As an economist, I'm often asked "How can Austin lower the cost of rent?" or "How can Austin lower the cost of starter homes?". But when I answer "Get rid of the minimum lot size.", I get stares of disbelief. I've tried to explain how consumers are buying more land than they want and driving up prices. Shrugs. I've tried to explain how economists have studied the minimum lot sizes in cities surrounding Boston. Blinks. My audience just doesn't accept that getting rid of a minimum lot size will lower rent/prices.
I've thought about it and I've realized that most people don't think about how prices are lowered in an economy. Lower prices are a consequence of many competitors interacting and that's hard to see. The "invisible hand" really is invisible! And, more importantly, people are not likely to notice processes that do them no harm.
But people do notice things that harm them. They notice merchants trying to screw them over. So I've learned to reverse the question. I say to them:
"Imagine you were an evil landlord, trying to raise the rent. You should get into character: Twisting your evil mustache. Get that gleam of greed in your eye. Now, imagine that you've bought yourself an apartment building and a City Council Member. What laws you would like your City Council Member to enact to dive up your rent and make you as much money as possible?
The best laws get rid of the competition. Competition lower rents and loses you money. So, as an evil landlord, you want laws to stop any housing that might compete with your buildings.
First, you want American-style zoning laws. You want commercial zones without any housing in them. You want retail zones without any housing in them. Huge swaths of land without any competition for you.
Second, you want single-family-zoning laws. Apartment buildings have lots of cheap units and are your biggest fear. You probably cannot ban them, but you can restrict them to as little land as possible. Reserving 90% of residential land for expensive houses that each hold only one family is a great start.
Third, you want a minimum lot size. Sneaky people might build many tiny houses on tiny lots and you want to stop that.
Fourth, you want a height or capacity limit on apartment buildings. Even if you limit apartments to a small amount of land, sneaky people might build very tall buildings with lots of units and you can't have that happening.
Those are the necessary laws, but there are plenty of other laws you might want as an evil landlord. A "Floor to Area (FAR) ratio" would limit square footage of buildings. Setbacks and impervious cover limits restrict the land that can be used for housing. A ban on cheap manufactured homes is delightful. There are so many great laws for driving up the price of housing."
After hearing that short speech, every listener has a perfect understanding of how to drive up the price of rent. The coup-de-grace is very simple:
"You asked how to lower the rent in Austin. We just need to repeal all those laws that drive up the price."
And that should be the end of this story: I found a way to explain how to lower rent. Except I'm scared by one fact. The list of laws was too good. Every law I could think of --- even a restriction on unrelated people living together --- was present in Austin. It felt planned.
I'm not one for conspiracy theories and I have no evidence of any planning by landlords or, the other profiters, sellers of land. The laws might be happenstance, the accumulated result of many individual profiters all nudging City Council in the same direction. And those profiters would be likely to seek out the City Council and vice versa. Still, the list of laws disturbs me.