Published July 16, 2023
This essay is the first in a three-part symposium on housing and family.
A “pro-family” approach to politics tends to focus on certain topics—increasing the child tax credit, implementing a paid leave program, expanding options in school choice or child care. But in advocating for families, policymakers and activists shouldn’t ignore the expense that takes the biggest bite out of parents’ wallets—their monthly rent or mortgage payment.
The “Yes in My Backyard” movement is famous for being heavily driven by young, left-leaning people in blue cities. After all, the highest rents are found there, and cities disproportionately welcome the left-leaning and childless.
But pro-family advocates of all stripes should adopt a version of saying yes to housing in their backyard for one very simple reason. The direct link between housing costs and family formation means more housing in their backyard will make it more likely their front yards will be filled with neighborhood kids playing.
How We Got Here
For the past couple decades, the rent was notoriously “too damn high” in coastal cities like New York City and San Francisco, driving the growth of the YIMBY movement. But eye-wateringly high housing prices, which used to be a just-so story told about blue cities, has increasingly become a hallmark of American life; and the recent rise in interest rates means inventory is tighter than ever. The ten markets with the biggest home price increases since the start of Covid are all Sun Belt hot spots: Tampa, Miami, Austin, Jacksonville, Charlotte, Atlanta, Nashville (where home prices have doubled over the past decade), Orlando, Raleigh, and Phoenix.
The story is familiar to many, but a nutshell version goes like this: in the Progressive Era, reformers concerned about nuisance and pollution in cities began instituting plans, or zones, where certain activity could and couldn’t take place. The entire theory took for granted that separating city life into different areas—residential, industrial, commercial—produced a harmonious and healthy style of living. And part of that separation was dividing single-family homes from multi-family units, or apartments, which were assumed to be home to undesirable sorts—namely, low-income families and single men.
In the wake of World War II, the United States adopted a type of industrial policy for housing—favorable tax treatment, federal assistance, a rejuvenated home building industry, and easier financing led to exploding homeownership rates (of course, not every group benefited equally). Regimented zoning regulations were part of the package, driving and driven by the rapid suburbanization of American life, which saw subdivisions carbon-copying this new, standardized built environment.
‘Green’ Concerns and New Red Tape
But by the 1970s, the great engine that had been powering the growth of the housing supply began to peter out. Two factors are of particular interest to our story: a regulatory climate that shifted from favoring development to protecting the environment, and the rise of what Dartmouth economist William Fischel calls the “homevoters.”
First, the passage of the National Environmental Policy Act and state-level equivalents made it more cumbersome for developers to build. These laws were arguably well-intentioned, but the added years of environmental and legal review are inevitably capitalized into the price of a home. The National Association of Home Builders offers a (potentially self-interested) estimate of the costs associated with regulatory fees, environmental review, costs associated with delays, developer fees, etc. All told, the NAHB finds the cost of regulation accounts for about $94,000 of the cost of a typical new home, or about one-quarter of the total price.
Funnily enough, in the context of today’s concerns over the climate, the environmental laws championed by 1970s activists may be making it harder to fight carbon emissions. For example, in today’s legal climate, it’s easier for developers to build in Arizona or Nevada than the Bay Area. As a result, more people move to hot, sunny areas that require intensive use of air conditioning rather than staying in more temperate areas like the Bay Area. The Harvard urban economist Edward Glaeser found a strong negative association between carbon emissions and land use regulations, arguing that “by restricting new development, the cleanest areas of the country would seem to be pushing new development towards places with higher emissions.”
Second, the high-inflation environment of the 1970s, combined with the record high rates of ownership, changed the mental framework around housing. For most people, a single-family home is the single largest purchase they will ever make. If a home continues to rise in value after its purchase, a homeowner can see the value of the house as both consumption (in the form of a place to live, make memories, etc.) and as investment. That means that homeowners have a rational, vested interest in seeing the value of the home maintain (if not improve).
Fischel and others point to concerns over inflation as one main reason why homeowners increasingly embraced land use restrictions to maintain property values. If inflation was eroding your nest egg, blocking new development nearby to preserve the biggest asset you owned—your house—became economically rational. A new road, apartment, or housing development changes the status quo, and even the most open-minded homeowner might be worried about taking a risk, even a small one, that their house could end up worth much less than what they paid for it.
This is largely the economic explanation behind the “NIMBY”—“Not in My Back Yard”—movement. NIMBYs, and the town planners who love them, rely on policy tools like minimum lot sizes, density restrictions, restrictions on multi-family housing units, parking requirements, setbacks, and other mandates and regulations make it harder for new housing to be built. In recent years, as rents have become increasingly burdensome, a slew of measures aimed at countering those restrictions have seen political success. States like Utah, Washington, Oregon, and others have passed legislation aimed at freeing up some of the barriers that make housing difficult to build.
An Economic Burden on Young Families
Because cities tend to be home to the young and restless, the YIMBY movement tends to focus on legalizing forms of housing that appeal to childless single people—so-called micro-apartments or accessory dwelling units (sometimes called a mother-in-law unit) to give more recent college grads more options to crash after graduation.
But what gets short shrift in the housing policy conversation is how a housing market that rests on the assumption that home prices must remain high to guarantee owners’ peace of mind, combined with our human capital-intensive model of economic growth, threatens family formation. According to the National Association of Realtors, the share of available houses that households earning between $75,000 and $100,000 could afford fell from 58 percent in 2019 to 51 percent two years later. Absent policy changes, we shouldn’t expect that to turn around any time soon.
This status quo uniquely burdens people with low disposable income and people with dependents who incur costs without bringing in any income. In other words, as the policy analyst Alan Cole wrote when we were both on the staff of the Joint Economic Committee, our current housing regime disproportionately penalizes young couples and new parents with children.
We know from economic research that family life is directly related to housing affordability. A 2014 paper found that a $10,000 increase in a home’s price led to a 5 percent increase in fertility rates among owners—and a 2.4 percent decrease among non-owners. The reason is fairly simple—if your home is increasing in value, you feel richer and more apt to feel more confident taking the plunge and becoming a parent. If you’re renting each month, however, you see the dream of a down payment getting more and more out of reach as home prices increase, and feel more financially unstable and less likely to transition into parenthood. High and rising home prices are a windfall for those who already own at the expense of those who have yet to buy in.
And the lifecycle effects of a housing market that rests on high home prices are equally straightforward. When young adults are in their twenties and thirties, their earnings are hopefully on an upward trajectory, but they’re not making what their peak income will be in their forties and fifties. But those years are, of course, the time of life that is most conducive to family formation, especially for women. There’s a direct conflict between an economic approach that asks workers save for years to afford a down payment, and the fundamental biology of reproduction.
The impact of this mindset can easily be seen in economic data. In 2004, 69 percent of adults aged 35 to 44 owned their home. It’s now 62 percent. High housing costs also keep young people living at home with their parents longer. Since 2000, the share of young adults living with family instead of on their own has risen by over 15 percent, according to the Federal Reserve.
Restrictions on housing supply have unpredictable second-order effects as well. If developers know they are working with a restricted number of housing units, they are incentivized to capture the highest possible rents to make back their fixed costs. This is why many of the new apartments that are built in expensive cities are deemed “luxury” units, with features like granite countertops and rooftop pools, to try to attract a high-end buyer and make back that investment. Family-friendly units, as Vox’s Rachel Cohen recently explored, get short shrift. And this dynamic also crowds out the provision of the low-end of the market—the so-called “starter home,” with just a couple of bedrooms and decent but not high-end furnishings, in which millions of households started building equity in decades past.
Even the best of intentions, such as maintaining a close-knit community or protecting the environment, can lead to these unintended problems that hit young families and low-income communities the hardest. Freddie Mac, the federal housing finance agency, estimates that the nation is short 3.8 million housing units to keep up with household formation. Not everywhere in the country is suffering from a housing shortage—some have a surplus, as too many rundown main streets in the Northeast indicate. But unless Rust Belt economies revive, or people opt for snowy winters over AC-filled summers, there will be a spatial mismatch between empty houses and the families that could fill them.
YIMBYism for Families
The YIMBY movement has succeeded by harnessing the energy of young professionals. As they age and decamp for middle America and the Sun Belt, the rhetoric of the movement must shift as well. It doesn’t mean adopting the zoning-free kaleidoscope that is the Houston landscape, or ignoring authentic concerns about small town aesthetics. But it does mean making the inarguable point that high and rising housing costs burden family formation, ideally in language that resonates with local homeowners who want an achievable future for their children. The unquestioned clubhouse leader in finding local vernacular to stress this point comes from Big Sky Country, where advocates pushed through a successful slate of pro-housing with the slogan “Don’t California My Montana.”
That approach will necessarily look different in different areas. But being pro-family must also mean being pro-housing reform. If we want more neighborhood children playing in our front yards, we should be pushing their elected officials to make it easier for developers to build, baby, build.
Patrick T. Brown is a fellow at the Ethics and Public Policy Center, where he writes on family policy. He is a former senior policy advisor to Congress’ Joint Economic Committee, and lives in Columbia, S.C.