Abundance

Klein and Thompson explain that economies are not bound by land but instead by the “outer borders of growth” of ideas and their technologies, and the “fiery creation of the new” occurs most frequently in the land of American cities (22). This land, the American cities, faces the cost-of-living crisis, as housing in most American cities is too expensive for young families trying to settle down. In the 1950s, thousands upon thousands of new houses were built in the US, but this accelerated rate of building declined in the 1970s and then again in the 1980s and 1990s. After the Great Recession in the mid-late 2000s, the construction of new homes nearly ceased. The US has 425 dwellings per 1,000 people, while countries like France and Italy have 600, and Germany and Japan have 500.

This lack of houses results in a housing crisis in the United States. As much as 30% of Americans spend 30% or more of their income on housing, and many either endure extreme commutes or inferior jobs to live where they can afford. In New York City, people used to move there and begin earning more money because of the better jobs available in the city. Now, people move to New York City and lose money because of the high cost of living there. Some view living in a city as a luxury and an indicator of wealth, which Klein and Thompson argue is a “perverse inversion” of what a city should be. Cities should be the escalators of the middle class.

Why Cities Matter Now More Than Ever

In the last couple of centuries, mankind has fought distance and won. Traveling is fast and convenient, and communicating across far distances is easier than ever before. Cities, “at their most elemental,” Klein and Thompson state, “are the ancient answer to the difficulties of distance” (25). Even as distances became easier to bridge, the centralization of the city became more important economically and socially. The contemporary American economy has shifted from producing primarily goods to producing primarily ideas and services. For example, Apple designs the iPhone in Cupertino, California, but the phones themselves are built in factories in Shenzhen, China. Manufacturing and innovation are not completely separate domains, as Taiwan began primarily making semiconductor chips for Intel, and now they lead the world in the development of advanced chips that American companies cannot replicate. In this way, manufacturing can lead to innovation.

Cities are an engine of innovation. Even as technological advancements allowed for businesses to spread their products globally, cities remained hubs of innovation. Studies have shown that people who live in metropolitan areas with more than a million residents are 50% more productive than those in smaller areas. However, cities are not a “dumb gift of density” (27). Cities often have their innovative niches. For example, tech thrives in California while finance thrives in New York. Innovation in specific fields works in these specific places because of the concentration of field resources and experts. Someone could try to make an AI startup in Toronto or Atlanta, but it would lack access to the AI talent and knowledge present in California. Cities where big businesses thrive are expensive, but innovation, Klein and Thompson write, “thrives among closeness” and “thrives in cities” (30).

The Great Divergence

Cities are engines of innovation and mobility. High housing costs only slightly blunt their innovative opportunities, as rich firms and highly paid workers can afford to live there, but they cause issues for cities’ offerings of upward mobility. Klein and Thompson offer an example of a firefighter who works in an expensive city he cannot afford to live in, depriving him and his family of the economic opportunities the city offers. Most people don’t work for Google or Goldman Sachs and instead work in the local service sector, which pays better in dynamic cities but still does not offer the economic opportunities of higher-paying jobs. Researcher Raj Chetty found that upward mobility has been on a steady decline since the 1940s, and now most children may or may not earn more than their parents before them. Upward mobility is also related to the location in which people live; for example, a child born into poverty in San Jose is more likely to become wealthy than a child born into poverty in Charlotte.

Certain areas also cultivate higher innovation, and children living in these areas are more likely to patent their inventions than children living in other areas. High innovation areas are more expensive to live in, and this causes a greater disparity in wealth between residents of different states. Klein and Thompson give an example of this disparity. Both janitors and lawyers can make more money in New York City than in the Deep South, so moving would benefit their paychecks. However, with the cost-of-living crisis, the janitors would be forced to spend 50% of their paychecks on housing, while the lawyers would still come out economically on top. Income inequality has been rising since the 1970s due to this growing cost-of-living crisis, and Klein and Thompson explain that a certain strain of liberalism that began in the 1960s and 1970s is partially to blame.

The Problem With Lawn-Sign Liberalism

Political science states that many Americans are symbolically conservative but operationally liberal. For example, Americans like tax cuts, but they like the programs that taxes fund. This dynamic is well known, but Klein and Thompson state that the inverse is also observable. For example, San Francisco is covered in signs with liberal messaging supporting the Black Lives Matter movement, while the residents of the city continue to oppose the construction of new houses, and the Black population of San Francisco has fallen in every census since 1970 and continues to fall. Poorer families, which are disproportionately nonwhite and immigrant, are pushed out of cities and forced into long commutes, overcrowded housing, or homelessness.

Texas has benefited from California’s housing crisis, as Texan cities, namely Austin, lead the nation in housing permits. In 2022, Austin permitted 18 new dwellings per 1,000 people while Los Angeles and San Francisco permitted only 2.5 new dwellings per 1,000 people. Generally, it is thought that liberals embrace change and conservatives eschew it, but that is not what happens in housing policy. Change in housing policy can be messy and uncomfortable. If a community likes itself the way it is, building more places for more people to move into the community could create problems with overcrowding; it’s more profitable for builders to build a small building with six dwellings instead of a single-family dwelling. The answer to this issue is zoning rules. In the 1800s, America had no zoning rules, but in the early 1900s, Los Angeles began designating specific areas for industrial buildings and specific areas for residential buildings. New York City and other metropolises were soon to follow. By 1933, 70% of the US was zoned. The first zoning rules simply dictated what kinds of buildings could go where. The second wave of zoning rules sought to curb rapid housing growth, rules that are still in place today.

Klein and Thompson offer two example communities that explain the shift in zoning laws. The first is Lakewood, an area outside of Los Angeles that boomed in the 1950s after many soldiers returned from World War II and sought homes for their families. In 1950, 17,000 homes were built in Lakewood, and on average, 20 people bought a house in Lakewood per day through the end of the year. The inverse community is Petaluma, a community outside of San Francisco, which implemented the Petaluma Plan in 1971. The Petaluma Plan limited construction to 500 new housing units annually alongside an urban growth boundary. California today is more like Petaluma than Lakewood. In the 50s and 60s, California built more than 200,000 homes per year. Since 2007, California has never permitted the building of more than 150,000 homes. Fewer and fewer homes are being built in California as the population continues to grow. America itself has become more Petaluma than Lakewood, but the Petaluma Plan has reached its limit. In 2020, California shrank instead of growing for the first time. California lacks affordable housing, and homelessness is endemic.

This Is Your State on a Housing Shortage

In 2015, the California Legislative Analyst’s Office researched the housing crisis and found an unambiguous cause: less housing being built than people demanding it. California has 12% of America’s population but 30% of its homeless population and 50% of its unsheltered homeless population. Conservatives blame homelessness on “liberal licentiousness” and claim that the homelessness crisis makes liberal cities unlivable. However, as the high cost of living indicates, liberal cities like San Francisco are still desirable places to live. The root of California’s homelessness crisis is difficult to identify. It cannot just be the weather, as Houston is warmer in the winter than California, nor the liberal California policies, as other states with less severe homeless problems have similarly liberal policies. Focusing on the individual events that cause someone to become homeless also cannot explain the mass root of homelessness in California. Mental illness and poverty remain incomplete explanations, and researchers maintain that availability and cost of housing are the key issues. Homelessness rises when rents increase and availability plummets. If homelessness is a housing problem, Klein and Thompson assert that it is a policy choice.

Boarding houses used to offer affordable housing, and though not as nice as a private dwelling, they were a better option than homelessness. However, in the 1950s, legislators worked to maintain high home prices and “orderly” neighborhoods. Zoning and building codes began to require more features and amenities in houses, functionally making boarding houses illegal. Cities do not want the homelessness they now face, but they instead want people who cannot afford to live there to leave. Many people cannot leave for myriad reasons, leading to increased homelessness. Cities’ push against expansion makes the existing houses more valuable, as scarcity drives up value.

What Happened in the 1970s?

Over the decades, the number of years the average laborer would have to save to afford a house has risen significantly. Before 1970, houses were not viewed as an asset but simply a place to live. In the 1970s, inflation began to rise. To combat inflation, the government began to back 30-year fixed-rate mortgages, making the interest payments into tax deductions. These mortgages became the cornerstone of the American housing market and a hedge against inflation. From 1955 to 1970, the house was typically 21% of a household’s net wealth. In the 1970s, this rose to 30%. A house is a strange financial investment, as it has sentimentality and is inherently a non-liquid asset. It is also difficult to protect, as someone cannot shape the area in which their house is located. People who own homes seek to control their communities through zoning laws and other restrictions, which contributes to the scarcity of available houses and high house prices, illustrating the selfishness of housing politics.

America the Ugly

The New Deal of the 1930s addressed a simple problem: People had too little and needed much more. However, by the 1960s, the impacts of the New Deal had created a culture of overconsumption. Modern American liberalism was born in the New Deal, and midcentury liberalism was shaped by reactions to the excesses of New Deal liberalism. Overconsumption created devastating impacts on the environment, as increased production of goods and construction increased pollution drastically. The environmental movement became incredibly popular, with the creation of Earth Day and its inaugural protest on April 22, 1970, which was the largest single demonstration in American history. Between 1966 and 1973, the government passed nearly a dozen environmental protection laws, and both sides banded together for nonpartisan support of the issue.

One of these laws was the California Environmental Quality Act (CEQA), which required an environmental impact report to be generated before embarking on major public projects. President Richard Nixon signed the law without fuss, and it received limited coverage in the press. However, in 1972, came a case called Friends of Mammoth v. Board of Supervisors of Mono County. A development company sought to build six buildings of condos, shops, and restaurants near Mammoth Lakes. The homeowners’ association, Friends of Mammoth, sought to block the construction of these buildings using CEQA. The developer was not an arm of the California state, so the first case ruled against the Friends of Mammoth. They appealed, and the case went all the way to the Supreme Court, which ruled in favor of the Friends of Mammoth. This ruling meant that CEQA applied to anyone seeking to build in California. A couple of years later, the California government was reviewing four times more environmental impact statements than the entire federal government, making CEQA a weapon against the construction of new homes.

The Plague of Growth

The Interstate Highway System was one of the great achievements of the postwar era, but the liberal reaction to it at the moment was mixed. Cities fought back in highway revolts and formed coalitions and tactics that could be used for opposing all kinds of development. After the 1950s, California became the fastest-growing state. Anti-growth sentiment was not aimed at native Californians, but instead at people seeking to move there. What could be done about it?