The following post was written in July of 2017 in response to a post by Julia Galef, but I decided not to post/finish it. I figured I’d piled on San Francisco enough. With the recent post on the subject by Scott Alexander, I figured I would dust it off, give it an editing pass to reflect new points, flesh out the unwritten parts, and let it fly free. Enjoy!

Epistemic Status: I never borrowed your pot, I gave it back to you in perfect condition, and when I borrowed it there was already a hole in it. Also, citation needed.

Originally a response to: Should We Build More Housing in San Francisco?

Yes. Also, yes. And in conclusion, yes.

Wait. We’re not done.

In her post, Julia presents what she sees as the three major disagreements between advocates of building more housing (YIMBYs) and critics of building more housing (NIBMYs). She views these as: Would adding new housing noticeably effect prices? Does new housing help poor tenants? Are NIMBY objections (that incumbents deserve extra consideration, and existing character is worth preserving) legitimate?

My mission, should I choose to accept it (and I do) is to come up with as many reasons as possible why building new housing in San Francisco would be a bad idea, because upon reading Julia’s list, I realized that my steelman arguments against housing construction mostly weren’t covered, and I wouldn’t group them in this way at all. Many of them seem to never be covered at all.

I will also cover the standard reasons, to see where they fit into my ordering of potential arguments, and because some of them have a point.

Added 10/11/2018: Scott’s reasons, in his recent article, are that San Francisco is uniquely bad at building houses, more housing might not lower rents, YIMBYs act like human garbage and show total disrespect for people’s lives and preferences and call anyone opposed to them names up to and including racist, that people moving to San Francisco is bad for them and that people moving to San Francisco is bad for their communities. I don’t address the completely true argument that YIMBYs are often obnoxious, and don’t consider ‘we won’t be able to do X’ a very good argument for ‘lets ban doing X’ but do address the others. Scott’s final preference is for coordination to move valued communities to better locations, a solution I endorse, and even tried to start multiple times without success.

Reason #1:

People shouldn’t move to San Francisco (regardless of what it does to housing costs and what it does to the rest of the city).

I’ll try to keep this section as short as possible. No promises.

There are four types of people in this calculation: Those in San Francisco who work in tech or related things, those in San Francisco who don’t work in tech, those moving to San Francisco, and those not ending up in San Francisco. I can argue it’s bad for all four.

Reason #1A: People moving to San Francisco is bad for those people

Many of our smartest, most ambitious and most hard working people, especially programmers, are being lured and tricked by the promise of sweet unicorn cash and various network effects. Their pilgrimage is the new army of the wannabes, just as dreams of stardom are pursued in Los Angeles – and just like LA and show business, they’re working long hours in lousy conditions and giving up their whole lives mostly for not that much reward, hoping to strike it big where few ever will. Meanwhile, they’re entering a city and culture that is toxic to a normal successful life, and the gender imbalance is increasingly bad for their social lives.

See later on for the argument that the ‘deal’ these people are getting would, if anything, actually get worse rather than better even if housing prices went down. That’s a separate line of argument!

More abstractly, if people have a bias in favor of moving to The Bay, helping more of them move to The Bay makes the group worse off, not better off, so a tax on moving there in the form of expensive housing is efficient.

Reason #1B: People moving to San Francisco is bad for the rest of the world/country

Look at who is moving to San Francisco. Those people are the founders of companies, the leaders of intellectual communities (including the one most dear to myself and many of my readers), those with drive and ambition and a tolerance for risk. They have the coding skills and the hustling and networking skills and the marketing skills. They want it bad and they’ll do what it takes to get it. Great people! These are what the in-group calls ‘community leaders’ and the out-group would call ‘job creators’ when they’re using that to do something real and not just code for ‘rich people’.

What happens when those people leave their communities? What happens when you take the superstars of other cities and put them all into The Bay? Some good things, to be sure. A group of extraordinary people can do extraordinary things, and if we are enhancing the productivity of our best people, that could be pretty great.

The parallel to immigration also extends to those left behind. The heart is ripped out of intellectual and business communities that never recover. The best people, the ones doing the things, leave the moment their things get real. Then they tell the best remaining people to come with them, and that if anyone stays behind they’re signaling they’re not serious, so no one is willing to fund them or take them seriously. The effective productivity of above-average people who are not world-movers, who have roots in their communities, goes from ‘could be a valuable part of something big’ to ‘guess I’ll code some stuff that these guys will pay me for and I’ll spend a lot of time surfing the internet.’

The brain drain is real, and so is the implied future brain drain. Why help people to become stronger, more ambitious and confident, more rational, when the very success you have means they will leave? How do you stay motivated to make new friends and hold together a community, when the best will leave?

The housing cost disaster in San Francisco is finally starting to present an argument for why one would start a company in Austin, or Boston, or New York, or whatever other city you actually want to live in, without being killed by metasignaling games. That lets those people then have a shot at actually doing things that matter. If we built enough housing to solve the crisis, that argument wouldn’t work, and that would be quite bad, since we’d shut out everyone who cared about living somewhere else from doing potentially very valuable things, even if The Bay itself wasn’t toxic.

More abstractly, if moving to The Bay has negative externalities outside The Bay, it is efficient to ‘tax’ moving to The Bay in the form of expensive housing.

Reason #1C: People moving to San Francisco is bad for the existing inhabitants of San Francisco that work in Tech

For the moment, ignore what happens to housing costs; we’ll argue later that this effect will cancel in any case. The current inhabitants have a competitive advantage against non-residents by virtue of having already moved to the area and secured housing, and because they are able to live under those conditions. If others are able to move in and compete for those opportunities, existing tech workers will get less of the best jobs, and competition will drive down wages and valuations. Meanwhile, being in San Francisco will be less special, so the average worker or founder will be lower quality, so on average it will be harder to find good opportunities and hire good people. The difficulty that gets taken away will be added back elsewhere, and this will suck.

More abstractly, if living in San Francisco is costly signaling, or it is a sorting/associative/positional good, then creating more of it can easily be net bad.

Reason #1D: People moving to San Francisco is bad for other inhabitants of San Francisco

They certainly don’t seem afraid to share this opinion with us! They seem quite vocal about it. They have many reasons, which fall mostly into the categories of increasing the density of the city (this is reason #3), changing the mix of residents in a way that will cause the city to give existing inhabitants less of what they want and more of what they do not want (see reason #4), and that they simply don’t like the new people. These involve the nature of the city changing for the worse (at least as far as the existing inhabitants are concerned), and the reasons are often contradictory (similarly to the fact that their three objections on price grounds seem to be that prices would go up and that’s bad, prices would go down and that’s bad, and prices would stay the same which is also bad) but I think there is a legitimate claim that these people would be worse off if more people move in and housing costs are unchanged.

More abstractly, if moving to The Bay has negative externalities inside The Bay, it is efficient to ‘tax’ moving to The Bay in the form of expensive housing.

Reason #2:

Prices

As promised, we have three main arguments: Prices would go up, prices would go down, and prices would stay the same. All are bad.

That may sound like a contradiction, but it isn’t. As I explained earlier, change is bad.

Reason #2A: Prices might go up!

The argument that prices would go up comes from gentrification. Building luxury housing and moving in the type of people who want luxury housing means increasing the Quality of the neighborhood, which means that housing prices in general go up even for a constant quality of house, thus raising prices and shutting existing residents out, so those residents lose out and the existing culture and neighborhood, which was generating a lot of value, is destroyed. See reason #4 for my view of why such arguments are legitimate and important; there are bundling reasons why the price movement might be bad even if the ‘value package’ improving is why prices are rising.

Pretty much everyone agrees that if you build more housing and prices go up, it’s bad for existing residents, and advocates for building housing use prices going down as their primary motivating reason for building. So this one isn’t a hard sell, it’s more about understanding the gears underneath.

Reason #2B: Prices might go down in general!

This comes back to what type of good San Francisco is. If San Francisco is a normal good, then prices coming down due to increased supply is a good thing. If it is not a normal good, but rather a positional good or a signaling good or an associative good (See Reason #1C) then the price going down means the good reflects that the good is now less valuable, and in an important sense no longer fully exists. The good was valuable because it was scarce and valuable, and now it is less valuable and less scarce.

Those who have already bought such a good are worse off, since their good loses value, and those who have not yet bought the good can also be hurt since they may have wanted the more valuable but expensive version more than the new less expensive but less valuable version.

Reason #2C: Prices for a given house might go down on my particular house! Due to supply and demand! I own that house!

If I own my home and it loses value, I can be made worse off. In extreme cases my home is now worthless since I owe more on the mortgage than it is worth. Putting a homeowner underwater has real negative economic consequences; the person becomes unable to move (in an area that is changing in ways they don’t even like, that drove the home value down in the first place!) or ends up giving up their house to the bank, which carries huge externalities with it.

It’s also kind of theft. The owner had previously acquired something that was valuable due to regulation, so taking that regulation away is a confiscation of their private property (e.g. get your government hands off my Medicare).

This also works together with #2B.

Reason #2D: Prices for a given house might go down because my house is a worse good.

This is in contrast to the argument that housing is not a normal good; this is saying that your house actually got physically worse – your light got blocked off, the noise level went up and so on. There’s also the argument from infrastructure (reason #3). It all adds up to the fact that you’re doing something on your property that is bad for what I have on my property, so you should have to fully compensate me for that externality before I let you do it.

Reason #2E: Prices might stay about the same!

I know. This is horrible! NIMBY advocates make this claim a lot – that you can’t build enough housing to move the needle and induced demand is a thing, slash that other major cities are reasonable substitutes for The Bay, so prices won’t change much if you increase supply.

The implication is that, since change is bad (Reason #4A), if you’re not getting the main benefit of building more housing (lower prices) than you shouldn’t build more housing.

Reason #3:

The Bay can’t handle more people (or everything I know about city planning I learned from Cities: Skylines, or the argument from civilizational inadequacy)

A city relies on a wide variety of limited capacity public goods. Roads and bridges can only handle so many cars and trucks. Trains can only carry so many passengers. Only so many people can enjoy a given park, a given riverfront. There’s only so much water, only so much power. San Francisco has a bunch of unique and special things that can’t be expanded and have limited throughput. Each resident uses a share of these public goods. Adding more people can stretch those goods past the breaking point where they get dramatically worse.

One can say ‘fine, then build more’ and in theory that works for most (but not all) of these things. Man can certainly build more power plants and roads and bridges and train tunnels, run more buses and so on. But can Americans in the 21st Century? Can California? Can San Francisco? Even if they can, will they? At what cost and with what delay?

An on-ramp to the Golden Gate Bridge was recently added. It cost dramatically more money, and took dramatically more time to build, than the entire Golden Gate Bridge. We are losing our ability to build things.

Yes, you say, fix it! Don’t use that as a reason to build even fewer things! And I agree with you in principle, but these goods are complements.

Already, traffic in San Francisco is pretty bad, and many people have really long commutes. The BART trains are pushed past their breaking point. Building more housing inside San Francisco could in theory make this better rather than worse, but it seems rather unlikely things would work out that way.

San Francisco can barely handle its existing residents. What makes us think it can handle a lot more of them?

Reason #4:

Adding New People To a Community Destroys Existing Communities. Here’s Why That Happens, and Why It Matters. (or: the Steelman Against Gentrification, with a clickbait headline for no good reason)

There are a lot of arguments against gentrificaiton and in favor of preserving existing communities, but I think a lot of the actual reasoning almost always remains hidden. What ends up being said is some variation of ‘poor/minority people good, rich/majority people bad’ but the better question is what harm is actually being done, how and why is that harm being done, and how much harm is being done, so we can decide whether this is worth it.

Reason #4A: Change is bad

I made this its own post. Changes are bad. Creating more houses and moving in more people involves a lot of change, so by default it is going to be bad, including in ways that are hard to anticipate and/or hard to describe. It is reasonable to argue that the burden of proof is on the one changing things to show improvement, not the other way around!

[Added 10/11/2018] Let’s strengthen that and preview #4D. Housing, living and neighborhoods are thinly traded, inefficient, low information markets with high search costs, lots of quirky aspects to each of their goods, and therefore a high level of idiosyncratic value even before people build their lives around such value (for investment see #4C). Thus, if someone has a package of goods they are choosing to continue purchasing, altering those goods in almost any way is likely to be horrible for them if they are asked to pay the associated costs. If they don’t have to pay, then you’re creating bad matches and lots of waste.

Reason #4B: Moving is bad

Moving to a new city, state or country is a bigger deal (See #4C), but even moving across the street sucks pretty bad. If you own your house, you’re paying several percent commission and engaging in two protracted and stressful negotiations. If you are lucky enough to only rent, you still likely need to invest a stressful week of your time into finding your new place. You then spend another week on a combination of putting things into boxes and taking things out of boxes, and/or buying all new things. You also need to get on the phone with several horrible bureaucracies multiple times, and get all your mail redirected and all your forms changed, and your devices reconfigured. You need to figure out how to adopt what you own, or what you need to buy, to the new space available. In the middle of all that, you need to lug all your stuff from one place to the other.

For an average couple, this means something on the order of two weeks of time and several thousand dollars in expenses; if they are lucky, this will simply eat all of their free time over a longer period, and they won’t miss work. It will often be months before everything is fully unpacked and the details get back to something close to optimal.

And keep in mind, that’s if the move is across the street. 

If you change the neighborhood such that people are forced to relocate, there’s a rather large loss.

Reason #4C: Investment and network effects are lost

If people start moving out of the neighborhood, or the neighborhood ceases to properly function, then things get far worse. When a person abandons a city, or even an area of a city, their friendships must be rebuilt. They could be torn away from their families, even their children; a large and growing number of Americans literally cannot move far by law or they will at least lose their custody rights to their children. They often need to find another job. It would be slightly overstepping to say they are getting a new life, but only slightly.

Being in a place is an investment, and the construction of a network. You are investing in your connections, your knowledge, your reputation, your future. Those effects are quite valuable, and for many, especially the less well off, they are the primary source of wealth. When that place no longer functions for that network, and that investment loses value, they can effectively lose everything. Everything is changing for them. And remember, change is bad.

Even for those who can remain, or who choose to remain, they are still losing friends, losing family, losing loved ones. The places they have explored, that have been optimized for their needs, face new incentives and higher rents, and will be less good at serving their old purposes. Old social spots will fall apart, watering holes will mutate, stores will sell the wrong things. The new strangers that show up might be good friends, and you might learn to like the new things, but they’re random unexplored things that aren’t a natural fit, replacing an explored fit that already existed. It’s pretty bad.

Reason #4D: Bad bundling is harmful

When one buys or rents a place to live, one is buying many things.

A resident wants the current bundle of benefits and services, especially proximity to family, friends, jobs and familiar places. Of all the bundles out there, they’ve chosen the local one, which currently costs them $X, so it was probably pretty optimal for them, and then they spent time optimizing on that.

As we explored in #4C and #4A, that bundle is going to change. Some things in it that were valued will be lost, which is bad. But also some new things that are not valued will be added, which is also bad. Non-optimized bundling is bad.

Gentrification raises prices. The reason prices go up is that the bundle of things has gotten ‘better’ in some sense. New things have been added to the bundle that some people value highly, and other bad things have been removed. In #4C we covered that the new bundle might be worse for a person who already had chosen the old bundle, since the old bundle was highly optimized.

Now, we point out that even if the new bundle is strictly better there is still a problem, because it being more better for other people means the price goes up more than the value proposition improves. If you add ESPN to a television bundle, that is going to raise the bundle cost by $6, since that’s what ESPN charges. It’s a lot. On average, people get more value than that, but that’s because some people (myself included) really dig ESPN. If you force ESPN to be added, then anyone who hates sports is suddenly out $6/month for something they don’t care about, and might no longer want to buy cable at all. It’s the same thing for houses.

Reason #4E: Valuable parts of the bundle are destroyed by demand 

Reason #4F: Valuable parts of the bundle are destroyed by shifting preferences

Reason #4G: Diversity, including within a geographical area, is good

I didn’t get to finish these in the old version but they follow logically in similar fashion to the points already made, so I won’t belabor the point much. The key argument here is that when prices are low and existing community resources already exist, maintaining those resources is cheap. As we all know, proximity to key places in one’s life is valuable, because the benefits gained from such key places is vastly higher than their cost. Which is as it should be, as that’s how we get net benefits out of life. But it also means that when determining whether Pop’s Barber Shop can stay in business, we really want it to stay in business. How far my family was from the original H&H bagels impacted our lives a lot, and we got great joy from the place, but when we’d visit all they made off us was a few bucks. If there are lots of close substitutes, then any one of them matters little, since you can substitute another, but unique stuff will punch well above its profit margin. Thus, when we see another bank or drug store open in an area already well-served by such things, we should be sad (although in a place that actually didn’t have such things within walking distance, we would be very happy to get one).