Trickle-Down Housing is a Failure. Here’s What You Need to Know.
Trickle-down housing policy, pushed by the real estate industry and politicians, has been a colossal failure. It hasn’t built the affordable housing that’s needed for California’s housing affordability crisis, and it fuels gentrification in working-class communities, especially those of color. Activists have long used the term trickle-down housing, but not everyone knows what it is. Here’s an explanation.
Trickle down is an economic concept that may have first entered the public’s consciousness in 1896 when presidential candidate William Jennings Bryan remarked that there are two ideas of government. One is to legislate to make the rich richer, and their prosperity will eventually leak down to the masses. The other is to legislate to make the masses more prosperous, which will find its way up through every economic class.
Many years later, in 1932, humorist Will Rogers popularized the term in one of his newspaper columns.
“This election was lost four and six years ago, not this year. They didn’t start thinking of the old common fellow till just as they started out on the election tour. The money was all appropriated for the top in the hopes that it would trickle down to the needy. Mr. Hoover was an engineer. He knew that water trickles down. Put it uphill and let it go and it will reach the driest little spot. But he didn’t know that money trickled up. Give it to the people at the bottom and the people at the top will have it before night, anyhow. But it will at least have passed through the poor fellows hands. They saved the big banks, but the little ones went up the flue.”
It’s easy to understand why Rogers was admired back in the day.
Then, in the 1980s, “trickle-down economics” became a buzz phrase. President Ronald Reagan pushed for tax cuts on businesses and the wealthy, saying it would trigger more jobs and financial growth for everyone. Wealth, according to Reagan, would trickle down from the rich to benefit the middle and working class.
But numerous studies have shown that trickle-down economics was a bogus, even harmful, concept. In truth, it was mainly a windfall for corporations and the well heeled — and, many people have argued, at the expense of the less affluent. Even President Joe Biden, during his joint address to Congress, pointed that out.
“My fellow Americans,” he said on April 28, “trickle-down economics has never worked… It’s time to grow the economy from the bottom up and middle out.”
Now we come to trickle-down housing.
For years, politicians, the real estate industry, and controversial YIMBY groups (Yes In My Back Yard, a clever twist on NIMBY or Not In My Back Yard) have aggressively pushed the idea that the housing affordability crisis is merely a supply-and-demand issue. That we just need to flood the rental housing market with more market-rate, luxury apartments and eventually rents will drop. In the end, they say, it’s a winner for everyone — from the working class to the middle class to the affluent.
The real estate industry, politicians, and YIMBYs make that case so they can push through their ultimate agenda: to deregulate land-use zoning ordinances so they can build whatever they, wherever they want, and as much market-rate housing as they want. (California bills SB 827 and SB 50, which were supported by YIMBYs, Big Tech, and Big Real Estate and defeated by the housing justice movement, are prime examples of deregulation, trickle-down housing legislation.)
In fact, Zillow, the real estate site, found that developers build almost exclusively market-rate, luxury housing. But to truly address the housing affordability crisis, Zillow Chief Economist Dr. Svenja Gudell warned that “apartment construction at the low end needs to start ramping up, and soon, in order to see real improvements.”
The real estate industry, politicians, and YIMBYs also use their trickle-down policy as a political weapon: any renter protections, they say, that prevent developers from building more market-rate apartments must be stopped in its tracks.
But just like trickle-down economics, trickle-down housing is seriously flawed and self-serving: similar to how tax cuts made the rich richer, corporate landlords and major developers will generate billions in revenue by charging sky-high rents for market-rate apartments, making massive profits off the backs of the middle and working class.
Between 2010 and 2019, Zillow found that tenants in the U.S. paid an astounding $4.5 trillion in rent. In Los Angeles, renters shelled out $39.1 billion to landlords in 2019 alone. That same year, San Francisco renters forked over $16.4 billion and San Diego tenants delivered $10.3 billion to landlords.
Trickle-down housing policy also benefits politicians: developers and landlords shell out millions in campaign cash, so politicians want to keep them happy and rake in major money to stay in or attain power. As for YIMBYs, trickle-down housing is a core principle of their controversial belief system — and they’re determined to prove themselves right, no matter who gets hurt.
Now let’s get into the street-level reality of trickle-down housing.
First, it’s common sense that building more market-rate, luxury housing for a housing affordability crisis doesn’t directly and urgently address an emergency that’s unfolding right now. In addition, middle- and working-class residents are getting slammed hardest by sky-high rents. They can’t afford, and don’t need, pricey, luxury housing. They need affordable housing.
Second, completely deregulating land-use zoning invites predatory developers into middle- and working-class communities, especially those of color, where land may be less expensive. As mentioned before, Zillow found that developers build almost exclusively luxury apartments, and that lures affluent individuals into once affordable neighborhoods. Those communities then gentrify with rising, exorbitant rents, forcing lower-income residents out of their longtime neighborhood. Far from being a winner for everyone, trickle-down housing policy turns the lives of middle- and working-class residents upside down.
Third, as the real estate industry and politicians champion trickle-down housing policy, developers end up tearing down affordable housing (such as rent-controlled units) to build luxury housing. In L.A., for example, the Los Angeles Times reported that “property owners are demolishing an increasing number of rent-controlled buildings to build pricey McMansions, condos and new rentals, leading to hundreds of evictions across the city.” The L.A. Times found that more than 20,000 rent-controlled units have been taken off the market that way. That was reported in 2016. The number now is even higher.
As a result, the trickle-down housing agenda dramatically reduces affordable housing stock and triggers an eviction crisis.
Even Richard Florida, a widely respected urban planning guru among politicians, is skeptical of trickle-down housing. He noted that “the markets — and neighborhoods — for luxury and affordable housing are very different, and it is unlikely that any increases in high-end supply would trickle down to less advantaged groups.”
These are the street-level realities of trickle-down housing that developers, politicians, and YIMBYs don’t want you to know. It’s how trickle-down policy truly works in working-class communities throughout California — from Oakland to Fresno to L.A. to San Diego.
“There’s a strong will to not build affordable housing or mixed-income housing,” housing activist Grecia Elenes explained to Housing Is A Human Right about how trickle-down housing policy is playing out in Fresno. “The people who have the most money are developers and lobbying organizations. There’s a lack of political will to go against that… The development industry has a real strong hold on City Hall.”
So what housing policy should politicians pursue?
Housing Is A Human Right and other activists have long called for a multi-pronged approach called the “3 Ps”: protect, preserve, and produce.
“Protect” involves addressing gentrification and homelessness by keeping rent prices under control and discouraging evictions. “Preserve” entails supporting sustainable land-use policies that maintain neighborhood integrity — and first and foremost benefits residents, not just developers. “Produce” involves creating affordable housing through the adaptive reuse of motels and other existing buildings and utilizing cost-effective new construction.
The 3 Ps strategy will directly and urgently assist the moderate- and lower-income people who have been hardest hit by the housing affordability and homelessness crises — and who need help the most.
Patrick Range McDonald, the author of this article, is the award-winning advocacy journalist for Housing Is A Human Right.