The U.S. has a critical shortage of affordable housing. Full stop. For too many, it took a global pandemic to appreciate just how broken America’s housing system is. When, with almost no notice, housing meant health, it became clear that our country doesn’t have enough housing and what we do have is out of reach to millions of Americans.
This didn’t happen overnight. It’s the outcome of 30 years of neglect by policymakers from both sides of the aisle and at all levels of government. Now those same policymakers are looking for “quick” and “free” solutions, like rent control and eviction moratoriums, to show their constituents that they care.
Sadly, history is our guide here. In 1971, facing reelection and an uncomfortable rate of inflation, the Nixon administration imposed a freeze on wages and prices. It was an unmitigated disaster that actually led to severe inflationary difficulties later in the decade. The lessons we should have learned is that attempts to override the forces of supply and demand are doomed to failure.
Yet, here we are again making the same mistakes. Let’s take rent control. It has failed everywhere and every time it has been tried, has been discredited by economists of all stripes, and most importantly doesn’t produce a single unit of affordable housing. Nevertheless, even well-meaning people have glommed on to it as a perceived means of addressing affordability.
But the facts speak for themselves. The only beneficiaries of rent control are those lucky enough to live in a rent-controlled building. For everyone else, rents go up in response to pay for this market distortion and new development grinds to a halt. There is no time or season for such a failed housing policy.
Similarly, using eviction moratoriums to address housing price inflation leads is a flawed policy that leads to serious unintended consequences. In the U.S., most apartment properties are owned by small mom-and-pop operators. In fact, the top 50 largest institutional owners operate just 9.9% of all rental apartment homes, according to the 2021 NMHC 50.
Eviction moratoriums leave those small owners with less income to pay their mortgages, property taxes, insurance, and payrolls—whether that’s because their residents can’t pay or think the moratorium is a “rent holiday” so they don’t have to pay.
The effects of the Centers for Disease Control and Prevention moratorium are still being felt by smaller landlords who were unable to make ends meet and were forced to sell, which ultimately reduces the stock of affordable rental housing. Equally devastating, renters who cannot, or choose not to, pay rent will have marred credit histories that will make it difficult to qualify to rent again, let alone secure a home loan.
So why do these ill-advised approaches keep being advanced given their obvious outcomes? Because they lend themselves to easy sound bites while those seeking to rebut them need full paragraphs of technical explanation.
The real causes of our housing affordability challenges are 1. decades of underbuilding, especially in the most desired markets; and 2. incomes that have seriously lagged costs for a long time for all but the wealthy.
The solutions to both of these are not complicated, but they do require political will to reject sound bites and pursue real solutions. The first order of business is to produce more housing of all types. The private sector cannot do this on its own, however. If it could, it would have done so already. We need more “P3” partnerships—private developers, nonprofits, and local government—teaming up to deliver new and rehabbed housing units at affordable price points.
And we need real policy changes to enable their success. Examples include:
- Access to underutilized low/no cost land;
- Zoning and regulatory reform that reduces unnecessary barriers to housing production. A big start would be to eliminate exclusionary zoning;
- Access to below market financing; and
- Local and state subsidies to incentivize producing desired housing types and acquiring and retrofitting vacant and underutilized building types that can be converted to housing.
On the other side of the ledger, we clearly need more support for struggling families whose incomes simply cannot afford to pay what it costs to build and maintain housing in today’s marketplace. A 50% increase in Section 8 housing vouchers would be a rounding error in the federal budget. But we also have to reform the Section 8 program to remove unnecessary regulatory burdens and costs so the majority of housing providers can participate in the program. States and localities should also dedicate funds to assist households who need an extra boost to qualify for affordable units.
None of this is rocket science. It’s blocking and tackling and using a playbook that contains the collective wisdom of the best minds in housing instead of seeking quick fixes that do nothing to address housing affordability and undermine the prospects of the very households they purport to help.
Let’s dispense with the “siren songs” and instead roll up our sleeves to do the real work. There is no time to waste.
