Los Angeles is a Conservative Problem

The conservative leaning supreme court of the United States just voted to repeal the EPA’s right to regulate emissions. One on hand, the judgment is reasonable because these matters should indeed be handled by a responsible Congress. On the other hand, the judgment is unreasonable because Congress has become terrible at passing legislature. Furthermore, it will not shock any reader to claim that an entire party is skeptical, at best, of scientific evidence and refuses to take action against climate change – which it generally considers a hoax. It may therefore be surprising to learn that many liberal cities in today’s America are actually facing problems wrought by following a conservative approach to development. In other words, Los Angeles’ housing crisis is the outshoot of a conservative view of city construction.

In this essay, I will first discuss housing development from a simple macro and environmental perspective to suggest that making sound strategic, long-term developmental decisions is critical. I will compare that with the output from the conservative approach to development, which is exemplified by LA. This essay will conclude by suggesting a pathway forward.

Macro Perspective: Adding Housing Units

Gross Domestic Product (GDP) is the total market value of all the finished goods and services produced within a country. All the economic activity over a period of time is included in GDP. Housing development is a very large part of GDP. Housing’s contribution to GDP averages between 15-18% each year through residential investment and spending on housing services. To put that in perspective, in sum Americans spend more on housing than the government spends entirely each year. Residential investment is the figure we are honing on in particular – it includes the construction of new housing units and remodeling of those spaces, and contributes about 3-5% of US GDP each year (the other category, which contributes 12-13% of GDP per year, is the estimates spending on housing services like rent and utilities).[1] Assuming 2022 US GDP is $23 Trillion, that means between $690 Billion and $1.15 Trillion will be spent on building or improving housing – an enormous sum. Non-fungible resources included in these calculations are hefty. The construction industry is the single largest global consumer of materials. Over 3 Billion tons of raw materials are used to manufacture buildings globally; 40% of solid waste is derived from the construction & demolition industry; 25-40% of energy is allocated to buildings.[2]

What do these allocations of resources get us? What is the marginal yearly change in housing stock from spending all that money and materiel? It turns out, not much. The total housing inventory of the United States changes very little. Between Q4 of 2021 and Q4 2020, total housing units increased by 0.87%. This amount is not a historical anomaly, between 2000 and 2021, the total stock increased by about 20%, a CAGR of about 0.9%.[3]

The point here is to say that we spend a lot of money as a society every year and don’t create too many new housing units. That means that when housing units are built, they should probably be built thoughtfully because changes to the stock will be slow and resources are finite.

Conservative Development Approach

Ever since the prodigal spread of automobiles, cities in the United States have followed a pattern of excessive sprawl. Today, the United States is the most suburban country in the world.[4] On their own, people sought the American dream which loosely consists of: a house, a lawn, a pet, and a family. This dream is so lovely that it is heavily subsidized. Part of the reason the great recession of 2007-9 was so bad is because Fannie Mae and Freddie Mac massively invested in mortgages at the height of the housing bubble to continue assisting all Americans – even those without the means – to immediately achieve their dream. This government intervention isn’t new, and hasn’t ended. The government has massively intervened in the housing market since the start of the New Deal to directly and indirectly support suburban growth. The levers pulled by the federal government to create more suburbs include providing direct federal funds, tax breaks, or tax subsidies to develop suburban sewer construction, road & highway construction to enable sprawl, suburban sewage treatment plants & networks, tax codes that favor suburban home owners, tax codes that favor suburban commercial construction, low-cost loans to vast numbers of citizens who wish to live in the suburbs (through the Federal Housing Administration and VA mortgage program in particular). Indirectly the federal government further supported suburban development by developing & supporting the national mortgage market to increase loan fungibility, creating a secondary market for mortgages (i.e. the creation of Fannie Mae and Freddie Mac), standardizing mortgage interest rates to decrease financing costs for suburban homeowners, enacting zoning laws that only allow for suburban development, and deploying rules for mortgages that heavily favored suburban development.[5] Of the half-trillion dollars the federal government spends on real estate, the majority goes to suburbia. In other words, suburban homeownership subsidies are by far the greatest direct federal expenditure associated with housing.

Based on the allocation of its resources, the United States government is and has been pro suburbs and anti-city. Government support therefore enabled excessive sprawl. To highlight the scale – consider three examples. From 1970 to 1990,

· New York' s population grew 5% while its total land area grew 61%

· In Chicago, the population grew 4%, its land area grew 46%

· In Cleveland, the population declined 11%, its land area grew 33%

There are many problems with supporting suburban growth explicitly. The first one is space – exemplified by Los Angeles. Nearby Orange County used to be known for… oranges [among other fruits]. It is now a sprawling suburban area. Much of the best farmland in the United States could be an attractive place to build a home. Thus industrial-scale farming is pushed into more arid lands where additional costs are necessary – putting greater strain on resources. The U.S. agricultural sector is heading straight for disaster as rivers dry, droughts become more abundant, and the massive midwestern aquifers upon which the entire irrigation-based American farm economy is based become dry. From 1970 to 1990, 20 million acres of rural land was developed (predominantly to build parking lots and suburbs), an average rate of 400,000 acres per year. Nearly 70% of all prime or unique farmland in the US is now in the path of rapid development.

A second problem is sustainable costs for suburbs – they are set up for financial ruination. When the infrastructure is constructed for a suburb, it actually looks pretty cheap for the inhabitants of that neighborhood. Lower land costs, easy permits, low fees, low initial taxes, and low-cost labor all contribute to that. The government actually chips in quite heavily. A new suburban city only contributes about 25% of the costs to construct its own infrastructure (utilities, roads, sewers, and water systems) – the rest is provided by the state and federal government.[6] So new infrastructure appears cheap to construct for the suburb. The problem is that the suburb has to maintain that infrastructure. In a low density environment, it is nearly impossible for the suburb to actually raise the tax revenue to afford its own infrastructure liability. A compact, dense area raises far more revenue and is far more valuable than a sprawled one. Furthermore, suburbs lure people in with promises of low taxes… According to the Chesapeake Bay Foundation (1993), the total cost to provide utility services to low-density sprawl development (three dwelling units/acre) is more than $39,600 (1992 dollars) per unit. This cost increases with distance from the urban core. For example, if the development is 10 miles from the urban core, the cost increases an additional $16,500/unit to $45,000. In other words, decreasing density increases cost. If the density of the development decreases to one dwelling unit per 4 acres, capital cost per unit increases to $87,700/unit. Total costs of delivering services to a low density development of 1 unit per 4 acres of land and is more than 10 miles from the urban core is more than $104,000. This represents a 266% increase in long-term recurring marginal costs.

Beyond paying for their long-term costs, suburbs also create a plethora of indirect costs. The costs of sprawl from 1940-1990 alone are estimated to be:[7]

§ Infrastructure — $750 billion

§ Lost time in traffic — $168 billion

§ Health effects and fatalities — $226 billion

§ Gasoline — $89 billion

§ Tires and parts — $34 billion

§ Insurance and registration fees — $26 billion

§ Defense costs — $50 billion

§ Crop losses — $5 billion

These figures do not even mention the enormous environmental degradation caused by destroying farmland or natural sites. There are few places in the world with less life than a suburban yard or a parking lot.[8]

Another major problem associated with sprawl is loneliness. All research shows that Americans are dreadfully lonely. For instance, Cigna considers 58% of Americans to be lonely,[9] a Harvard paper estimates 36% of Americans are lonely, while a National Academies of Sciences report finds that one third of Americans over 45 and 43% of adults over 60 felt lonely.[10] Mental health is difficult to track, but loneliness has measurable and massive impacts beyond mental health. Among its negative effects, social isolation increases risk of premature death from all causes (rivaling smoking, obesity, and physical activity), increased risk of dementia, heart disease, stroke, depression, anxiety, heart failure, and increased rates of obesity.[11] Not to mention that the majority of gun deaths in the United States come from lonely Americans taking their own lives.[12] Sprawling neighborhoods are an ideal setting to cultivate loneliness. Suburban living is notoriously poor at developing feelings of community, and fosters a culture of mistrust, separateness, and privatization.[13] The need to plan and drive to experience any out-of-the-house interaction creates barriers (in other words, high costs) for any social interaction.

Conclusion

Let us return to the original point of this essay: Los Angeles’ housing crisis. Los Angeles has run out of space to expand its already enormously overexpanded sprawl. It’s a giant suburb that never ends. Obviously as its population continues to increase, they have a problem. Median house prices in LA are up by 165% from 2012 in LA, and LA hosts 28% of America’s homeless. So what does the city do? What the California legislature has passed – SB9 & SB10 – allows Californians to convert their houses into separate units (and thereby house more people) and to build apartments.[14] It’s definitely a step in the right direction as it will add hundreds of thousands of new housing units. A different point that I’ve been suggesting, is that LA is a harbinger for the problems faced by suburbia on a super city-scale. All the conservatives who “hate California” should recognize that the root of many of California’s issues lie in following traditional conservative development ideas. Allowing and supporting endless suburban house construction is bad for the economy, bad for the environment, and bad for inhabitants.

What to do?

First, we should be thoughtful how our future housing units are built. Housing for normal people working in service or industrial jobs should be relatively dense – which includes streetcar suburbs. Denser communities should be encouraged by local governments who can enact better zoning laws. Thoughtful community building codes would help to create unique characteristics in each community and enable the development of attachment. Denser neighborhoods yield more stable economies, provide a stronger tax base, and limit environmental degradations. Legacy urban cities like Chicago have massive numbers of free plots of land and post-industrial infrastructure waiting to be used. The federal government should recognize that the status quo is unsustainable, and should move to enact legislation and tweak administrative rules to halt their support of suburban growth in favor of denser cities. Considering the increase of prime farmland this should result in, it is a question of narrative rather than political suicide. Those truly seeking peace and privacy will find themselves un-encircled by neighbors, while those looking for affordable properties will also find a community. Let the suburbanites who are breathed in by the lung of the city via the highway in the morning, then breathed out at night, instead stay for a while. They’ll find that the city they work in is in fact the home they’ve been yearning for all along.

[1] Congressional Research Service, “Introduction to U.S. Economy: Housing Market,” Updated May 3, 2021, https://sgp.fas.org/crs/misc/IF11327.pdf; National Association of Home Builders, “Housing’s Contribution to Gross Domestic Product,” https://www.nahb.org/news-and-economics/housing-economics/housings-economic-impact/housings-contribution-to-gross-domestic-product [2] World Economic Forum, “Shaping the Future of Construction: A Breakthrough in Mindset and Technology,” May 2016, page 11 [3] St. Louis FED, “Housing Inventory Estimate: Total Housing Units in the United States,” https://fred.stlouisfed.org/series/ETOTALUSQ176N [4] Demographia, Demographia World Urban Areas, 18th Annual Edition (July 2022), http://www.demographia.com/db-worldua.pdf [5] Devon Marisa Zuegel, “How We Subsidize Suburbia,” The American Conservative, Oct 20, 2017, https://www.theamericanconservative.com/urbs/we-have-always-subsidized-suburbia/; The Other "Subsidized Housing" Federal Aid To Suburbanization, 1940s-1960s By Tom Hanchett Originally published in John Bauman, Roger Biles and Kristin Szylvian, editors, From Tenements to Taylor Homes: In Search of Urban Housing Policy in Twentieth Century America (University Park, Pennsylvania: the Pennsylvania State University Press, 2000), 163 – 179. [6] Well explained by, Not Just Bikes, “Why American Cities Are Broke – The Growth Ponzi Scheme [ST03],” YouTube, Jan 11, 2021, https://www.youtube.com/watch?v=7IsMeKl-Sv0 [7] Jane Kay, Asphalt Nation: How the Automobile Took Over America and How We Can Take It Back (University of California Press, 1998) [8] “Are our lawns biological deserts?” National Science Foundation, July 11, 2018, https://beta.nsf.gov/news/are-our-lawns-biological-deserts [9] “The Loneliness Epidemic Persists: A Post-Pandemic Look at the State of Loneliness among U.S. Adults,” Cigna https://newsroom.cigna.com/loneliness-epidemic-persists-post-pandemic-look [10] The National Academies of Sciences, Engineering, Medicine, Social Isolation and Loneliness in Older Adults: Opportunities for the Health Care System (2020) [11] National Institute on Aging, “Social Isolation, loneliness in older people post health risks,” April 23 2019, https://www.nia.nih.gov/news/social-isolation-loneliness-older-people-pose-health-risks#:~:text=Health%20effects%20of%20social%20isolation,Alzheimer's%20disease%2C%20and%20even%20death.; CDC, “Alzheimer’s Disease and Healthy Aging, Loneliness and Social Isolation Linked to Serious Health Conditions,” Updated April 29, 2021, https://www.cdc.gov/aging/publications/features/lonely-older-adults.html [12] John Gramlich, “What the data says about gun deaths in the U.S.,” Pew Research, February 3, 2022 https://www.pewresearch.org/fact-tank/2022/02/03/what-the-data-says-about-gun-deaths-in-the-u-s/ [13] Eric Oliver, “Mental Life and the Metropolis in Suburban America: The Psychological Correlates of Metropolitan Place Characteristics,” University of Chicago, https://www3.nd.edu/~adutt/activities/documents/oliver-hapconf_000.pdf [14] The Economist, “California ends single-family zoning,” September 23, 2021, https://www.economist.com/united-states/2021/09/23/california-ends-single-family-zoning