(Unedited) Podcast Transcript 378: Repairing America’s Broken Housing System
This week we’re joined by Jenny Schuetz, a senior fellow at Brookings Metro to talk about her new book Fixer Upper. We chat about making housing decisions at the wrong scale, where housing reform would make the most sense around the United States, and how we could use MPOs to better organize regional housing.
Jeff Wood (1m 23s):
Jenny Schuetz, welcome to the Talking Headways podcast.
Jenny Schuetz (1m 42s):
Thanks for having me.
Jeff Wood (1m 43s):
Well, thanks for being here before we get started. Can you tell us a little bit about yourself?
Jenny Schuetz (1m 46s):
Sure. I’m a senior fellow at Brookings Metro. I’m an urban economist by training and have spent a really shocking amount of time at this point, thinking about zoning and restrictions on housing supply.
Jeff Wood (1m 57s):
And how did you get interested in zoning restrictions and housing supply?
Jenny Schuetz (2m 1s):
I wrote my dissertation on zoning in greater Boston and particularly looking at anti apartment buildings, zoning, which it turns out is rampant. By the time I finished reading a hundred and I think it was 186 cities and towns worth of zoning, I was completely radicalized. I thought this is a really important issue and we should talk about it more than we do.
Jeff Wood (2m 22s):
What is zoning like in Boston? What did you learn from your dissertation?
Jenny Schuetz (2m 26s):
The Boston suburbs really hate apartments, And they have lots of very creative ways of making it virtually impossible to build them. Boston is it’s. It’s an interesting area to think about land use because it’s very fragmented from a political geography standpoint. So the city of Boston is actually a pretty small part of the region. And then you have lots and lots of these really small cities and towns, many of which have existed since colonial times and think they’re still in colonial times. And so they still kind of think that they live in an agrarian economy where you have kind of a central green and everybody kind of does their own farming or sort of small craftsperson thing. And because of that, they really would prefer you only to build very large detached single family homes on two acres of land, even though they’re like 10 miles outside of Boston and everybody is a commuter.
Jenny Schuetz (3m 15s):
So it’s a place that thinks of itself is very progressive on kind of big social and economic issues, but it’s actually very small C conservative when it comes to a lot of kind of urban related issues like housing and transportation.
Jeff Wood (3m 28s):
Well, that leads to a question I had when I, when I was going through your book, which is like, what’s the impact of so many unincorporated or incorporated places on, on regional housing markets? It seems like that’s one of the biggest issues is there’s so many little tiny fiefdoms, and there’s so many ways for them to circumvent the regional need.
Jenny Schuetz (3m 44s):
That’s exactly right. We are making decisions about land use and housing at the wrong scale of geography. We have lots of local governments, most of which are very small in population terms individually, deciding do you want to build housing? What kind of housing, how much and an individual local government may think, I only want to build a small number of homes and they should all be million-dollar homes. And I will have, you know, one small school and sort of minimal public services, but if every local government or even a decent share within a Metro area come to the same conclusions independently, then the Metro doesn’t build enough homes. Employers can’t hire and retain workers because there isn’t housing for people at a range of different incomes.
Jenny Schuetz (4m 28s):
And in particular, this is really bad for lower wage workers because they are the least able to compete for housing. They wind up in the least desirable locations, which either means very far on the outskirts sort of, you know, two hour commute from their job or in a handful of core urban neighborhoods that have legacy apartments and subsidized housing in some cases, but almost never are those kinds of the high opportunity places. And so poor people wind up with just really lousy options and even a lot of middle-class households at this point, can’t afford to live in places like California and New York and DC and Boston, which creates sort of regional economic problems
Jeff Wood (5m 8s):
In the book. I found the illustrations of San Marino, California and commerce city. Really interesting. It feels kind of like a protection racket almost when those places decide that they don’t want to have more housing.
Jenny Schuetz (5m 20s):
It’s exactly right. I mean, the homeowners in really wealthy community is, might as well be incorporated hos and gated communities. They have essentially made it so hard to build housing. That’s affordable to anybody who’s not rich. I mean, we’re not even talking about sort of building low income subsidized housing, but just housing that a middle income household could afford to live in is illegal in a lot of places like San Marino. And so it winds up this very exclusive, very small community that essentially serves as sort of, you know, private enclave and nobody else has access to it, which maybe would be okay if there were a handful of places like this that kind of did their own thing. But in, you know, in areas like Los Angeles and the bay area, that’s a pretty large share of the overall land.
Jenny Schuetz (6m 4s):
And it makes the region essentially not function that well,
Jeff Wood (6m 7s):
I found it really interesting also the difference in say like their planning focus, right? You know, the ones that worked on code compliance versus the ones that actually thought about, you know, future planning, et cetera.
Jenny Schuetz (6m 17s):
Yeah. So San Marino and commerce are about the same size and population, but you know, San Marino has essentially twice the number of planners on staff. And if you look at the job descriptions, they are very definitely hiring people who have professional expertise who have graduate degrees. San Marino has a big focus on essentially neighborhood preservation. So they want to keep their homes in their neighborhoods the way they are. They’re very focused on aesthetics and providing a nice environment for their current residents. There’s absolutely no interest whatsoever in growing the size of the community overall, which when you think about it is sort of like that’s traditionally been, what planners do is they plan for expansion and growth, but these places are not interested in growth whatsoever.
Jenny Schuetz (6m 59s):
You know, and places like commerce would love to have more growth, but they’re not as attractive to market rate developers. And they don’t have kind of the resources in-house to be able to think about what kinds of investments could we be making, for instance, in, you know, parks and open space that might make us a more attractive community to bring in capital. You know, they’re sort of pushed at the limits just to manage the stock that they already have and keep things in decent condition.
Jeff Wood (7m 25s):
What do you think the hiring process is like when they’re hiring a planner? Is it like, are you going to be the one who can restrict the housing? Like, is there some way that they could intimate that they can get the right person for the job? That’s not going to ruffle any feathers?
Jenny Schuetz (7m 39s):
Yeah, that’s an interesting question. I haven’t looked at what a job posting looks like, but my suspicion is that there’s a lot of self-selection. So if you are a planner who wants to encourage say more income diversity in a community, and you really want to be embracing growth and thinking about how to do more climate friendly, high density development, I think you probably just don’t apply for a job in the San Marino planning department. My suspicion is that the people who apply for that know what they’re getting into and are okay with that.
Jeff Wood (8m 9s):
Yeah. Another thing that I thought about when I was thinking about the number of different jurisdictions in a region is it can happen actually at the city as well. I mean, there’s all demonic privilege and there’s single member districts for cities. It’s not just a regional thing that happens from different jurisdictions. It’s actually inside of a city that these problems seem to come up as well.
Jenny Schuetz (8m 28s):
They do, although that varies somewhat across cities. So last week I was talking to a group in Philadelphia, which has aldermanic privilege and Philly has really uneven growth and uneven demand across neighborhoods. So it’s, it’s actually one of the more affordable cities that has a lot of housing and quite a lot of really low cost housing. The problem is there may be three or four neighborhoods where everybody with money wants to live and those neighborhoods can’t accommodate enough demand. But then it’s, you know, it has some pretty high income neighborhoods, which are zoned for low density, single family, and the council members from those districts. Absolutely won’t consider building more apartments, you know, essentially making those neighborhoods open to growth.
Jenny Schuetz (9m 9s):
And so the city overall has just made this deal. There are a couple of neighborhoods that will absorb a lot of growth and grow quickly. And there are other neighborhoods that will get to stay the way they are, both high-income neighborhoods and low income neighborhoods, essentially, which don’t change over time. But it makes for a very strange kind of unbalanced mixture in the city.
Jeff Wood (9m 28s):
Well, so the book is fixer upper, how to repair America’s broken housing systems. What was the thing that made you want to sit down and write a book from the authors that I’ve talked to? It seems like it’s a fun process, but it’s also daunting. And I don’t know if stressful is the right word. It’s just like, it’s a lot of work.
Jenny Schuetz (9m 44s):
It’s a lot of work. It’s basically a second job. Yeah, for me, a lot of the ideas in there had been milling around in my head for quite a while. You know, we sort of have a couple of different housing conversations that feel like they’re going on parallel. So there is a conversation around zoning reform and housing supply. We need to build more housing. We need to make the process easier. Then there’s sort of a conversation around poor people who can’t afford housing. And the government provides subsidy is should we have more subsidies or different kinds of subsidies? And then sort of a third strain is we should be worried about the climate impacts of housing, both that we’re building housing that has high carbon footprints and that we’re building kind of risky areas, but these conversations very often happen in different rooms with different groups of people.
Jenny Schuetz (10m 32s):
And don’t really intersect. And I view these very much as angles of the same question or problem they’re sort of root causes driving all of those bad outcomes. And until we start talking about these as a package of problems and solutions that can help on all of them without making one dimension worse, we’re not going to make that much progress. I think both from a policy perspective, some of the same decisions, like make it easier to build market rate housing also makes the subsidy dollars go farther. So these should not be opposed to one another, they should be a collective. And sometime I think the politics may be a little bit easier if we’re trying to solve on multiple dimensions rather than sort of, we’re going to build a ton of market rate housing and not provide subsidies for poor people that gets you into this sort of political debate where you’re putting groups against one another.
Jeff Wood (11m 20s):
Why don’t we have that separation though? I mean, it’s interesting because I mean, I see all these things as one kind of topic and they’re all kind of interconnected and in the larger scheme of things, it’s interconnected with a whole host of other things like transportation, et cetera. Why is it siloed and why is it kind of disconnected like that when it should be put together? Like you mentioned?
Jenny Schuetz (11m 38s):
I think there are two structural reasons. One is that subsidies for housing and specifically for low income households are primarily a federal responsibility. So we have public housing and housing vouchers and the low-income housing tax credit, all of those come out of DC. And so those get talked about by people who are engaged in sort of the federal budget decisions, how much housing we’re building and the process for building housing is traditionally a local government responsibility. So we have local governments talking about their zoning, not connected to HUD and the conversations about the federal budget. And so it’s both happening at different levels of government. Some of this is about subsidies and expenditures and some of this is about regulation.
Jenny Schuetz (12m 21s):
And so those, you know, the, the sort of disconnect between the government agencies and the levels of government having the conversation, make it harder to integrate.
Jeff Wood (12m 29s):
Is there a best level of government to focus on in terms of reform?
Jenny Schuetz (12m 33s):
I think the most promise is potentially at the state level. And for two reasons, one is that state governments create local governments and give them their powers and authorities, including the power to zone and the power to raise revenues. And so state governments have this sort of legal and constitutional authority to get involved with it, which the federal government just doesn’t really have. The other thing is it’s not a nationwide problem or not the same problem everywhere in the country, right? So I’m not sure for instance, that, you know, Mississippi and Oklahoma need to be doing a really active role in state zoning reform and legalizing duplexes. So not all of the states need to be doing the same thing.
Jenny Schuetz (13m 15s):
What states can do is going to differ quite a bit. So crafting a federal response to the supply problem is going to be very difficult crafting state responses in say six to eight states that are really underbuilding is a much more manageable thing to do and can be tailored to the problem where,
Jeff Wood (13m 34s):
And what am I recent hobby horses is I live here in San Francisco and it’s a mess as you know, but it seems like a lot of our regulation is kind of a proxy for a lot of other issues that could be solved in a lot of different areas. For example, right now we’re having this discussion about an Amazon warehouse in San Francisco and the supervisor who’s in that district is like, you’re not going to come in here and just do whatever you want, you know, because the zoning allows it. You’re going to have to, you know, make sure that your wages are good. You’re going to have to make sure that you give everybody healthcare. You’re going to have to make sure that you pay us taxes, et cetera. But isn’t that like a, you know, minimum wage discussion, isn’t that a tax discussion, isn’t that a larger discussion about progressive ideas, which I, I totally appreciate, but why are we doing this all with zoning rather than say, you know, fixing all these other things, which obviously are hard politically, but it’s, you know, they’re getting combined into this little ball rather than being separated out.
Jenny Schuetz (14m 30s):
Yeah. I mean, that’s it, it’s a great question. Zoning is being asked to do a lot more than it was, you know, in the 1920s, when we started having zoning, then it really was about regulating the types of activity that could take place and the size and dimensions of structures. And if you look at kind of a modern zoning code and just look at the table of contents, there’s still pieces that, but they’re also things like, you know, environmental protections and review and historic preservation. And we sort of bundle a lot of our urban policy goals onto land use, which zoning wasn’t initially intended to do part of what happens in places like San Francisco, because there is so much demand to build.
Jenny Schuetz (15m 11s):
They’re both, you know, an Amazon warehouse and housing and everything else. There is so much market activity that wants to happen in San Francisco that isn’t allowed to. It creates a system for local governments to extort things from both the developers and the users of the space, right? So whether it’s Amazon or other companies or households moving in, it’s just, it’s the entry point to a negotiation where local governments can ask for goodies that they want themselves and that they don’t want to ask their current voters to pay for. Right? So like impact fees in theory are supposed to be used to offset the actual increase in public services from a new development. And instead you’ll get towns that are asking developers.
Jenny Schuetz (15m 53s):
If, you know, in order to build an apartment building, you have to build bike lanes that serve the entire community and upgrade our entire stormwater system, which is already overburdened. Like, why don’t you guys pay for that out of the revenues you already have, rather than expecting everything essentially to be paid for by new development.
Jeff Wood (16m 9s):
It’s often an individual development that is supposed to provide something for the whole city, like you mentioned. And that’s the frustrating thing too, is we’re asking the last person into the system to pay for everything else that everybody else should have otherwise been paying for.
Jenny Schuetz (16m 22s):
Yeah. I mean, it makes perfect sense from sort of a local political economy standpoint. If elected officials can get everything paid for, by people who aren’t yet voters, it’s much easier than getting paid for the people who are currently voters who don’t want to pay more in taxes.
Jeff Wood (16m 37s):
I really liked your idea about using NPOs to turn them into housing vessels, kind of as a way of funneling, you know, CDBG and L HTC monies. Do you think we’ll ever see MPOs have a larger role in regional planning than maybe they do now? I mean, I know that they have a role in some places like here, and we have a bag in here in California in the bay area, et cetera, but do you think the MPOs could be that for, you know, housing in that way or more regional governance structure
Jenny Schuetz (17m 3s):
They could be. And some of this is state specific. So for instance, Oregon actually has a much stronger role for their MPOs already because they have a statewide sort of how housing and conservation plan, where the MPOs really get to decide on kind of a regional distribution of housing. So the state framework has given the MPOs more teeth to enforce things than most states have. California obviously has the regional housing needs assessment. You know, the MPO is don’t have budgetary authority, but they do have somewhat more responsibility. You know, the way to give MPO is power is to give them a budget, which they can allocate or withhold. And so I think the easiest way to think about that is using some of the federal funding stream is better.
Jenny Schuetz (17m 46s):
You know, the federal transportation dollars go to the MPO, which then decides how to spend it regionally. There’s no housing money at all. That goes through MPOs things like the low-income housing tax credits go to states, which then allocate them to developers. Can you development block grant funds go to larger localities or to the state to pass on, but those are a couple of the funding streams that you could imagine if you pull those all together and potentially did some discretionary grants, as well as top-ups that would give the MPO a lot more authority in negotiating with local governments.
Jeff Wood (18m 18s):
I just think it’s such a fascinating way to do things. I mean, I think we have, you know, because of the earlier discussion we had about kind of jurisdictions that are so numerous, I mean, here in the bay area, we talk about transportation. We talked about how we have 29 transit agencies, et cetera, and how that could be you’re laughing and how that
Jenny Schuetz (18m 34s):
Transit agencies is a lot.
Jeff Wood (18m 36s):
It is a lot, it is a lot, but it’s even worse with housing, right? Because each place has its own housing authority to a certain extent and approves all these things. So, you know, maybe there’s a role for the MPO in that structure as well, just because of that bifurcation of responsibility.
Jenny Schuetz (18m 50s):
Yeah. And sort of a natural experiment to look at this is that there are some MPOs that are much more fragmented than others. So I live in DC and we actually have relatively small number of independent jurisdictions. And they’re pretty big just because we live in an area where they’re big counties that don’t have incorporated land, right? So Fairfax county, Montgomery county each have more than a million people. They’re larger actually than the district of Columbia. We have a couple of these large jurisdictions that are both job centers and population centers. And internally they kind of have to take into account whether they’re providing housing for workers at different levels because they also provide those jobs.
Jenny Schuetz (19m 32s):
So we actually have less dispersion in housing costs across jurisdictions, within the region than places like the bay area or LA. We do have a lot of sort of variation in costs within jurisdictions, but it’s a somewhat more integrated market just because of the size of most of our counties.
Jeff Wood (19m 50s):
Do you have any different thoughts about housing before and after writing the book? Was there anything in your research that changed your thinking on something specific?
Jenny Schuetz (19m 58s):
So the, the chapter on climate impact was sort of a new area for me. I hadn’t read really deeply in the academic literature on that. And I will say that writing that chapter freaks me out. Like I thought more about the sort of we’re building homes in places that are car dependent, where people have to drive a lot and that’s bad for climate impacts, but I hadn’t read as much on how many homes are in places at really high risk. And that’s sort of built into our mortgage and insurance systems. We encourage people to keep building those places. I feel like we got a lot of people and a lot of buildings in places that will be damaged by climate over and over and over again.
Jenny Schuetz (20m 38s):
And there’s not an easy answer to that, right. We can’t in fact, just tell everybody to pick up and move away from areas with high sea level because they can’t afford to move there. Right? So like long-term homeowners, can’t abandon the house, that’s their entire asset and move someplace else without compensation. And there’s no money to pay for this. So the extent to which we have enormous, both human exposure and financial exposure, and as best I can tell policy makers are just not facing that and are not kind of providing support or have a plan at anything like the scale that we need to do. I find really scary.
Jeff Wood (21m 18s):
Yeah. There’s small plans, but not the large plans. There’s not a large kind of focus on that. There was a yesterday, I think it was the FEMA released about, I think it was hurricane Ida came through maybe last year. There’s so many hurricanes and I can’t remember which one’s, which unfortunately, but you know, they have a fund for that and FEMA put down $60 million and I was like 60 minutes. That’s nothing, nothing. But the cool part is, is that they’re actually working on programs where they can give the money to towns and then the towns can decide how to use it. But they are allowing the towns now to use it, to purchase people’s property and then they could vacate it. Right. So they can go somewhere else. So they can actually now, even though it’s such a small amount of money, it’s a, I think it’s a good way to start forward in that process that they’re actually starting to think about managed retreat and allowing it through funding rather than just, you know, saying, well, you’re out of luck.
Jeff Wood (22m 4s):
You can either rebuild your house. You can put it on stilts or you can do some sort of mitigation measures, but now they’re allowing people to move, which I think is a big step. And even though it is just $60 million, I think that’s a good step forward. But like I said, it’s $60 million. That’s nothing. When you think about how much housing costs and how much damage is done through a lot of these natural disasters.
Jenny Schuetz (22m 22s):
Yeah. I mean, there needs to be more money for planned relocation in places that we’ll just have to do this at some point, it’s a conversation that’s really hard to have. And I can understand why, you know, city officials don’t want to say, look, guys, we’re all going to have to move because none of us are going to be above water 10 years from now where we’re all going to keep burning down. So these are, these are hard conversations to have, but it feels like we’re not having honest conversations about the level of risk and exposure and the amount of money available for this stuff. Both for, you know, things like seawalls, but also for relocation. It it’s, it’s a drop in the bucket compared to what we’re going to need.
Jeff Wood (22m 58s):
The other interesting conversation is the insurance industry conversation, especially say here in California with the wildfires, I mean, there’s been a number of articles recently talking about they’ve got profits for like 26 years and then two years of fires and it’s all gone. Everything that they had built up to save for future insurance needs are gone. And so, you know, how are they going to ensure any future housing that might go on the urban wild land interface? They’re not basically. And so there’s going to have to be a reckoning because the state props it up, you know, they’re, they’re saying you have to have insurance and you have to provide a basic insurance, but there’s some sort of reckoning that needs to happen in that sphere as well.
Jenny Schuetz (23m 32s):
Yeah. And I think that could be one of the levers to make people take this seriously. If, if insurers in California just stop insuring large parts of the state, then either the state has to step in and be the insurer of first resort and pay for that, which is going to be just astronomically expensive. Or they have to in fact, say, look, people can’t live here. And we are going to figure out a managed strategy to move people away from high-risk areas to safer places, which by the way, like you can’t move people away from high risk, high fire risk areas. If there’s no housing to move them to. Right? So like these really are flip sides of the same coin. Most people who are living in areas that are at high risk would prefer to live someplace at lower risk, if they could afford housing there.
Jenny Schuetz (24m 17s):
And so we’re going to have to lean on both sides of this equation.
Jeff Wood (24m 21s):
There’s another interesting piece that I thought about last week as well, which there was a, I think it was a research paper and maybe it was in nature or something along those lines, but it was published in Anthropocene magazine and the Chinese have moved 350 million people from rural areas into cities from 2005 to 2020, that’s over the population. United States, obviously United States is 330 million or so. And so that’s a really fascinating, and what they found was that it actually increased the carbon intake of those rural areas because the people weren’t farming, they weren’t using the land anymore the same way. It was actually allowed to go back into nature, those types of things. And it’s actually created a carbon sink so that a lot of that prop that land. And so I’m thinking about that in the same way with these insurance discussions is that there’s a double benefit from not allowing people to live in that wild land, urban interface.
Jeff Wood (25m 8s):
They don’t have to worry about wildfires. They can move to cities. And then we also have that recreation of nature that actually helps our carbon issue that we’re having, trying to get away from the increase in temperatures.
Jenny Schuetz (25m 19s):
Yeah. I mean, there’s no question from a climate perspective, we should have fewer people sort of sparsely sprinkled and in risky areas. And more people concentrated in cities for people who really like a low density lifestyle and they like being in the country or what feels like the country that is going to be a shift. And, you know, we’re essentially going to have to tell people at some point, if you want to continue doing this, it’s going to be a lot more expensive for you because we’re not going to subsidize it. We can’t, in fact, relocate that many people to urban cores, if the urban cores won’t build more housing, China has sort of a couple of safety valves for absorbing all of the rural to urban migrants, including a really large informal housing market. And the U S doesn’t have one in quite the same way.
Jenny Schuetz (26m 2s):
Although we do have informal housing, but not nearly as much. And I think we would be less comfortable with what an informal housing market at scale looks like.
Jeff Wood (26m 12s):
Another question I have for you is how much of the national debt do you think comes from the poor long-term housing location decisions? So the great recession Tory’s sleep. We got to sprawl before it got to urban areas, natural disasters are causing a lot of problems that we just talked about and, and spending, what do you think the overall impact on better housing outcomes and better land use decisions have on the say the national debt writ large?
Jenny Schuetz (26m 35s):
Yeah, I don’t know about the debt necessarily, but there’s pretty good research that we’ve lost overall GDP. So productivity in the economy from building housing in cities that have really productive companies, you know, so there’s a sort of famous estimate by a couple of economists that our GDP is 36% less than it should have been over about a 30 year period of time because San Francisco is so expensive that people who want us form their own kind of startup companies, can’t do it. And you wind up with a lot of talent. That’s locked in low productivity places, you know? So that seems to be a pretty strong argument on the national level that we should care about this. And it’s not just a local issue.
Jeff Wood (27m 14s):
Another interesting part of the book discusses household wealth, the point about a housing asset, not being very liquid is, is a really important point, but also makes me wonder why people are so worried about their assets appreciating or depreciating. If they know that a new building being built next door will mean more housing it’ll probably mean higher values for their houses. I’ve always wondered why people are so worried about it, especially here in San Francisco, a new housing complex decreasing their values when that doesn’t seem to ever be the case.
Jenny Schuetz (27m 42s):
Yeah, there, there’s sort of a funny logic going on. If you go to a community meeting and people are worried, you know, building an apartment next door to my single family house is going to lower my property values. And also it’s going to cause gentrification and displacement, both of those things, can’t be true at the same time yet somehow, you know, they are. And you know, we do know that building new housing has different impacts in different kinds of neighborhoods. So for instance, building a new light equity building in a relatively low-income neighborhood can actually raise the value of properties in the neighborhood because it’s usually an asset, right. It’s providing new, higher quality housing and that’s, you know, good in low income neighborhoods. There’s some evidence I think, particularly coming out of Vancouver that like building 80 years and super rich neighborhoods does bring down the values of properties a little bit because people in those super rich neighborhoods don’t want EDU’s within eyeshot.
Jenny Schuetz (28m 32s):
But yeah, like we’ve, we’ve overly exaggerated how much dense housing can harm low density neighborhoods. And there’s just, there’s not much evidence that it really does. But I think a lot of the people who were saying it’s gonna bring down my property values are actually more concerned about lifestyle factors. Like they’re going to be non rich people living with an eye shot. You know, I don’t really like that. It makes my neighborhood less exclusive, which is true, but that’s also kind of one of the benefits,
Jeff Wood (29m 2s):
But then you can’t have all these other cool factor. Anyways, I, we were talking the same language. I want to get into an argument with something that we both agree on. So funny.
Jenny Schuetz (29m 13s):
I mean, what if the other things that I think we could make more sort of the proactive argument, if you build more housing in some of the low density neighborhoods that really don’t have much of a commercial sector, you can support a lot more neighborhood serving retail. So over the weekend, I was at a neighborhood in DC called Cleveland park, which is traditionally one of the very high income affluent neighborhoods. And they’ve got a main commercial stretch along Connecticut avenue, which honestly looks pretty dead and awful this point because it’s such a low density neighborhood, not that many people live within walking distance, and most of them are older households who don’t go out to eat that much. So the restaurants there are really struggling and it feels like a neighborhood that is declining.
Jenny Schuetz (29m 55s):
There’s no energy, you know, there’s no pedestrian life on the streets. Those businesses are having a hard time staying in business. And then you go to some of the neighborhoods where they’re building a ton of new apartments and there’s energy and there’s bustle. And there are a ton of brand new eateries and they’re still opening more stuff. So I feel like people who live in his sort of high income, but low density neighborhoods have forgotten what it’s like to be in an energetic neighborhood. That’s kind of the new hot place.
Jeff Wood (30m 21s):
That’s an interesting kind of juxtaposition value versus energy versus vitality as a, as it were, you know, some of like Jane Jacobs or, or Robert Venturi or others would say that the messy vitality of cities, this is a really interesting point because you can store value, you can stock it away. And if you’re a Russian oligarch, you can store it in a building in New York city or whatever, but then it takes away from the city overall because there’s just, it’s a bank vault, not actual city.
Jenny Schuetz (30m 44s):
Yeah. And I think some of the neighborhoods that historically have been not just high income, but also high social status, or actually becoming less desirable places, at least for younger households to live because they feel kind of old and dead and stuck in the bud. Like that’s not the new, exciting place to live. That matters a lot for sort of retail and the commercial side of things. But it also matters for households and they’re kind of coasting because they’re in a close in location. They have access to the Metro. They do have probably the highest performing schools in the city, but hardly anybody lives there. And it just doesn’t feel like a place that’s in as much demand as it probably was 20 years ago.
Jeff Wood (31m 24s):
What’s your favorite topic to talk about these days?
Jenny Schuetz (31m 26s):
I mean, everything zoning related,
Jeff Wood (31m 30s):
I mean, was there something in the book that you’re the most excited to write about that was like the first chapter you wrote? You’re like, okay, I have to write, you know, this much about it. I have these ideas and maybe these topic areas, but which one did you start with or which one was the one you were like, okay, this is the, and it’s probably zoning. I’m guessing
Jenny Schuetz (31m 44s):
It is. I mean, zoning zoning as the, sort of the molding thinking factor to start the book, it’s the biggest problem and the hardest to solve. I think the chapters that made me or the topics that made me most excited and optimistic coming out of it are sort of the growing reforms or interest in reform at the state level and the political coalitions that are building around some of these state and local reforms. You know, so this is really still quite new. I mean, California has had state level housing policies for many decades, some good and many not so good, but many more states are starting to realize that this is something they could do something about to talk about some positive directions.
Jenny Schuetz (32m 27s):
You know, I’ve had conversations with a number of people in Utah. Connecticut had some interesting activity in New York state, even sort of walking in the direction of something this year. I think that’s a really positive move on the policy side. And I’m very energized by the amount of political conversation going on. Local groups springing up all over the country that are actively organizing to say, we want more housing. We want more density. You know, we want more economic diversity in our community and pushing back against the NIMBYs. That’s a really a new phenomenon. And I think that’s the way we’re going to make policy change.
Jeff Wood (33m 1s):
That Connecticut discussion has been really interesting lately. There was a, I guess it was a state legislator that came out and argued was arguing with an activist about whether housing was a human right or not. And she basically came out and said, housing. Isn’t an a right. You know, you have to earn it and you have to get enough money to live here. And it’s like, well, there’s a problem with that because you’re restricting how much money it takes to actually buy a house. And it’s just frustrating to see these conversations happen over and over again. I feel like they’re also talking past each other to a certain extent.
Jenny Schuetz (33m 27s):
Yeah. I mean, if you’re an elected representative from Greenwich, Connecticut, you were doing exactly what your constituents want you to, which is to protect really, really high income places that don’t want anybody else to move in, but it’s not a particularly helpful stands for the state in Connecticut’s a great example, they’ve they don’t build enough housing that people can afford. There are other places that people can live in the larger region and they are losing overall households and especially younger households. Right? So being a shrinking aging state is not a good position to be in. If you were the governor, you know, the individual legislators are sort of towing the line for their constituents, but that’s not a good trajectory to be on.
Jeff Wood (34m 8s):
Yeah. It doesn’t seem like it helps people in the long run. Why was it important to have a discussion about community infrastructure and finance as well in the book?
Jenny Schuetz (34m 16s):
Because the way we pay for a lot of stuff is really distorting to housing market outcomes. You know, we rely very heavily on local governments to pay for things like schools and roads and parks, local governments rely on property taxes, which then creates this perverse incentive. If you’re a local government only allowing million-dollar homes makes it easier to bring in revenues. And you have a limited population to serve. When you start building lots of housing, there’s the fear that the new housing is going to increase the demand for services without paying for itself. So this creates local governments sort of their own incentive apart from their voters to block moderately priced low-income housing.
Jenny Schuetz (34m 58s):
And that’s obviously not great then for the region for low-income households, you know, the us is I think sort of on the far end, among developed countries in relying on local governments to pay for stuff, especially things like schools like France just has a national education system. And the federal government provides equivalent funding for every student in the country, which sort of like blows my mind. You know, that’s an option and we have chosen not to go that route. So we’ve created a system that both has enormous inequalities in the quality of public services across rich and poor places, and also creates disincentives to build enough housing.
Jeff Wood (35m 36s):
It’s interesting. I do feel like like European countries are often more like states than they are like federal governments, just because of their size and also how much population they have. But it is interesting to think about, you know, a lot of times in transportation that discussion I’m, I’m just kind of states bother me. And especially from a regional perspective, when you get into like the smaller states or even like when you get to the Dakotas, which are like, why are there two Dakotas? It doesn’t make any sense, but it just, it’s frustrating to see all these levels of government. And then we have the federal government state government, local governments, then you have your regional MPOs, et cetera. It’s hard to kind of coordinate all that. And I feel like in the European examples, a lot of times it feels like they just have a state government, they just have a local government and they don’t have that kind of third tier. They have it, but it’s not quite the same.
Jeff Wood (36m 16s):
And it’s frustrating to kind of see the differences and try to reconcile them, I guess, because there are so many good examples, right? There’s so many good examples of in Vienna and, and other places of, of housing policy that actually works.
Jenny Schuetz (36m 27s):
Yeah. And I mean, all of the European countries are a little bit different too. It’s like Germany is a federal system and they do have state governments that provide some level of services, but most of the European countries have more things, sort of federal standards around stuff that we would consider to be part of the social safety net. Right. So, and school is part of that. And healthcare is part of that higher education. So there’s just more acceptance that you will have federal guidelines, federal funding, equivalent kinds of services, rather than delegating this stuff to the local level.
Jeff Wood (36m 59s):
The other interesting thing that popped out to me in the book was the discussion about subsidies for housing. So the mortgage interest deduction and another, all those other things. It also brought me to thinking about kind of, you know, you, your suggestion was to target first time home buyers, which I thought was really interesting. And for me as somebody who just purchased the house, it was really fascinating to think about that. But I’m curious why a first-time home buyer and not necessarily somebody from a certain income strata where they might’ve bought a starter home at some point, but then, you know, they might’ve had a couple of kids and then maybe they just need a little bit of help to get up to that next level to get enough space for the family.
Jenny Schuetz (37m 32s):
So I think the way to think about the proposal is first of all, the way we have the mortgage interest deduction Strat structured currently is both ineffective at helping people become first-time home buyers and incredibly regressive because most of the benefits go to rich households who not only already own their home, but could buy it without any kind of subsidy. Right? So it’s ineffective and regressive both. If we want to subsidize home ownership. And I would put it sort of a question mark around that, because I’m not convinced that homeownership is sort of the be-all and end-all, but if we’re going to subsidize home ownership, the way to subsidize it is for people who are just getting into it for the first time.
Jenny Schuetz (38m 12s):
Right? And some of this is just like buying your first house. There are big transaction costs, so there’s the down payment and the closing costs. And so you have to have a chunk of wealth in order to transition into that. That’s the transaction that could be made easier with some kind of a targeted subsidy, right? And the way it works. Now, if you come from a family with wealth, there’s a good chance your parents or grandparents are going to give you some money to help you buy your first home. If you don’t come from a family with wealth and that your family can’t help you, that’s a much harder move to make. Right? So providing a first time home buyer tax credit in a sense would be giving a leg up to people without family wealth without necessarily conditioning it on family wealth.
Jenny Schuetz (38m 53s):
Right. We could also do that. And most of the proposals was just doing this graduated by income. So like if you’re, if you were in $500,000 and you’re buying your first time home, you’re not going to get much of a credit, or it’s not going to be much relative to the value of the house. If you were in $40,000 and you’re buying your first time home, a $15,000 tax credit is actually quite a lot and could be very helpful.
Jeff Wood (39m 15s):
Are you optimistic about our housing future?
Jenny Schuetz (39m 17s):
I’m optimistic about pieces of it. I do think that we are getting more momentum in high cost states for the state to do something and more of a collective action response to nimbyism, which has taken a long time to come. You know, everybody I talked to under the age of 40 is furious and frustrated that housing is so expensive, right? If they’re renters, they can’t save up enough money to buy a house. They see their rent going up faster than incomes. Every year. There’s a sense that previous generations had access to wealth building that they don’t. So, you know, the under forties are angry and they should be, if they show up at community meetings and they start voting in local elections at higher rates, we could see some policy changes.
Jenny Schuetz (40m 2s):
I think the generational push is likely to help a little bit. The counter side is status quo is really hard to change. And there are a lot of people who are heavily invested in the current system, obviously a lot of existing homeowners who sort of have comfortable lives and want to stay there, but also all of the kind of interest groups that are doing okay under the current system and not really interested in opening the conversation to new policy ideas.
Jeff Wood (40m 28s):
Yeah. It’s so frustrating to see the conversations as they are right now. And especially since there’s so many people that are disingenuous about it, you mentioned the book, the slide about avocado toast. And that’s like the common, you know, the avocado is like this symbol of housing to a certain extent. I mean, there’s even the California housing podcasts. They even have a whole section related to avocado of the Fortnite, et cetera. And so it’s frustrating to see those little tiny dinks versus that larger discussion of, you know, there’s so much wealth being created and it’s all going to a certain age group that got in early and especially here in California. But I think around the country, you’re seeing that to places like Austin are starting to see it as well as it ramps up there, et cetera.
Jenny Schuetz (41m 8s):
Yeah. And the generational split is not just the us. I talked to colleagues who are working on housing in the UK and then in Germany and France in Canada, because we all had kind of the same demographic trajectory. You know, the boomers exist everywhere. The boomers, as it turns out really our opportunity hoarding, they had big subsidies and they had a growing economy and God got a great deal on their first home and their trade up home and are, I think really oblivious in many cases, just how much harder it is for people to get into home ownership and even just for people to be able to pay the rent on a decent quality apartment in a decent neighborhood. Yeah.
Jeff Wood (41m 47s):
Well the book is fixer upper. How to repair America’s broken housing systems. Jenny, where can folks find the book? If they want to get a copy,
Jenny Schuetz (41m 53s):
You can find it online through bookshop. That’ll provide it through one of your local independent bookstores through Amazon. It’s in bookstores around the country and bricks and mortar stores. And you can find more information on Brookings website as well.
Jeff Wood (42m 5s):
Awesome. Yeah, it’s a great book. I hope folks get a chance to read it, pick it up when you get a chance. Jenny, thanks for joining us. We really appreciate your time.
Jenny Schuetz (42m 11s):
Thanks for Having me