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HomeEconomyPolitics as Self-Interest: Housing Is the Exception That Proves the Rule 

Politics as Self-Interest: Housing Is the Exception That Proves the Rule 

In a recent Substack post, economist Bryan Caplan avers that economic illiteracy, not self-interest, is what drives voters to support restrictive land-use regulations that drive up the cost of housing. But in fact, housing politics are the exception that proves the rule: Self-interest doesn’t usually drive political opinions, but the same underlying logic explains why self-interest does drive housing opinions. 

First, Caplan is right that self-interest doesn’t usually underlie political opinions. In northern New England, the bivariate correlation between household income and the Democratic presidential vote is actually positive: Richer people are more Democratic. (Social liberalism is the opiate of the elites.) There are many such examples. 

Second, he’s right that a study showing that voters don’t understand that increasing the supply of housing decreases its cost is evidence of economic illiteracy. The bulk of the evidence shows that an exogenous increase in housing supply reduces its cost relative to the counterfactual of no increase, especially on a metro area scale. 

But Caplan is wrong to conclude that this is “good news” since it means that we just need to educate voters about the economics, and they’ll come around to YIMBY

Rather, what’s going on is likely “motivated ignorance.” Voters don’t want to believe that increasing housing supply reduces its cost, so they steadfastly refuse to believe it, because for many of them, their self-interest lies in restricting housing supply. 

What’s my evidence? First, the same study Caplan cites finds that “housing is different” from all other goods, with respondents largely understanding that new car supply-chain problems cause the prices of used cars to go up, that training more plumbers causes plumber wages to go down, and that free trade agreements cause consumer prices to go down. Upshot: Many voters know supply and demand just fine, but they refuse to believe it applies to housing. 

Why would they refuse to believe this?  

The answer is self-interest, and the evidence is overwhelming. William Marble and Clayton Nall use a survey experiment and find that when homeowners who claim to believe in a federally guaranteed “right to housing” are told that housing production will lower their home values, they oppose it – at the same rate as homeowners who don’t claim to believe in a right to housing. When they’re not told this, “right to housing” homeowners are far more favorable to housing production.

Survey evidence repeatedly shows that renters are more favorable to housing production than homeowners. Why? Homeowners are worried that housing production will drive down the value of their homes. Renters, by contrast, want lower rents. 

True, even renters are more NIMBY than they should be, often wanting citywide increases in housing production but not increases in the immediate neighborhood, presumably because they are worrying about displacement. Whether such preferences reflect economic ignorance or not is unclear, as the effect of new apartments on rents in their immediate area is only modestly negative. But it does suggest YIMBY needs to work through making the regulations allow more development by right everywhere in a municipality, not just by pushing to approve developments in particular neighborhoods. 

Finally, in the last New Hampshire housing survey, I embedded an experiment, randomly asking half of respondents whether they agreed that, “My community needs more affordable housing to be built,” and the other half whether they agreed that, “My neighborhood needs more affordable housing to be built.” Fully 69 percent agreed that their “community” needs more affordable housing construction, but only 50 percent agreed that their “neighborhood” needs more affordable housing construction. It’s harder to find clearer evidence of a pure NIMBY effect, as opposed to ideological opposition to housing anywhere. 

So why does self-interested housing politics “prove the rule” that politics isn’t usually about self-interest? Because the reason why politics isn’t usually about self-interest – the low stakes – isn’t true about housing. 

As Caplan knows, because he wrote a whole book about it, voters are rationally ignorant and biased about public policy, because they have little incentive to educate themselves about the best policies for the country. Their vote isn’t decisive, and the benefits of an informed vote would accrue almost entirely to people other than themselves. 

But housing is different. The stakes are large: The value of their homes is the biggest part of most homeowners’ wealth. They care a lot about maintaining and increasing that number. And homeowner engagement is usually decisive. They simply have to turn up at a local public hearing to complain about a proposed development, and they can usually delay, diminish, or even kill it altogether. Nearby developments are particularly motivating because even if they don’t usually hurt property values nearby, they could, and that risk is intolerable

The costs of NIMBYism hit renters, landowners, employers, and future generations hard. But of those groups, only landowners have the direct incentive to show up to support projects being built on their own land. Renters and employers lose from NIMBYism in general but don’t have the motivation to support specific projects. And future generations don’t exist yet. 

The usual reasons why voters would be “rationally irrational,” in Caplan’s phrase, don’t apply to housing – or at least, apply in a different way. Many homeowners have a direct, vested interest in marshaling whatever evidence they can find to oppose nearby housing developments. Believing – or pretending to believe – that new housing won’t help with rising housing costs is instrumentally rational for them. 

Caplan should like this story, because it fits with his underlying theory of political failure. Housing is the rare case where political failure does not come from tiny yet motivated interest groups exploiting an ignorant and ideologically biased majority, but instead from tyranny of the motivated majority, who know exactly what they want and why, and are ready to say anything to get it.