What is Causing Seattle’s Slide Toward Being the Next San Francisco?

I’ve already written about the San Francisco Death Spiral: limit supply, prices go up, blame developers and landlords, impose supply killing regulation, watch prices go up, repeat. Well, we’re right at the top of the spiral and getting ready to take the plunge. Local wannabe elected officials don’t have the intellectual acuity to offer solutions and reassurance to people angry about housing prices and others are taking advantage of the anxiety and stoking it with really bad policy ideas like impact fees, Mandatory Inclusionary Zoning (MIZ), and a host of other things sure to increase costs and limit supply. But all the bad ideas get lots of applause because, as I wrote yesterday, the villain gets his just punishment. Before we can offer solutions, I think we need to figure out, in the simplest syllogism possible, what is causing the problem. Here’s my first draft:

  • Rising housing prices make people unhappy, but are usually associated with many other factors outside of what we know creates higher prices, inadequate supply and rising demand;
  • Therefore, interventions to affect housing prices by local government are usually more regulation which increases costs and reduces supply, and thus increases prices;
  • Then, since people don’t associate rising prices with lagging supply, they assume housing is not being regulated enough and demand more regulation in the face of even higher prices; and
  • Extracting money and value from the production of housing to solve growth related problems (e.g. funding non-profit housing, building infrastructure, etc.) further exacerbates cost related production issues, limiting production and leading to higher prices.

For many people the response to this might be, “Duh!” and a forehead slap. But for most people in Seattle here’s how it works.

  • Housing prices are rising because Amazon and other tech related business are paying young kids lots of money to work at highly specialized jobs;
  • Since they are young, don’t have many other financial obligations, these young tech workers are willing to spend enormous sums of money on their housing costs, including for rent;
  • Rather than build housing for ordinary people, greedy developers are building “luxury housing” for these young tech workers and landlords are raising their rents to force out ordinary people so that they can rent to higher paying tech workers; and
  • Since greedy developers and landlords control City Hall, the Mayor and the City Council have agreed to massive upzones so that developers and landlords can build even more of this luxury housing to make more money from tech workers and squeeze poor people and people of color out of the city.

There it is folks. Two different movies playing the same screen. I’m working on what we’ll have to do to overcome this dangerous dissonance in the next few years ahead. It may be too late. If MIZ goes forward without pause and the City Council continues to add more and more regulatory costs and if we get rent control (it’s illegal, but that didn’t stop the Council from imposing an income tax which is also illegal), it will be exceedingly difficult to reverse this. Leadership matters, and today we have no leaders, only people that are selling stuff we don’t need.

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