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Why Affordable Housing Is So Hard to Find in America’s Big Cities

This column appeared February 8th, 2019 at the Foundation for Economic Education

Few things better illustrate the dynamic of government intervention > unintended (but predictable) consequences of government intervention > further government intervention to mitigate these consequences…(ad infinitum) than housing.

Across the United States, it is frequently said that a lack of “affordable housing” is a problem. Predictably, this observation is usually followed by the demand that the government—local, state, or federal—”do something” about it. That “something” almost always involves spending more money or issuing a new raft of regulations.

California is a case in point. In San Francisco, for example, the median cost of a single-family home is already five times the US average, and the city now has the highest rent per square foot of any municipality in the nation. To deal with these high prices, Democrats in California’s state legislature want to revive a community renovation program that would bring back redevelopment agencies and the roughly $1 billion they provided annually for affordable housing. The program was previously cut in 2011 by then-Gov. Jerry Brown when the legislature was intent on closing a huge budget hole. Now, Democrats believe their proposal will get a boost from the support of the state’s new governor, Gavin Newsom.

Far away from sunny California, the same story could be told about Minnesota. In April 2017, the Pioneer Press wrote:


So, policymakers in the Twin Cities are “doing something.” Forty million dollars of Minneapolis Mayor Jacob Frey’s 2019 budget is earmarked for affordable housing. Saint Paul’s mayor, Melvin Carter, has announced a $71 million, three-year housing initiative, which will focus both on keeping existing housing “affordable” and building new housing.

But before rushing in to spend and regulate away the lack of “affordable housing,” shouldn’t the policymakers in California, Minnesota, and elsewhere take some time to ask what is causing it?

As the Minneapolis Star Tribune reported last week:








In short, the “affordable housing” crisis in the Twin Cities is a creation of state and local government there.

The same is true in California. The bizarre story of Bob Tillman’s five-year, $1.4 million legal battle to turn his coin-operated laundromat into an apartment building shows how regulations constraining supply coupled with rising demand have driven house prices ever higher. Again, when politicians in the Golden State complain about the lack of affordable housing, they themselves are in large part responsible for that lack in the first place.

Indeed, the same is true nationwide. Vanessa Brown Calder found for the Cato Institute that increased land-use regulation is associated with rising real average home prices in 44 states and that rising zoning regulation is associated with rising real average home prices in 36 states. “In general,” she finds, “the states that have increased the amount of rules and restrictions on land use the most have higher housing prices.” As a result, the $200 billion in federal funds, which was spent on subsidizing, renting, and buying homes in 2015, went to states with more restrictive zoning and land-use rules. “Federal aid thus creates a disincentive for the states to solve their own housing affordability problems by reducing regulation,” Brown Calder finds.

These regulations are intended to achieve various safety, environmental, and aesthetic goals. Michael Noble, executive director of Fresh Energy, a Minnesota-based energy conservation nonprofit, defended the state’s housing codes by saying “The reason we have codes is to protect buildings, protect public health and not unduly waste energy.” Utopias usually involve someone else suffering to build them.

But policymakers need to wake up. They need to acknowledge that they cannot have these regulations and low-cost housing. If they are serious about making housing affordable, what is needed are not new regulations and vast spending programs like those proposed in California and Minnesota; they will either exacerbate the problem or treat only its symptoms. To make housing affordable, what policymakers need to do is remove the things that are making it unaffordable now: excessive regulations.





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