As Americans continue to flock to large cities in search of opportunity and connection, many of those same cities are suffering from expensive housing costs, arbitrary price controls, onerous regulations, and cronyist governance—the sum of which is serving to diminish access to the pond and stunt opportunity among the disconnected.
In Seattle, Washington, for example, we see the typical cocktail of a progressive urbanist’s daydreams, mixing excessive land-use regulations with a series of knee-jerk jolts in the minimum wage. Despite being home to some of the fastest growing companies, the city’s policies are beginning to take a toll on local businesses and workers. Meanwhile, homelessness is on the rise.
Far from recognizing the source of such woes, however, the City Council has sought a remedy in additional economic distortion, passing a “head tax” on the city’s highest grossing businesses, amounting to $275 a year per full-time employee (down from the originally proposed $500-per-head). For a company like Amazon, the tax will amount to an estimated $12.4 million per year.
The goal is simple: to make 585 or so businesses pay their “fair share” for the city’s housing dilemma by funding affordable housing and emergency services for the homeless. As Councilmember Mike O’Brien explained it, “We need companies that are profitable and making billions of dollars every year to help with the folks that are being forced out of housing and ending up on the street.” Or consider the attitude of SEIU Healthcare 1199NW, a local union: “Seattle’s exploding homeless population is a symptom of our city’s extraordinary economic growth and astronomical home prices…The corporations who are profiting most — the top 3 percent — should rightfully pay a fair fee to address the problems they create.”
Whatever the needs of Seattle’s homeless population, this is a curious path indeed—blaming economic growth for economic woes—which only goes to show the backwardness of the logic, the size of the blind spot, and the scale of the planner’s delusion.
Despite the professed aims of the city’s planning class, such policies will only serve diminish opportunity and affordability—further distorting prices and driving away producers, rather than correcting the actual follies that led to a shortage of affordable housing in the first place.
The ripple effects of taxing jobs aren’t just bad for companies; they cut straight to Seattle’s workers, as many are making it known. Further, as Richard Epstein observes, “Picking on one group of successful firms will likely reduce their presence or even drive them out of town, as with Amazon. And it will surely deter other successful firms from coming in.” If you need evidence, just witness the recent migration from coastal centers to middle-metros in the Midwest.
Instead of driving a wedge between successful businesses and those in need, the City Council would do well to focus on the barriers to growth, rather than the engines behind it. If the activity at the bottom is healthy, one could easily conclude the problem might be up top.
As Michael Hendrix argues in The Closing of the American City: A New Urban Agenda, a report from AEI’s Values and Capitalism project, the city’s with high economic growth and rising housing costs have plenty they could focus on without imposing more fees or tinkering with prices:
The extremely high cost of city living has an obvious cause and an obvious solution. The problem is one of simple economics: An increase in demand for a good will cause its price to rise until supply grows to meet it—unless it is constrained by some outside force. The outside force in this case is the noxious combination of overly restrictive land- use regulation, byzantine permitting processes, and a rampant fear of development in one’s own backyard.
…Reformers must liberalize zoning restrictions—full stop. America should enjoy a less regulated, more market-oriented housing market. Fewer neighborhood types should be deemed illegal. Changes in supply should more readily keep up with changes in demand. In prosperous urban areas, freer markets will yield denser housing. They may not immediately lead to more economical housing, particularly in geographically constrained cities with globalized property markets, such as New York City. And we must keep in mind that a vibrant city hosts a broad array of housing types; the aim is not to pave paradise and put up a skyscraper. But the costs of inaction are higher than those of action. In Austin, rents stabilized after 10,000 new apartments were brought to market in 2014 and another 8,000 were added the year after. Building more units does in fact lower prices.
To spot such solutions, however, requires a full and accurate vision of where a city’s flourishing actually begins: not from top-down tinkering, but bottom-up creativity and exchange; not from planning, but from searching, and empowering the searchers, in turn. If cities like Seattle wish to cultivate a city with provision for all—not just the rich and connected—it should begin with fostering freedom and opportunity in the paths of connection, creativity, development, and investment.
That will require more than lessons in basic economics or a self-awareness of the risks of political power. It will demand a shift in basic attitude and moral perspective—one that focuses not on dismantling the powerful but on expanding opportunity for entrance.