Economics and Affordable Housing

Do urban planners know enough about urban economics?

Just mentioning economics is often enough to cause most eyes to glaze over. Why should planners’ eyes be any different?

One reason that urban planners don’t tend to study economics too much may be that economics is currently depicted as a conservative mode of thinking, while planning has been framed as a liberal mode of thought.
This has certainly not always been the case (ask Jane Jacobs).
Regardless of one’s political leanings, both disciplines are valuable and have much to learn from each other. I strongly believe planners should pay attention to economists and be able to understand their work. However, when economists start talking in numbers and smart-sounding words (instead of familiar acronyms), people, even planners, tend to nod knowingly and think it must be true since there is math involved. Numbers don’t always equal truth, but they can help us describe our world and make sense of problems. Because planners’ work affects private goods and public goods too, they need to be able to decipher the math and be able to evaluate it for themselves.

Take for instance the concept of filtering as it applies to affordable housing.
Here is another definition of filtering for those who haven’t come across it before.

The idea is basically that housing changes prices over time. A new home starts out expensive and then filters down toward a lower price tier as it ages and becomes less desirable. This may also happen because too many homes are built and as supply exceeds demand, property becomes less desirable in general. This also works in reverse: if there are too few homes, lesser quality or older ones tend to become more valuable. Filtering is an important concept and should affect how planners plan for affordable housing. In theory, increasing affordable housing units instead of market rate units will make other units filter up (become less affordable) due to the decreased availability (increased demand) of market rate homes for the rich. This also has that simplistic truthiness that ‘trickle down economics’ relies on, but actually does work in specific situations.

Yet in New York City, even in the darkest days of the 1970’s, there has historically been a very low vacancy rate (often way too low during the City’s early years of rapid growth). Because of the shortage of housing overall, filtering has never quite worked in the downward way that it is supposed to because supply has never quite met demand. This means that the economic theory falls apart in certain real world applications (just like planning theory can too). It also means that if New York doesn’t actively strive to build affordable housing, the market won’t take care of the poor, it could simply push them out of homes in the City and make them some other jurisdiction’s problem (or worse, potentially bring us back to the not so fun 1980’s when there was a homeless epidemic to deal with instead).

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