Rethinking Federal Housing Policy

by Glaeser, Edward L.

• ISBN13: 9780844742731
• ISBN10: 0844742732
• Format: Paperback
• Copyright: 2008-12-31
• Publisher: Aei Pr

Summary

Despite the recent drop in house prices, housing remains unaffordable for many ordinary Americans. Particularly along the coasts, housing remains extremely expensive. In Rethinking Federal Housing Policy: How to Make Housing Plentiful and Affordable, Edward L. Glaeser and Joseph Gyourko explain why housing is so expensive in some areas and outline a plan for making it more affordable.

Policymakers must recognize that conditions differ across housing markets, so housing policies need to reflect those differences. The poor and the middle class do not struggle with the same affordability issues, so housing policy needs to address each problem differently. The poor cannot afford housing simply because their incomes are low; the solution to that problem is direct income transfers to the poor, rather than interference with the housing market.

In contrast, housing is unaffordable for the middle class because of local zoning restrictions on new home construction that limit the supply of suitable housing. The federal government can sensibly address this issue by providing incentives for local governments in these markets to allow more construction.

Ironically, current subsidies for construction of low-income housing only tie impoverished Americans to areas where they have limited job prospects. These supply subsidies also crowd out private-sector construction and benefit politically-connected developers. Mortgage interest deductions, which are intended to make housing more affordable for the middle class, simply allow families who can already afford a house to purchase a bigger one. In restricted, affluent markets, these deductions increase the amount families can pay for a house, driving up prices even higher.

Glaeser and Gyourko propose a comprehensive overhaul of federal housing policy that takes into account local regulations and economic conditions. Reform of the home mortgage interest deduction would provide incentives to local governments to allow the market to provide more housing, preventing un

Author Biography

Edward L. Glaeser is the Fred and Eleanor Glimp Professor of Economics at Harvard University. Joseph Gyourko is the Martin Bucksbaum Professor of Real Estate and Finance at the Wharton School of the University of Pennsylvania.

Table of Contents

List of Illustrations	p. xi
Acknowledgments	p. xiii
Authors' Note	p. xv
Introduction	p. 1
The Plan of the Book	p. 6
Our Proposal	p. 12
How Do We Know When Housing Is "Affordable"?	p. 16
Poverty and Housing Affordability	p. 17
Affordability across Space	p. 19
How Should Housing Affordability Be Measured?	p. 21
The State of American Housing	p. 24
Housing Consumption over Time	p. 25
House Prices, Income, Amenities	p. 32
Housing Prices and Construction Costs	p. 40
Public Intervention In U.S. Housing Markets A Historical Perspective	p. 48
Housing Regulation and Externalities	p. 48
Correcting Market Failures	p. 52
In-Kind Redistribution	p. 54
Conclusion	p. 56
Current Policies-Price And Quantity Controls	p. 58
Price Controls	p. 58
Quantity Regulations #1: Building Codes	p. 62
Quantity Regulations #2: Land-Use Restrictions	p. 64
Hybrid Price and Quantity Controls: Inclusionary Zoning	p. 81
Massachusetts Chapter 40B	p. 82
The Mount Laurel Decision	p. 84
Conclusion	p. 86
Other Interventions In Housing Markets-Taxes And Subsidies	p. 88
The Tax Code and Homeownership	p. 88
Credit Market Interventions: The Rise of Fannie Mae and Freddie Mac	p. 99
Project-Based Subsidy Programs for the Development of Affordable Housing: Public Housing and Low Income Housing Tax Credit Programs	p. 102
Tenant-Based Subsidies for the Consumption of Affordable Housing: Section 8 Vouchers	p. 115
Conclusion: Toward A New National Housing Policy	p. 119
The Growing Affordability Problem in Markets with High Land Costs	p. 121
One Size Does Not Fit All	p. 123
Can the Federal Government Induce Localities to Permit More Construction?	p. 126
Reforming the Home Mortgage Interest Deduction	p. 131
Ensuring the Poor Can Consume Some Minimum Housing Quality: Vouchers	p. 132
Summary and Conclusion	p. 135
Economic Incidence Analysis Of a Subsidy	p. 137
Per-Unit Subsidies to Demand	p. 137
Limited Subsidies to Demand	p. 139
Supply-Side Subsidies	p. 140
Implementation of Our Proposed Policy Reform	p. 142
Summary of Our Reform Proposal	p. 142
Defining Elastic and Inelastic Regions of the Country	p. 145
Funding the Program: Reforming the Home Mortgage Interest Deduction	p. 161
Reforming Supply-Side Policies: Administering the New Home Mortgage Interest Deduction Program in Counties with Inelastic Housing Supplies	p. 168
Notes	p. 173
References	p. 187
About The Authors	p. 193
Index	p. 195
Table of Contents provided by Ingram. All Rights Reserved.