Easy credit caused a real estate boom in the early 2000s and took rental housing out of the market as apartments converted to condos. (Apartment owners were left with high vacancy rates and plummeting income as renters rushed into the housing market, but government was not offering reverse-rent control then!) The subsequent market bust left a shortage of lenders, buyers, investors and builders to satisfy the pent-up demand for housing units. A perfect storm was created for housing shortages and price increases. Only one factor - the birth rate bulge of the 50s and 60s and 80s and 90s - that wasn't caused by government's interference in the housing market. (Read article below for other government causes of housing shortages and high prices.).
Solutions are not simple, but most government agencies are not capable of figuring out the long-term consequences of their fixes. Urban, progressive municipalities and State and Federal programs tend to want to control the outcome of the market to further some notion of "economic and social justice." The results are usually wasteful and don't work - rent control, inclusionary zoning, and public housing being the worst. Private entities, responding to market demand, do housing better - without subsidies.
Temporarily subsidizing those in need and staying out of the housing market does more to stimulate a growth in housing supply than trying to solve housing problems directly. Increased supply is the only long-term solution to high housing costs.
Politicians get elected to "solve" problems, but can't bring themselves to believe they are not smart enough nor powerful enough to control economic markets and human nature. Bureaucrats and unions congratulate themselves for being generous and kind, and at the same time are guaranteed a never-ending pool of customers. It's a hideous Merry-Go-Round of dependency at taxpayer expense - but the real harm is to the clients themselves who are trapped in government-assistance hell.
USC NOTE: USC is an apartment owner and has extensive knowledge and experience in the Portland-area rental market.
Wall Street Journal, October 18, 2016, By Laura Kusito
New Culprit for Income-Inequality: Land-Use Regulations
Trend of income gap between poorest and richest states steadily closing is upended by growth in regulations
Developer Patrick Kennedy wants to build apartments for middle-class families near San Francisco’s Financial District, but he is struggling to win the city’s approval. The problem: in one spot the building’s courtyard is 5 feet too narrow.
Mr. Kennedy said his efforts constantly run up against such obstacles, which he said drive up the cost of construction and make it nearly impossible to build anything but luxury housing in one of the nation’s most expensive markets.
In this year’s election, candidates have focused blame for rising income inequality on broad economic forces, from globalization to the decline of the American manufacturing base. But a growing body of research suggests a more ordinary factor: the price of the average single-family home for sale, from Fairfield, Conn., to Portland, Ore.
Moving to a wealthier area in search of job opportunities has historically been a way to promote economic equality, allowing workers to pursue higher-paying jobs elsewhere. But those wage gains lose their appeal if they are eaten up by higher housing costs. The result: More people stay put and lose out on potential higher incomes.
The typical home in New York in 1970 cost 4.5 times as much as the income per capita, while a home in Alabama cost about four times what a typical family made. By 2010, that gap had widened significantly, with a home in New York costing six times what a typical family makes and one in Alabama costing roughly 3.5 times as much.
“There are traditionally two ways to change your fate—get an education or move to a higher-wage part of the country,” Mr. Shoag said. “The second channel isn’t really available because the prices make that a bad deal.”
Data from home-price tracker Zillow show that wealthier areas are doing a poor job of remedying the imbalances. San Francisco and New York City, for example, built just one unit for every four adults who moved there between 2010 and 2014. San Diego added 15 adults for every unit of housing.
USC NOTE: San Franscisco, New York and San Diego all have Rent Control laws that discourage new construction of housing units; Housing shortages raise the prices of all other housing in the city and nearby jurisdictions.While it is likely the U.S. as a whole would benefit from making it easier for lower-income residents to move to wealthier cities, that doesn’t mean wealthier cities like San Francisco and New York would be better off. Building large amounts of new housing threatens to destroy the distinct housing stock that has helped make these cities appealing in the first place.
“Most of those regulations aren’t just crazy. They’re there to maintrain a sense of identity that people care about,” said Vishaan Chakrabarti, founder of Practice for Architecture & Urbanism, a New York architecture firm.