Opinion: Here’s how to make housing more affordable without the government getting in the middle

California Democratic Sen. Kamala Harris recently proposed a foolish idea to address a real problem: America’s housing affordability crisis.

Noting that about half of the 43 million renters are spending more than 30% of their incomes on rent (and many millions spend more than 50%), Harris proposed a federal refundable tax credit to reimburse them for the “excess” rent they are paying.

As others have noted, Harris’ plan would do nothing to solve the real problem, which is that this country doesn’t have enough affordable housing.

All Harris’ plan would do is put even more money into the hands of those “greedy” landlords, while proving yet again that good intentions often lead to predictable, bad consequences.

Why is Harris’ idea foolish? Because the subsidy would almost certainly go to the landlords, who would raise the rents once they realized that their tenants could afford to spend more on housing without reducing their other expenses.

And, as Jibran Khan wrote in the National Review: Harris’ bill “could compound the problems facing renters by reducing the political pressure” to fix them. “Defenders of the status quo will simply point to the Harris plan and insist that something has been done.”

Basic economics

If you want to lower the price of housing, you need to build more housing. This is basic microeconomics: If the supply of something is scarce relative to demand, the price will go up. If you want to lower the rents, you need to increase the supply of housing. (Alternatively, you could try to reduce the demand, but we already have too many homeless people.)

Traditionally, progressives have tried to keep housing affordable through regulations, such as rent controls or inclusionary zoning, which requires developers to hold back a certain portion of the building for “affordable” units. These policies may have succeeded for those lucky enough to live in a rent-controlled or a subsidized apartment. But they’ve failed to spur construction of enough housing to keep prices generally affordable, especially in cities where wealth is growing fast.

It’s been conservatives and libertarians who’ve backed market-based solutions to the housing shortage. Rather than slap on rent controls that can discourage new construction, the emphasis on the right has been on reducing the obstacles to building, such as restrictive land-use regulations.

Some progressives get it. There’s a growing movement on both left and right to take a hard look at why our housing policies are so awful, and design policies that combine market forces with smart government nudges to create a better outcome.

And that starts with a simple slogan: Build More Housing.

NIMBY

Unfortunately, plenty of liberals and progressives, rich and poor, take reactionary stances when it comes to housing. They don’t want to build more housing, at least not where they live. Their simple slogan is: Not In My Backyard — NIMBY. They have reasonable-sounding excuses: It would detract from the “character” of the neighborhood. It would “gentrify” their neighborhood. It would let those “greedy developers” get rich.

Those are the sentiments of people who are afraid of losing what they have, even if it’s not much.

In California (ground zero for high housing costs), it was this group of NIMBY liberals who recently defeated the best new idea in housing policy: Permitting dense housing development near transit stops. The proposal by state Sen. Scott Wiener of San Francisco would have upended decades of restrictive zoning that keeps most of the Bay Area off limits to multi-family housing, keeps housing prices out of reach for many, and maintains racially segregated neighborhoods 50 years after passage of the Fair Housing Act.

Writing in Slate, Henry Grabar argued that Wiener failed largely because he didn’t line up the allies he needed in the environmental and fair-housing movements. Despite the failure, California is ripe to pass pro-renter legislation, if we can just get the Democrats to focus on non-foolish solutions.

Other politicians in the state understand that building more houses is essential to solving the affordability problem. California is creating far more jobs than it is housing units.

A new Marshall Plan

Gavin Newsom, who will likely be elected governor of California in November, is calling for a Marshall Plan for housing — 3.5 million new housing units in the state by 2025. That would require construction of about 378,000 units a year, about four times as many as are being built now.

Newsom would increase state funding for low-income housing, and tie transportation funding for cities and counties to meeting their housing affordable-housing goals.

Municipal housing

That’s where municipal housing comes in. Taking inspiration from the successes of city-owned or -operated housing in Europe, the People’s Policy Project is calling for 10 million new municipal housing units to be built in the United States in the next 10 years.

Don’t misunderstand; this isn’t your typical U.S. public housing, which is open only to the poor. Such housing — “the projects” — concentrates poverty in some neighborhoods, creating all sorts of bad side effects.

The new approach would locate municipal housing throughout the city and be open to people of all incomes, all ages, all races. That would reduce the stigma of public housing and making it self-sustaining. It would be a true public option, equivalent to the private housing stock.

Yes, such housing would require a modest public subsidy, but remember that single-family housing in the suburbs is highly subsidized as it is. Municipal housing in Vienna, Austria, rents for about 15% of what an apartment in Manhattan costs, the study says.

“Today, our housing policy bears a marked resemblance to our health-care policy: an expensive band-aid over a gaping hole, left by the absence of a public-sector alternative,” according to Peter Gown and Ryan Cooper, the authors of the People’s Policy Project report.

Our cities are dynamic engines for capitalism, but their growth is limited by the inability of lower-income people to live there. Who is going to pour the coffee, drive the Ubers, teach the children, and protect the public safety if working-class and middle-class workers can’t afford the rent?

The cost of housing is a social, political and economic problem, but it’s not insurmountable as long as we don’t settle for foolish half measures, like giving renters a tax break, or allowing our most dynamic cities to become strictly enclaves of the wealthy.