Only an alliance of Georgism and YIMBYism is capable of addressing rising housing costs and economic inequality
by Stephen Hoskins, @GeorgistSteve
Spend any time trying to untangle the Gordian knot of urban housing costs and you’ll quickly encounter two groups claiming to hold the scissors: the YIMBYs and the Georgists. YIMBYs (‘Yes-In-My-Back-Yard’) argue that cutting land use regulations (’upzoning’) will boost housing construction and improve affordability; while Georgists believe we should shift the tax base onto land, to punish the speculative under-use of urban lots and stimulate the supply of homes. While many folks agree with both positions and there is much overlap between the two groups, they sometimes lob criticisms at one another and often vie for primacy in the housing discourse.
In this article, I will argue that both upzoning and land value tax are absolutely necessary if we want to fix our cities. I’ll explain why they are natural allies in the fight against landed interests, and demonstrate that they are so much better together. All urbanists should adopt both as a core tenet of their advocacy.
Ardent readers of this substack probably want to tax land already, so let’s start by talking about why you should also support upzoning.
Henry George was precocious in his understanding of the power of human proximity. In a love-song to the city, he writes “Here, if you have anything to sell, is the market; here, if you have anything to buy, is the largest and the choicest stock. Here intellectual activity is gathered into a focus, and here springs that stimulus which is born of the collision of mind with mind.” Dense cities are unrelenting engines of progress. They ensure all our desires are nearby, allow us to learn from each other, and provide a buffet of jobs so we can pick the perfect one. Cities boost innovation and entrepreneurship. Productivity grows by 15% with every doubling of city population.
While George’s lifetime predated our Euclidean system of zoning, it is clear that he would have found it an abhorrent barrier to human freedom. His single tax advocacy ultimately sought to liberate individuals from the extractive burden of land rents, thus providing freedom to all. “Freedom is the panacea for social wrongs and the ills they breed, and the single tax principle is the tap-root of freedom.” Freedom to George meant an ardent opposition to all regulations “save those required for public health, safety, morals and convenience”, which clearly excludes our burdensome zoning. **George wields this principle most directly in Protection or Free Trade, arguing that trade tariffs protect companies from competition, and grant them monopolistic power to raise prices, hurting consumers. In an identical manner, zoning is a regulatory tax on production which grants landowners the right to exclude others from their community and ultimately curtails our freedom to live and work on land in the manner that best serves human need.
Zoning which limits the densification of urban areas, like height limits, setbacks and maximum floor area ratios, acts as a stifling handbrake on the dynamism of our cities and banishes us to suburban isolation. Easing zoning in NYC and the SF Bay Area alone could boost US production by between 14% and 25%. Zoning prevents workers from moving to places where their labor will be more productive and more highly paid. Americans used to migrate in this exact direction, but that trend has reversed as zoning prevents housing from being built in the most valuable places. Low-income folks are hurt most by this exclusion, exacerbating inequality. YIMBY upzoning would not just improve social mobility and equality, but will also weaken both racial and economic segregation within cities.
Through a witch’s brew of tight density restrictions, sweeping prohibitions on apartments, and high minimum lot sizes, among other zoning regulations, these neighborhoods and suburbs effectively preserve their economic exclusivity and high-quality services to the detriment of everyone else. - Nolan Gray in Arbitrary Lines
Georgists should be appalled by zoning which forces households to over-consume land, such as minimum lot sizes, minimum parking requirements, and use restrictions that separate where we live from where we work and play. These force cities to sprawl outwards, undermining the viability of public transit and increasing carbon emissions through car-centric commutes and less energy-efficient dwellings. Enabling densification was one of the key climate abatement policies identified in the latest IPCC report.
Upzoning enables developers to shift away from sprawling suburban single-family homes and towards more sustainable typologies. A decade ago, only 12% of houses built in Auckland were townhouses and apartments, but after sweeping upzoning they’ve grown to fully 70% of new supply. Aside from all the benefits discussed above, this density has the added benefit of creating a voter base for whom land is a smaller share of their household balance sheets, making them more amenable to Georgist arguments in the future.
“[YIMBY policies] will disrupt systems of people who treat their home as an investment … and will create renters and condo owners who own less of the land, so they are going to be more likely in the end to support radical measures to discipline land markets" - Mark Mollineaux on the Henry George Program
YIMBY readers may be clapping along in agreement that upzoning can solve many of our social woes. But without incorporating the lessons of Georgism, many of the benefits of upzoning will be slow to materialize and will flow straight into the pockets of landlords.
For the owners of upzoned land in desirable locations, YIMBYism can be incredibly lucrative. Relaxing a height limit multiplies the rental income that can be earned from building upward on a piece of land. Landowners know this and respond by demanding much higher prices from developers trying to acquire their land for construction. Thus, upzoning can instantly raise the value of upzoned land. A huge portion of what we call ‘developers’ are really just speculative land bankers who buy sites, lobby for upzoning, and then make-off with their ill-gotten windfall gains, without actually adding to the supply of housing. This mechanism is why YIMBYs often find ourselves confronted by Yonah Freemark’s finding that transit-oriented upzoning in Chicago immediately capitalized into higher property values. Likewise, my recent thesis found that even widespread upzoning across Auckland still generated windfall profits in the order of USD$100,000 for the owners of a typical single family dwelling where townhouses and apartments were newly allowed.
Crucially, this is not an argument against upzoning! Instead, we must find ways to capture the value that is created by upzoning so it can benefit everyone in society, not just lucky landowners. Upzoning paired with a windfall gains tax can help share the land rents created by upzoning. Land value tax (LVT) ensures that whoever benefits most from zoning will also contribute the most taxes. Even better, by placing a price on land banking, it will nudge developers back into the business of building.
The windfall profits from upzoning contribute to the (mistaken) belief among many left-urbanists that YIMBYs are just feckless shills for the real estate lobby. One benefit of being both a YIMBY and Georgist is that you can respond to these allegations with “I want to tax the entire value of land away from the landed class and redistribute it to the public”.