A Housing Agenda for Conservatives
If Republicans retake the Senate, there are ways they can make housing more affordable.
The term “housing crisis” is now ubiquitous in American media and politics. But what is a crisis, exactly? Is there a way to measure it? How do we know when a crisis starts, and when it ends? These are questions that anyone who heard the words “housing crisis” should ask, yet few do.
Conservatives, especially those in elected office, need to become more inquisitive about housing. And they ought to build their housing-policy positions atop the basic economic idea that when housing is scarce, it is more expensive. Housing policy is on a disastrous course. As it stands, only conservatives can redirect it toward solutions that will help people who need it most.
I’ve written before about how we think about housing policy in the United States. In today’s world, housing prices rise when new jobs are created and people have more money to spend. But these price hikes are exacerbated by sclerotic permitting policies, zoning, and land-use regulations that makes housing hard to build. When prices go up, almost nobody calls for cutting unnecessary rules to allow for more supply.
Only recently, because it has been called “racist,” has the left questioned single-family zoning. But calling single-family homes “racist” without incentivizing people to build anything else, only implementing more rules, won’t improve the supply-side issues. Worse, when prices go up, so do calls for price controls and the expansion of inefficient programs.
But what have conservatives done about this inflationary cycle? Not much. To his credit, Republican Senator Pat Toomey of Pennsylvania, the ranking member the U.S. Senate Banking Committee, said this last year:
We need to dispel the myth that more spending without reform helps families. I welcome a discussion of novel ideas to advance affordable housing. I want to hear new suggestions for helping families succeed and am eager to advance legislation that promotes those ideas.
So, if conventional wisdom is right and Republicans retake the Senate, here is a quick rundown of some of “those ideas.”
First, the federal government should stop subsidizing bad local policies.Local officials get the best of both worlds. They restrict housing supply by imposing onerous regulations, and watch prices rise. Then, they call on Congress to send them more and more money. Meanwhile, existing homeowners see the value of their asset rise.
Federal housing dollars, whether in the form of vouchers, tax credits, or capital investment, must be tied to localities’ ending modern zoning. Housing should be healthy and safe, but how it looks, its height, bulk, and scale should be determined by market need.
When the federal government does fund housing, those funds should get to households fast. The idea of using “cost burden,” the number of households that are paying more than 30 percent of gross income on housing, to measure the need for construction of subsidized housing leads to absurd results.
In Cincinnati, for example, the claim has been made that 40,000 units of housing are needed. But according to the Federal Reserve Bank of Saint Louis, there were something like 50,000 units in the Cincinnati Metropolitan Statistical area for 10 years, from 2012 to 2022. That is everything. Trying to fund and build 40,000 units of subsidized housing would cost billions of dollars, take many years, and would be unnecessary.
There are a few ways to put federal housing resources to work quickly for families that need help. First, recipients should be able to use vouchers at their current residence, without inspection. Across the country households are getting vouchers, but can’t find qualified providers to take them. Recipients should be able to use vouchers like cash for rent.
Second, Congress and the Department of the Treasury should end the complicated system of disbursal of Low Income Housing Tax Credits (LIHTC) and simplify it. One idea I’ve written about before is simply letting developers contribute directly to projects in exchange for rent restrictions on ongoing market-rate development. This would almost immediately create rent subsidies without evaporating the equity in the current system.
Third, as Senator Toomey pointed out, not everyone needs a single-family home right now, or perhaps ever. We need to have a national discussion about how we back home-mortgage debt; cheap money drives housing bubbles and drives up land costs. It makes more sense to improve existing and affordable (but rapidly aging) housing than to fill up bubbles for new housing. Doing so would keep housing on the market at a lower price, keep renters and homeowners housed, and leave small-time property owners in control of their assets.
State legislatures with conservative majorities should consider preempting cities from making bad housing policy. In states like Indiana, Ohio, and Tennessee, city governments are toying with everything from rent control to charging fees and taxes on new housing, or banning investors from creating rental housing. State legislatures should prevent them from doing this.
While tax credits make sense as an incentive, they should be used to fund the inclusion of rent-restricted units in market-rate housing. An initiative called the Multifamily Tax Exemption (MFTE) Program in Seattle has created thousands of rent-restricted units as part of private development. Non-profit developers are producing units with insane price tags; in Seattle, one non-profit developer spent $67 million for 108 units, a per unit cost of over $600,000. Larger private projects, by contrast, create many more units and do so faster—all with less public money.
A couple of final thoughts. Cash for rent is inflationary—putting more money into people’s pockets to pay rent could have inflationary effects. But if we deregulate housing at the same time, people won’t have to spend as much on housing, meaning that fewer families will qualify for subsidies. That is a good thing! Building subsidized housing managed by government or non-profits should be limited to housing people who may, because of disability or age, never earn enough money to pay for housing on their own.
We won’t need to create more permanent affordable housing units for working households if prices are pegged to supply and demand. Housing prices going up isn’t the only reason people struggle to pay for housing; that also happens when wages fall. Helping people make rent payments for a period of time makes more sense than building and operating housing that assumes those families won’t see their wages increase.
Conservatives could lead the effort to allow for abundance in American housing supply. Conservative policies would ease price shocks when jobs are created. They would also provide for fast, efficient, and compassionate subsidies that operate on the assumption that a family is striving to improve its situation, but just needs some help paying rent. Perhaps when Senator Toomey is chair of his committee, he’ll entertain some of these “novel ideas.”
Roger Valdez is director of the Center for Housing Economics, a nonprofit housing research and advocacy organization, and a research fellow at the Foundation for Equal Opportunity (FREOPP).
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