Democrats who have restricted the supply of housing are vulnerable on the inequality front

Joel Kotkin:
The rising cost of housing is one of the greatest burdens on the American middle class. So why hasn’t it become a key issue in the presidential primaries?

There’s little argument that inequality, and the depressed prospects for the middle class, will be a dominant issue this year’s election. Yet the most powerful force shaping this reality—the rising cost of housing—has barely emerged as political issue.

As demonstrated in a recent report (PDF) from Chapman University’s Center for Demographics and Policy, housing now takes the largest share of family costs, while expenditures on food, apparel, and transportation have dropped or stayed about the same. In 2015, the rise in housing costs essentially swallowed savings gains made elsewhere, notably, savings on the cost of energy. The real estate consultancy Zillow predicts housing inflation will only worsen this year.

Driven in part by potential buyers being forced into the apartment market, rents have risen to a point that they now compose the largest share of income in modern U.S. history. Since 1990, renters’ income has been stagnant, while inflation-adjusted rents have soared 14.7 percent. Given the large shortfall in housing production—down not only since the 2007 recession but also by almost a quarter between 2011 and 2015—the trend toward ever higher prices and greater levels of unaffordability seems all but inevitable.
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Rognlie concluded that much of this was due to land regulation, and suggested the need to expand the housing supply and reexamine the land-use regulation that he associates with the loss of middle-class wealth. Yet in much of the country, housing has become so expensive as to cap upward mobility, forcing many people to give up on buying a house and driving many—particularly young families—to leave high-priced coastal regions for less expensive, usually less regulated markets in the country’s interior.

The regions with the deepest declines in housing affordability, notes William Fischel, an economist at Dartmouth College, tend to employ stringent land-use regulations, a notion recently seconded by Jason Furman, chairman of President Obama’s Council of Economic Advisors. In 1970, for example, housing costs adjusted for income were similar in coastal California and the rest of the country. Today house prices in places like San Francisco and Los Angeles are three or more times higher, when adjusted for income, than most other metropolitan areas. For most new buyers, such areas are becoming what Fischel calls “exclusionary regions” for all but the most well-heeled new buyers.
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Houston and Dallas have three times the permits for new housing as does LA and San Francisco.  Thus, housing is much more affordable in Texas and income inequality is much less of a problem.  It is really why income inequality is a much bigger issue in blue states where they are more likely to impose control freak regulations.

Republicans should be hammering Sanders and Clinton on this issue.

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