YIMBY & Antitrust: Natural Allies, Uneasy Partners, or Sworn Enemies? Interview with Antimonopoly Counsel's Basel Musharbash

Natural Allies in Real Life, Uneasy Partners (and sometimes enemies) on Twitter

Photo by Danist Soh on Unsplash

Dave Deek: What did David tell you about me?

Basel Musharbash: Not much. He said you're a reporter who was working on a story about the intersection of anti-monopoly and YIMBYism, and he said you're a Dave. So that's about it.

Dave Deek: I'll just give you a background here, then. I'm writing an article about how these groups have several commonalities. For example, here you have AOC, Elizabeth Warren, and I think Tim Walz, they all share the same commonality of both being YIMBY as in for housing reform, but also for antitrust and stuff like that. However, on the more intellectual side, we're seeing a conflict between YIMBY organizations and antitrust groups.

Basel Musharbash: Right.

Dave Deek: And what I'm trying to do is trying to figure out where the divisions lie and try to get a better understanding of what's going on. Because it seems to me that functionally speaking, on the ground level, the two groups are in alignment. It's just on the intellectual side that they seem to be at odds with each other.

Housing Market Concentration and Barriers to Entry

Basel Musharbash: Yeah. Yeah, I mean I think I would say that there is alignment on some of the ideas, but I think there's also misalignment on funding sources and interests that support both sides. So I think in general, from an anti-monopoly perspective, what we know about the housing markets is that regulations raise barriers to entry for small and mid-size developers, they give, because of sort of the long uncertain process of getting approval for a new development. You have to go through public hearings and you might have to go through a variance and so forth. That creates an inherent advantage for investor-backed developers over self-capitalizing small developers. So that's a problem.

But on the other hand, we've seen just a massive decline in new home starts since 2008 that has had nothing to do with zoning regulations or anything to do with local government. Zoning regulations haven't been transformed since 2008. And the explanation for that is the massive consolidation of the home building industry, right? We've seen—I can send you, there's an article by Matt Stoller that really digs into this stuff—but there's just been a bloodbath consolidation in the home-building industry since 2008 that's allowed this handful of national homebuilding conglomerates to have privileged access to financing.

And that's increasingly allowing them to sit on land and sit on properties that they've built and either, um, manage them as rentals for financial companies, for private equity funds, or manage them as assets for private equity funds to just take advantage of the appreciation. That in turn has just made it really difficult for small and mid-size developers to access developable land, to access valuable land, to access financing—particularly as the banking industry has likewise consolidated dramatically.

Banking Consolidation's Impact on Local Development

Basel Musharbash: We used to have 15,000 community banks in this country at the end of the 1980s. We now have something less than 4,000, right? And, uh, a lot and it used to be that almost every local community of any size—a town of 20,000 people—used to have a local bank. That local bank, you would, because they were rooted in the community, because they were small, they would make lending decisions based on their knowledge of the borrower. They would know people personally and have a relationship with them, and if they felt like the person was trustworthy, they would lend to them.

That largely has gone away after consolidation because a bigger bank doesn't give a whole lot of leeway to the local loan officer. They require a bunch of hard metrics to be met in order to make a lending decision, and oftentimes a small local developer just starting out doesn't have those hard metrics, can't provide that data. So all of that, put all of that together and you get a situation where you have massive consolidation in the home building industry. We see substantial concentration in regional markets for home builders too. It's not just national, it's also regional. And that naturally makes it easier for home builders to, uh, to restrict supply, to collude, to keep apartments or properties off the market through things like RealPage if they're managing apartments and so forth.

And so that's a real problem that needs to be fixed alongside the regulatory stuff that YIMBYs often talk about. And I think there wasn't really much disconnect between anti-monopoly and YIMBY, until sort of the RealPage case came out and a whole bunch of YIMBY organizations started slamming it and saying, "This is just a charade. This doesn't really affect anything." And I don't know why they did that. Maybe it was just reactionary, or maybe it's something more sinister, but I don't know. But that's sort of where the disconnect started growing.

Dave Deek: Hegel does love reaction... but a couple of notes following off of that.

Basel Musharbash: Yeah. Right. Yeah.

Small-Scale Development and ADUs

Dave Deek: I mean, it could also explain why the most effective YIMBY reforms are infill ADU, granny flat developments. Every time we see one of those reforms go through, you see a massive boom in ADU, a massive boom in granny flats, massive boom of all sorts of infill development. I believe like in San Diego, I might be wrong about this, but I believe San Diego, the vast majority of the units built were basically granny flats.

And I believe that's also connected back to what you're saying here about the granny flats—who's going to build them? Is it going to be the large-scale developer or the regional monopoly, or is it going to be the small infill developer? Most of the time it's usually the small infill developer. It's usually self-financed or financed through a home equity loan, which is no problem here.

From my understanding here, back to what you're saying about that developer financing and regional monopoly stuff—the most effective YIMBY reforms are often granny flat reforms or infill development, and guess who are the only ones that usually built in developments? Smaller construction companies and it's usually self-financed, which might explain why they're so much more effective because they're kind of immune from the whole consolidation aspect.

Basel Musharbash: Right. Right. That's really interesting. I knew about ADU reforms, I wasn't so certain about sort of the response to them. And it's great to hear that there is a supply response. When you enact an ADU law, you get a whole bunch of new ADU units. And I think yeah, that explains a lot. ADU developments don't lend themselves sort of to consolidation just because, there's no platform for it. But it does lend itself to everybody who has a property and has a little bit of space and wants to make a little bit extra income to and has some access to financing to be able to build an accessory dwelling unit. So that's great. Yeah.

Regional Monopoly and Construction Delays

Dave Deek: And another thing I believe—I believe I written an article about this a while back here. I believe the paper's called "Why Delay: Understanding the Construction Lag" aka the buildout rate. I believe, um, going back to what you were saying here, it's not just regulatory reform. It turns out that the second biggest cause of construction lags besides regulatory issues and NIMBYs, it turns out to be regional monopoly, at least in the UK experience.

Basel Musharbash: Interesting. Were they talking about regional monopoly in developers or in the supply chain for materials? I didn't even know. That's great.

Dave Deek: If I remember correct, additional stuff besides development, but the construction lags are either because of, yet, NIMBY or regional developer concentration. And the biggest construction lags are of course in NIMBY areas with consolidated regional developers.

Basel Musharbash: That's interesting. Yeah, that would make sense. It's like, the consolidation slows down development, but if there's no NIMBY regulations, at least you still have some hope of new entry. You don't have as high entry barriers. But then if you have both NIMBY regulations and consolidated regional development markets, then you're just kind of screwed. You're stuck with the few dominant developers that you have and they have no interest in opening the floodgates of development. They want to control the supply so that prices go up instead of going down. So that makes sense.

Relationship Between YIMBY and Antitrust Organizations

Dave Deek: Out of curiosity, back to the YIMBY organizations at hand... I mean before the whole RealPage case, did the antitrust organizations actually work together, or what was their relationship beforehand?

Basel Musharbash: I mean I will say there is a difference between YIMBY, the sort of like the YIMBY industry organizations and the sort of public interest—I'm going to call them the public interest YIMBY organizations. In the US, groups like Strong Towns. Have you heard of them by any chance?

Dave Deek: Yes, I believe most people associated with YIMBYs are a part of a Strong Towns chapter. I believe that most people associated with a YIMBY group, it's usually Strong Towns is the group that they're usually associated with.

Basel Musharbash: So Strong Towns is sort of what I would call a public interest YIMBY group. They're not just saying, they do say we need to relax zoning rules, and part of it is to sort of build more units and part of it is—but a big part of it for them is to build sustainable communities, right? They're saying when we have these restrictive zoning regulations, we don't allow incremental growth in our communities. We don't allow our communities to change.

So they just dilapidate over time. And we end up building very spread out development patterns that are not sustainable from a tax perspective. They don't generate enough in taxes to pay for all the infrastructure and maintenance that they require, driving our communities into insolvency. So there's that angle, and you have groups like Institute for Local Self-Reliance that also, they're not as focused on this stuff, but they're aligned with that.

And they also would talk about sort of how restrictive zoning and development regulations inhibit small business and how restrictive business regulation rules in communities make it hard to sort of develop things like small-scale manufacturing and small-scale production in agriculture within city limits. And so these are all sort of YIMBY positions I would say.

But they're very different for—I would say there's difference between these groups and the YIMBY group in a major city in California which is funded primarily by developer interests. They may lobby for a lot of the same things. But the funding may create a wedge when an issue presents itself that is in interest of more development, better development, but cuts but sort of incriminates the developers themselves, right?

So Strong Towns has had folks in the anti-monopoly space on their podcast. Chuck Marohn has given overtures to anti-monopoly stuff in the stuff he writes on their website and on Twitter and so forth. ILSR has been a key advocate for the intersection between anti-monopoly policy and community development.

And when the RealPage stuff came out, ILSR was very supportive. Strong Towns, it's not directly tied into what they said, but they saw that it was related, right? Because Chuck Marohn would say it's like another symptom—I don't want to put words in his mouth—but it's another symptom of control over local development being siphoned away from the local community. But then you had sort of YIMBY interests that were funded by developers, just sort of going on the attack and saying that RealPage didn't really matter. It's not the driver, it doesn't drive rent increases.

And all of that stuff. And I think that's sort of a bit of a schism. It could be—and I don't want to say that people are operating in bad faith—it could be just that they were like, "We're lobbying for all of these reforms and now you have this RealPage thing which all of our opponents are going to say is the sole driver of rent increases. It's the collusion, it's not the regulations." And so maybe they just felt like they needed to go on the attack. They couldn't absorb it, because it was like something for their opponents to focus on. So maybe that was it.

But I do also think it's kind of strange that Strong Towns didn't have a problem assimilating the RealPage and collusion critique into their broader message. ILSR didn't, but these other YIMBY groups did. So, I don't know.

The RealPage Controversy and Its Impact

Dave Deek: So the whole RealPage incidents kind of show the cracks between different groups and...

Basel Musharbash: Yeah, yeah. Right.

Dave Deek: Rather than going to different groups and reconciling with each other, they chose to go in and fight rather than pointing out that RealPage lends itself to landlords getting together in groups and conspiring to keep all sorts of new development down because I believe RealPage had a user group, quote-unquote, that gets landlords together and...

Basel Musharbash: Mhm. Right.

Dave Deek: Landlords tend to be the demographic groups of older wealthier individuals that likes to go to town hall meetings and block development and rather than pouncing on that, you're saying the YIMBY groups basically taken RealPage's side in argument?

Basel Musharbash: I mean, essentially. Yeah. And you saw people—I don't want to mention names—but you saw people, YIMBY accounts on Twitter with large followings essentially adopting RealPage talking points in response to the lawsuit. And I just don't see... Yeah. And that just seemed really weird to me. But yeah but that's sort of the major rift there.

I think that—I mean there's core alignment, right? I mean the argument should be that we have these regional developers that have consolidated, they dominate our markets, we should engage in a concerted attack on their control over our markets so that we can unleash the market to build new housing and we should use all the tools at our disposal to do it, right? We should reform regulations. We should build connections between local developers and financing sources.

We should bring antitrust cases to break up the collusion and to make sure that these big developers aren't foreclosing entry by small developers. We should take an all-of-the-above approach, not just one thing. But that's not what happened, at least not so far. Right? Yep.

A Path Forward: The Harris Campaign Example

Dave Deek: So let's just talk about something a little bit more pleasant. I believe the New York Times reported about a group called Future Forward that responded—Harris's best performing ad that Kamala Harris had was an ad basically proposing both renter protections and rental price gouging and YIMBY reforms all at the same time here.

From that perspective, how do you see the base or the groups of the different groups actually getting together and working together? Not besides in the organizations all disagree with each other. How do you think the ad might illustrate a way forward for getting the base or the activists or the group or the people themselves together?

Basel Musharbash: So I think it shows the potency of an all-of-the-above approach to unleashing the market. If it shows that people are most responsive when you say not just we need to cut regulations, but we need to attack the powerful corporations that are strangling the market. And we need to do it by reforming regulations, by enforcing the antitrust laws, and by protecting consumers and protecting renters with regulation.

So I think it shows a great path forward and it should be a lesson for folks in the YIMBY space—if they really believe in advancing this agenda then there's a model, right? The model is that you pair renter protections with attacks on entrenched dominant developers with regulatory reforms that open the door to small local developers, which are by the way the key actors to help us build the kind of communities the YIMBYs and all of us want.

The kind of interesting walkable small-grained communities that we all admire, when we go on vacation to places that are interesting where lots of small developers over many decades built interesting landscapes and interesting streetscapes. That's what we should aspire to. That's the kind of development ecosystem we should aspire to build in our communities today.

International Models and Future Direction

Dave Deek: Alright. And no, I mean complete agreement here. I mean, Tokyo is a fantastic city to go to, for example. I believe they both have greater tenant protections along with being easy to build out and everything else like that.

Basel Musharbash: Right. Right.

Dave Deek: I remember, there's some sort of article coming out every other day about some ancient small business in the depths of some building because at least commercial rent is so cheap in Tokyo that it lets all sorts of small businesses, but thank you for doing this interview, Basel.

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Questions for the Audience

1. What are your ideas on getting on getting different groups such as YIMBY and anti-monopoly advocates better coordinate their efforts while respecting their different areas of expertise, even if leadership does not see eye to eye?

2. Basel discusses how banking consolidation has reduced community banks from 15,000 to less than 4,000, affecting small developer financing. Have you observed how the loss of local banks has impacted development (or other) patterns in your area?

3. Basel points to Kamala Harris's campaign ad combining tenant protections with YIMBY reforms as "a great path forward." What specific tenant protection measures do you think could work alongside supply-side reforms without discouraging new construction (think Japan)?

4. What do you think about the relationship of the broader YIMBY and Antitrust movements, Natural Allies, Uneasy Partners, or Sworn Enemies?