There’s not much debate over whether or not cities across the United States face a housing affordability crisis. On that, folks on the left and right agree. The point of contention is what the solution to the crisis should be.
Democrats, particularly those of a more progressive bent, are proposing a laundry list of government interventions to make housing more affordable, writes Jeff Stein in The Washington Post.
In Illinois and New York, gubernatorial candidates are touting proposals that would free cities to impose rent controls on housing units, a policy also backed this year by the Democratic parties of Washington State and California.
California’s Democratic nominee for governor is calling for 3.5 million new housing units in the state, an enormous escalation of the housing plans under incumbent Gov. Jerry Brown (D)…
[A bill introduced by Senator Kamala Harris] expands on a measure that Rep. Joseph Crowley (D-N.Y.) has introduced in the House, calls for the federal government to give tax credits to renters who earn less than $100,000 a year and spend more than 30 percent of their income on rent (which includes utilities) — a widely used gauge of housing affordability. (The credit would be refundable, meaning taxpayers can receive payments even if their tax liability is $0, and those in particularly expensive areas could earn up to $125,000 and still receive the credit.)
Housing affordability is a problem that the people demand a solution to, and Democrats are supplying that solution through (greater) government intervention into the housing and rental market.
But this is far from the only solution, and may in fact be counterproductive, as Niskanen’s Will Wilkinson explains.
But other experts worry that Democrats’ plans are not addressing the root of the affordable housing crisis. Will Wilkinson, vice president of research at the libertarian-leaning Niskanen Center, said Harris’s plan to put additional money in the hands of renters may simply lead landlords to increase prices rather than address the scarcity of housing that cuts into renters’ bargaining power.
“The problem with housing prices is a lack of housing supply relative to demand,” said Wilkinson, who has instead proposed creating a pot of federal funding to reward states that rapidly create new housing stock. “Cities need to build a lot more units, and fast. A tax credit for renters may take the edge off in the short term, but it does nothing about the fundamental problem and could even make the problem worse.”
Wilkinson’s comments highlight two important issues. First, measures to give renters more money will increase the demand for housing, but if supply doesn’t grow in kind, this redistribution will just drive up rents, creating a vicious cycle.
Second, even ignoring this unintended consequence of Harris’s plan, the root cause of the problem is an artificial restriction on supply due to regressive land-use and zoning regulations.
Or, as San Francisco’s Mayor London Breed tweeted:
At the root of so many of our issues is our housing crisis. Our unending systems of laws seems designed as if to say NO to creating more homes, and we’ve seen the results. It’s time to say YES to more affordable housing, more middle income housing, and more market rate housing.
— London Breed (@LondonBreed) July 11, 2018
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