For Affordable Housing, Let Supply Meet Demand

There’s a common misconception that conservatives are hostile toward affordable housing. While it’s true that the rhetoric surrounding housing and the plight of urban areas can, at times, be downright off-putting, free-market policy prescriptions are the way to make affordable housing a reality for those who need it most.

Good Intentions Do Not Equal Good Results

A cursory look at some of the most unaffordable cities in the country—San Francisco, New York, Boston, Chicago—shows that despite the verbal commitment to increasing affordability made by every big-city local official, their policies have worked against that goal.

Economist Jed Kolko compiled a study a few years ago with Trulia, a real estate site, looking into affordability in metro areas. Kolko analyzed 32 right-leaning metros, 40 left-leaning ones, and 20 solidly Democratic strongholds and found that “even after adjusting for differences of income, liberal markets tend to have higher income inequality and worse affordability.”

A separate study by Matthew Kahn, a UCLA economist, noted that as metros in California became more liberal, they issued fewer permits and built fewer homes. Kahn wrote that “cities experiencing a growth in their liberal voter share have a lower new housing permit growth rate.”

Regulations and Government Intervention

State lawmakers in Texas took note of issues caused by slow permitting in cities. During the 85th legislature, Governor Greg Abbott pushed for permitting reform. Many of those who opposed his effort—big-city mayors and interest groups like the Texas Municipal League—did so under the guise of “local control.” Around the country, a similar reluctance to address permitting delays can be found, but at the same time, those officials push for increased subsidies for affordable housing, ensuring that supply never meets demand.

City officials often favor stricter land use policies overall, not just in permitting. Mandatory parking minimums, which require a portion of otherwise usable square footage to be dedicated to parking, abound in most urban areas. There are also minimum lot size requirements. As the name implies, they require all parcels of land in a given area be equal to or greater than whatever square footage is predetermined by the local government. If someone wants to build a starter home, they’re still required to own a large lot, which decreases density and drives up housing costs, effectively banning anyone who can’t afford a massive lot of land.

Rather than subsidizing traditional affordable housing, conservatives have pushed to liberalize land use as a way to preserve options for everyone.

These cities often have higher property tax burdens than average, too. Many forget—or don’t realize—that renters are not exempt from paying property taxes. In Texas’ largest county, Harris, the burden on renters has increased four times faster than on homeowners. One complex owner in the Dallas area said that roughly $400-$500 of his tenants’ $1,500 a month rent goes to the overall property tax burden. Considering renters don’t get the exemptions that homeowners do—like exemptions for the elderly, disabled, and veterans—in many instances they carry a larger property tax burden.

Rather than subsidizing traditional affordable housing, conservatives have pushed to liberalize land use as a way to preserve options for everyone on the economic spectrum, but there is a lot of room for improvement in cities. Reinserting the free market into the housing debate will make affordability a sustainable reality in a way that subsidies never will.

The post For Affordable Housing, Let Supply Meet Demand was first published by the Foundation for Economic Education, and is republished here with permission. Please support their efforts.

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