The Three Powerful Myths Keeping MIZ Alive

I’ve been in Mexico on a last minute trip. Maybe I got too much sun. But I was suddenly struck with why Mandatory Inclusionary Zoning (MIZ) has been so hard to fight or even engage over. Both supporters and opponents just seem to fade away when they learn that people who build housing oppose MIZ and think it will just raise prices. There are three powerful myths that reinforce the conceptual framework around MIZ and make it so hard to break.

Myth 1
“Developers must pay their fair share!”

This is rooted in deeply doubts about supply and demand held by people who just don’t believe building will lower prices, but supporters who say they believe that but really don’t. Supply doubters think that if allowed to build like crazy, developers will keep raising prices, and we’ll get more high priced housing.

The supposed supply siders say things like, “Sure, we need more supply, but the market can’t possibly solve the problem.” This view is held by many “Urbanists” who don’t want to sound like Republicans or libertarians, even though nobody I know (including me) argues the market will “solve the problem problem” whatever that means.

The MIZ scheme allows for Urbanist types to say, “We get more density!” And for supply deniers, the notion that onerous fees will stifle new projects or squeeze developer profits is satisfying.

The Truth:

More housing supply will have an ameliorative impact on prices by better meeting demand for newcomers and creating competition between sellers and between typologies. More housing means an apartment dweller can afford a single-family house, opening up her apartment for a new comer that won’t displace a person in a down market rental.

It’s worth noting that before he unlearned what he knew about MIZ and relearned it while at the Sightline Institute, Dan Bertolet wrote the definitive take down of this myth at Publicola.

Myth 2
“We need more affordable housing!”

If you deny supply’s benefits then it’s obvious that the market will just keep producing expensive products, even if there becomes a glut of them. One funny but persistent ghost story is the one about developers leaving their buildings empty rather than lowering prices. That means subsidized housing funded from the exactions taken from developer profits (see above) is satisfying. Robin Hood will steal from the rich and give to the poor.

For weak principled supply supporters this is mostly sloppy language. Some mean More supply and more housing will lower prices, but most also believe that somehow, non-profit producers sort of know what they’re doing, they just don’t have enough money. Taxing new housing and skimming profits is like any other tax, and progressives like taxes. “If we had an income tax,” some counter, “we could take those ill gotten gains and give them to non-profits; but we have an unfair tax system. Sad!”

The Truth:

We don’t need more affordable housing, we need more housing so that it is affordable. The implications of this shift in language matter. We don’t know at what point the market would fail to produce housing that some levels of income couldn’t pay for; that is unless and until we get out of the way of buyers and sellers, we won’t know who was “priced out.”

We have a pretty good idea of who can’t pay rent; a person with zero income or $12,000 in social security income is clearly never going to be able to afford housing in Seattle or much else. But a 22 year old college graduate paying 50 percent of his income on a microhousing unit is probably a perfect solution; he has fewer expenses, location means more than unit size, and he’s moving up one would guess in the economy. It would be wasteful and silly to heavily subsidize him or have him compete for housing with truly poor people.

The market figures these things out of there is lots of supply. Microhousing is a great example of how the innovation of the market can ease competition between consumers not just with lower prices but more selection of type and location of housing.

Myth 3
“The Grand Bargain is a compromise!”

This drives the angry neighbors, slow growthers, and communists crazy. The notion of the Grand Bargain as an agreement between a cabal of developers and City bureaucrats fuels their anger; but it reenforces the notion that the Bargain just set fees and requirements too low, otherwise why would developers agree to it. This means the supply deniers don’t want an end to MIZ, but a hand in dialing up exactions so that nothing gets built or that it is at least expensive and puts money in their control through turning the ransom for building permits over to the City where they have influence over how it’s spent.

For Urbanists, people who love to chat and talk about housing and economic theory, compromise means more chit chat and theory. Compromise is also part of their value system that derives from academia and planning professions. The notion is that the Grand Bargain somehow, in theory, is a win win; people who actually build housing get more square footage and profit, the Urbanists get density in the abstract, and non-profit colleagues get cash to keep doing socially beneficial things.

The Truth:

The simple facts are that the Grand Bargain was drawn up but a few big developers, their lawyers and lobbyists, City bureaucrats, and non-profit developers. The people who build, operate, and understand housing across typologies and locations in the city weren’t involved at all. Neither were angry neighbors that are mostly supply deniers. The socialists and communists weren’t involved either.

What the architects of the Grand Bargain did wisely account for was the narrative frame. They new nobody would listen to developers not part of the deal if they complained. After all, those people are greedy and only want profits. The MIZ scheme central to the Bargain is the narrative of the “fair share.”

The people behind the Bargain also new that most ordinary people share the view that “we need more affordable housing.” As I’ve pointed out, the person on the street thinks that market rate housing whether single-family or multifamily will never be affordable for working class or poor people. Government had to intervene and squeeze something from wealthy developers for production of subsidized housing.

The Grand Bargain was a compromise the way a successful hostage negotiation with an exchange of the prisoner and he cash is a “compromise.” That would all have been fine with me anyway had not all the developers not in the room been expected to pay the ransom. It’s like finding out that hostage you read about in the paper was freed because someone handed over the passwords to your bank and retirement accounts.

Cerberus: The Vicious Three Headed Dog of MIZ

Of course I’m using the term “myth” in the popular sense of something not true, not the classical sense. But this three part structure does remind me of a an actual myth, the story of Cerberus, the three headed dog guarding the gates of Hell. Cerberus would let the dead pass but not let them out. Overpowering and capturing Cerberus was Hercules final task.

I wish Hercules was around now. These three deeply held narratives mean the Grand Bargain has strength and momentum. Any one of them, on their own, is a challenge to overcome. Put them together and it’s easy to see why such a bad idea is still bearing its teeth and barking loudly.

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