Making Affordable Housing Affordable

Matt’s book has prompted a new round of discussion of the nature of housing supply response in generating affordability. There is a general discomfort among many on the left with the idea that sufficient liberalization of housing regulations could lead to enough new supply to make housing affordable for lower income workers. There will always be some need for housing subsidies of one sort or another, they reckon.

Matt’s response, I suspect, would be that if we deem the earnings of lower income workers to be too small to afford the basic amenities to which everyone ought to have access, then the thing to do is to write them checks, and the right level at which to do that is the federal level. I’d say that’s basically right.

If people are bound and determined to have local governments provide wage or housing subsidies, however, then it’s worth noting that the local government will be wanting to raise revenue as effectively as possible in order to make that happen. And a good way to begin is by raising revenue, as much as possible, through increases in the size of the tax base rather than through hikes in tax rates. And a good way to do that, of course, is by allowing lots of residents who’d like to live in the city to live in the city, by permitting the development of sufficient housing capacity to hold them. Even if you doubt that more housing supply will make housing cheap enough for lower income households, you still ought to appreciate that more taxpayers means more revenues and more money for pet social programs.

More residents will also mean more infrastructure needs, of course. A city that begins by addressing congestion through market pricing of scarce road, rail, and parking resources will find that it ends up earning a lot of money in the process. A city that is more willing to use the market to drive housing and infrastructure investment will find that it has more revenue available to allocate to progressive ends.

The rub, of course, is that cities ideologically disposed toward a more market-oriented approach to housing and infrastructure will also be less likely to favor additional progressive spending — and vice-versa. But perhaps, with enough argument and conversation, that can change.

Comments

  1. Dan Keshet says:

    I’m one of those liberals who doubts that liberalizing housing markets will be enough to have affordable housing for everybody. And I’m not sure how well cutting checks will work out at the municipal level. But I see liberalizing the markets as a necessary precondition to any other kind of housing assistance. As long as supply is so heavily restricted, affordable housing programs are worthless; every poor resident you help will simply displace somebody else who wanted that unit.

    Also, I think cities mixing market-oriented approaches to some things with progressive spending for others is becoming more of a norm. Look at how San Francisco is leading the way in both market-oriented parking solutions and subsidized health care. Congestion pricing is seen very much as a progressive policy, in the same way that public transportation is.

  2. Jan Wiklund says:

    The solution to the problem in Scandinavia from the 20s through the 70s was public investments like hell, according to the recommendations of Keynes. That is – the municipality builds a lot of houses; this gives jobs to many people and raises their incomes while also raising the supply of buildings causing the rents to go down, according to the laws of the market.

    This model went off rail when the municipalities began to discard quality in the 60s, when immigration to the cities went up to new highs. The blocks built then were so bad that the whole idea of municipal building lost public favour.

    But the model worked well for two generations. It should do it again, now when immigration is manageable and quantity doesn’t need to trump quality.

  3. tracy L avent-costanza says:

    Not only am I also an econ major, I am also an Avent. I found your link at the same time as one for Peggy Avent, an MFT psychologist in the San Antonio area. I am a descendant of Benjamin Avent of Oxford MS, and of Francis Marion Avent of Old Somerset (Bexar-Atascosa county) who died there in about 1888.
    Are you familiar with any of these Avent names? thanks
    Tracy
    Los Gatos california

  4. aj devine says:

    housing is, at the risk of seeming contrarian, not housing but simple economics. if we, as a nation, focused on growing the economy increasing minimum wage and re-investing in infrastructure, housing would take care of itself. people would make more money, then be able to afford to purchase rather than rent their homes.