Andrew Price wrote this article in “Strong Towns” on April 22, 2016. The full text of the article can be found here.
The article discusses the issue of housing unaffordability in the United States, particularly in urban areas like New York City and San Francisco, where the cost of living has skyrocketed. It differentiates between affordable housing, which can include options for middle and upper-middle-class individuals, and low-income housing. The author highlights that to afford a $3,000 monthly rent, an individual would need an annual income of $108,000, significantly above the national average household income of $53,657 in 2014. This disparity indicates a serious affordable housing problem.
The article explains that housing operates as a commodity, with prices determined by the basic economic principles of supply and demand. When demand exceeds supply, prices rise, making housing unaffordable for many. The author uses the example of a neighborhood with 50 housing units and 1,000 interested residents to illustrate how limited supply can lead to high prices, ultimately pricing out the majority of potential renters.
The author also discusses exceptions to the free market in real estate, particularly rent control, which can exacerbate housing shortages. Using Sweden as an example, the article notes that strict regulations on rent and land use can lead to severe shortages, with people waiting years for housing. The author argues that one cannot advocate for affordable housing while simultaneously supporting restrictions on development, as this creates a hypocritical stance.
The article suggests two primary solutions to the affordable housing crisis: lowering demand and increasing supply. Lowering demand can be achieved by promoting the development of quality urban areas outside of high-demand cities, thereby distributing the population more evenly. The author emphasizes the importance of supporting neighboring cities to absorb some of the demand, which would help make areas like Hoboken more affordable.
Increasing supply is another crucial solution. The article argues that in a free market, increasing housing supply should naturally occur unless hindered by regulations. The author criticizes burdensome zoning laws that make it difficult for developers to build new housing or expand existing properties. For instance, one resident had to pay $70,000 just to navigate the zoning process for a small extension to his home, which is indicative of the inefficiencies in the current system.
The author advocates for relaxing zoning restrictions, suggesting that urban areas should be zoned as mixed-use to facilitate development. Height restrictions are also criticized, as they do not necessarily preserve historical character and can limit the potential for new housing. The article posits that relaxing these restrictions would lead to increased land values, more tax revenue for cities, and ultimately lower housing prices.
In conclusion, the article asserts that unaffordable housing is primarily a result of artificial scarcity created by restrictive regulations. The market should respond to demand by increasing supply, but current policies hinder this natural response. Instead of implementing price controls that only address symptoms, the author calls for a reevaluation of zoning and planning practices to foster a more efficient and responsive housing market. The article emphasizes the need for a shift towards a more free-market approach to land use, which would benefit both citizens and the economy.