Affordable Job Shortage The Pioneer

Affordable Job Shortage The Pioneer Press' DJ Tice of the Pioneer Press does the unthinkable - applies empirical reasoning - to the "affordable housing debate:

Ron Feldman, an analyst with the Federal Reserve Bank of Minneapolis, released a paper on the much-discussed "affordable housing crisis." This "crisis" is occurring all around the country, but is said to be particularly severe in the Twin Cities. It concerns the fact that a considerable number of people have to spend a larger percentage of their incomes on housing than they ideally should.

Feldman's startling, controversial diagnosis of the problem?

Poor people, he says, don't have enough money.

Almost seems hard to believe that a government agency came up with that, doesn't it?

Tice continues:

This may sound like a pointless spat over terminology. What's the difference whether we say rental prices are too high or incomes are too low?

In fact, as Feldman argues, accurately identifying the real problem may determine how many "house poor" people can be helped with available resources.

The commonplace view of the housing issue is that we face is a "shortage" of "affordable" housing. The idea is that there is some malfunction in the housing marketplace, which isn't producing enough low-cost housing. Therefore, government needs to subsidize new construction of housing for the poor.

Feldman's paper, which I'm forced to oversimplify, says this is a misunderstanding (read it at www.minneapolisfed.org/pubs/bsdpapers/housing.cfm). He points to data showing that among Twin Citians paying more than 30 percent of their income for rent (the accepted arbitrary definition of "unaffordable" housing), virtually all are in households with very low incomes. Even if rents were to decline significantly, Feldman calculates, most of the poor would still be living in "unaffordable" units.

That's the question - is it possible to lower housing prices - however artificially - enough to make a dent on the demand, to say nothing of the inevitable increase in demand that the subsidy will cause?

I doubt it - and thank goodness the GOP won.

(Via Powerline)

Posted by Mitch at November 27, 2002 07:26 PM