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households don’t need a unit years from now — they already have one — they’re just paying more than the normative standard today. Most cost burden could be eliminated quickly and efficiently with cash payments. We’ve already explored this option, and it is far more efficient and compassionate than building new units of housing.
The savings achieved by buying down “cost burden,” the amount a household pays above 30 percent of their gross monthly income, is enormous. And more importantly, it solves a real problem fast without having to take the risk and expense of buying land, and building, financing, and operating units.
REFORM AND IMPROVE THE SECTION 8 VOUCHER PROGRAM
The Housing Choice Voucher program, usually called “Section 8,” is a well-intended program that aims at getting people with less money for housing into market rate apartments. The problem is that the program is complicated and subject to many limitations imposed by local housing authorities and governments. It’s time to move beyond vouchers — something that requires too many strings — and toward cash. There are a growing number of proposals for direct cash benefits as a more efficient and compassionate way of helping people. State and local governments should explore this idea as well.
SEVERAL OTHER IDEAS
• End Zoning. Zoning is a 20th century solution to a 19th century problem and premised on the notion that separating use is good planning; it isn’t. Allowing many uses — manufacturing, retail, and residential, for example — closer together is more sustainable and efficient that separating uses. Zoning also creates geographic differences in typology that heighten scarcity of housing choices. Zoning also segregates people, limiting their opportunities.
• Incentivize Density. It is efficient to have more people living on less land and it is more sustainable. Tax incentives should be structured to allow fewer people on more land but with incentives for people who live in greater concentrations.
• Encourage Impact Investing. People with less
money with needs that they can’t meet create costs to the broader community. These costs can be identified and if they can be reduced through intervention, that intervention has a value that can be monetized. Providing low- or no-barrier shelter and housing along with case management and other services is a short-term cost, but if it is effective those costs can be paid back, with interest, when savings to government budgets are realized.
CONCLUSIONS
Housing inflation is caused by a lack of housing. The three Ps are critical: Population, Permits, and Price. When local governments overregulate housing, they benefit incumbents by increasing the value of their asset and increase housing prices. This is especially true when population surges because of new jobs and prosperity in a city or region and is the real cause of “skyrocketing” prices. Rent control helps few people, and harms many more. Although people lucky enough to win the rationing game find themselves in a cheap apartment, everyone else bears the burden of even higher prices for housing. The notion that even more complete control of prices will solve this problem is yet untested, but expansion of rent control beyond existing housing to new housing and eliminating options for property owners would ensure more conversion and complicate an already complex regulatory environment.
More housing, not more rules, is the answer. As long as housing is scarce, tenants will have to compete with each other for housing rather than landlords competing for tenants with lower prices or rent concessions.4 When vacancy rates are low, and supply is limited, consumers see their money buy less. Allowing builders and developers more freedom to build ameliorates and solves housing price issues.
There are more effective ways to help people. Programs that invest public resources in offsetting costs of rent restrictions and that get cash into the hands of people who need rent money are the best way to help people. For people who need even more complex services and support, programs that invest private dollars for public benefit offer an opportunity to save money and lives.
1 For example, in California prices are rising and real estate analysts believe this is due to regulation, “Housing is more affordable in places where land is cheaper and developers face fewer regulatory and legal barriers that, in California, delay construction and drive up legal and consulting fees.”
2 “Let financial speculators and corporate developers determine new construction, let the supply of market-rate rental apartments increase. And at some point, magically, rents will come down and create housing affordability.” Rent Control FAQ, Seattle City Councilmember Kshama Sawant, April 2019.
3 “Rent and rent increases are determined by the relative balance of political power between renters and the real estate ruling class.” A concession is a reduced rent price or comes in the form of a gift that has a certain value. The most common concessions right now are no-fee apartments, one month of free rent, two months of free rent, or amenities like a free gym membership.” Your Guide to Rental Concessions in New York City, Julep, January 8, 2018.
APARTMENT MANAGEMENT MAGAZINE - APRIL 2022 CS-27