The “Housing Affordability Crisis”

This is a defining problem of our current urban generation.<p>It&#x27;s fascinating to read about the Next City study that &quot;concludes that poor housing affordability in Philadelphia is a symptom of low income rather than of insufficient rental supply.&quot;<p>Having studied this in depth, specifically in regards to China&#x27;s Ghost Town problems where they increased housing supply by many folds - Here&#x27;s the current VICE documentary on it.<p><a href="http://www.youtube.com/watch?v=trs_udhjWqc" rel="nofollow">http:&#x2F;&#x2F;www.youtube.com&#x2F;watch?v=trs_udhjWqc</a><p>The problem is not one of supply divorced from affordability. There needs to be both sufficient supply (ie. Not SF &#x2F; LA) and there needs to be sufficient affordability (ie. Not China). Yet with these two constraints people seem to sit around wringing their hands unable to do anything. It&#x27;s almost as if, politically, people are incapacitated by this problem. To which I always respond - look at Ford. The Pre-Ford cars had the same problem, lack of supply and lack of affordability. And Ford changed the equation with the Model T, by making an affordable, readily available car - thereby jump-starting the car economy worldwide.<p>We CAN do the same thing with housing. By eliminating the speculative incentives on housing (as is done in Germany) through capital gains taxation, and through multiple non-residence ownership taxation, we can address some of the market structures that diminish affordability. And on the other side we can create growth opportunities, through zoning primarily - such as a reduction in the required number of parking spaces per residence unit - and through a reduction in average square footage (which has been growing in America over the last 30 years) --<p><a href="http://www.census.gov/const/C25Ann/sftotalmedavgsqft.pdf" rel="nofollow">http:&#x2F;&#x2F;www.census.gov&#x2F;const&#x2F;C25Ann&#x2F;sftotalmedavgsqft.pdf</a><p>And while this is just a start. This can be done. We don&#x27;t even need the &#x27;political will&#x27; to do it. We just need to do it. With just a few slight changes in the way we manage our housing inventory, both financially, and with regards to zoning and planning, we could radically alter the availability of affordable (NOT low income! or qualified housing) Over night.

This seems like very circular logic. There are not many single-family units available to rent to ELI (Extremely Low Income) renters for &lt;= 30% of their income. Right, if there were then you wouldn&#x27;t call it <i>ELI</i>.<p>To look at it another way... Plot the price of every rental, sorted by price, X axis is percentile, Y axis is price. ELI is defined as the Xth percentile price times 3.<p>You want more cheap housing? State it another way, you want to encourage investment in cheap housing. Land is scarce, housing has lots of fixed costs, renting is a massive risk to the landlord.<p>One interesting catch-22 is the stronger the renter protection laws, the more risk to investors who would build and rent these units.<p>There are a lot of ways to make this area less risky for investment. Better legal frameworks to deal with problem renters. Better tools to select reliable ELI renters. Better legal framework for using these tools to screen renters. Better tax incentives for renting to ELI tenants (subsidies).

In many older parts of California you can rent an apartment over a garage. Great system. Revenue for the home owner, good environment for the renter, distributed rentals. Of course that was then, right? When people talk about rentals versus homes now they have a mental image shaped by very strong zoning. That is the apartment strip, this is the single home suburb.<p>Compare to Japan, Tokyo in particular, with tiny homes and tiny apartments pushed into every nook and cranny.<p>Why do our costs keep rising? Because we have structured it that way, for the apartment owner and for uniform suburban living.

Rents higher than 30% of income seem pretty normal to me (living in Germany). Makes me wonder: aren&#x27;t rents prone to rise to the level that people can bear? If people can bear 30%, rents will rise to that level in attractive locations.<p>That&#x27;s part of what makes the game rigged against common people.