Housing doesn’t “occur naturally”

Using zoning to preserve older, smaller homes doesn’t protect affordability

There’s no such thing as “Naturally Occurring Affordable Housing”–older, smaller homes become affordable only if supply and demand are in balance, usually because it’s relatively easy to build more housing.

The parable of the ranch home shows that old, small homes don’t “naturally” become affordable:  they’re utterly unaffordable in markets like Silicon Valley that constrict housing supply.

“Preserving” older, smaller homes will have exactly the opposite of the intended effect, restricting supply, driving up prices and increasing displacement.


There’s a catchy but fundamentally flawed idea floating around housing affordability discussions:  “naturally occurring affordable housing.”

To many housing policy practitioners, “affordable housing” is a creation of government policy:  it’s either public housing (built, paid, for and operating by local authorities), or subsidized affordable housing (typically built by non-profits) with government subsidies and tax breaks.  By extension, anything else that turns out to have low rents or inexpensive prices (and wasn’t built with these subsidies) is somehow “naturally occurring.” It even has a cute acronym: “NOAH.”

A new report from the American Planning Association claims that restrictive zoning can be a way to hold down housing costs by “preserving naturally occurring affordable housing.”  The report concedes that up-zoning and expanding supply might help with affordability, but then simply ignores this point, asserting that added supply doesn’t result in more homes affordable for low income households, and argues that public policy should protect older, smaller homes from being redeveloped, especially to add many more units.

What this misses is that the cumulative effect of these ostensibly well-intended efforts to “preserve” older smaller homes is to drive up the price of these homes by making them scarcer, and to increase the overall level of prices and rents in a market.  There’s a profound myopia to this approach to planning that assumes that the affordability of a structure is an intrinsic characteristic of that building, rather than the overall balance of supply and demand in a city or region.  Affordability is a system condition, not something that inures to a particular building.  Ignoring the system level effects of supply restrictions makes housing availability and affordability problems worse.  The additive, cumulative effect of limitations on constructing new homes is to make all homes more expensive, and measures like those advocated in this report drive up rents for everyone.  Indeed, measures to restrict new home construction assure that older, smaller homes will not become less expensive over time.  That’s the big lie about the term “naturally occurring”–older smaller homes are cheaper in some cities because they are abundant relative to demand, and typically because these places make it easier to build new housing.

Whether a 1950’s ranch home is “affordable” today or not has nothing to do with its age or size, but rather the supply and demand for housing in the market in which it is located.  The reason 1,000 square foot, 1950s ranch houses in Silicon Valley sell for over $1 million, and never became “naturally occurring affordable housing” the way they did in other cities has everything to do with the zoning and other restrictions that “preserved” these homes and prevented enough new housing getting built.

As a result, the idea of “preserving naturally occurring affordable housing” has a kind of “leeches and bleeding” quality as a policy prescription.  Precluding redevelopment of smaller, older homes actually makes the housing affordability problem worse by blocking new supply that would help drive down prices.  Instead of fetishizing smaller, older homes, planners should step back and look at overall supply and demand in the market.

The world according to NOAH

The idea of “naturally occurring affordable housing” has been kicking around in planning circles for a few years. There’s a 2016 report from Co-Star (the real estate advisory firm), issued in collaboration with the Urban Land Institute and the National Association of Affordable Housing Lenders, which inventories the number of such naturally occurring units in each of the nation’s large metropolitan areas (they count about 5.6 million).

Even conservative think tank the Manhattan Institute has employed the term, arguing that Mayor Bill de Blasio’s affordable housing program is unnecessary because the city has a reservoir of “naturally occurring affordable housing” that are currently available and require no additional government investment.

The term is a relatively recent coinage. Google shows no instances of the phrase “naturally occurring affordable housing” appearing prior to 2007. There were fewer than 10 websites using that term in the years up through 2013, and in 2014, “NOAH” began to take off. There were 66 occurrences in 2014, 39 in 2015 and 125 in 2016. While it’s a popular, and to some, seductive, term it’s fundamentally misleading.

Reality:  There’s no such thing as naturally occurring affordable housing


A cave: Actual “Naturally Occurring Affordable Housing” (Flickr: Adifferentbrian)

Basalt, glaciers, arable land and virgin forests are all naturally occurring. So are clouds, insects, and mountains.

While there’s nothing wrong with affordable housing that doesn’t currently rely on direct government subsidies, there’s something profoundly misleading with the term “naturally occurring.”

There’s nothing “natural” about it. Housing markets and the process of investment, decline, and filtering, are all profoundly influenced by a range of policies, from the federal government’s subsidies to housing and highways, to local land use decisions. The process of investment and neighborhood change that results in used housing is “anything but natural” as the University of California’s Karen Chapple and her colleagues put it in a recent report to the California Air Resources Board:

The story of neighborhood decline in the United States is oft-told. While early researchers naturalized processes of neighborhood transition and decline, the drivers of decline are anything but natural and stem from a confluence of factors including: federal policy and investments, changes in the economy, demographic and migration shifts, and discriminatory actions.

(Ironically, that doesn’t stop the authors from also using the term “naturally occurring affordable housing” four times in their report, juxtaposing that with Section 8 vouchers and deed-restricted affordable housing units.)

Naturally occurring conjures up visions of mineral deposits, or mountain ranges or a benign climate.  But the existence–or non-existence–of affordable, privately owned housing has everything to do with a wide range of conscious public policy choices that simply don’t belong in the category of natural occurrence.  The danger with this term is that it implies that there’s really nothing that we can or should do to promote market housing–it’s naturally occurring, right? It’s either going to be there or it isn’t, so there’s really no point trying to influence it.  And if your community doesn’t have enough, well, then there’s really not much you can do about it.

What that misses, of course, is that public policies, especially local zoning requirements, building codes, parking requirements, development fees and the like have everything to do with whether the private market provides housing that is affordable. When we ban apartments from wide swaths of most communities, when we outlaw affordable micro-units in desirable neighborhoods, when we subject development to a wide range of discretionary and arbitrary approval processes, and when we impose enormous costs in the form of parking requirements, we’re making sure that the private market doesn’t produce housing that is affordable.

And as we’ve noted, the whole process of filtering, where, as housing ages it becomes more and more affordable, is contingent on allowing an ample supply of new housing, even when those new units are themselves more expensive than low and moderate income households can afford. The only reason that some communities have plenty of what gets called “naturally affordable” housing is that they made it relatively easy to build new housing and that in turn led housing to filter downward and become more affordable.

In contrast, many communities–we’re looking at you, San Francisco–made it really difficult to build any new housing, with the result that a lot of older units which would have filtered down market as they aged, became the only feasible housing alternative, and consequently their prices got bid up so that they didn’t become more affordable as they got older.

So by all means, let’s talk about the role of markets and privately owned housing in addressing affordability; but let’s not use a term that intrinsically isolates this from the policy arena.