LEGISLATIVE AFFAIRS: Solutions to Solving the Housing Affordability Crisis
Philip Weiden | September 2019
The United States has a housing crisis. There are essentially two components to it that leaders in state capitals across the country have refused or been unable to tackle effectively. Some states are starting to get innovative in how they handle this problem.
The first issue occurs where local governments refuse to build affordable housing so supply is not keeping up with demand. This is often the case in New York. Local governments refuse to build because of pressure brought to bear by a not in my backyard attitude.
The second problem is stagnant wages meaning people do not have the income to keep up with rising housing costs.
The first one is fairly easy to tackle. If you build a bigger supply of housing, prices inevitably come down. Tokyo has essentially free zoning requirements and housing prices have been stable. If a developer wants to build a multi-family dwelling next to a single-family home there is nothing that can be done to stop this. Why is this? It is because Japan controls zoning at the national level. According to an article in Vox.com “The reason, argues Financial Times writer Robin Harding, is that Tokyo does a better job of allowing housing supply to keep up with housing demand. In 2014, Tokyo issued permits for 142,417 new housing units. In contrast, the entire state of California—which has three times the population of Tokyo—issued permits for only 83,657 new housing units. Little wonder that demand for housing has outstripped supply in the Bay Area”. https://www.vox.com/2016/8/8/12390048/san-francisco-housing-costs-tokyo This is a staggering failure on the part of California to keep housing prices stable at the rate of inflation. Now California and other states are passing or considering passing legislation mandating that housing construction keep up with population growth. This may be a positive development.
The next and more intractable problem, with any solution at least at present totally lacking agreement in political circles, is wage stagnation. Wages are below 1970’s levels adjusted for inflation. https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us-workers-real-wages-have-barely-budged-for-decades/
Wages have not kept up with the rising costs of housing, healthcare, school, child care and the basic necessities of life. Home ownership is a huge builder of wealth, but if people cannot even afford the basic necessities of life, they won’t be able to purchase a home.
While the federal government may have a role to play in ameliorating the affordability problem vis a vis tax policy, tax credits and additional funding for FHA, the more pragmatic solution probably lies in finding solutions to building more affordable housing thereby addressing the supply issue.