Reforms to Help Housing Affordability
What is next for America’s housing market?
On the one hand, unemployment is down to a 53-year low, and 500,000 jobs were added in January. On the other hand, millions have stopped looking for work, wage increases are not keeping up with inflation, mortgage rates are still above 6%, and the Federal Reserve has signaled that it is willing to continue increasing rates.
What is certain in the housing market is the continued presence of a housing shortage, which some put as high as 5 million homes. With such a large shortage, it is unsurprising that housing prices increased for a record-breaking 130 consecutive months, despite wages effectively decreasing.
This combination of scarce housing availability and trailing wages puts pressure on individuals and families to widen their search for affordable housing. Unfortunately, affordable housing is all too rare in the urban centers that have the most and highest paying job opportunities. This means that even as employers try to attract new workers, workers are moving further away due to expensive urban housing.
States are taking notice, and housing reform proposals are making their way through state legislatures. For example, both Maine and Montana have legislation this year that eases or eliminates restrictions on manufactured homes, with Montana’s requiring that manufactured housing be “treated the same as other types of conventional housing allowed in a zoning district.”
ALEC’s Commerce, Insurance, and Economic Development Task Force passed a similarly-aimed model policy, the Factory-Built Housing Act. This model policy aims at increasing the supply of low-cost housing by allowing factory-built homes to be built/installed in any areas zoned for single family residential dwellings.
The task force also passed the Rent Control Preemption Act that prevents local governments from enacting or enforcing rent controls on private or commercial properties. As this CIED blog explains, despite the seemingly good intentions behind rent control policies, they distort the market and ultimately results in higher housing prices. As evidenced by California and New York, rent control not only results in a steep decline new housing development. It also causes people with rent-controlled housing to become “apartment locked,” unable to move out of deteriorating housing due to the huge disparity between their controlled rent and the other market-driven rates that must compensate for the artificially cheap rents. Florida’s SB 102, the Live Local Act, includes a ban on rent control across localities.
Other types of reform in the states include Virginia’s HB 2100 that would create an advisory panel to develop a model ordinance for the “administration of accessory dwelling units,” which are sometimes called “granny flats” or “backyard cottages.” Maryland’s SB 151 would encourage transit-oriented development by establishing a grant program. Transit-oriented development allows dense, multifamily dwellings to be built around transit hubs, thereby increasing the number of people who can easily access this infrastructure. Such reform can help lower-income families have access to cheaper, efficient transportation options, and it has the added benefit of easing traffic congestion.
Even more than business equity, primary residences (homes) constitute the largest share of nonfinancial assets in American society. States can help more Americans achieve economic mobility through homeownership by implementing reforms that clear the way for new affordable homes to be built. States and cities might not be ready to forgo zoning like Houston, but reforms like those described above can go a long way towards encouraging homebuilding and homeowning.