We Are All in this Together: A Discussion on Housing Affordability

The shortage of affordable housing is hitting everyone, from senior and mid-career professionals, to college students just starting out. Conduit Street runs down some of the latest discussion about, and contributors to, this important topic.

One does not need to look far to find evidence of families everywhere struggling with the increasing costs of rents and mortgages. Affordable housing is a unique issue that hits almost all demographic groups in some way. Household budgets stretch a little less, local economies lose steam, and employers have a harder time attracting and retaining talent. There are very few winners in an unbalanced housing market.

The Problem

Affordable housing is essential for any economically and socially robust community. When housing costs are too high, it can trigger a cascade of negative implications. The media has been filled with stories of people losing their homes, which translated into losing their jobs, leaving them unable to find either new employment or new housing. Rising rents are even making higher education increasingly difficult, if not impossible, to obtain. It is evident that housing affordability is intertwined with the job market, local revenues, and the quality of public services. If there is one inescapable truth about housing affordability, it is a crisis that we are all in together.

How We Got Here

The lack of affordable housing is not something that popped up overnight. Much like how a small drip in a roof grows into a mold infestation, the current crisis grew over time and has been fed by a mixture of policy decisions, private market influence, and major historical events.

Policy Decisions: One of the unique facets of American society is the focus on the single-family home. In the years after the Second World War, decision-makers at all levels of government and the private sector opted to focus new development on suburban growth. From this era, we get the classic American dream; a decent-sized tract of land with the iconic single-family home, one to two cars in the driveway, and a sprawling lawn. As cars and the new interstate became the primary mode of transportation, there was little to no focus on walkability or public transit. Public spaces and easy access to services and amenities largely took a back seat to the romanticized idea of the classic suburban lifestyle.

Private Developers & Landlords: The vast majority of housing stock is developed by the private sector. Developers largely react to market forces, allocating resources to projects with the highest margins. As a result, in recent decades, new housing stock has been more high-end and priced out of reach of many middle-income families. Seeing little incentive to invest in more spartan but affordable units, developers & landlords have focused on high-end units, translating into high-end rents, and high-end returns.

Recent History: Two major events of the last fifteen years have pushed housing costs to new heights, the Great Recession of 2008-2009 and the COVID-19 pandemic. Long-time readers of Conduit Street may remember that the Great Recession spurred a cut in the local share of Highway User Revenue (HURs) and a dramatic loss in road and transit funding. The Great Recession itself was spurred on by an imbalance in the housing market, but of the opposite extreme. Excessively cheap capital was made available to homebuyers who eventually couldn’t make good on monthly payments, and a deluge of defaults plunged the global economy near the brink of collapse. The economy and stock market rebounded from the Great Recession, but housing production never picked up to its previous pace. This lag in production was only exacerbated by the COVID-19 pandemic, first grounding the world to a near halt and then causing prices of materials to soar.

The Solution

There is no silver bullet. Much like the complex history of how housing became so expensive, the solution to help realign rents and mortgages is equally intricate. This has been a top issue for MACo, and one conclusion is clear: housing affordability will only be solved by collaboration at the county, state, and federal levels. Two points must be the focus of any long-term coordinated plan; infrastructure and investment.

Infrastructure: Residents have a right to quality public services. The vast majority of services are provided at the county level. Education, public health, emergency services, and waste management make up just a tiny portion of the universe of things that residents expect. When building either a single-family home, an accessory dwelling unit, a duplex, or an apartment building, all of these structures equate to additional demand on local governments. While to some, housing solutions may seem as simple as erecting four walls and a roof, the real solution is more detailed. Children deserve a quality education, and this will require more schools and teachers. New homes mean more wastewater, and in some communities, wastewater treatment facilities are already at or near their limit. Significant increases in the number of new housing units will translate into either upgrades on existing wastewater treatment facilities or developing new ones. In nearly all areas, new homes will translate into a need for additional capacity in public services.

Investment: County governments cannot do this alone. Housing affordability cannot be solved solely at the local level. Decisions involving new taxing authority and investment are ultimately made in Annapolis and Washington. Local autonomy around assessing impact fees and development excise taxes on new construction; the creation of a state affordable housing development tax credit and a low-income housing tax credit (LIHTC) for the owner or developer of qualified low-income housing projects; funding for inter-jurisdictional partnerships related to planning and zoning; funding for broad redevelopment of local zoning policy where appropriate; all of these solutions need state and federal action. 

Key Takeaways

Solving the housing affordability crisis is not insurmountable, but no level of government can fix it alone. The solution to realigning rents and mortgages is as equally complex as the history of how housing costs became so out of control. While there is no silver bullet, there is a path forward. The one inescapable truth about housing affordability, we are all in this together.