The Demand Is Too Damn High?

A great thread from an NYC housing advocate on households and housing demand

Today’s piece is brief, and is largely a Twitter thread (rewritten as a Substack Note…too many social media platforms these days) from New York City housing advocate Daniel Golliher. It’s very good, so I’m just reproducing the whole thing. This is worth reading if you’re casually interested in housing.

The question is basically, how is it possible that housing demand is going up when the population is basically flat? Some people think this means prices are manipulated. Others think it means a handful of housing-crunched cities have too much demand and those people should just move elsewhere. Golliher’s social media post really explains this well.

I get this question all the time whenever people see a city’s population flat or declining over time, but rent going up: “How can demand for housing go up if the population goes down?” Because housing demand is not measured by population, rather by number of households. For example:

If you have two people living together, and then they each get their own apartment, then:

• population has remained flat

• households have doubled

• demand for housing went up, competition for existing housing stock went up

If you grasp that housing demand is measured by household, not population, then other things will mentally snap into place more easily, like the different effects of families versus single individuals on the housing market.

A family probably has one or two earners, and might be looking at 2-4 bedroom places. In a healthy housing market with ample supply (measured as a vacancy rate of ~7-9%), homes of that size would likely tend to go to families, at least on the margin.

But in markets with severe shortages like NYC’s, roommates consolidate into one household since they can’t afford to live separately or with fewer roommates. That household is all earners, and can afford to outcompete families with 1-2 earners in the 2-4 bedroom market.

So there are a lot of different forces here: less wealthy people consolidate into fewer households, tending to outcompete families and leave fewer right-sized homes for them in the city. By itself, you might think this lowers housing demand (more people into fewer households)—

But this isn’t happening in a vacuum. Roommates consolidate into fewer households because demand from wealthier individuals has driven them from their preferred housing market segment, just as they in turn drive families from theirs.

Throughout the whole supply-constrained system, any increase in demand causes a displacement ripple. Not because anyone is evil (far from it—we’re all just trying to live the lives we want), but because static housing supply creates a musical chairs situation.

This “ripple” is filtering, and it’s why housing of all kinds must be built at all income levels. If you don’t build new housing for the $150k/year professionals, they compete for the same housing as those who make less. And prices go up.

If you build more housing for the $150k/year professional, they don’t compete as much for existing housing stock. And so roommates don’t consolidate households as much (especially if SROs and other typologies are legalized), and so families have more options, etc.

Some people like to pick actors out of a story like this and demonize them on the basis of income, creed, point of origin, race, and more. This is counterproductive at best, because it takes away focus from the solution: changing the law, and legalizing all the housing we need.

I don’t really think there are any arguments against the math or reasoning here. In other words, this is not an agenda; it’s a description with a bit of basically correct analysis. (This is why I wrote recently that “fairly and neutrally presenting the housing issue is going to look like advocacy, because the problem is so bad.”)

The only argument I can see against Golliher’s explanation is a moral one of sorts: the argument that people stay single/unmarried too long, and that there just shouldn’t be so many households. I always think of and have mentioned before a piece I wish I could find, from Alan Jacobs, where he wondered whether the expectation of having sex with a series of partners for some number of years was an impetus behind young people wanting their own places. In other words, underneath the banal statistic about lots of households consisting of single people is lust. I dunno.

I don’t really think it’s the job of anybody to treat obvious problems like housing or homelessness as invitations to make moral judgments. In that sense I’m libertarian (very much small-l, though). But also, the only lever you actually have for this is reducing the appropriate housing supply to incentivize people to start families (which we’re already effectively doing!). And it just doesn’t work that way. It’s like cutting the bottom half of the ladder to incentivize people to climb.

I’m curious if there are any other opinions or reactions to all this. It’s a little bit nitty-gritty to start asking why people end up in the sort of housing units they do, and it can shed light on elements of our housing problem.

Leave a comment!

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Related Reading:

If You Hate The City, Hope It Thrives

Two Cents On 5-Over-1s

Have You Ever Seen A City?

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