How Governments Outlaw Affordable Housing, by Ryan McMaken

Great article about how governments and existing homeowners make it hard to increase the supply of housing. From Ryan McMaken at mises.org:

It’s no secret that in coastal cities — plus some interior cities like Denver — rents and home prices are up significantly since 2009. In many areas, prices are above what they were at the peak of the last housing bubble. Year-over-year rent growth hits more than 10 percent in some places, while wages, needless to say, are hardly growing so fast.

Lower-income workers and younger workers are the ones hit the hardest. As a result of high housing costs, many so-called millennials are electing to simply live with their parents, and one Los Angeles study concluded that 42 percent of so-called millennials are living with their parents. Numbers were similar among metros in the northeast United States, as well.

Why Housing Costs Are So High

It’s impossible to say that any one reason is responsible for most or all of the relentless rising in home prices and rents in many areas.

Certainly, a major factor behind growth in home prices is asset price inflation fueled by inflationary monetary policy. As the money supply increases, certain assets will see increased demand among those who benefit from money-supply growth. These inflationary policies reward those who already own assets (i.e., current homeowners) at the expense of first-time homebuyers and renters who are locked out of homeownership by home price inflation. Not surprisingly, we’ve seen the homeownership rate fall to 50-year lows in recent years. 

But there is also a much more basic reason for rising housing prices: there’s not enough supply where it’s needed most. 

Much of the time, high housing costs come down to a very simple equation: rising demand coupled with stagnant supply leads to higher prices. In other words, if the population (and household formation) is growing quickly, then the housing supply must also grow quickly — or rents will rise.

Moreover, where the housing gets built is a key factor. We cannot speak of housing supply for an entire metropolitan area. Metro areas are composed of a wide variety of employment centers and neighborhoods. The mix of employers and workers varies from place to place depending on tolerable commute times, local industries, and geography.

To continue reading: How Governments Outlaw Affordable Housing

 

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3 responses to “How Governments Outlaw Affordable Housing, by Ryan McMaken

  1. One of the problems is building way too many new homes in areas that have empty houses that have been on the market for long periods of time.
    There’s thousands of homes that can be “rehabbed” for substantially less cost than building new homes in most metro areas.
    Up until late ’08 a business partner and I were fixing up old Cleveland,Ohio single family homes, most of them built in the early to mid 1900’s.
    We restored these homes- recreated all the original millwork- mostly red oak- and plaster freizes and medallions, even some tin ceilings. Lots of great hardwood floors , lots of highly skilled tile work.
    Upgrade plumbing and electrical, put in new windows and doors -(if needed, some old oak entry doors just needed refinished.)-re-roof the place, re-side with vinyl siding and hang new gutters.
    Kept a lot of guys working year ’round for the 7 years we were doing it.
    The only guy we could find to do the plaster was from Jamaica. Never seen anybody that good at plaster before or since.
    Those homes should all be saved- every one that’s structurally sound should be repaired before more new homes are built.
    Keeps more people working, and the end product is light years ahead of the total crap that Pulte, Ryan Homes et- al slap together and have the balls to call “custom built homes”.
    If people knew the crap these companies do as the build these homes, the substandard materials used, and the horrible framing of these homes these companies would never sell another home- ever.
    I packed up my tools and left on the first home in a 26 home development we were supposed to install all the siding and windows in because of how poorly it was framed- that was in 2003.
    They haven’t got any better- they’ve got worse.
    Why this is allowed I have no idea, I do know it’s the same all over the U.S. with very slightly better quality building techniques in hurricane zones and commifornia quake zones.
    The homes are junk, poorly built, poorly sided, poorly roofed, poorly insulated, and have low quality doors and windows.
    The people buying homes need to stop buying these poorly built Mcmansions.
    That would be a start towards fixing the problem.

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    • Why did you stop fixing up old homes? It sounds like a good, psychically rewarding business.

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      • When housing market crashed in ’08 that was the end of it. No one was buying and if they were it was only people who could buy with cash because banks stopped all loans for single family homes.
        Around here, the housing market is coming back slowly. Maybe by next year it will be worth doing again. There’s a few guys rehabbing the old houses again- but the money isn’t there like it used to be.
        Spending 3-4 months on a house and end up clearing. $4-5,000.00 isn’t worth it.
        The least we ever made on a house was $10,000.
        That was at the end in ’08.

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