Portland columnist Steve Duin laments that the city is not doing more to make housing affordable. He proposes to either tax new homes and use the money to build affordable housing or to mandate that developers to sell or rent a certain percentage of their new homes at below-market prices (inclusionary zoning).
The problem with either of these policies is that they create a few “affordable” homes by making housing more expensive for the vast majority of renters and homebuyers. Taxing new homes obviously makes them more expensive. But like the rising tide lifting all boats, it also raises the price of existing homes because sellers of those homes see that their competition–new homes–is more expensive so they can ask for more too.
Research has shown that inclusionary zoning leads developers to build fewer homes and then to sell the market-rate homes they do build for higher prices to make up for the losses on the below-market homes. Since inclusionary zoning pushes up market rates for new homes, that same rising tide makes all other homes less affordable as well.
