Tuesday, February 7, 2017

When Do Renters Behave Like Homeowners? High Rent, Price Anxiety, and NIMBYism

by Michael Hankinson
Meyer Fellow
In theory, renters and homeowners disagree about proposals to build new housing in their communities, particularly if that housing is close to where they live. However, in practice, this is not always the case. 

Rather, in a new Joint Center working paper that is based on new national-level experimental data and city-specific behavioral data, I find that in high-housing cost cities, renters and homeowners both oppose new residential developments proposed for their neighborhoods. However, in high-cost markets renters are still more likely than homeowners to support citywide increases in the supply of housing. Since changes in city governments over the past several decades have generally strengthened the power of neighborhood-level opponents to proposed projects, my findings help explain why it is so hard to build new housing in expensive cities even when there is citywide support for that housing.

NIMBYism and the Rising Cost of Housing

Since 1970, housing prices in the nation’s most expensive metropolitan areas have dramatically increased. Real prices have doubled in New York City and Los Angeles and nearly tripled in San Francisco. Driving this appreciation is an inability of new housing supply to keep up with demand. Even accounting for the cost of materials and natural geographic constraints on supply, the dominant factor behind this decoupling of supply and demand is political regulation, such as limits on the density of new housing developments and caps on the number of permits issued by a localities’ government.
                                               
These limits are a classic example of the NIMBY (Not in My BackYard) phenomenon. Even if residents support a citywide increase in the supply of housing, they may still oppose specific projects in their neighborhood. This seeming disconnect between views on citywide and local development policies creates a classic collective action problem for those policymakers who must find ways to reconcile the conflicting views.  

Photo by Michael Hogan/Flickr

Despite its popularity as a scapegoat, there is no individual-level, empirical data on how NIMBYism operates and among whom.
 Students of urban politics generally assume that homeowners have strong NIMBY tendencies not only because they benefit from rising house prices but also because they worry that nearby new housing units, particularly nearby subsidized housing units, might decrease the value of their home.

There is less consensus on (or studies of) how renters view new development. New supply may help ease prices for renters but their pro-development views may not be reflected in local policies because renters are less likely to become politically involved than highly motivated homeowners.  Alternatively, renters might not favor new projects if they believe the units will increase demand in their neighborhood, which, in turn, will lead to increased housing prices. To date, however, there has been very little research on how renters view development projects and whether their views differ from those of homeowners.
                                               
Measuring NIMBYism

To measure NIMBYism and general support for new housing, I collected two unique datasets. I conducted the first experimental tests of NIMBYism through an online survey of 3,019 respondents across 655 cities in 47 states. Respondents were asked about their support for development policies, including whether they would support a 10 percent increase in their city’s housing supply, with the question customized to each respondent’s city, stating how many homes and apartments currently exist and how many more would be built. Respondents also participated in an experiment where they were presented with two housing developments and asked which of the two proposals they preferred for their city. Each proposed development was described using several attributes, such as height and affordability level. To measure NIMBYism, respondents were also told how far each the of developments would be from their home, from two miles away to ⅛ mile away. By randomly varying this distance along with the other attributes, I was able to measure respondents’ sensitivity to proximity (NIMBYism), holding all other attributes equal.

To supplement this national survey, I also conducted a 1,660-person exit poll during the 2015 San Francisco election. Voters at 26 polling locations were asked their opinions on several housing-related ballot propositions similar to those presented in the national survey.

When Renters Behave Like Homeowners

As noted, renters and homeowners are expected to disagree on support for new housing, with NIMBY homeowners opposing citywide and neighborhood development and renters likely supporting the new supply. In line with existing theory, homeowners in my national survey largely opposed the proposed 10 percent increase in their city’s housing supply (28 percent approval), while a majority of renters supported the new supply (59 percent approval). Likewise, when asked in the experiment which of two randomly generated buildings they would prefer for their city, homeowners exhibited consistent NIMBYism, preferring buildings that were farther away from their home. In contrast, renters on average did not pick buildings based on distance from their home. If anything, renters preferred affordable housing that was closer to their home, displaying a YIMBY or ‘Yes in My BackYard’ attitude. In short, homeowners and renters tend to have very different attitudes towards both NIMBYism and the citywide housing supply.

However, in high-rent cities, renters look far more like homeowners. Instead of paying little attention to the location of proposed new housing, renters in expensive cities are just as NIMBY towards market-rate housing as homeowners. Moreover, this renter opposition to nearby development does not mean they support less new development overall. In fact, renters in expensive cities show just as much support for a 10 percent increase in their city’s housing supply as renters in more affordable cities. The main difference between these groups of renters is their NIMBYism.

Results from the San Francisco exit poll show a similar combination of supporting supply citywide, but opposing it locally. When asked about a 10 percent increase in the San Francisco housing supply, both renters and homeowners expressed high levels of support, at 84 percent and 73 percent approval, respectively. But, somewhat surprisingly, when asked if they would support a ban on market-rate development in their neighborhood, renters showed far more NIMBYism than homeowners, with 62 percent of renters supporting the NIMBY ban compared to 40 percent of homeowners.

NIMBYism and How We Permit Housing

Renters in high-rent cities generally both want new housing citywide but behave like homeowners when it comes to their own neighborhood. These scale-dependent preferences present a policy challenge for keeping cities affordable. Over the past 40 years, city governments have increasingly empowered neighborhoods to weigh-in on housing proposals through formal planning institutions. In doing so, these decisions have amplified NIMBYism and the ability to reject new housing, without maintaining a counterweight for the broader interest for new supply citywide. In other words, while most residents may support new housing for the city as a whole, both homeowners and renters are willing and increasingly able to block that supply in their own neighborhood, effectively constraining the housing supply citywide. This is housing’s collective action problem.

In separate research, I am empirically testing the effect of these strengthened neighborhood institutions on the rate of housing permitting since 1980. Likewise, I am conducting further experimental research on what types of citywide housing proposals are able to win the greatest support among both homeowners and renters. Hopefully, by measuring the tradeoffs between the ‘city’ and ‘neighborhood’ in the politics of housing, we can better address the deepening affordability crisis facing many American cities.

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