With rents soaring across major cities, a key part of the American Dream—buying a home—is increasingly becoming out of reach for young adults. Over the past decade, the movement advocating for pro-housing development policies, YIMBY (Yes in My Backyard, in opposition to the anti-development NIMBYism), has grown tremendously. From left-leaning policy wonks like Matt Yglesias and Noah Smith to center-right think tanks, a variety of people consider themselves YIMBYs.
As it stands currently, the movement is too caught up in a set of overly-idealistic, ideological objectives including drastic increases in density and the abolition of single-family zoning in suburbs. Both focus on the wrong place and threaten to undo tangible efforts to increase housing supply where it’s most needed. In foregoing realism, the progress the movement has made in liberalizing zoning laws in major metropolises—the key culprit of unaffordable housing—risks being stalled.
It all comes down to basic economics—supply and demand. Getting rid of overly complicated and arcane zoning regulation frees up supply, leading to more housing units being built. However, just like “drill, baby, drill” won’t magically solve energy shortage, “build, baby, build” won’t bring rents down overnight; supply is only half of the puzzle. Increasing supply itself cannot bring prices down if there’s a sizable increase in demand. In the housing market, where good-paying jobs are concentrated in a few major cities, demand is almost guaranteed to catch up immediately with, if not outpace, supply.
For example, in New York City, a study done in 2019 found that for every 10 percent increase in housing stock within a 500-foot radius, rents decrease by only 1 percent. Likewise, in San Francisco, researchers found that within 100 meters of new construction, rents fall by a meager 2 percent. These cases align well with the findings of a Federal Reserve longitudinal study from the late 80s showing that merely increasing supply does little to bring prices down because demand has largely kept up with the increase in supply. YIMBYs need to swallow this hard truth, realizing that their goal ought to be an increase of supply far beyond that of demand.
However, YIMBYs do themselves a disservice by preferring larger populations everywhere, lamenting that America has too much open space. Evidence from human history suggests that humans tend to congregate and conduct business in select cities yet appreciate the gift of nature elsewhere. If the YIMBY vision is implemented, it would more likely than not destroy natural beauty and result in suburban and exurban sprawls that YIMBYs rightly criticize. One example of YIMBYs’ wishful thinking is Matt Yglesias, a leading figure of the movement, who famously wrote a book titled One Billion Americans, a passionate case for tripling the American population. While it is certainly true that a population increase of that magnitude translates to more consumers, more venture creation, and a higher aggregate GDP, it also equates to a dramatic increase in housing demand—it is human nature to seek shelter.
Even under an unlikely hypothetical system with no zoning regulation, prices won’t stay low because people migrate at a faster rate than units are constructed. For the last decade, California added 3.2 times more people than housing units, resulting in the sky-high rents that plague the state. While the U.S. may need immigration to fill in labor shortages in key technical areas, desiring density for density’s sake is fanciful and counterproductive to housing affordability. The task at hand is to increase supply and address shortage while stabilizing demand, not musing about unrealistic population growth.
They also need to wrap their heads around the fact that dense housing is not practical everywhere. Preferring dense neighborhoods with a close community atmosphere is good, but these objectives must be implemented in the places ideally suited for them. Increasing walkable streets in between row houses and building skyscrapers are great proposals for urban areas, but this approach won’t work everywhere.
YIMBYs love to herald the end of suburbs and many would like to see all single-home zoning laws demolished if possible. By waging useless class wars against suburban homeowners, they might alienate people sympathetic to their cause. Increasing housing density in Atherton by 15% will have little if any impact on rent in San Francisco. Instead of converting single-family homes into duplexes in suburbs, YIMBYs should liberalize regulation in urban areas and advocate for new high rises. Even building new towns with distinct characteristics—dense, green, and walkable—might have a higher likelihood of success than wading into meaningless political fights with middle-class homeowners.
Worse still, YIMBYs seem to have a blind spot for another culprit of demand inflation: institutional investors. Private capital rushing into the housing market has an unfair competitive advantage against the average homebuyer, especially young first-time homebuyers. Private equity firms inflate demand by having near-unlimited cash on hand compared to regular Americans.
When BlackRock invests in real estate, the firm thinks of housing as providing an income stream over time in the form of rents. Large investors can also keep prices artificially high by utilizing their ample resources to refurbish existing units, distorting the natural depreciation of housing. Because of that, housing behaves like an investment rather than a consumption good, meaning institutional investors are willing to pay more knowing that they will make profits in the medium and long run.
While YIMBYs are right in that new housing requires capital investment from the private market, they fail to acknowledge that institutional investors crowd out homebuyers and inflate demand and, as follows, prices. Every political movement must deal with its own version of “cakeism”—the idea that one can have everything one wants. It’s time the YIMBY movement dampens down some of its idealisms and returns to point zero.
