Category Archives: Housing

In 1947, the U.K. Parliament passed the Town & Country Planning Act, which limited urban development to 6 percent of the land area of the country. Housing soon became expensive. Politicians responded by promising to build lots of new housing, mostly high-rise but some mid-rise.

The new housing proved to be a disaster. It created lots of social problems including crime and congestion. Much of the housing was also poorly built. Meanwhile, housing affordability continued to decline. Today, only the upper classes own their own homes while most working-class Brits live in “council housing.” Continue reading →

The Colorado legislature is considering a bill to allow cities to require developers to provide “affordable housing” in their developments. This is called “inclusionary zoning.” Such requirements have three effects.

This five-story building is typical of the new housing being built in Denver. It has 871-square-foot one-bedroom apartments for rent for $2,400 to $3,600 a month. Someone would need an income of nearly $100,000 a year to afford one. Inclusionary zoning would make it even more expensive. Photo by Jeramey Jannene.

First, developers respond to the higher costs by building fewer units of housing. Second, to pay for the units they have to sell or rent at below-market rates, they raise prices on the market-rate units. Third, existing home sellers or landlords, seeing that new units are going for higher prices, raise their prices as well. Voila! Inclusionary zoning makes housing less affordable. But don’t believe me: here’s a paper that proves it using real-world data. Continue reading →

Jerusalem Demsas, a writer for Vox, thinks people should “sue the suburbs” to eliminate their exclusionary zoning, meaning single-family zoning. Her example is Franklin, Tennessee, a suburb made well-off by the location of North American corporate headquarters for both Nissan and Mitsubishi.

As a result, the median home price in Franklin is higher than nearby Nashville. Demsas blames that on exclusionary zoning. But incomes in Franklin are higher than Nashville; when compared with incomes, Franklin housing is actually more affordable than Nashville’s. Considering all of the businesses located in Franklin, it is only a suburb in the sense that it is near Nashville, not in the sense that huge numbers of commuters pour into Nashville from Franklin every morning.

Demsas says that Franklin’s relatively small share of multifamily housing is evidence of exclusionary zoning. In fact, it is just evidence that when people get enough income, they prefer to live in single-family housing. Using 2019 American Community Survey data for more than 500 cities across the country, there is almost no correlation between the percentage of housing that is multifamily and the affordability of housing in those cities (correlation = 0.3 where 1 is perfect and 0 means no correlation). Continue reading →

“Had someone asked me in March,” wrote economist Megan McArdle in September, “I would have predicted that after six months of pandemic, the housing market would be full of panicked people frozen in their homes, except for those who were being evicted. Instead, the housing market is roaring.”

It continues to roar today. As the Economist observes, those roars are fed by low interest rates, government cash handouts, and a desire of many to move to homes suitable for telecommuting.

Of course, some housing markets are roaring louder than others. As CNN notes, “home prices are rising faster in the middle of the U.S. as Covid drives people away from coasts.” CNN cites home price index data published by the Federal Housing Finance Administration. Continue reading →

The Wall Street Journal recently published an op-ed piece about “the housing crisis that is plaguing rural America.” Using Orange County in southern Indiana as an example, the writer, Kerry Thompson, frets that “There simply isn’t enough housing for the people who want to live there,” which is “having a devastating effect on rural America’s economy.”

Evidence of a housing crisis? This 2,900-square-foot home in rural Orange County, Indiana is currently for sale for $265,000, or $91 per square foot. A Wall Street Journal op-ed somehow argues that this low price is evidence of a rural housing shortage. Note the Trump banner; I suspect this is really evidence of the divide between urban and rural areas, as the Journal writer doesn’t seem to understand rural areas despite running an organization that is supposedly devoted to rural problems.

This is a problem, Thompson claims, because the pandemic has led to “upticks in interest in rural areas, as more Americans determine to flee the cities for greener pastures.” If there is a rural housing crisis, there may not be any greener pastures for them to move to. Continue reading →

The federal government has 160 different housing programs run by at least six separate departments and more than a dozen independent agencies, observes a report released this week by the Senate Budget Committee. These programs often overlap and there is no effort to test how successful any of them are in accomplishing their objectives. The 160 programs were actually identified in a 2012 GAO report (and listed here by agency).

Click image to download this report.

In a Budget Committee hearing on September 16, University of Virginia economist Edgar Olsen testified that “most current recipients” of federal low-income housing assistance “are served by programs whose cost is enormously excessive for the housing provided.” He recommended phasing out the least-cost-effective ones while retaining the ones that were working the best. Continue reading →