America’s housing crisis is often portrayed as a matter of supply. Depending on whom you ask, the shortfall is anywhere from 1.5 million to 7 million homes. Much of the policy debate focuses on how to close that gap.
Yet there’s a deeper and less tractable problem: Even if housing gets built, it won’t do much good if people can’t afford to live there. And far too many can’t.
There’s an abundance of viable solutions to the housing shortage. If so inclined, Congress could boost supply by expanding the low income housing tax credit, supporting public housing and encouraging religious institutions to build on their property (yes in God’s backyard!). State and local governments can reform zoning rules, building codes and property taxes to encourage more construction and productive use of space. Given the heterogeneity of the housing market — with myriad unit sizes, types and ownerships — a scattershot approach is just what’s needed.
Suppose America manages to add 7 million homes. Will housing become affordable for everyone? I doubt it. Certainly the added supply will lower prices, but not nearly far enough for the country’s millions of extremely low-income families.
Consider the standard affordability rule: Housing should occupy no more than 30% of income. By that measure, the lowest-income tenth of US workers can afford no more than $733 a month. Nearly 900,000 workers earning at or below the minimum wage can afford no more than $377 — and that’s assuming they toil 40 hours a week every week of the year.
