How to Make ‘Affordable Housing’ Affordable
Nice-sounding adjectives are no substitute for basic economics.
To house more people, build more housing.
It seems simple enough—yet this basic formula, like those pesky Pearson™ textbook homework assignments, is often forgotten. Instead, policymakers routinely present government subsidies and price controls as the solutions to affordable housing. But they fail to grasp that without more housing units, housing cannot become more affordable.
Consider the Conn administration, in an attempt to make student-housing more available, decides that the twenty students with the worst housing lottery scores will get their numbers boosted. This would decrease the probability these students receive an undesirable housing outcome—think the nauseating monstrosity that is Lazrus House, the glorified common rooms disguised as dorms, or the dreaded “unassigned” status that eventually leads to a cramped double with the weird kid who leaves nail clippings on the floor. Yet, the next twenty students with the worst lottery numbers will see their probability increase by the same margin.
College housing is a zero-sum game, where the odds of ending up with the nail-clipping freak remain unchanged, just with different people in the lineup.
Similarly, the problem with government subsidies—such as voucher programs—is they don’t increase housing availability. Instead, these programs cause rent inflation, which prices out lower-income earners who narrowly missed the eligibility threshold for housing vouchers. Taxpayer dollars intended to solve homelessness inflate housing prices and make landlords the true benefactors of these subsidies. Unless more housing is made available, government vouchers merely facilitate a musical chairs of living arrangements, enriching landlords at the expense of taxpayers.
Price and rent control tactics also fail to alleviate the woes of the housing market. Forced low rent only fuels demand for a unit—this doesn't lead to an increase in the number of individuals who can or will occupy it. The housing occupancy rate remains unchanged. Meanwhile, landlords are further disincentivized to provide quality housing, exacerbating the situation.
When Conn faced a student-housing shortage, the administration didn’t delude itself into believing that redistributed lottery numbers would fix the problem, nor did it remain idle. Instead, the administration implemented methods to increase overall housing capacity: Conn leased the Manwaring apartments and allowed students to live off-campus.
If only public officials were as wise as Conn administrators.
Indeed, government—federal, state, and local—often impedes the availability of housing. Take a common state and local source of frustration: zoning restrictions. Advocates for zoning argue it ensures tranquility in neighborhoods where families can live comfortably without being disturbed by loud industrial activities. But like much government policing, these rules often become strict and overbearing. Ultimately, zoning restricts where people are allowed to live. When there are too many restrictions on where houses can be built, it limits the supply of available housing, which drives up prices and makes it harder for people to find affordable places to live.
The advocacy group Desegregate Connecticut explains how state zoning restrictions limit housing availability.
The zoning enabling act permits municipalities to enact zoning that sets controls for things like the height and size of buildings, lot size, open spaces, building and population density. Such controls can allow municipalities to use their zoning codes to restrict who is able to live in those towns because things like large minimum lot sizes, for instance, can make housing more expensive.
This is no result of greedy developers. Rather, it's the natural reaction of a government-imposed incentive structure. M. Nolan Gray provides an illustrative example in The Atlantic:
To see how this works, imagine a three-acre plot of suburban land. Let’s assume that regulations require a quarter of it to be set aside for streets and a small park—fair enough. After a market study, a developer finds strong demand for homes on 5,000-square-foot lots. The size of the plot should allow her to develop 19 such homes, but there’s a snag: Local code imposes a minimum lot size of 7,500 square feet. Thus, she can build only 13 homes, all of which must be more expensive to cover the land costs. At best, the community is left with 13 expensive homes. At worst, this market can’t yet sustain the higher price point, and no homes are built.
Not only do zoning regulations prevent certain types of housing from being built, but their complexity alone can prevent developers from even trying. Desegregate Connecticut notes that zoning’s “stringent and inconsistent rules make it difficult for people to build accessory apartments, or even to know how they must build this type of unit.”
Zoning may sabotage housing projects, not unlike Brutus’s sabotage of Julius Caesar’s 55-year run of not being stabbed, but like Caesar’s assassination, the challenges that face housing aren't just a single stab wound but 23 of them.
Federal tariffs on housing construction resources are another culprit. Steel, a crucial material for developers in constructing apartment complexes and urban housing, becomes extraordinarily expensive due to its high tariff rates. And higher costs of steel make housing construction a more exorbitant endeavor.
As Dana Pearson writes in National Review,
Even before the Trump administration’s 2018 imposition of the 25 percent Section 232 import tariff against steel, the United States had the highest steel prices of any major country. This was due largely to more than 200 antidumping/countervailing duty restrictions applied to iron and steel imports from a wide range of countries. Today, steel prices in this country are even higher.
When the Trump administration raised the already high steel tariff rates, steel prices and housing costs increased significantly. The Biden administration has largely kept the Trump steel tariffs in place (yet another example of how Biden’s “Buy American” agenda bears resemblance to Trump’s “America First” agenda).
By no means are zoning regulations and steel tariffs the sole hurdles erected by the government against affordable housing. But unlike housing subsidies and price controls, which seek to conjure more housing out of thin air through an unreliable accounting sleight of hand, zoning reforms and tariff reductions would make housing more available and, in turn, more affordable.