There two things that cause some of us no end of frustration: really smart people mischaracterizing the views of a market approach to addressing housing issues‪ and an odd misunderstanding of what a market is and how it works. In the first case, nobody I know makes the argument that drastically deregulating the housing market will end homelessness or even ensure that every person in Seattle will have housing that is affordable based on the current system of measuring affordability. But it is often pointed out as a weakness of supporting increases in supply that doing that won’t solve the most intractable problems in meeting housing need. But nobody says that and the fact that the market can’t solve those problems all by itself isn’t an argument that the market, supply and demand doesn’t exist.

In the second case, lots of people get muddled up. Here’s part of a Facebook exchange including noted writer for the Stranger Charles Mudede.

The history of capitalism, and financial capitalism, has not been about supply and demand but booms and busts.

What an odd statement. Here’s what I said in response.

Boom and bust is simply another way of expressing the cyclical nature of supply and demand; it’s hardly an argument that supply and demand don’t exist.

Somehow people who want to punish and tax new development because they see it as somehow destructive think that arguing that supply and demand doesn’t work or doesn’t really work to explain housing prices think that making that argument successfully will end the debate; we should tax and limit housing which drives up costs and redistribute the money we collect to build more housing. Allowing the market to produce as much housing as it can is simply a sanctioning of greed and higher profits for a few.

Of course this is folly. As I pointed out before, even if we said housing is a right to a product to be bought and sold, we’d still need to build more of it. Think about it. Let’s say we lived in a socialist run economy in which every person who lived in worked in Seattle was entitled by law to 500 square feet of housing, that housing would still have to be built. Imagine if job growth was booming and thousands were coming to the city, if the supply of the entitlement didn’t keep up with people who qualified the price wouldn’t go up, since there is no price on housing. But the scarcity would mean that people would have to wait longer and longer for what the law said they were entitled to. How to solve that problem? Build more housing!

I wish that those who wade the intellectual discussion about housing would stop arguing about supply and demand. That’s over. The question is how do we create the increase in supply. Anything less than rolling up our sleeves and solving that problem, including figuring out how to punish people who build housing, is a waste of time.

Here’s the whole exchange and I suggested that everyone on the thread watch Ray Diallo’s brilliant video that explains exactly what a market is and how it works. It’s worth watching over again if you’ve already seen it.

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‪Charles Mudede The market system in this situation is going to explode in our faces. I really do not know why this can’t be seen. Market urbanism is pure utopianism. Density without laissez faire, that’s what we need. Even Ruth Glass knew this.

Like · Reply · 1 · March 26 at 6:40pm

Shane Phillips replied · 2 Replies

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‪Nate Cormier And what other ways do you see us getting to density…real climate helping, transit and walking, obesity reducing density…without building a lot more housing? And if you agree with building a lot more housing how do we get it other than via the market? Many of us who want to roll back exclusionary zoning also want public housing and publicly financed rental subsidies for folks that can’t make it alone to have help, but the amount of housing we need to really move the needle on urban form and settlement patterns and to make so much of it that it returns to prices that are broadly affordable will need to happen primarily through private investment.

Like · Reply · 2 · March 26 at 10:53pm · Edited

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‪Charles Mudede But I’m not against building. I’m very much for it. What I do not get is why construction growth has to be left to or dominated by the market forces.

Like · Reply · Yesterday at 5:38pm · Edited

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‪Nate Cormier I don’t think we can leave it at that, and most of the progressive urbanists I know, even ‪Roger Valdez who would probably shrink from either term haha, have expressed the same. We think that the market should not be constrained by exclusionary zoning and then we as a society should also look for ways to take care of those left behind…SHA style public housing, rent vouchers for low income people, rolling back mortgage interest tax deductions for the rich and giving that instead to folks who can’t afford housing, and on and on. All the folks we always link to…Daniel Hertz, for example…go on and on about these kinds of alternatives to the misguided notions of exclusionary zoning and rent control as ways to achieve affordable housing. Unfortunately, our desire to eat the rich gets in our way and we end up as a society screwing over the most vulnerable and helping the most wealthy with the wrong policies.

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‪Charles Mudede I totally understand the zoning issue, and how zoning has this racial dimension and how it made these awful cities we now live in. We speak of the war on cars now, but this history of zoning has been a war on cities, or what cities really mean. So, I’m there with you. Where I part is on the market and its role in development. The laws of supply and demand do not hold without the intervention and management of the state.

Like · Reply · 1 · Yesterday at 5:46pm

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‪Nate Cormier So, what does that state intervention mean if not zoning…I think I’m understand that you are also exclusionary zoning…? And does it lead to lots more housing happening or does it reduce the “natural” (not constrained by EZ) rate of housing production?

Like · Reply · 1 · Yesterday at 5:48pm

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‪Charles Mudede The reason why zoning is the way it is is a lot of middle-class white people want to protect their home values. And with good reason: wages have been stagnant over the past 40 years. Solving the issue of zoning will still leave us with the problem ofwages and what is known as “secular stagnation.” Inflated asset values are the only game in town in the age of oversupply. The Schumpeterian entrepreneurialism celebrated by Forbes is a myth or thing of the past. What else is quantitative easing but asset price inflation. This is the market you speak of.

Like · Reply · Yesterday at 5:59pm · Edited

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‪Nate Cormier So are you for or against exclusionary zoning? Before I thought you agreed it is racist and only enriching incumbent landowners, but this answer sounds more ambivalent…

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‪Nate Cormier I agree with most of your concerns about an unregulated market and could see lots of ways we can attempt redistribution, but exclusionary zoning isn’t doing that. It is having the opposite effect.

Like · Reply · 2 · Yesterday at 6:10pm

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‪Charles Mudede In my opinion, land-use regulations as they are now must be seen in the context of the market. to challenge them is indeed to challenge the market. maybe we all need to figure what we mean by: market.

Like · Reply · 1 · Yesterday at 6:16pm

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‪Nate Cormier Ok, press on with the semantics. I’ve always been a bit quick to jump to the application…must be my short attention span. Wake me when there is a policy proposal to which I can react

smile emoticon

Like · Reply · 1 · Yesterday at 6:25pm

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‪Roger Valdez ‪Nate Cormier you’re right, I don’t like either term. But why can’t people–even geniuses like Charles get that nobody –especially not me– is saying building is the monopoly of the private sector. I’ve embraced Sawant’s idea of using our public debt to build on City owned land. The City could do that. But even she hasn’t pursued the idea. The market always fails at the margins, and that’s where the government can level up the basic for the poor.

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‪Michael Cornell The answer is, and always has been about SUPPLY. More housing supply eases price increases.

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‪Dan Bertolet i’m guessing that the blow up ‪Charles is alluding to is the current housing market situation in vancouver, yes charles?

Like · Reply · Yesterday at 5:25pm

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‪Charles Mudede The history of capitalism, and financial capitalism, has not been about supply and demand but booms and busts. This is not a controversial thing to say. It is understood that markets, in the financial sense (meaning, the dominant sense), and housing isdeeply financial because most need to borrow to purchase property, prefer booms and busts to the utopia of supply and demand. this is in the record. i do not get why this fact is ignored or why we think the boom/bust model can provide the good we all want: density

Like · Reply · 1 · Yesterday at 5:39pm · Edited

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‪Nate Cormier So what other mechanisms besides private investment are you suggesting will get us massive amounts of new housing? I’m open to other ideas and can see lots of publicly financed or subsidized channels adding supply as well…just hard to imagine them happening at the pace we need, especially if we continue to have much of the organic supply constrained by exclusionary zoning.

Like · Reply · 1 · Yesterday at 5:43pm

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‪Dan Bertolet Hmm, isn’t the boom/bust cycle of real estate development what created the high density we already have in places like NYC?

Like · Reply · Yesterday at 5:45pm

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‪Charles Mudede In philosophy, we have a name for this kind of thinking: accelerationism. I’m in the school that believes you can have growth without the pain of busts, which always (or often) lead to a concentration of wealth.

Like · Reply · 1 · Yesterday at 5:50pm · Edited

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‪Roger Valdez Boom and bust is simply another way of expressing the cyclical nature of supply and demand; it’s hardly an argument that supply and demand don’t exist.

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‪Dan Bertolet ‪Charles Mudede: “Tighter land use regulations may exacerbate house price bubbles. Gyourko, Glaeser, and Saiz (2008) demonstrate that cities with more restrictive zoning and thus a more inelastic housing supply have historically been more likely to experience house price bubbles and that these episodes of elevated prices tend to last longer.”

‪https://www.whitehouse.gov/…/20151120_barriers_shared…

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‪Roger Valdez I know it’s longer than a snapchat video or IG video. It’s almost as long as an episode of MASH. Anyway maybe this will help.

‪https://www.youtube.com/watch?v=PHe0bXAIuk0 

How The Economic Machine Works by Ray Dalio