Tag Archives: homevoter

Silicon Valley’s Housing Crisis

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photo by Smitha Murthy

Drop in the Bucket?

Realtor.com quoted me in Could There Really Be Relief Ahead for Silicon Valley’s Housing Crisis? It opens,

Finally! A glimmer of hope has appeared in Silicon Valley’s housing crisis. Amid gloomy and downright terrifying stories about astronomical home prices and tighter-than-tight inventories forcing well-paid tech workers to live in vans, pay $2 million for a tear-down shack, or ponder commuting to work from Las Vegas, there seems to be some good news for a change: City Council members in Mountain View, CA, approved plans to build 10,250 new homes in the area.

Given that Mountain View has only about 32,000 homes total, this will increase its housing inventory by a whopping 32%—all purportedly within “walking distance” (possibly a bit of a long walk) of tech giant Google, which has long been lobbying on this front and will no doubt break out the Champagne once developers break ground. Sure, it may be years before these homes become a reality, but even the idea of them may have many locals (or those moving there) daring to dream. Might this new influx of housing cause home prices to drop within reasonable reach?

As logical as this renewed optimism about Silicon Valley’s housing market might seem, experts aren’t so sure home prices will budge all that much.

“This news in itself will not drive down prices much,” says David Reiss, research director at the Center for Urban Business Entrepreneurship at Brooklyn Law School. “While a 10,000-unit commitment is significant, Silicon Valley as a whole has about 3 million people living there.”

So if you consider the population of the entire area—many of whom would likely kill to move to Mountain View—10,000 new houses would house only 0.3% of these people. For you math-challenged, that’s less than a measly half-percent! 

And even though the number of homes may be edging upward, so are the number of people moving there.

“Silicon Valley remains a booming economy, so it’s likely that the population will continue to grow, further driving up prices,” Reiss continues.

As further evidence that more homes doesn’t necessarily lead to cheaper home prices, Florida Realtor® Cara Ameer points to another historically hot market: New York City.

“In New York, more new buildings has had no impact on housing prices or rents,” she says. If anything, the only change New Yorkers noticed is their neighborhood got a lot more cramped. The same will likely be true for picture-perfect Mountain View.

“The biggest thing people will see is increased congestion,” says Amer, “with many more residents, cars, and the need for schools and additional services.”

In fact, fears of overcrowding might even galvanize current homeowners in the area to show up en force at future City Council meetings to fight the greenlighting of additional developments—that is, unless they’re out-muscled by employee-hungry firms such as Google.

“As key businesses realize that the lack of housing is hurting their ability to recruit and retain good employees, it is possible that Mountain View’s decision is a harbinger for more pro-development decisions throughout Silicon Valley,” Reiss explains. “Current homeowners, called ‘homevoters,’ tend to make their anti-growth views known to local officials, but once the interests of local businesses focus on the lack of workforce housing, it can change the dynamics.

“These are powerful companies. The result is that those decisions can become more pro-growth than is typical for suburban communities.”

Zoning Rules and Income Inequality

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Bill Fischel photo 2015

Bill Fischel

William Fischel, a preeminent land use scholar, has recently published Zoning Rules!: The Economics of Land Use Regulation. The abstract for the book reads,

Zoning has for a century enabled cities to chart their own course. It is a useful and popular institution, enabling homeowners to protect their main investment and provide safe neighborhoods. As home values have soared in recent years, however, this protection has accelerated to the degree that new housing development has become unreasonably difficult and costly. The widespread Not In My Backyard (NIMBY) syndrome is driven by voters’ excessive concern about their home values and creates barriers to growth that reach beyond individual communities. The barriers contribute to suburban sprawl, entrench income and racial segregation, retard regional immigration to the most productive cities, add to national wealth inequality, and slow the growth of the American economy. Some state, federal, and judicial interventions to control local zoning have done more harm than good. More effective approaches would moderate voters’ demand for local-land use regulation—by, for example, curtailing federal tax subsidies to owner-occupied housing.

The book engages with many other leading land use scholars like Edward Glaeser, Robert Ellickson and Vicki Been so the reader gets a good sense of what is at stake in contemporary land use debates.

I was particularly intrigued by Fischel’s discussion of the relationship between land use policies and income inequality. He writes that, “Moving to opportunity was an important source of income equalization for the first two-thirds of the twentieth century. That migration trend has nearly stopped as a result of increased land use regulation in the high-productivity areas” on the coasts. (166-67). The book carefully parses out how such changes in land use regulation had such a big effect on people’s choices.

You can find the first chapter of Zoning Rules! here if you want to give the book a test run.