Last week, a reader emailed me about a post over at the GazetteXtra.com, entitled, “Neighborhood Oppose Housing for UW-W Students.” The story highlights the views of Whitewater dentist-councilman Roy Nosek, on student housing, the housing market, aesthetics, and neighborhood quiet. I’ll address the GazetteXtra.com post with three of my own: Part 1 addresses the economic aspects of Nosek’s views, Part 2 will address the cultural aspects of his views, and Part 3 will address the quality of the GazetteXtra.com post from Carla McCann.
In this post, I’ll focus on the economic aspects of Nosek’s views on student housing. It’s not an easy subject, as Nosek betrays not the slightest real understanding of markets, supply and demand, or growth.
Nosek sees a problem with students living in his district, and other districts, their presence being to him (as he has said publicly) a death-knell for a district. For Nosek, student housing represents, in summary, three problems: (1) disruption to peace and quiet, (2) impairment of the beauty of a neighborhood, and (3) demand for student housing drives up home prices.
To solve these problems, Nosek proposes greater code enforcement of (1) ordinances against unrelated persons living together, and (2) ordinances against too many cars in a front driveway of a home.
What’s wrong with his economic approach and understanding?
Disqualifying Demand. Nosek dislikes student housing, so he asks the community to enforce ordinances that would limit student off-campus apartments in homes. He knows that there is a demand for student housing; he just doesn’t like it. His approach effectively ignores this demand by making it unlawful to fulfill it with the existing supply of real estate. Nosek would prevent the satisfaction of that demand — that is, student need for housing plus ability to rent — from being satisfied. And yet, these students are there, they have the ability to rent, and homeowners will rent to them or sell to landlords who will. It doesn’t matter; he does not recognize student housing needs as legitimate market demands. They’re not his kind of buyer (or renter), so to speak.
Nosek’s like a man who thinks that he’s eliminated unemployment because he’s made it illegal for the unemployed to look for work.
These students are not going away, and Nosek offers no alternative to where they should go. I joked once that Nosek wanted these students out of the city, or inside the campus behind a high wall. I was unfair when I said that about his dislike of student housing: I was too generous to him. Those two outcomes would be infeasible and wrong, but they would constitute a plan. Nosek offers no plan of his own half as credible as those two ridiculous ideas.
Assumption of Alternative Demand.More than once, Nosek has said that his goal is home ownership for young couples with families. That’s a goal for young couples with families, too. He complains that home prices are higher because of demand for student housing, and so young families cannot afford buy homes. His solution: disqualify, so to speak, student or landlord buyers, leaving young families better representing among remaining potential buyers.
How many of the homes then up for sale would go to young couples with children? Nosek cannot tell you, because no one knows. Currently, there are three scenarios for young home-buying couples: (1) none are bidding now, (2) some bid and sometimes win, (3) all those bidding lose. (Since Nosek complains about too many student dwellings, we know that young home-buying couples cannot be bidding and always winning.)
If landlords and students would not bid on homes (assuming it would be pointless to do so if enforcement were 100% effective, as Nosek wishes), then does that mean that all the homes for sale would go to young families with children, etc? No, of course not.
If I tell you that you cannot sell a home to a brunette, it doesn’t mean that you’ll sell your home to a blonde. Without brunettes who want to buy a home in the bidding, you may not have any good buyers at all.
Restricting Buyers Only Impoverishes Sellers. This brings us to Nosek’s inability to understand fully the implications of restricting the pool of buyers. He understands it in part, however. When he tells us that homes are too expensive now, and that he wants to make homes affordable for his preferred buyers by disqualifying other buyers, he implicitly — and correctly — assumes that a reduction in the number of available buyers will likely stagnate or depress home prices.
If this were not his assumption, then there would be no point in his complaining that home prices were presently too high for young families. When he reduces the number of available buyers, then he will almost certainly reduce the price that existing homeowners would otherwise be able to command as sellers.
Existing homeowners will be able to command less for their property for sale, or refinancing for remodeling, etc.
Misunderstanding Demand and Supply. I cannot tell if Nosek understands that demand and supply are wholly interdependent. When he speaks, he seems to be someone who thinks about altering the number of buyers (demand), but only with a partial understanding of how that would affect sellers (supply). Tinkering with one affects the other in ways that Nosek does not acknowledge.
Reduction in demand would depress supply, as fewer homes would be offered on the market, and fewer would be renovated or preserved where they would command less in the marketplace. With fewer homes sold, there would be fewer opportunities to create demand and for newer and larger homes (those trading up, or moving into different properties, like condominiums).
In fact, when I write ‘disqualifying buyers,’ I could as easily say ‘restricting sellers.’ A supply of one thing is merely satisfaction of another’s demand. They are neither separate from each other nor easily modified without — often — unintended consequences.
Stagnation as a Way of Life. The consequence of disqualifying purchasers through municipal ordinance is fewer buyers, stagnant or depressed prices for existing homes, and reduced investment in student housing or new single family homes. Lifting restrictions on sale would change the community, in positive, voluntary ways: there would be more student and single family housing, and an end the present shortage. It is a shortage that zoning regulations have only made worse, and that unfettered transactions would only make better.