Which One Lives in a Rent-Controlled Apartment?

The progressive’s “preferred two-pronged housing approach . . . is government-owned real estate plus restrictions on private-sector developers,” notes Reason magazine’s Matt Welch writes in the Los Angeles Times, but this strategy will only “make a bad problem worse.”

Though California cities spend hundreds of millions of dollars trying to subsidize “affordable” housing, Welch notes, that money has only helped build 5 percent of the new homes constructed in the state. This is a mere “a rounding error in the total supply of housing stock.”

Meanwhile, high developer fees, lengthy permitting processes, rent control, and statutory limits on housing growth in some cities all do far more to make housing unaffordable than subsidized housing does to make it affordable. Welch cites Paul Krugman saying, “The analysis of rent control is among the best-understood issues in all of economics, and — among economists, anyway–one of the least controversial. In 1992, a poll of the American Economic Assn. found 93% of its members agreeing that ‘a ceiling on rents reduces the quality and quantity of housing.'”

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Setting an Unaffordable Target

Portland and San Francisco are not the only urban areas with housing affordability problems. Where the 2013 ratio of median home prices to median family incomes was 7.0 in San Francisco-Oakland and 3.8 in Portland, it was a wallet-busting 9.6 in Auckland, New Zealand.

In response, Chris Parker, the Chief Economist for the Auckland city council, has published a report that correctly identifies the problem as “excessive planning constraints” and a “limiting supply of greenfield land.” Unfortunately, his timid recommendation is that the city seek to reduce the value-to-income ratio to 5.0.

That’s like the Federal Reserve setting an inflation target of 50 percent. A 50 percent rate of inflation sounds pretty good compared with Zimbabwe’s peak inflation of 79.6 billion percent, but as a way of life, 50 percent inflation is still pretty awful.

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Housing Prices Reach New Highs

Housing has once again become a big issue in many cities. No wonder: as the spreadsheet posted last week by the Antiplanner shows, non-inflation-adjusted prices in many urban areas have reached or exceeded what they were at the peak of the housing bubble last decade.

Portland prices have reached the point where a home will go on the market and sell in a few days for significantly more than the asking price because so many people bid on it. More controversially, Portland and Seattle builders are buying homes, replacing them with several skinny homes, townhomes, or condos.

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Someone Teach Him the Laws of Supply & Demand

With its “vibrant mix of residential, retail, commercial and green space,” Arlington County, Virginia is exactly where a lot of Millennials in the Washington DC area would like to live–at least according to one such Millennial named Harrison Godfrey. However, many can’t, as the median home price is $550,000, which is far more than two professionals who each earn $50,000 a year can afford.

Godfrey has apparently never taken an economics class. At just 26 square miles (compared with an average of 450 miles for the rest of Virginia’s 94 counties), Arlington County is in reality a small city. According to the 2010 census, it is 100 percent urbanized with a population density of 8,000 people per square mile.

By comparison, the urbanized portion of Montgomery County, Maryland is just 3,500 people per square mile. In other words, there really isn’t any more room to build in Arlington County, at least not without displacing a lot of people who live there now–which would probably mean some of the ethnic minorities that help make the county “vibrant.”

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