Affordable housing policy in the US is a mess. As I mentioned at the American Action Forum meeting on the future of the GSEs yesterday, the housing market today reminds me of the housing market from the 2000s … where home price growth was over twice that of earnings growth for most households. The credit market composition is different (e.g., fewer low-doc loans), but the ratio of home price growth to earnings growth is the same.
With local zoning and construction restrictions, it is difficult to provide “affordable” housing. The typical reaction from the Federal government and its agencies/enterprises is to expand the credit box (lower credit standards) to make housing “more affordable.” In reality, it only makes housing “more attainable” while at the same time making housing more costly.
By making home ownership more attainable in a restricted supply area (like Los Angeles), that only serves to make entry-level housing even MORE unattainable.
But enough of that (Washington DC is filled with rent seekers and is not likely to change).
For May, 1-unit starts grew 5% (good, but not good enough). But permits fell by 5% too.