The Opportunity to Transform Housing
The Opportunity to Transform Housing

The Opportunity to Transform Housing

We live amid a global housing crisis. By some estimates 1.8 billion people lack adequate housing, and the US needs to build 6.5 million new homes. Most of us know this. What’s less clear are the root causes of the problem and how we can address it.
Further study of the various incentives among actors that influence housing supply and demand can shine a light on misalignments and offer better ways to move forward.
Housing is one of many sectors that can be transformed; see our vision for more.

New houses are not in the interests of current residents

The biggest problem with increasing housing is that it’s not in the interests of the current residents. And the existing residents are the voters who control the politics and are on the approval committees.
The more new housing is built the less exclusive their current one is. Plus new housing leads to more traffic, more density, obstructed views, and a host of other problems. It’s completely rational for existing residents not to want housing.
From a societal level, however, this creates stagnation. Sadly, the potential residents of a city don’t get a vote.

Poor methods of taxation

More forward-looking approaches to taxation could help alleviate the situation, but these unfortunately seem like non-starters politically. The most common method of taxing land based on its value creates a disincentive to development because the more one improves the land the more they pay in tax. Oh the other hand, the Georgian scheme of taxing the value of the land, or a land-value tax, require land-owners to pay based on the value of the underlying land rather than their improvements and thus create incentives for growth. (The underlying land value will increase in time regardless of your actions, but by developing it — or selling to someone who can — you increase your capacity to pay those taxes.)
Politically, however, these seem completely unrealistic. They go directly counter to the interests of existing residents. California’s Proposition 13 provides a firm example of a disincentive for growth in favor of current residents, capping the rate at which property taxes can rise.

Rent control is logical for today’s population at the expense of future ones

Rent control is great for existing renters, a powerful voting block. It keeps rent low today at the cost of increased overall housing costs in the future. Future renters, however, don’t get a vote @.

New cities offer some possibilities

One possible approach to breaking some of these intractable challenges around misaligned incentives is to start new cities. Many entrepreneurs are seeing this possibility and the Charter Cities Institute seeks to build this into a worldwide movement.
The opportunity is huge, both for entrepreneurial profit and human benefit. Land value grows many fold when people move in and economies develop, showing the tremendous potential for a community that keeps pro-growth policies and can manage to avoid the NIMBYism that inevitably slows growth elsewhere. Shanghai and Dubai demonstrate how much pro-growth policies can move the needle. A rising economic tide has many societal and quality of life benefits.

City shares offer other possibilities

Imagine you could own a piece of your city through shares, just like one owns a piece of a company through shares of stock. Could we grant shares to existing residents? Or make them available to future potential residents or to those who could help raise its value?
Issuing city shares might help create a growth incentive to help counteract anti-growth tendencies that intrinsically develop over time. They could provide a way to share the wealth that cities can create with a greater number of people and provide tangible incentives for current residents to find pro-growth solutions.
Thinking of a city like a corporation leads to some interesting questions, for instance why not have a recruiting department to attract and retain the best talent to join your city?