MINNEAPOLIS, June 13, 2002—The Federal Reserve Bank of Minneapolis has released a working paper that tries to clarify the current debate on the affordable housing shortage. The working paper, The Affordable Housing Shortage: Considering the Problem, Causes and Solutions, by Ron Feldman, assistant vice president of Banking Supervision, measures the size of the problem, diagnoses its underlying causes and discusses treatments that policymakers should consider.
While our review is hardly exhaustive, we've concluded that a shortage of income is largely behind the housing affordability problem despite the current focus on housing. Policymakers should recognize that government financing of new housing units is unlikely to be a cost-effective response to low household income. Excessive land use regulation also contributes to the affordability problem, but in many locations it appears to be of secondary importance, Feldman said.
Working papers by the Banking and Policy Studies unit of the Federal Reserve Bank of Minneapolis are preliminary materials circulated to stimulate discussion and comment.
As one of the 12 Federal Reserve Banks, the Federal Reserve Bank of Minneapolis contributes to a variety of Federal Reserve System functions, including operation of a nationwide payments system, distribution of the nation’s currency and coin, supervision and regulation of member banks and bank holding companies, and serving as a fiscal agent for the U.S. Treasury. Additionally, the president of the Minneapolis Fed serves as a member of the Federal Open Market Committee, the monetary policymaking arm of the Federal Reserve’s Board of Governors.
The Federal Reserve Bank of Minneapolis together with its branch in Helena, Mont., serves the Ninth Federal Reserve District, which includes Minnesota, Montana, North and South Dakota, 26 counties in northwestern Wisconsin and the Upper Peninsula of Michigan.