Bringing grocery stores to rural areas and considering free markets

Declining populations in some rural areas means it is more difficult to sustain grocery stores:

Some states are trying to tackle their rural grocery gaps. Supporters of such efforts point to tax incentives and subsidies at various levels of government that have enabled superstores to service larger areas and squeeze out local independent grocers. Now, dollar stores are opening in rural regions and offering items at lower prices, posing direct competition to local groceries.

Critics see that development as a threat to public health, since dollar stores typically lack quality meat and fresh produce.

But every town and every store is different, making statewide solutions elusive. Some legislators say they are reluctant to intervene too heavily because the market should close the gaps…

In rural areas, the poor tend to live farther from supermarkets than residents with more resources. The median distance to the nearest food store for rural populations in 2015 was 3.11 miles, and a shade farther for rural households enrolled in the Supplemental Nutrition Assistance Program (SNAP), better known as food stamps, according to a May 2019 report by the U.S. Department of Agriculture, which oversees the program.

Providing a range of social services and cultural services is an increasing issue, ranging from medical care to religious congregations to food.

While there are logistical issues in how to run, supply, and sustain organizations across such broad distances with limited participants, the political approach cited in this article is interesting. Should more conservative states provide government assistance for grocery stores? The article suggests there is some reluctance for state governments to step in. But, this might be exactly a good case where free markets simply cannot work well: there are not enough people in certain areas to generate profits or efficiencies. Plus, the federal government over the decades has helped rural areas, such as through rural electrification projects. Will state lawmakers refuse help just because of commitment to certain ideologies?

This situation also suggests Americans could think more about providing services in ways that do not have to generate profits. Instead, the services exist to serve the community. Think cooperatives. Think community-based organizations meant to help sustain each other rather than make a profit.

Trump administration pushes housing deregulation

A look at the Trump administration’s approach to homelessness includes this summary of how they view housing more broadly:

Housing deregulation is probably the core of the report outlined by the Council Advisors. That lines up with the Trump administration’s overall position on housing—from Carson’s enthusiasm for breaking up exclusionary zoning to the housing plan that the Domestic Policy Council is drafting. Trump signed an executive order establishing a White House Council on Eliminating Regulatory Barriers to Affordable Housing in June.

While making it easier to build housing could ease the affordability crisis, it may be hard to achieve those reforms, Hanratty says. Several of the Democratic Party primary candidates have outlined housing plans with various strategies to promote new construction, but all of them would require sweeping new legislation. And in practice, deregulation might not produce housing that is affordable to very low-income families or people with substance-abuse or mental-health afflictions without subsidies.

This is a common conservative argument to make these days: the housing market needs to be a more free one with less interference from local governments as well as the federal government. Attempts at more explicit intervention – such as in public housing – have not proved popular. If the law of supply and demand could simply take over, the market would provide housing options for all.

However, this may not work as intended. The suburbs, a space seen as desirable by many Americans was not the result of free markets but rather the result of all sorts of social and government interventions. Would Houston’s growth without zoning look attractive for communities around the country? Without any regulations, developers and builders may have little incentive to build cheaper housing and instead pursue units that provide more profit.

Finding some middle ground where specific and limited interventions actually lead to more affordable housing will prove difficult. Without some negative consequences for communities and housing market actors who do not participate in providing cheaper housing, what can be done?

Rebuilding beachfront McMansions

A journalist argues the construction and reconstruction of large homes near Atlantic beaches is a losing proposition in the long run:

Through federally funded flood insurance, huge appropriations for beach nourishment projects, and generous, well-intended relief aid, government policy allows developers and wealthy investors to build huge houses and hotels on beachfronts and low-lying barrier islands at high risk from coastal flooding as well as hurricanes. Uncle Sam’s generosity makes it all possible…

Writing just as the extensive damage from Hurricane Florence became apparent, Gaul covers the waterfront, so to speak — from Hurricane Katrina to South Florida, to the halls of Congress. In North Carolina, he stops Down East in Columbia, Creswell and other towns of North Carolina’s “Inner Banks,” where rising water levels and flooding are washing away entire communities…

According to Gaul, things began to tip in the 1980s, when multistory “McMansions” began to supplant the simple Cape Cods. (A similar trend has transpired on the north end of our state’s Outer Banks). Disasters such as the Ash Wednesday flood of 1962 did little to discourage development. On the contrary, real estate dealers saw storms as “clearing the market,” blowing down older, ramshackle structures and making way for the new, bigger units that buyers seemed to want.

Real estate prices went up, and increasingly retirees and residents with modest incomes were squeezed out. But there were always more customers in line for resort property.

I wonder if the primary objection is that big homes are being built and someone is profiting from the government money or should there be no homes on these properties? If the goal is to protect the beach and taxpayer dollars, less development in these areas is better. If the problem is profiting with the government’s money, there could be restrictions on the size of the new home or how the money is used.

It would be an interesting thought experiment to consider what this would look like without any government intervention. The argument here is that the government’s funding for rebuilding simply encourages the cycle of building larger and larger homes. If there were no regulations, what would the market bear? Or, as the author seems to suggest, would different regulations be better for the long-term fate of the beach and tese communities?

Housing as the ultimate marker of poorly functioning (free) markets

Alexis Madrigal considers generational access to housing and the high real estate prices in some markets:

There are obviously many reasons that coastal housing markets have gone so bonkers. But it is an ironic twist that residential property, which once served as the bedrock for American capitalism, has become the most obvious sign for young people that something is deeply wrong with the markets.

What exactly has gone “deeply wrong” with these housing markets? Madrigal lays out a number of factors. But, I wonder if we could extend the analysis a bit further from “housing markets” to “economic markets” more broadly. Here is what two opposing sides might say:

One side: these housing markets with high prices have never truly been free. For decades, federal policy has privileged single-family homes. Local policies have made particular choices, often toward protecting property values and limiting density. Open up these markets to true competition. If affordable housing is needed, limit regulations and let all the money of potential buyers drive new development.

The other side: housing markets have not been regulated enough. The federal and local policies have tended to privilege certain actors – like the white middle-class and connected developers – over the needs of many working-class and poor residents as well as non-white residents. Policies aimed at providing more housing for all need more teeth and the ability to compel protected wealthier residents to accept development near their own homes.

As a sociologist who has studied this for over a decade, I tend to side with the latter argument: (1) markets are rarely ever completely and free and (2) the scales have been tipped toward whiter and wealthier residents for a long time. Perhaps the true lesson of these high-priced housing markets is that calls for regulation and oversight only go so far when property values and who neighbors are is truly at stake.

The suburban way of life is not the result of free markets

Even as Americans have exercised some agency in choosing to live in suburbs, the whole system cannot truly be described as being the result of free market activity:

I get the concern and rarely disagree with Shelley, but there’s nothing free market about current single-family zoning rules. The suburban landscape largely is a creation of subsidies and zoning rules, which mandate only one house per certain size of lot and require umpteen parking spaces for every new shopping center, restaurant, office and church. Everything is micromanaged in the planning department.

I’m on the building committee of our church and have closely examined many proposed construction projects. It is so hard to build, expand or try any new development ideas because these planning edicts—designed mainly to protect our suburban way of life, and backed by residents trying to bolster their property values—are costly and inflexible…

But the underlying debate is about two visions of our California landscape. One side wants to protect our suburban model and the other side wants to urbanize. It’s a false choice driven by their own personal preferences. We need more apartments and condos. We need more single-family neighborhoods. We need to allow builders to provide the housing products people want, and different people want different things. The same people want different things at different stages of their lives. I live on an acreage, but now that we’re empty nesters, my wife and I plan to move into the city. That’s why I’m squarely on neither side.

After my housing column last week, I’ve heard from readers who oppose the legislation. Frankly, I’m frustrated by some of their arguments. To summarize some comments: If you can’t afford to live around here, then maybe move someplace else. There are too many people here already and too much traffic congestion. If your kids can’t afford California, they should consider less-costly states. Such views transcend political affiliation.

Zoning is a good example of how regulations can dictate what communities can construct and then who can reside or work in such locations.

Add two other other less-than-free-market aspects of suburbia:

1. A legacy of racial and class discrimination in suburbs.

2. Government subsidies for highways and other local services as well as propping up suburban housing in the form of single-family homes.

Americans might not acknowledge the ways suburbs developed and may even resist seeing them as social products. But, addressing tough suburban issues such as affordable housing probably requires thinking and acting at more collective levels than letting the beloved local governments dictate what they want (which can often deliberately lead to exclusion).

Where are the people oriented suburbs?

The book Market Cities, People Cities by sociologists Michael Emerson and Kevin Smiley examines big cities in light of two ends of a spectrum: market cities follow an economic logic and people cities look out for the well-being of their residents first. In their study, Houston is the model of a market city and Copenhagen is the people city exemplar.

This got me thinking about American suburbs. Given their history and priorities, they appear to be market communities. On the whole, American suburbs emphasize single-family homes, private families, driving, and local control over resources. They are generally known as wealthier communities. Additionally, the suburbs have generated a lot of money for developers, builders, the construction industry, and communities through tax revenues. Most of this is private wealth or money that residents hope can be spent on their own lives.

So, are there suburbs that emphasize the welfare of residents over markets? If so, where might they be located? A few ideas:

  1. Inner-ring suburbs. This could be because they located near big people cities or the sets of issues facing such suburbs – often racial and ethnic diversity and more poverty – could prompt a different approach to local governance and community life.
  2. Suburbs within blue states. If this is the case, suburbs in states like New York, Illinois, California, New Jersey, Connecticut, and Washington are more likely to have people suburbs.
  3. Suburbs that have strains of political liberalism. While suburbs are traditionally associated with more conservative political stances, this has been in flux in the last few decades. With new residents in suburbia as well as new generations, some communities may view suburban life through a different lens.
  4. The rare suburb that has experienced a significant crisis – a major development gone awry, the loss of a major employer, severe budget issues – and tried to forge a new path.

If I had to guess what percent of suburbs could be considered more devoted to well-being than markets, I might venture 20% at most.

No cheap homes left at the bottom of the housing market

One downside of increasing housing values is that the lower end of the market also rises:

More telling is that at the start of 2013, when home prices were just beginning to bounce off the bottom of the housing crash, the share of homes sold above $500,000 was just 9 percent of all sales. Today that share is more than 14 percent. The share of lowest-priced home sales today is less than half of what it was then as well.

“On the lower end, there is virtually no property at a very low price level anymore,” said Lawrence Yun, chief economist for the National Association of Realtors. “The same property has been moved up to a different price bucket just because the prices have been rising strongly, over 40 percent price appreciation in the past five years. We are not getting the transactions on the lower end because there is virtually no inventory on the lower end.”

In the wake of the housing crisis, investors bought thousands of low-priced, distressed homes, putting a price bottom on the market but also removing lower-priced inventory. The expectation at the time was that if prices jumped, the investors would sell. For the most part, they did not. In fact, investors continue to buy properties, even at peak prices today because both the rental market and the market to flip these homes are so lucrative…

Homebuilders are continuing to increase production and selling homes they haven’t even built at a historically fast pace. They are not, however, putting up low-priced homes, even though demand there is high. They argue they cannot make the margins work, given the high costs of land, labor, materials and regulation. The median price of a newly built home recently hit a record high.

Two quick thoughts:

  1. I thought letting this go to the markets would solve the problem. In other words, if there is a need for cheaper housing, shouldn’t the market correct? It does not appear this is happening as builders do not want to have smaller margins. Some interventions may be necessary if no businesses see an opportunity.
  2. This makes the issue of affordable housing even more difficult. Many big cities already have major shortages of affordable housing. If prices keep increasing and little is being built at the lower end, might be drastic consequences?