“In the United States,” wrote Alexis de Toqueville in 1832, “a man builds a house in which to spend his old age, and he sells it before the roof is on … ; he settles in a place, which he soon afterwards leaves to carry his changeable longings elsewhere …”
Ambitious rootlessness is America’s land-of-opportunity image. But it’s no longer America’s reality. Studies show that overall mobility of Americans has been in historic decline for years — and not least for a reason that helps explain why housing policy lately has become such an energizing controversy.
Unfortunately, the housing issue, even more than most economic debates, seems to keep many disputants richocheting from confusion to contradiction and back again.
Ordinarily, we think of access to housing as a source of stability — but it makes mobility possible, too. A roof over one’s head has apparently grown so costly in much of urban America, especially in coastal boom towns like San Francisco, Seattle and Boston, that many Americans no longer can afford to wander in search of greater opportunities — adding, economists say, to the sluggishness of wage growth.
The Twin Cities, we’re told, is heading toward its own “affordable housing” crisis, although housing costs here remain more reasonable than in many big metro areas, according to a recent report from the Metropolitan Council. Still, our region has lately suffered one of the larger shortfalls between new housing units produced and population growth.
That’s a trend, the council says, that could produce a falling level of “housing supply relative to its demand,” which in turn can put “upward pressure on housing costs.”
It’s worth pausing here to notice researchers with the Met Council — no right-wing think tank — invoking “supply and demand” as an important influence on housing prices. One can sometimes get the impression nowadays that the law of supply and demand has been repealed in places like Minneapolis, along with the spitting and lurking ordinance.
In the heated grass-roots reaction against the Minneapolis 2040 development plan, critics have often cited studies they say show that the kind of higher-density residential construction the plan contemplates does nothing to produce more “affordable housing.”
And besides, they often ingenuously add, all that crowding might lower their property values.
Perhaps both our terms and our objectives could use some clarification.
Let’s start by distinguishing what we often call “affordable housing” from the broader issue of “affordability” in the housing market. “Affordable housing” often is loosely used to describe longed-for housing units that cost no more than a certain percentage of earnings for households with “low-to-moderate incomes.”
But that wide range of incomes conceals a critical dividing line.
Unfortunately, some people in our communities have incomes so low that they cannot afford any rent that would actually cover the cost of decent housing. That’s tragic. But it is a painful income shortage, not a malfunction in the housing market.
Confusing these two different kinds of challenges could lead to ineffective responses and even make housing for many less affordable, not more.
Way back in 2002 (this has been a durable crisis), a memorable paper was written on this sort of confusion by Ron Feldman, today first vice president and chief operating officer at the Minneapolis Federal Reserve Bank.
People in poverty, Feldman patiently explained all those years ago, are forced to spend comparatively large portions of their incomes not just on housing but on all the necessities of life. Such is the regrettable meaning of being poor.
Yet, Feldman wrote, “policymakers … do not consider [this] evidence of an ‘affordable food crisis’ that requires the planting of additional crops” and “few have called on the government to build new [electric power] generators to address excessive utility expenditures by the poor. Instead, policymakers typically [see this] as evidence that some households have too little income and respond by … providing [vouchers or subsidies].”
As it happens, both Minneapolis Mayor Jacob Frey and St. Paul Mayor Melvin Carter, and a task force impaneled by Gov. Mark Dayton, are out with new housing proposals that include intriguing programs to directly assist low-income residents with their housing costs — rather than attempting to manage the housing market.
This is encouraging. But the mayors’ efforts, and housing policy generally, still put emphasis on funding construction of “affordable housing” and on various devices to restrict the cost of certain housing units. The Minneapolis City Council has also embarked on a market regulation effort with its process to develop a “renters’ bill of rights.” Specifics are yet to come, but it seems likely the net effect will be to make providing rental housing in the city at least a little harder.
The trouble is that such interventions in the housing market may frustrate efforts to free the market and stimulate more housing construction overall — even if political resistance to growth can be overcome.
Last Sunday, Star Tribune business columnist Lee Schafer revealingly explained how popular “inclusionary” requirements that force new apartment developments to set aside price-restricted “affordable” units can make whole projects financially unworkable.
This is where it’s key to keep in mind that there exists a larger housing “affordability” problem — distinct from the needs of truly poor residents. Preserving and creating housing that is within reach for what broadly could be called middle-income residents is where boosting “housing supply relative to its demand” is critical.
A rising supply of new market-rate housing “produces” less expensive housing, as Feldman put it, “through a process called filtering, where existing housing units drop in cost as their relative quality falls” in the face of newer, higher-quality housing being built.
That “filter” ought not be plugged.
The problems of poverty need attention of many kinds, of course. But trying to force the housing marketplace to solve the problem of poverty may only prevent it from providing affordable mid-range housing and helping get America back on the move in more ways than one.
D.J. Tice is at Doug.Tice@startribune.com.