Barriers to Shared Growth: The Case of Land Use Regulation and Economic Rents

Before I turn to longer-term structural trends, let me highlight that the housing recovery has been strong in recent years, aided by a wide range of countercyclical policies from the Administration and general improvement in the economy. Residential investment rose solidly at a 4.6 percent annual rate in the last two years, reflecting further increases in housing construction, which has surpassed an average pace of 1 million units per year. In addition, household formation, which had been depressed since the recession, has begun to pick up and points to additional demand for housing. A solid recovery in house prices has boosted home equity and strengthened household balance sheets, such that the share of homeowners underwater today is now less than half of what it was in 2010 and 2011. Rising housing wealth has also supported consumer spending, a bright spot in the economy. And with financial and mortgage market reforms in place to prevent a repeat of earlier market excesses, access to mortgage credit continues to expand, although at a pace that is still too gradual; including the fact that gains in mortgage credit have been slow to reach minority and lower-income households.
The fact that this cyclical recovery in the housing market is well underway makes it a good time to step back and examine broader trends and features of the housing market. For one, expanding affordable and fair housing—giving families the ability to live in economically thriving communities and housing choices free from discrimination—remains an ongoing concern and focus for the Administration. As researchers right here at the Urban Institute pointed out this past June, not one county in the country has a large enough stock of affordable housing for renters with extremely low incomes

Jason Furman

White House

November 20, 2015

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