More on the 5,000 "missing" affordable housing units

A clarification on the claimed shortage of affordable housing in Howard County

I don’t usually post articles commenting on what my fellow Howard County bloggers write. However I’m more likely to jump into the fray when important points need to be clarified—all the more so when I myself haven’t done a good job of being clear in my own blog posts.

The topic today is the oft-repeated claim that Howard County has a shortage of 5,000 (or 5,500) affordable housing units, and in particular the post “The High Cost of Affordable Housing” by the pseudonymous blogger “Shaykh”. In this post they write,

The current refrain of the far left is that Howard County “needs more affordable housing,” making claims such as “we have a shortage of 5,500 affordable housing units.” Why is there a shortage? Where are these 5,500 families that are without housing? Are they living in a tent city like we now see out in Seattle?

Shaykh then goes on to speculate:

If each of these 5,500 affordable housing units sees an average of 2.5 persons, that would equal 13,750 more residents, or a 4.3% population increase over the current 321,000 residents. This is more than 3.5 times higher than the current growth rate of 1.2%. … If each of these 5,500 affordable units has an average of 1.5 children (I feel this is a reasonable guess), that would mean 8,250 more children in HCPSS, a 14% increase of the roughly 58,000 students currently enrolled.

First, to nitpick: I think the number 5,500 should actually be 5,000, if (as I think) the source of this estimate is ultimately the the 2018 Howard County Rental Survey commissioned by the Howard County Housing Commission. If so, this is not Shaykh’s fault, as various politicians and activists have used the 5,500 number in their public statements.

More fundamentally, the estimate of 5,000 “missing” affordable units does not mean that there are 5,000 Howard County households who are homeless, or 5,000 households living elsewhere who would like to move to Howard County but cannot. Instead it is an estimate of the number of households already renting housing in Howard County who are paying more for rent than is considered “affordable”.

I already posted about how this estimate was derived, but looking back on that post I’ve concluded that I didn’t do a very good job of explaining things. So, I’ll try again:

The 5,000 estimate is based on a comparison to a theoretical ideal: If the housing market were a totally free market and if there were no factors artificially inflating the price of housing, then we would presumably see developers and landlords offering a range of housing options priced to be suitable for households in each and every income range, just as we do with other types of consumer goods. (Just as, for example, with clothing we see the free market offering options ranging from buying low-priced outfits at TJ Maxx to buying haute couture from Christian Dior.)

At the time the 2018 Howard County Rental Survey was produced, there were an estimated 9,545 households with household income of less than $50K who were living and renting in Howard County. To put this in context, at the time of the survey there were an estimated 116,711 households in Howard County, of which an estimated 32,358 households were renting. (See page 17 of the survey, Table 10, “Renter Household Characteristics”.) These lower-income households thus make up about 8% of all Howard County households, and about 29% of renting households.

So, if the housing market in Howard County were a totally free market and if there were no factors artificially inflating the price of housing in Howard County, then we would expect to see these 9,545 lower-income Howard County households renting units that were priced roughly in line with the incomes these households have.

However at the time of the survey there were only 4,486 rental units in Howard County that were considered to be “affordable” to those 9,545 lower-income households, with “affordability” based on the (somewhat arbitrary) guideline that a household should spend no more than 30% of its income on housing. The difference of 5,059 (9,545 minus 4,486), rounded off to 5,000, is then considered to be the amount by which Howard County falls short in terms of providing affordable housing.

So this has nothing whatsoever to do with enticing thirteen thousand poor people to move to Howard County, or adding eight thousand more FARM students to Howard County public schools. Those people are already living here, and their children are already attending school here. They’re just paying more than 30% of their household income for their rental housing.

As for how to make housing more affordable in Howard County, Shaykh’s position is that the best solution lies in making the housing market more of a free market, for example by loosening zoning restrictions. I agree with this, and said so in my previous post.

The fundamental problem with government policy on housing is summed up by the economist Arnold Kling as “restricting supply then subsidizing demand”. On the one hand, zoning regulations and other government-imposed restrictions (e.g., APFO regulations) result in less housing built than would otherwise be built in a totally free market, reducing the supply of housing and driving up its price.

Government then seeks to offset the impact of increased housing prices through various direct and indirect subsidies, including things like Section 8 vouchers (which attract the most attention and controversy) but also including providing tax credits for developers building affordable housing and allowing homeowners to take tax deductions for mortgage interest and real estate taxes.

These subsidies not only divert government spending from arguably more useful purposes (like improving transportation infrastructure), they also have the effect of increasing the demand for housing beyond what it would have been in the absence of the subsidies. This then further drives up the already high housing prices caused by the restricted supply of housing.

From this point of view the way to address the issue of housing affordability is not to create more “affordable housing”, it’s to build more housing, period.

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