Stronger Property Rights Can Reduce Housing Costs

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Housing costs have taken on great importance in the 2020 presidential election as a policy issue. Several Democratic candidates have put forward proposals to combat housing costs that are increasingly burdening working families. These policies vary from one candidate to another and they are not all the same. Some are better than others. Many candidates favor some form of tax credit or voucher. Policies based on market incentives have been scant. Almost alone in this regard is Senator Cory Booker, who favors financial incentives to encourage local governments to repeal zoning laws that make it hard to construct affordable housing.

To get an idea of which policies might help and which will not, it is good to look at which places have the highest and lowest housing costs and what their characteristics are. Kiplinger publishes a list of average house prices in the 100 largest metro areas in the United States. The cheapest places are decaying cities in the Rust Belt. Setting these areas aside, most of the cheap metro areas are in the southern states, stretching into Texas and Missouri. In the south, even big cities like Atlanta, San Antonio, and Kansas City are fairly affordable. Somewhat more expensive are urban areas in the intermountain west. Most expensive are the west coast and northeast. Of big cities in the northeast, only Philadelphia is somewhat affordable.

The least expensive places are those with fewer land use regulations that do not burden property owners. As rules about minimum lot sizes, building requirements, permitted uses, etc. pile up, the stock of housing diminishes. Existing property owners reap a windfall as their home values rise, but many people are priced out of the market.

When setting the rent for a house, incentives matter. If you know that your renters are going to get a tax break or a voucher, why should you lower the price you ask of renters? These tactics just make prices go up higher. In contrast, getting rid of burdensome zoning laws will let property owners compete and increase the stock of affordable housing. They let property owners do what they want with their property. They are a part of a strong property rights regime. The details matter greatly, but the basic idea of Senator Booker’s plan, or at least this part of his plan, might actually work for reducing high housing costs.

https://www.npr.org/2019/06/21/734143716/2020-democrats-offer-up-affordable-housing-plans-amid-surging-prices

https://www.kiplinger.com/tool/real-estate/T010-S003-home-prices-in-100-top-u-s-metro-areas/index.php