The Bay Area Should In-Fill

Matthew Yglesias notes perfectly understandable frustration with this article, which basically reports that cost of living in the SF Bay Area is skyrocketing, and people who aren’t tech workers blame tech workers.  Yglesias (entirely correctly) notes that the way you deal with this is you increase population density, raising housing supply, which lowers housing prices, but that the Bay Area is relentlessly hostile towards increased density.

I would like to point out that there’s a vicious cycle here.  My wife and I bought a house in San Francisco recently.  We paid about $800,000.  That’s a ton of money.  People in our situation tend to get paranoid about housing prices, in no small part because our house is such a huge percentage of our overall wealth.  If our house fell to $400,000 in price, it would be devastating to our financial health.

Even though probably everyone would be better off if housing prices were substantially lower once the new equilibrium was reached (I’d be completely happy to have a mortgage payment half what it is now, and have a less valuable asset), the hump of “Hahah, you currently owe a mortgage of three quarters of a million or much, much more” is insurmountable.

And there’s probably no way out of this puzzle right now.  Homeowners are a powerful and very conservative (small-c) force in local politics, especially in the smaller suburban towns in the Bay Area.  If you’re a city councillor and you endorse a policy that homeowners in your town believe will reduce their housing prices sharply, you absolutely will be pilloried.

So the lesson here is don’t let this problem start.  If you’re in a place where housing is relatively inexpensive, but you’re growing and prosperity is coming to your community, keep the in-fill development happening right now, before your taxpayers get into the trap of having invested heavily in the real estate of the area.

And read Yglesias on all of this: he’s extremely correct on housing.

(A quick terminology note:  in-fill development means “take out existing single-family-detached housing and replace it with higher density housing.”  It is not related to landfill, and nobody is proposing landfilling the Bay.)


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