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.