I thought I’d do a rudimentary explanation of my profile picture and how it can explain why the cost of housing is increasing and how up-zoning can help. 🧵THREAD🧵 
It’s a simple aggregate supply/demand chart where, naturally, the quantity of land is fixed (represented by a vertical line, S to S'). The demand curve (D to D') tends to shift up as people have more means (higher incomes) to afford more desirable locations.
This results in the equilibrium price going up (the line from R to E), shown here. The growth of the purple area represents total aggregate land value going up. This seems like it will spiral into an affordability crisis for newcomers and long-time residents without rent control.
However, the vertical supply line is not actually in its natural position. It's artificially held low by zoning restrictions. The quantity of “land” is actually the total available physical space in which to construct housing. Up-zoning would shift this line to the right.
This results in the equilibrium price going down! The total purple area still increases in the aggregate, reflecting the fact that up-zoned sites will increase in value as there is more available space above a parcel for construction, but the price per unit of space is lower.
But demand (and therefore price)would still goes up, right?! Yes, so let’s see what happens when we combine both the forces of an upward shift in demand and up-zoning to increase available space.
Applying both, we have more available space for constructing housing and the aggregate price remains stable as long as the amount of up-zoning stays in balance with demand.
I know this is very rudimentary, but I hope it that it helps make the case that up-zoning can help stabilize housing costs.
If you’re like me, you’re probably also thinking: “But the increase in total land value (the purple area) goes to land owners! That’s unfair!” and I agree.
If you’re like me, you’re probably also thinking: “But the increase in total land value (the purple area) goes to land owners! That’s unfair!” and I agree.
Personally, I am in favor of a land value tax that is high enough to tax away most (or all) of the unearned land value. And the revenue from that land value tax could be used to subsidize more affordable housing.
Making that increase in wealth more equitable requires changes to our property tax laws, and we have a long way to go on that.
Thanks for coming to my TED talk. 🧵END THREAD 🧵
Thanks for coming to my TED talk. 🧵END THREAD 🧵
