Affordable Housing 101

The Free Press again looks at affordable housing; this time in an editorial.

Let me make the issue as clear and simple as I can.

A new car can be very expensive, but no one argues that the state of Vermont should buy new cars for Vermonters who can’t afford them (nor do we even try to measure what “car affordability” is). Nor do we force Ford or Toyota to produce “affordable cars” as a condition for producing and selling cars in Vermont.  So how do low income Vermonters afford cars?

There are two ways.

First, they buy used cars. And as more and more new cars are produced—at any price range—the price of used cars goes down. We saw that clearly in the early part of this decade when, in the face of fears of a decline in sales after 9/11, auto makers financed new cars with no down payment and zero percent interest.  People responded and bought record numbers of new cars. The price of used cars plummeted for the next few years.

Second, the auto makers have an incentive to produce cheap cars for lower income customers. That’s why nearly all the car manufacturers have new cars in the $10,000 to $14,000 price range. They do it to make a profit, not because they are forced to.

The housing market works in much the same way. The more new houses that are built – yes, even McMansions – the more “used” houses will be put on the market and, as any student who has taken Econ 101 can tell you, the higher the supply, the lower the price.

Most of the truly affordable housing stock in Vermont, or anywhere else, is older housing that is lower cost. It’s not brand new houses produced by either the private sector or by taxpayer-financed affordable housing programs. And I use the word affordable without quotes. Cheaper houses anywhere in Vermont generally are older houses.

Someone buys a McMansion and sells their expensive home. Someone else sells a less expensive home and moves into the expensive home. The less expensive home is purchased by someone living in a cheaper home. The cheaper home is now made available for a lower income family who previously rented. If public policy prevents the McMansions from being built, or limits the number that are constructed, then public policy is also making the cheaper homes more expensive and therefore reduces the supply of truly affordable housing for lower income Vermonters.

Developers would like to emulate the car companies and build low cost housing, so long as it is profitable for them to do it. But if development laws and regulations, both state and local, make it difficult to do that, those houses won’t be built. When a permitted building lot costs $100,000 or more, that’s a big deterrent to building a low cost house.

Today is the 63^rd anniversary of D-Day. Consider what the GIs did when they returned home. They moved into the millions of low cost new houses that were built all over the country over the next two decades. Those houses were nearly identical, and were put on small lots to minimize land and construction costs. Where are the developments today that allow for 80 or 100 houses to be built on a 10 acre parcel of land? Neighbors would, and do, howl in protest and they have lots of legal tools to fight developments.

We won’t get truly affordable housing in Vermont until we take a very hard look at all the restrictions that prevent housing of all types from being built.   As Pogo said, we have met the enemy, and he is us.