Unholy Alliances, free trade, and zoning reform
Why I don’t think zoning reform will fall victim to the populist backlash that killed free trade
Preamble
In housing policy, there’s often discussion of a so-called “unholy alliance,” generally between NIMBY homeowner groups such as the Sherman Oaks Homeowners Association or the Western Center on Law and Poverty and tenant groups such as the LA Tenants Union or local Democratic Socialists of America chapters. Whenever new housing developments tend to come up, the former tend to object on the basis of “property values,” in a transparent attempt at rent-seeking. The latter, on the other hand, tend to ask questions such as “affordable for whom?” when it comes to subsidized housing developments, and often object to unsubsidized developments for various reasons, ranging from the patently false (“it will raise rents” or “we don’t need more unsubsidized housing”) to ones that require nuance (“it will lead to gentrification and displacement”).
Why this is described as an unholy alliance is that rich NIMBYs (who tend to be extremely politically powerful) often use some of the arguments of those activist organizations. Go to any local planning commission meeting (or for that matter the Western Center’s website) and you’ll hear some old homeowner talk about how “this crisis is a crisis of affordable housing, we don’t need more luxury housing” or talking about how new building will lead to gentrification and displacement. At rare moments, the groups will merge and end up endorsing candidates or policies that are actively anti-housing — such as when with Sunrise Bay Area endorsed Jackie Fielder against the pro-housing Scott Wiener in 2020, or when rich homeowners and the activist group Tenants Together both worked to lobby against Scott Wiener’s SB 827 (which ended up dying in committee).
Obviously not all tenant, activists, or leftists are NIMBYs or form unholy alliances with homeowner groups. The ever awesome Jordan Grimes (@cafedujord on Twitter) and Darrell Owens (@IDoTheThinking on Twitter) are two of a number of so-called “Left YIMBYs,” who are among the most important factions of the pro-housing cause, especially considering that left-leaning politicians tend to be in power in major cities where the housing shortage is most dire, and having more of them being pro-housing is crucial in order to help alleviate California’s housing challenges.
The emergence of the left as a major force in pro-housing activism shows how much the pro-housing movement has grown over time, and more importantly provides a foil to the idea that working class groups will flippantly oppose market reforms. While unholy alliances do exist, left YIMBYism has shown a marked departure from the market reform activists of old.
Free Trade and the working class
Trade, like housing, is an issue where more free markets (that is, markets free of rent-seeking) is genuinely a good thing. To understand the basics of why free trade is good, it’s important to understand the idea of comparative advantage. If Country A produces cars more efficiently than furniture, while Country B produces furniture more efficiently than cars, it does not matter whether Country A produces more of either product, their production should be oriented towards cars, while Country B’s should be oriented towards furniture, and Country A and Country B should trade with each other to consume the other country’s primary good.
While free trade may be conceptually simple to understand as a very necessary phenomenon (maximizing productivity gains through comparative advantage and trade is perhaps the best way for a country to bring itself out of poverty), the rhetoric around it is flawed (and continues to be flawed to this day). The author Henry George, aside from writing Progress and Poverty, wrote perhaps the greatest tract in favor of free trade, his Protection or Free Trade. The essence of the work is that the problems of free trade do not come from free trade, but from something much more insidious — monopoly rents.
Protectionist policy is often captured by rent-seekers and special interests — for example, the most vigorous defenders of the god awful Jones Act (which despite the claims by some protectionists, has actually reduced American shipping capacity and production by a lot) are major American shipping companies such as Matson. It’s no wonder that the a common slogan during the fight to reduce tariffs in the late 19th and early 20th century was “the tariff is the mother of the trust.” Protectionist policy allows companies to monopolize their sectors by increasing the barriers to entry significantly; far from “protecting” worker power, protectionism allows for further exploitation and diminished worker power.
In recent years, sadly, there has been a populist backlash to free trade and towards protectionism. Politicians like Donald Trump on the right and Bernie Sanders on the left have derided free trade and attacked the North American Free Trade Agreement (or NAFTA), and protectionism in recent years has gained support from major unions. A common refrain among NAFTA opponents at the time was that NAFTA supposedly led to the loss of American manufacturing jobs — however, as economist Brad DeLong noted in Vox, NAFTA was not the reason America lost manufacturing jobs. The idea that NAFTA did lead to a loss in American manufacturing jobs was and remains powerful in public imagination, and fueled working class support for protectionist policies in the 2010s — both Donald Trump and Hillary Clinton opposed the Trans-Pacific Partnership, and the former was successful at renegotiating NAFTA as the United States–Mexico–Canada Agreement as President (and also implemented a lot of tariffs).
Just like any market liberalization policy, free trade has both benefits and costs — the primary problem facing free traders is that the benefits are extremely diffuse (spanning continents, even), while the costs are heavily concentrated. A company town in America losing its factory that had kept it alive for generations after NAFTA provides a much more compelling story than the fact that garment prices have stayed flat over the last three decades. Much in the same way, the people who suffer from protectionism do not get their voices heard — a woman in Bangladesh who doesn’t get the chance to work in a garment factory and instead is forced to continue subsistence farming does not get her story heard, nor do the stories of factory workers in the United States who lost their jobs from the monopolies promoted by protectionism.
The best way to prevent populist backlash to trade liberalization is to understand the central dynamic of diffuse benefits and heavily concentrated costs, and to set up generous social safety nets in order to cushion the blow of trade liberalization. The method that the United States took — of enacting “welfare reform” that drastically reduced the social safety net at around the same time as NAFTA — is not the way to go. Free traders cannot rely solely on our charts, graphs, and data if we lose the rhetorical war to the protectionists, while winning the rhetorical war relies on creating a broad coalition that places the working class’s needs front and center.
Zoning reform: preventing the mistakes of free trade
Just as with free trade, zoning reform is majorly economically beneficial. A 2019 paper by Chang Tai Hsieh and Enrico Moretti found that overly restrictive land use regulations in America’s major metropolitan areas hamper labor mobility drastically and have reduced aggregate U.S. growth by more than 50% from its potential. Zoning reform and creation of more housing is key to allow more people to live in highly productive metropolitan areas such as Los Angeles and San Francisco, but oftentimes supporters of zoning reform have faced the unholy alliance described earlier.
Supporters of zoning reform who tend to lean towards the liberal/libertarian side (rather than the left) tend to phrase zoning reform in two primary ways: the economic growth argument (citing papers such as Hsieh and Moretti), and the property rights argument — the government artificially restricting what people are allowed to build restricts their freedom. Both of these arguments are strong on their own (and I have personally used them many times), but neither of them are particularly compelling when engaging with the working class (who don’t necessarily own property and are often precariously housed). Similar statistical arguments to the former — such as this research roundup that shows a strong connection between new housing and reduced risk of displacement lower rents — do not do much to convince people who see buildings go up around the same time as rents are rising.
Anecdotes are powerful, not data. Stories of families being evicted or eminent domain-ed out of their ancestral homes, or neighborhood change occurring at the same time as rising rents, are far more interesting to read and far more anger-inducing than what really happens in cities like Los Angeles: people get displaced from rising rents due to a lack of housing, not due to an abundance, and many who would consider moving to the city for good employment opportunities instead pass over them due to high housing costs.
As with free trade, the status quo makes everyone worse off, but the benefits of change from zoning reform are diffuse while the costs are concentrated. Rhetoric that doesn’t take this into account (which sometimes comes from liberal/libertarian-leaning pro-housing advocates) can end up being harmful, potentially leading to populist backlashes — the most visible example of which is left NIMBYism and unholy alliances.
There is a silver lining, though: pro-housing advocates did not make the same mistake that free traders did. They made sure to highlight the racial injustice of exclusionary zoning laws (not just the economic effects), boosted by popular books such as The Color of Law, and how reducing barriers to housing production help everyone. They passed laws such as providing a right of return (California’s SB 330), which reduces displacement of incumbent tenants during redevelopment, helping to cushion the blow that comes from a major upending of the status quo. But most important of them all, they passed true, tangible zoning reform that provides for the creation of more housing (in the form of SB 9 and 10). Obviously, there is a lot of work to do, but pro-housing advocates such as California YIMBY show that there is no fundamental disconnect between zoning reform and placing the working class front and center.
There are always going to be a couple groups that ostensibly represent the working class who will refuse to accept the fact that California, as a state with a massive housing shortage, needs to build more housing; unholy alliances will always exist. Despite that, I don’t think there will not be a populist backlash to zoning reform like there was against free trade — the general public understands more housing to be a positive end. Overall, I am personally hopeful that, despite how maddening unholy alliances are in housing, they will not prevail — we will be able to achieve abundant housing in California and across the United States, in due time.