Yuppie Fishtanks: YIMBYism explained without "supply and demand"
In 2018, I wrote a post about why building market-rate housing in gentrifying cities helps relieve rent pressure on long-time working-class residents. I dubbed this kind of housing “yuppie fishtanks”, and I tried to explain why they help without resorting to the theory of supply and demand. Later, someone made a TikTok video about the concept. Anyway, with people moving back to the big cities after Covid, and housing construction still lagging, I thought it would be a good time to re-up my original post.
YIMBYism is the idea that cities need to build more housing in order to relieve upward pressure on rents. In Northern California, where I live, YIMBYs tend to get into fights with progressives about market-rate housing. YIMBYs don't want to build only market-rate housing, but they think market-rate housing has to be an important component. NorCal progressives, in contrast, tend to think that market-rate housing is bad - either they think it lures more high-earners into a city and pushes up rents (induced demand), or they object to private housing developers making profits, or market-rate housing just sounds like cities catering to the needs of richer residents instead of poorer ones. Instead, the progressives tend to support what they call "affordable housing" - either public housing, government-subsidized housing, or privately-subsidized housing mandated by inclusionary zoning. When defending market-rate housing, many YIMBYs appeal to the idea of supply and demand. If you supply more market-rate housing, the market rate itself will fall, making many previously unaffordable houses into affordable ones. This might be true - in fact, evidence suggests it is true, at least to some extent - but I think it's a weak defense, for several reasons. First of all, supply and demand is a simplistic model. It assumes a single homogenous good, when in fact everyone knows that housing comes in a bunch of different types. It doesn't take location into account, when everyone knows location is crucially important in urban real estate. And there are some situations, especially labor markets, where supply and demand just seems like a bad model for how the economy really works. Second, the effect of new supply on rents might not be enough to help working-class families. If you build a ton of new housing and rents only go down by 3% - or go up by 3% less than they would have otherwise - it's not going to do a lot to help the people who progressives really want to help. Because of this possibility, "supply and demand" can sometimes sound a bit like "let them eat cake". But in fact, I think it's very important to build market-rate housing. And though the forces of supply and demand are probably at work, I don't think the supply-and-demand model captures exactly why market-rate housing is important. So in this post, I want to try to explain the YIMBY position without invoking supply and demand. Background: Invasion of the Tech Yuppies The structure of the U.S. economy has changed a lot in recent decades. Knowledge-based industries like tech, medicine, and finance are much more important - for simplicity's sake I'll refer to all of these as "tech". Tech businesses have ever more of an incentive to cluster together in cities, which means that tech workers - who tend to earn high salaries - have been moving into cities like San Francisco.
But these beautiful giant yuppie fishtanks have limited space. So some of the incoming techies will go looking for apartments in other parts of town - neighborhoods occupied by long-time residents.
