The hermeneutical principle is "The Purpose of a System is What it Does". The economic principle is that people respond to incentives.
A cartel is an association of suppliers with the purpose of maintaining prices at a high level. The only suppliers of land (they aren't making any more of it) are existing landowners, and for most municipal jurisdictions, that means the owner occupiers of single-family detached homes.
'Zoning is a conspiracy to protect property values'. Anyone who owns a house has a vested interest in preventing prices from decreasing, and from encouraging them to increase to a higher level. A mortgage locks in both the minimum acceptable level of price and the minimum rate of appreciation* (the mortgage rate).
Prices are the equilibrium between supply and demand, so maintaining prices means ensuring supply grows no faster than demand. Where supply is elastic, and new housing can be readily supplied, home prices don't appreciate. The less readily equivalent housing can be supplied; the less elastic supply is. Locations being unique and space being finite, new housing is less readily-equivalent to existing housing, simply because it is more distant. The more distant something is, the less equivalent it is--even equally accessible locations offer access to different things.
In a stagnant metropolitan region, housing supply matches housing demand and the price level is stable*. It is only in growing regions that the value of homes appreciates. It is the value of location that appreciates, not the decaying bundle of sticks and tar atop it. And the value of a location is proportional to the transportation costs of that location--central locations are always more valuable. Hence, assumptions of housing appreciation rely on the production of new housing in inferior locations.
So the homeowner cartel to maintain the value of their asset, they must maintain the value of their location but preventing additional supply. Conceptually, doubling the number of houses available halves the premium of the location, simply because that premium is divided over more houses. (Empirically, the relationship is non-linear, because doubling the houses halves the land per house and the premium for a location isn't a 1:1 relationship to the number of houses).
Municipal policies depend on voter preferences, and all voters must be residents. When a new suburban municipality incorporates, land values don't support apartments, so all housing (and hence all voters) are home-owner households, are part of the cartel. Voters elect people who restrict supply, restricted supply fuels appreciation, and the cartel works for its members.
The cartel can even permit some rental housing, as renters tend to be younger or poorer and hence less politically engaged, so there is minimal political conflict - the cabal remains hegemonic, and the only conflict is between developers (who want to build/sell apartments) and the homeowner cabal of voters, who don't want competitors for parking, views or public amenities. It's a very stable equilibrium, as the stock dominates and the financial incentives for density are low enough that developers stick to the low-hanging fruit.
But inevitably, as the value of a location appreciates, so do the rents to live in that location, for both apartments and single-family rentals. Which, when it happens faster than wage growth, displaces existing renters to worse housing (more remote/lower quality). Still an equilibrium, but a less stable one, as fewer voters are members of the cartel. Higher rents are also destabilizing, as the support the development of new 'luxury' apartments, occupied by older, higher-income renters more likely to be politically active, and indifferent to homeowner cartel concerns about appreciation but sensitive to displacement. Worse yet, there is a substantial latent constituency of voters (otherwise politically marginal) that can be organized -- renters threatened by displacement by rising rents.
To buy off this constituency, the classic homeowner cartel tactic is to offer rent control: buying off political support through subsidy. It has the added advantage of blunting the development of apartments by capping rent and hence expected return on investment. Converting existing rental housing into 'permanently affordable housing' aids and abets this, by preventing existing rentals from being refurbished into 'luxury apartments' which might house politically active renters.
When homeowners cry "Manhattanization", it's not just a matter of density--it's the danger of a renter dominated polity indifferent or hostile to the political hegemony that underlies the homeowner cabal and continued property appreciation.
Maintaining the political consensus to limit supply to guarantee appreciation requires restraining the political power of both renters and landlords. The first is achieved by ensuring renters are politically marginal: poor, young and characterized by short tenure. Over time, traditional rent control sabotages the second and third characteristics, as renters age in place. Contrast housing vouchers, available only to the needy, ensuring that renter residents are always poor (and hence politically disengaged). Zoning unpleasant locations (noxious, noisy, smelly or dangerous) such as near freeways or along arterial roadways supports rapid turnover.
Homeowners don't disparage developers by accident: developers aren't part of the cartel. The mortgage rate they can support is set by the appreciation in rents, rather than directly by the appreciation in location as it is for the homeowner cartel. A municipality dominated by a homeowner cartel will be hostile to developers, and active in using regulation to constrain with unreasonable requirements for parking, facade articulation, and public improvements, while also delaying them with conditional approvals and design review. The explicit goal is both to ensure cartel members aren't negatively affected by new development, but the outcome is to limit the supply of new housing.
The real threat to the homeowner cartel is when developers make common cause with politically engaged renters to advocate for additional rental housing at the state level. Developers can supply the money for political advocacy, while politically engaged renters can rally an even larger latent constituency. At a municipal level, only resident renters can vote, and so only those in danger of displacement are willing to organize. But at the extra-municipal level, that constituency consists not just those threatened by displacement but anyone who has ever been displaced by rising rents and is hence sympathetic to existing renters.
Another classic cartel tactic is to permit new development, but to try to ensure new entrants are aligned with the cartel by permitting only for-sale condos intended for owner-occupiers.
The aims of the homeowner cartel are to:
- * limit new supply
- * marginalize renters
- * ensure any new housing is owner occupied
The tactics of the homeowner cartel are to:
- * use regulation (zoning, lot sizes) to restrict supply
- * use zoning to limit apartments to noxious locations
- * use rent-control / affordability mandates to buy off renters and make new development unattractive
- * convert existing market rental housing into income restricted housing
- * prioritize apartments with politically marginal renters (young, poor, high-turnover)
- * permit condos, but not apartments, despite identical physical form
*Interesting corollary is that if a mortgage sets the required appreciation rate, and the appreciation rate is zero (ie, in a stagnant metropolitan area), it implies lower future values, and hence lower present values, in the same way in which appreciation at a rate greater than the mortgage rate implies higher future values, and hence higher present values. Hence, in any stagnant metropolitan areas, the higher the interest rate, the greater the rate of depreciation in local housing prices. The magnitude of the effect is proportional to the number of people with new mortgages - older mortgages were financed (or refinanced) at lower rates.