I am always on the search for simple and short explanations of really complex and important ideas. This 4 minute video isn’t bad. It conveys quickly what this whole housing discussion is all about. First, remember, that what we want is a great city. A great city would create livable density with lots of jobs and a minimal impact on the environment and climate. That’s where price comes in. Price is a signal, and the good news is that higher housing prices are an indication that lots of people want to do a really sustainable thing, live in the city. That signal is a big arrow pointing to producers of housing to produce more. When policy interferes with that it interferes with the way markets naturally seek the “most efficient allocation of resources that can be achieved.”

One important note. This is not libertarianism. It’s not even capitalism. It’s just an explanation of how markets work, and they don’t always work to achieve that efficient allocation. When they don’t, it’s really interesting but also a challenge. If, for example, there is lots of demand but producers refuse to produce, or there aren’t enough producers, then policy makers have to ask, “Why?”

We don’t have that kind of market failure in Seattle. We have lots of willing producers and lots of demand. And, again, this is a thing to celebrate, not a crisis. It’s only a crisis when we make policy that sends weird and scrambled messages to producers and consumers by adding additional costs and barriers to production. When that happens, we essentially create a shortage. As I’ve pointed out before, markets are composed of lots and lots of people and lots and lots of discrete decisions that together send messages to lots and lots of people who make lots and lots of other decisions in response. It isn’t a monolithic thing, but a lot like the weather; we can forecast it and adapt and respond to it, but we can’t make it stop.

Finally, most of us got into the housing issue not because of price, but because we have some kind of vision for the kind of city we want; inclusive, sustainable, livable, and yes, affordable. We can’t get there without working with price signals and using what we learn to shift policy to encourage good things, and discourage bad things. In Seattle today, our policy almost always starts by seeing housing production as an impact, a bad thing. That’s the wrong read, and it results in policy that just slows production, which limits supply, and that means higher price barriers for people who want to share our city.