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Toward a Conservative Housing Policy

A conservative policy would be fair, efficient, and lead to an abundance of housing.
Toward a Conservative Housing Policy

After 23 years as a planner, non-profit developer, and advocate for more housing production, I have not found a coherent conservative housing policy.

Yes, many conservatives would say the answer to our housing woes is increased supply, but many would also say we need more “affordable housing.” We don’t need more affordable (subsidized) housing; we need more housing so that the housing created is affordable. A conservative housing policy would be fair, efficient, and lead to an abundance of housing. And yes, a conservative housing policy would be compassionate.

The urge to exchange value in a market is rooted in human nature. This fact is central to my definition of “conservative” housing policy. While government can referee the market, price is the impersonal driver of market decisions. When prices go up, a conservative will urge more production, not price controls. Inflation provides an incentive for firms to produce a desirable product at a lower price than the competition, which benefits the consumer. The left, by contrast, sees inflation as the product of greed, which inspires them to pursue price controls and regulation.

To understand inflation in the housing market, start with supply. Milton Friedman calls supply a “bit player” in the story of inflation. The real villain is too much money. Yet, as I point out, when local governments choke housing supply and subsidize the resulting inflation by funding the construction of non-profit housing, they are essentially printing money. The cash comes from Low Income Housing Tax Credits (LIHTC), subsidies from the Department of Housing and Urban Development (HUD), and local taxes, fees, and fines on new housing. Republicans in Congress go along with big increases for LIHTC, letting local governments off the hook. Locals make inflationary housing policy and the federal government pays for the damage with subsidies. 

A conservative policy would tie these subsidies to deregulation of local housing markets. If a city wants to limit the production of new housing with rules and fees, local officials should have to explain the rise in prices to their constituents and pay for subsidies with local money. This wouldn’t be a mandate, but a way to hold local governments accountable. Let’s face it: When local governments restrict housing supply, they boost the value of existing homeowners’ investments; the resulting rent increases and associated inflation are effectively a tax on poor people. The federal government shouldn’t be subsidizing that transfer of wealth with non-profit, subsidized housing. We don’t need more money, we need more housing

Second, while we need subsidies, those subsidies should be efficient and provide prompt and direct help to those who need it. Housing is expensive and complicated to build. Even in a city where local officials understand that rules and fees contribute to higher housing prices, prices can spike for other reasons, like building-material or labor shortages. One way governments measure affordability (one I’m skeptical about) is “cost burden”—the difference between the normative standard for housing costs (30 percent of gross monthly income) and what people actually pay. The number of “burdened” households becomes a proxy for the number of units subsidized-non-profits say they should build.

This is nonsense. If a family is paying $235 more per month for housing than HUD’s normative standard, the conservative approach would be to give them $235 today, not place them on a waiting list for a subsidized non-profit unit five years from now. I estimate that non-profit housing can cost as much as $500,000 per unit and take longer to build. It’s cruel to use these households as hostages to blackmail government into increasing its capital investment. Giving families cash now is more efficient

Finally, a conservative housing policy would be built on fairness. For forty years, the Israelites were in the desert, and they often ate manna—a kind of frost found on the ground and vegetation. “When they measured [manna] by the omer, the one who gathered much did not have too much,” the author of Exodus relates, “and the one who gathered little did not have too little. Everyone had gathered just as much as they needed.”

This captures the aim of a conservative housing policy. When the Fair Housing Act turned 50, I wrote that the best way to celebrate it would be to, “Establish serious efforts to roll back and eliminate regulation that limits supply, and [propose] models for subsidy dollars that are not reliant on capital expenditures but investment in reducing poverty and creating improved access to economic opportunity for families.” And no, there would be no promised outcome to specific classes, races, or groups. Rather, a conservative housing policy would not allow government to put its finger on the scale and shift wealth toward property owners at the expense of renters through land-use and tax policy.

At the national level, a conservative housing policy would stop subsidizing locally created housing inflation and help needy families with direct transfers. It would reverse the long-standing subsidization of homeownership through restrictive land-use policies and easy money and abstain from trying to racially program neighborhoods. Conservative housing policy would support an open market for a commodity without substitutes and a quick cash safety net for needy families. This would, in the end, be compassionate, offering individuals and families opportunity and a chance to realize it.

Roger Valdez is director of the Center for Housing Economics, a non-profit housing research and advocacy organization, and a research fellow at the Foundation for Equal Opportunity (FREOPP). This New Urbanism series is supported by the Richard H. Driehaus Foundation. Follow New Urbs on Twitter for a feed dedicated to TAC’s coverage of cities, urbanism, and place.

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