1 thought on “Housing: the case for YIMBY (Yes, In My Back Yard!) (Part 2)”

  1. Posted 27/06/2018 at 16:11 | Permalink

    Imagine a single entity owned all the land under San Francisco and controlled what got built and where. In order to maximise their rental incomes they’d need to get the correct balance of planning rules and regulations. Make them too restrictive and that harms economic growth, lowering rents, while if they are too lax, demand for locational amenity will be shifted to other places or goods/services.

    Thus the incentives of this hypothetical landowner results in optimally allocated resources, that maximises the total stock of wealth/welfare in an economy. It’s the incentives of individual plot owners that leads to a tragedy of the commons, and thus a deadweight loss. This is why we have planning rules.

    Making a city denser will not in itself make it more affordable, as that allows for greater economies of scale, increasing wages and the diversity of good/services to enjoy. People are then willing to pay more for proximity to those jobs and amenities. Easily observable as the results of urbanisation around the globe confirm.

    What you can do is make somewhere less attractive, as that will certainly lower demand for nice locations.

    Therefore the trick to getting beautiful cities and affordable housing is to collect the rental value of land as state revenues. Not only does this act as a full housing rebate to typical working households of that part of housing expenditure that currently makes it unaffordable, but also incentivises the state to get the right balance of rules, regulations and laws in order to maximise its tax revenues.

    Without doing this, both YIMBYs and NIMBYs are likely to unreconciled and be forever dissatisfied with the cities they live in.

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