Seattle is experiencing a surge in housing costs. Many blame NIMBYs for this sad state of affairs. Because these type of homeowners want to protect the value of their home, they block any effort to increase the supply of homes in the market. These types hate urbanism. They hate micro-apartments. They hate renters. They are thinking only of themselves. They will put Seattle on a course that ends with San Francisco, the most expensive city in the United States. The solution? Permit inclusionary zoning that exchanges development rights for affordable housing. Though it sounds like a great idea, a win-win, a solid middle-finger to NIMBYs, there is one big problem: You will not find a moment in the economic history of housing that has the poor benefiting from a deal struck between the public and the market. With such pacts, the lion's share of the gains has ended up in the pockets of developers, real estate agents, and builders.

Even when the US economy was going through a depression in the 1930s, the market shaped how the government responded to the housing crisis. Instead of massively funding public housing, the government offered loans that spread widely over time at low interest rates. And from this policy we got expensive suburbs for the middle class instead of affordable dense cities for the poor. If the progressive New Deal could not escape this fate, and resulted in the abandonment of millions of poor Americans in the inner city, how is inclusionary zoning going to do any better? It would still operate within the context of the market, and yet the problem at the root of the housing crisis in Seattle and elsewhere is the market and the way it is structured, which is to generate short-term gains for privately owned capital.

In the excellent In Defense of Housing, David Madden and Peter Marcuse explain how, since the crash of 1929, a series of proposals to democratize housing in the United States never made it to the light of day without huge concessions to those who dominate the real estate market. From New Deal public housing programs (activated for military reasons) to the urban renewal of the 1960s (which James Baldwin called "negro removal") to HOPE in the 1990s (which decimated a large section of much-needed public housing), the "real estate machine" has dictated the terms of public policy and programs. So despite the "best intentions" of those who advocate inclusionary zones, how are we to believe this program will not end up like the others? History tells the truth.

But even beyond all of this, the orthodox economics of housing, which is also the model followed by orthodox urbanists, does not provide a non-neoclassical account of the market economy. (Neoclassical economics is the leading form of academic economics and imagines the market to be rational and efficient, and communicates useful information to individuals by way of prices.) For them, things fall neatly into two categories: supply and demand. The less friction or stickiness there is between these ends, the better the market provides the goods to the public. This would be close to the truth if only property was a standard commodity. It's not. It also has the aspect of a financial asset, like a bond or a share in a company. As a consequence, property can store wealth (something that's hard for, say, a loaf bread to do) and also move through time. The latter attribute opens it to speculation.

But there is more to it than that. Capitalism is a system that does not so much suffer from scarcity but from surpluses. Now, brace yourself for what I'm about to say: To protect profits from falling, the market actually requires a large amount of capital devaluation. I know this sounds strange. But it is actually what happens in the real and present economy. If there is to be surplus value (the source of profits), there also has to be some form of devaluation occurring in parts of the system, otherwise there will be stagnation (falling and no profits). This key feature of the system (the destruction of value) does not exist for neoclassical economists (orthodox economists). But, sadly, it actually happens. If you are poor, you know all about it. And it makes nonsense of any hope that the market can help solve poverty or the housing crisis.

David Harvey, an urban geographer, provides an excellent description of how it works in his book The Limits to Capital, and if you want to see how it relates to urban development and planning, read Housing and Residential Structure: Alternative Approaches by Keith Bassett. Cities not only absorb surplus capital in the form of development but also destroy it in the form of slums (devaluation). The two are a couple. Someone pays for this destruction, and that someone is almost always a poor person. And because the poor in America are often black, they foot the bill for the needed destruction of capital. This is the jobless world we find in the pages of William Julius Wilson's When Work Disappears: The World of the New Urban Poor. We see unemployed blacks abandoned by the government for the purpose of devaluing huge amounts of unabsorbable capital. In a rich society, this is all a slum is and is doing.

A form of urban poverty that began in the 1970s, and spared no major city in the US, including Seattle (this is the Central District in a nutshell), was the government providing the market with not only devaluation in the form of divestment but also "devalorized capital" in the form of investments in suburbs. Again, the idea of devalorized capital does not exist in neoclassical economics, but it real, it is an investment that does not expect a return or high return and so transfers those gains to privately owned ventures. (Building a highway or a bridge is a form of devalorized capital.) Both devalorization and devaluation protect profits from stagnation (overproduction). I know, this sounds crazy, but how else can you explain the presence of homelessness or the working poor in an economic system that has no basic material scarcities?

But once capital is destroyed, investment can return. We call this gentrification, which Ruth Glass, a mid-century German-born British urban sociologist, named and described in her 1964 essay "London: Aspects of Change" (it's in her book Clichés of Urban Doom and Other Essays). Through a set of policy changes, revaluation occurs in devastated areas (in the case of London, a massive war helped devalue huge sections of the city). But revaluation of a devastated area is only a temporary fix to the system's struggle with the pull of stagnation. Soon, investment opportunities dry up and there is great pressure for devaluation. Seattle must keep its eyes open for this. It will happen. And any economic or urban thinking that does not factor in the urban history of capital devaluation/destruction will not see the future clearly. The crisis of poverty in a rich country is always a crisis of profitability, and no amount of zoning or rezoning is going to meet this fact meaningfully.