The Elly Report: Around the County

Affordable Housing, a Market Solution

Much has been said lately concerning the availability of affordable housing. How can a solution be found? The answer lays in free market principles-supply and demand. Like everything else, housing is affected by market forces. Therefore, market forces can and should be applied to the issue.

Basic economic principles tell us that when something has limited supply, the cost increases with constant or rising demand. We can see this trend in housing. As land for building is declared off limits or as new construction is limited, the number of new homes (supply) remains limited. However, people still need places to live and this provides us with constant and, in some places increasing, demand. Land is limited or restricted for new construction when laws are enacted to preserve "wetlands" or "open space." In addition, zoning laws, which require minimum standards for new construction, such as two-acre minimum laws, restrict the available land and ultimately drive up prices.

Restricting access to land for building also has the opposite effect of that intended. Pushing houses farther apart in the name of preserving "open space" has the effect of using more land for housing than otherwise could be used. Preserving "open space" should take into account that it may be necessary to build more units in higher concentrations, like apartment buildings. This will make available more units for housing, while saving "open space," thus increasing the housing supply.

Housing will become more affordable when more houses (greater supply) are made available to meet the current and future demand. When builders and landlords are seen as allies in the search for affordable housing rather than enemies, and when zoning/building laws reflect this partnership, housing will become more plentiful and more affordable. This is an essential part of the market solution.