By now, pretty much everyone acknowledges that the housing affordability situation on both coasts is a major cause of income inequality and, probably, a drag on growth.
Have been thinking about what the next administration could do to improve things.
The problem is obviously that cities control zoning and city governments tend to listen to home-owners, who, because they are effectively suppliers, favor laws / regulation that limit supply (and thereby drive up price).
Think I’ve found a useful analogy in education policy under the Obama Administration. There, the problem was that local governments have been captured by teachers unions, which do everything possible to improve the lives of teachers, even at the expense of students.
Under Obama, the federal government instituted “Race to the Top”, which was basically a contest among the states for extra education funding. To enter / win the contest, states needed to reform their education systems to improve curricula, allow some innovation, and institute systems for measuring student and teacher performance.
Imagine if Trump did something similar for housing:
- Announce a huge pool of money to build housing that is affordable not just to poor people but to the middle class (perhaps even on a “for-sale” basis… to encourage home-ownership)
- Direct the money to cities
- Require that cities which wish to be eligible for the grants reform land-use to allow for greater density, particularly around mass transit
The above plan would have several benefits:
- Creation of a bunch of new housing in places where it is desperately needed;
- Create a bunch of construction jobs;
- Incentivize cities to allow for denser development, which will allow private developers to add even more supply
Now, if only I knew how to get this idea in front of Dr. Carson, our soon-to-be-HUD secretary…