The Homevoter Hypothesis

Ned Resnikoff has a nice piece in The Nation about YIMBY’s, the abundance agenda, and realism about the politics of housing.

He highlights how YIMBYs really are interested in levelling the playing field in fundamental ways. Left anti-YIMBYs and Abundance critics accuse YIMBYs of ignoring political conflicts of capital vs. consumer. Resnikoff notes that YIMBYs are addressing those conflicts with additional layers of subtlety that the critics should give some attention to.

The nub of it: “What is true for the labor market holds true in the housing market. Where housing is scarce and expensive, landlords, homeowner associations, and developer cartels hold the power, and tenants and homebuyers are cast into the role of supplicants, forced to accept subpar accommodations at whatever price and in whatever neighborhood is dictated to them. But where housing is plentiful, the roles are reversed: Landlords, sellers, and incumbent developers need to compete on both price and quality.”

Abundance gives consumers power. That’s the point.

It seems to me that certain progressive ideological frameworks treat power imbalances as a state of nature that must be directly wrestled away, and housing is an empirically clear case where power imbalances are currently largely a product of obstructed markets. Markets will do a lot of that balancing for us where we let them.

Of course, in the well-functioning market, there will be some power imbalances that fit more comfortably in the progressive framework. But, at this point in the narrative of American housing, fixing the larger imbalances created by obstructed markets is an important prerequisite to get to a place to functionally deal with the imbalances that are more of a state of nature.

My general view on this is that it is sort of a litmus test of whether a person is ruled by empirical curiosity or prejudices. If you have to engage in an argument about this, it’s a sign of intransigence. Politically, progress will come from getting the word out to more people rather than improving the argument for intransigent critics. I don’t mean that as a criticism of Ned’s piece. He does a good job of laying out the basics for those who might not be intransigent.

The Homevoter Hypothesis

Resnikoff posted a short supporting piece, titled, “The Homevoters Hypothesis, Revisited, Or: How I Learned to Stop Worrying and Love Material Analysis”.

The Homevoter Hypothesis came from Dartmouth economist William Fischel. Broadly speaking, Fischel argues that NIMBYism is fueled by homeowners protecting their property values.

Resnikoff writes, “My view on his argument changes from year to year, if not month to month. When I first encountered it in my Baby YIMBY era, I pretty much swallowed it whole. Then I thought about it some more, consumed some more literature, talked to other YIMBYs, and slowly came to reject most of the homevoter hypothesis. But recently—and writing my latest Nation piece really crystallized this—I’ve once again become more sympathetic to Fischel. It’s not the whole story, but it’s a big part of it.”

I also have a fluid relationship with the homevoter hypothesis.

I have come around to an alternative homevoter hypothesis. Homeowners aren’t exactly motivated by the resale value of their homes. They are motivated by the rental value of their homes. They are motivated by the “character of their neighborhoods” - the neighborhood’s value to them as a resident. Of course, that naturally can feed into the value of their homes, which they also happen to benefit from.

One shorthand I have come to accept in housing politics is that families naturally tend to, and want to, segregate by class and income, for better or worse. In functional urban housing markets of the late 20th century, home values tended to be highly correlated with neighborhood incomes. In most cities before 2008, homes across the whole metropolitan area tended to sell for 3x to 4x the incomes of the neighborhoods’ residents.

Families basically sorted themselves by income across a city, and then maintained and re-invested in their homes at the rate that was appropriate to very local income levels.

Neighborhoods used zoning to require that the minimum cost of buying and maintaining homes there stayed high enough to avoid sliding down the socio-economic ladder. Keep the neighborhood nice. Keep the riff-raff out. Not really an unreasonable goal, to a certain extent.

The problem was that when everyone does it, it doesn’t work well. The riff-raff lives somewhere. And, when everyone does it, it basically cuts off a major source of affordable housing - filtering. Filtering is, really, the equalizing economic benefit of aging neighborhoods “sliding down the socio-economic ladder”.

What soured me a bit on the homevoter hypothesis is that all that effort does frequently help maintain the status quo in the neighborhoods that use it. But, as zoning and other NIMBY tools came to dominate the housing marketplace, it wasn’t the protected neighborhoods that gained value. It wasn’t the neighborhoods that low-income residents were excluded from where home values inflated the most. It was the neighborhoods where low-income residents were excluded to where home values inflated the most.

I don’t think the homevoter hypothesis says that homeowners are motivated by inflating the value of other neighborhoods. But, that’s what has happened. So, in a way, I think the “strong version” of the hypothesis has failed. NIMBYs want the lived value of their neighborhoods to be protected. If they were renters, that would increase their costs. Homeowners have that cost hedged. They pre-paid their future rents. But, homeowners aren’t primarily motivated to created windfall gains for themselves. They are motivated to protect the status quo. They are motivated as residents, more than as owners.

But, as this problem as metastasized across housing economics, their motivations as owners have become more central.

The result of universal zoning and NIMBY obstruction has left us with a shortage of apartments and with rising rents in neighborhoods that were formerly more affordable. This has led to increased pressure of households to move into protected neighborhoods in spite of exclusionary rules, and for developers to build homes that meet the structural requirements of the protected neighborhoods in a way that meets the housing needs of excluded families.

This has led the homevoters to move on to two new policy preferences.

Homevoters and Mortgage Access

First, homevoters supported tightening mortgage access, which largely was implemented in 2008 coming out of the 2000s housing boom. The wrong people had been getting mortgages, it seemed.

The very popular opinion at the time was that homes had become too expensive. Aren’t homevoters supposed to like that? The sentiment around 2008 suggests not! They want to live in homes with high rental values, because as residents it is pleasant to live in a home with high rental value.

So, the homevoter position was to clamp down on mortgage access to keep home prices low. This was, perhaps, the most popular policy choice of my lifetime.

One criticism of the YIMBY movement is: if supply really can help lower costs that much, then YIMBY faces a political backlash if it works. To the contrary, collapsing home prices were so popular, America chose crisis in order to make it happen. More fundamentally, that experience supports the idea that homevoters are interested in the stability of the structures and neighbors that are close to them more than net worth.

The problem was that they were giving mortgages to the riff raff, which threatened to rev up the filtering process. Rick Santelli’s famous “Tea Party” rant in February 2009 was a homevoter rant. He was mainly angry that the government might modify mortgages to help homeowners avoid foreclosure.

“In terms of modifications, I have an idea… How about this, President and the administration? Why don’t you put up a website to have people vote on the internet as a referendum to see if we really want to subsidize the losers’ mortgages? Or would we like to, at least, buy cars and buy houses in foreclosure and give ‘em to people that might have a chance to actually prosper down the road. And reward people that could carry the water instead of drink the water.”

The average home price across the country was down 20%. The homeownership rate was down 2% from its peak. New home sales were down 80%. The homevoter position was that this was not enough. We needed fewer homes, fewer homeowners, and lower home prices, until the riff raff was gone.

Homevoters and Renters

The mortgage clampdown did a fabulous job of getting the riff raff out for more than a decade. But, stasis is unsustainable.

By the time Covid arrived, rents were rising enough in the old, aging neighborhoods and apartments that investors started stepping in where mortgage lenders were forbidden. Investors started buying up homes to rent them. Increasingly, investors could justify buying new single family homes to rent them to the excluded families.

As a result, today, you can’t attend a housing-related community outreach meeting without seeing at least one homevoter at the microphone. And, again, they are upset that home values are rising. The investors are bidding up the prices of homes so that they are too expensive for families.

The rising movement to ban investor homebuyers is the new homevoter position. And, again, it is a position against rising prices.

It is, however, a position for high rents. From an aesthetic point of view, renters infiltrating the neighborhood lowers neighborhood socio-economic status. It lowers rents. From a supply and demand point of view, if the supply of rental units is obstructed, landlords will charge more and renters will have to pay more.

It’s the homevoter sweet-spot. High rental value without the high prices.

Increasingly, as the failures of zoning play out, simple restrictions on structures have had to give way to restrictions on access to capital, and now, potentially, access to any housing at all.

If you’re not excluded, you can get a mortgage and a home at a “reasonable” price. If homevoters succeed at adding obstructions to single-family rentals to the existing obstructions to multi-family rentals, then excluded families will increasingly not have homes of any kind.

I can’t help but see the parallels to immigration. Tents on the sidewalk are illegal. As we increasingly block the normal avenues to basic human needs and aspirations, the status of the excluded will be “illegal”.

Markets facilitate some natural level of socio-economic segregation. But, not completely. Almost all housing politics are motivated by a fear that less regulated housing markets will allow uncomfortable socio-economic mixing. Zoning, mortgage regulation, and now potentially regulation of large scale landlords, have created crisis-level conditions. The outcomes are so egregious that they are easy to document. The challenge is to build a plurality of one-eyed reformers in the land of the blind.