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Center for Policy Studies
Public Affairs Discussion Group |
| The Housing Affordability Crisis: Causes and Consequences |
Daniel Shoag, Ph.D. - Associate Professor and Chair, Department of Economics |
Friday December 6, 2024
12:30-1:30 p.m.
Meeting Both In-Person and by Zoom
Dampeer Room, Second Floor of Kelvin Smith Library*
Case Western Reserve University
Dear Colleagues:
When this week’s discussion was scheduled at the beginning of the semester, we didn’t know that one consequence of high housing costs would be the election of Donald Trump as president.
Other factors mattered, of course. But it seems clear that a large part of voter concern about inflation was the price of housing. “Many of the counties that swung most dramatically toward Donald Trump on election day were also among America’s toughest housing markets, according to an analysis of election returns and the NBC News Home Buyer Index.” NBC News’ report quoted Columbia University political science professor Robert Shapiro that, “voters were facing economic hardship to an extent that was not fully appreciated by the Democrats, by the administration – the Harris campaign picked up on it, but it was too little, too late. And the price of housing figures into this heavily.”
Most analyses emphasize that housing became less affordable because, over a number of years but especially since the pandemic, construction of new housing units declined. In the words of one analysis, “the decade immediately after the Great Recession saw less housing construction than in any previous decade since the 1960s.” A Brookings Institution study published last week estimates that in 2023 there were 4.9 million fewer housing units than there would have been if the level was comparable to 2006. If supply doesn’t keep pace with demand, prices should go up.
But that just leads to some further questions, as Daniel Shoag has pointed out. For example, high prices as a result of production shortfalls should lead to more production, but that hasn’t quite happened. Ultimately, prices should equilibrate to something resembling the price of producing a product; but prices have increased distinctly more than construction costs. The cost of housing also has major further effects on the economy. For example, it seems to have made it much harder for people to move from lower-wage areas to higher-wage areas, as they cannot imagine paying for housing in the latter.
Both presidential campaigns had a series of proposals to make housing more affordable, but lord knows how well either’s would work. Harris proposed to build 3 million more units (how?), while Trump proposed to reduce zoning restrictions (which isn’t a federal government policy). Any subsidies to make it easier for first-time home buyers (a common idea) might mostly raise prices further.
So what is going on, and what is to be done? Join us as Professor Shoag reviews a series of causes and consequences.
Best wishes for safety and security for you and yours,
Joe White
Luxenberg Family Professor of Public Policy and Director, Center for Policy Studies
About Our Guest
Daniel Shoag is an associate professor and the department chair in the department of economics at at the Weatherhead School of Management. His research focuses on state and local government finance, worker signaling and the hiring process, and regional and urban economics. Shoag’s research has been published in major academic journals and has been featured in, among other outlets, The New York Times, Bloomberg, The Washington Post, and The Wall Street Journal. He was selected as one of Forbes magazine’s 30 under 30 in 2012. Professor Shoag received his BA and Ph.D. in economics from Harvard University.
* Kelvin Smith Library requires all entrants to show identification when entering the building, unless they have a university i.d. that they can magnetically scan. We are sorry if that seems like a hassle, but it has been Library policy for a while in response to security concerns. Please do not complain to the library staff at the entrance, who are just doing their jobs. | |
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