better health and the age-in-place movement
- Millennials, a large demographic who are in their 20s and 30s, are now in the housing market
- Remote work allows people in cities to compete with potential home buyers in more rural areas
- Historically low interest rates reduced the cost of mortgages
- An increasing wealth gap enabled more people to buy second homes
This means more bidders, and bidders from economic communities that have more money, are competing for too few houses.
Finally, housing is now a safe place to invest money, and there’s a lot of money out there. We recommended a book, which we still recommend, “In Defense of Housing,” by David Madden and Peter Marcuse. They argue that the housing problem begins when we treat housing as a commodity, an investment, rather than a basic human need.
It wouldn’t matter that housing is expensive if wages kept up. But as prices rise, there’s no guarantee that wages will increase at the same pace. We did a second show just on wages, again with Professor Neilson: “Brother Can You Spare A Dime?” It turns out there was a very quick answer to why the market doesn’t guarantee wages will buy housing.
Remember supply and demand? When prices are too low, producers of a product stop producing it, reducing the supply, which pushes the price up. In this case, the “product” is labor. But most workers don’t have the luxury to opt out of the market. Most people don’t have a choice not to work.
On the last two shows, we were trying to figure out why housing isn’t getting built. We came up with two answers: NIMBY and Bureaucracy.
NIMBY
In “Entitlement of the Status Quo, or NIMBY Weaponized,” we looked at one of the most powerful obstacles to housing development: NIMBY, or Not In My Backyard. At one time, if the government or a well-connected developer wanted to build something, they built it. As a reaction to that, environmental protections and other laws and citizen rights were established in the 1960s and ’70s. That was progress, in that regular citizens were able to stop some pretty horrendous projects in order to protect neighborhoods and the environment.
But perhaps the pendulum has swung too far. Now one or a few homeowners can use those same tactics to stop the development of multifamily projects that would house dozens of families. It happened in Great Barrington and it is happening in neighborhoods all over the country.
Complaints brought by neighbors aren’t necessarily frivolous. If you live on a quiet street with single-family homes and someone wants to take down a few houses and build 50 apartments, your quiet block is going to change. There will be more people, more noise, more traffic, and less light. All of that is true.
But if housing is a human right, how do we allow the “right” of 1 or 2 or 5 families to have a quiet street outweigh the rights of 50 families to have a place to live? As the title to this column implied, the current process gives an advantage to the status quo.
What allows this to happen is the administrative process. When the zoning was first established 100 years ago in Euclid, Ohio, it was legislative. Citizens, or their elected representatives, said what was and was not allowed in certain areas. The Supreme Court said that was a legitimate, democratic process.
But over the years, administrative bodies have been set up to administer zoning, and those administrative bodies have added regulations never vetted by democratic process, including the specious “condition,” which is discretionary. The Supreme Court, and lower courts, have been less enthusiastic about that. In fact, a legal challenge by one person to an administrative decision has enough of a presumption of likely success that the mere filing of an appeal puts the permit on hold until a decision is reached. That gives a lot of power to a single abutter.
Bureaucracy
Our most recent show focused on the bureaucratic obstacles facing anyone who wants to build housing. “Who Will Build Our Housing?” included an interview with developer and property manager Sam Nickerson, who told us there was a 25-page manual to guide would-be developers through the permitting process.
He said that the actual zoning requirements (the legislative requirements) were complicated enough, requiring lawyers, architects, and engineers just to figure out what is allowed on a given site. But then the administrative process kicks in, requiring drainage plans, lighting plans, traffic studies, and other reporting which, in the case of one of his recent projects, was a 650-page document that was presented to several town boards at many meetings. All this for a project creating just 13 apartments. Each presentation required an architect, an engineer, and a lawyer. Each board could suggest conditions before the project is given final approval. This process can cost hundreds of thousands of dollars, making smaller projects nearly as expensive to permit as to build.
We asked Sam, “What guarantees, what security do you have as a developer after you go through that process, that you can actually build it?” He answered with a single word: None.
The result? Some affordable housing projects are getting built by nonprofits using government money, and luxury homes are being built by developers, since the financing and the permitting are straightforward. The housing in between, what developers call the missing middle and which is most needed, has amounted to only a handful of market-rate, multi-family dwelling projects in the last several decades.
To sum up in a few sentences: not enough housing is being built to keep up with demand; and what housing is being built is either “affordable,” limited to a very narrow income range, or luxury. The free market isn’t going to save us, and we are throwing obstacles in front of developers, making it even harder to build housing.
There are a few things we can do locally to chip away at the problem. (It won’t be solved locally, but we can help.) In our next column we will explore some of the proposals that have been made and look at what it would take to implement them.
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Is there an issue you’d like us to discuss on the show? Do you have comments about this or previous shows? We invite your suggestions of topics that may be of interest and that might seem simple to address. Maybe there IS an obvious solution we haven’t thought of, or maybe It’s Not That Simple.
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