Commentary: How to fix the housing crisis


There is universal agreement that there is a real problem with the average person being able to afford adequate housing (i.e., the “housing crisis”). Young people on beginning salaries, adults in mid-career, and older folks trying to move often cannot save enough for a down payment, nor can they afford the monthly payments of a house. Many are forced to spend their money on rent, which means less funds for saving for a down payment on a house.

The problem is a combination of low wages and salaries and high housing prices. They are two separate problems, but only the latter will be addressed in detail in this commentary.

The former problem, low wages and salaries, is easily addressed. It is a direct result of legislation by federal and state “representatives” who consistently vote to keep the minimum wage low, refuse to implement single-payer health care (making health insurance cost much more than it would otherwise), pass laws making it difficult for workers to organize into unions, allow the wealthy elite to organize their businesses into monopolies (thereby controlling prices), give the same wealthy elite huge tax breaks and loopholes, etc.

The result is a political economic system that puts the great majority of profits into the hands of the wealthy class and only crumbs for the rest of us.

The solution to this problem is simple: start electing representatives who actually create and vote for legislation that favors the working class. (Hint: these representatives will not be of the Republican Party.)

The other half of the housing crisis is related to market economics. Housing prices have reached immoral heights because local legislators too often believe a “free market” will solve all economic problems. There are many fallacies in this argument. The primary fallacy is that the housing market is free, i.e., that it is subject to a natural force of supply and demand. In fact, there are far too many constraints on the supply side for free market economics to work. Supply is limited not only by how much land is available to build houses, but also by constraints that legislators place on building houses. The result is much less supply than demand can meet. This creates a bonanza for developers with financial resources, as anytime demand outstrips supply, it allows the greed of people to prevail, and developers will squeeze every penny they can into their pockets. Some call it a “profit motive” or a “natural” desire to enrich ourselves, but we see the result: massive profits in housing development by developers and houses priced far too high for the majority of people to afford. This system is based on greed and is anti-social.

Legislators try to put bandaids on the problem. One popular ploy is to give developers a choice: build a proportion of houses that are affordable, or else pay extra fees so that funds can be collected for the government to give to other developers to build affordable housing. The result is that developers hardly ever build affordable housing units up front because it is easier (and more profitable) to pass on the extra fees to consumers, which only furthers drives housing prices up. Another result is that, while funds do get deposited into accounts for building affordable housing, they are far too little to even barely put a dent in the problem.

Market solutions cannot fix what is not a market problem. As long as there is little supply (such as land to build on) and demand for housing is high, housing prices will continue to be outrageously high.

The only solution is for legislators to take the bull by the horns and demand that any development include affordable housing by a certain percentage. I suggest 65%.

Sounds high, I know, but we need a lot of affordable housing. The other 35% of the development can be whatever price the developer will get.

Of course, the greed of the developer will price those houses very high, but there will be people who can afford those houses. Otherwise, a socially-conscious developer will settle for less profit, while still making a good living.

Another good solution to the housing problem is for government agencies to get into the business of building houses. While developers will scream, government involvement will be a sure fire way to get affordable housing on the market. We have learned a lot about how not to build “housing projects,” and there are excellent examples of government-built housing that is affordable, is of good quality, and promotes healthy communities. Such housing can be funded by placing large fees on any house that is over a certain cost or square footage and returning to fair taxation on large corporations and wealthy citizens.

While some will decry this government-intervention solution as “socialism,” I say, get over it. Capitalism has caused the affordable housing crisis, and it won’t solve it.

Modern-day democratic socialism has given us road construction, public education, libraries, police and fire protection, clean air and water (in most places), and many other perks of a modern, mature, and citizen-minded society, and it is time we faced up to the reality that housing is a right, as well, and deserves the same consideration and solutions as other problems we have faced and solved through direct government action.

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