The Failure of Affordable Housing Policy

(c) by Mark Dempsey

If you read most editorials decrying the shortage of affordable housing (here's one), you'll actually believe the USA doesn't have enough houses. That's why we have the largest homeless population since the great depression! If we could only build more homes, that would solve the problem! If only the government would get out of the way and deregulate this stuff, darn them!

Except the US has more vacant homes than homeless people, and in San Francisco, there are five times as many vacant homes as homeless. And yes, government policies like zoning and building codes restrict home building--and we should look into revising them--but the distribution of housing, not a shortage of deregulation, is the problem.

Following the New Deal, the federal government built affordable homes. Of course, they skimped on maintenance and generally sabotaged affordable housing that might be available even to poor people, but at least they built affordable housing in some manner. 

One notion behind the attack on the poor is that they deserve their poverty, and of course, rich people deserve their wealth. Note: A family member who was active in philanthropy met many wealthy individuals and was quick to point out that, while 90% of them were "born on third base," they all wanted to act like they had hit a triple. But hey, it's okay to punish the poor because they deserve it.

Richard Nixon halted federal efforts to build affordable housing in the 1970s. Meanwhile, as he cut taxes on the wealthy by roughly half, he and his successor increased payroll taxes eightfold. Consequently, Reagan reduced HUD's affordable housing budget by 75%. The attack on the poor is bipartisan, too. Bill Clinton signed legislation that included the Faircloth amendment limiting the federal government's ability to fund affordable housing. Meanwhile, the local charity serving the homeless started during the Reagan administration. 

Many people believe our homeless population is largely mentally ill and/or addicted in some way. Even though the majority of the unhoused are really just too poor to afford rent, mentally ill people are a larger portion of the unhoused than the general population. 

With this in mind, it's useful to remember that Reagan closed California's asylums when he was governor, and JFK wanted to close the big federal asylums and move the inmates to transitional housing more integrated into the community. Congress approved the federal asylum closures but failed to fund the transitional housing. Both of these government moves threw the mentally ill out on the street. Senator Daniel Patrick Moynihan described the omission of funding for transitional housing as the most shameful episode of his career in public service.

So rents rising faster than paychecks has been the story for the majority of those homeless or even those precariously clinging to their housing.  Surveys also confirm that mental health and addiction problems most often occur after people experience homelessness. Being unhoused can induce a form of PTSD, leading to self-medication. PTSD can also vanish once the unhoused get shelter. Some communities have even found it's cheaper to house people than to deal with the policing and health problems homelessness produces.

One lobby opposing affordable housing is banks. They love higher home prices--with bigger mortgages, they get bigger profits--so they lobby for restricting the supply and type of housing. If you want to see how banks control the housing market, try to get a loan for a boarding house. If FNMA ("Fannie Mae") introduced a special affordable housing mortgage, we would have much more affordable housing. 

"But where would we get the money to discount loan rates, etc?" Just a reminder: the feds make all the legal dollars. Here's something no one said, ever: "The Japanese just attacked Pearl Harbor, but we're a little low on cash, so I guess we won't respond." Pleading that the government (or public bank) that makes the money can't afford something is slightly ridiculous.  

Former congressional aide and author of Goliath: The 100-Year War Between Monopoly Power and Democracy, Matt Stoller writes that monopolists are driving up the price of land and materials, never mind the monopolists whose rental software algorithms raise rent. 

Contrary to the "deregulate everything" narrative of the Abundance-ists, these are evidence that the government movement toward deregulation is behind at least part of the rise in housing costs.