The key to fixing the world’s home affordability mess is in front of us

Inman News

By Brad Inman

The one-two punch of government action and private sector innovation is the right formula for fixing the affordable housing mess, which has grown into a global epidemic, writes Brad Inman.

Two particular issues plague the world: immigration and high housing costs. They explain much of our political strife, economic unevenness and inability to shore up shared values and a unified public purpose.

A Persian immigration lawyer told me, “All over the world, we are divided into two parts: the immigrants and the rest of us.”

I recently sat in a barge bar on the Seine in Paris and met a young German couple who discussed the changing politics of Germany and the discontentment of young people.

What’s behind it? I asked.

“High housing costs,” said the young woman. Her partner nodded feverishly.

Indeed, we are divided worldwide into people seeking affordable housing and the rest of us.

I will leave the immigration quagmire to others. 

Can we solve the housing affordability problem? Yes, and I believe that with all my heart and soul.

Humans can make the world better

Seventy-five years ago, intractable problems like low life expectancy and high poverty levels seemed intransigent. Then, the global life expectancy age was less than 45 years, but today, it is 78.

​​According to World Bank data, in 1990, two billion people lived in poverty, and by 2019, that had fallen to 600 million.

Two important things happened in both cases: government action propelled private investment and innovation. China and India are the leading examples where government action unleashed a free market of economic activity, which slashed poverty rates.

Supported by government action, medical innovation spawned new treatments and vaccines that stopped or curbed diseases — dramatically extending our lifespan. 

The affordable housing fix

The one-two punch of government action and private sector innovation and investment is the formula for fixing the affordable housing mess, which historically worked well in the U.S. when the country mustered the political will.

The Homestead Act in the 19th century democratized property ownership. Between 1862 and 1934, the federal government granted 1.6 million homesteads to families and distributed 270 million acres of federal land for private ownership.

Looser local policies 

In the 1930s, the 30-year mortgage and the home loan tax deduction made homeownership possible for millions of Americans.

From 1950 to 1990, flexible zoning rules in the suburbs all across the U.S. unleashed a private-sector housing boom that met real estate demand.

In the late 1970s and early 1980s, New York Mayor Ed Koch leveraged the power of municipal government to spawn the development and rebuilding of 180,000 housing units. His efforts were a boom in housing and economic growth throughout the city.

In the 1990s, the easing of rent control rules for property improvements upgraded the entire New York City housing stock.

In the early 2000s, Mayor Jerry Brown announced his plan to build 10,000 housing units in downtown Oakland, California. He suspended arcane zoning and building rules and welcomed developers to build thousands of housing units — revitalizing downtown with new residents, tax dollars, and retail and office growth.

Today, we need a new generation of bold thinking and significant actions.  

Incentivize the private sector

Here are some ideas.

  • Offer special tax incentives for companies mass-producing affordable housing and industrializing home production.
  • Municipal bond rating agencies should downgrade cities with restrictive zoning policies. 
  • Provide tax incentives to landowners who partner with homebuilders to produce affordable housing.
  • Reward title and mortgage companies that reduce fees and offer new, affordable closing and financing options.
  • Create a new federal real estate depreciation rule that rewards affordable housing production and ownership.
  • Redirect the Realtor Political Action Committee (RPAC) to support a new national housing policy that supports a massive housing production plan.
  • Use RPAC funds to support state laws such as allowing accessory dwelling units (ADUs). California enacted zoning changes in 2017, spiking ADU construction from 1,100 units in 2016 to 23,600 in 2021 and as many as 100,000 this year.
  • Use RPAC monies to support YIMBY (Yes, in my backyard) organizations that fight restrictive housing policies.
  • Put a stop to institutional real estate funds buying homes or create a tax credit for them to unload a portion of their portfolio for affordable housing.
  • We should consider a modern Homestead Act, giving away local, state and federal underutilized buildings and land to people and investors who build homes. The government has lots of it.

NIMBYs need to chill

Those with ample housing should begin to understand how important it is to build more housing.

Their local political clout kills so many great housing projects.

Their greed and exclusionary attitudes spell doom for a civil and egalitarian society.

Maybe not embracing a homeless shelter next door, but a well-built apartment building at a proper scale will enrich, not spoil a neighborhood.

I swim in the sea at Midtown Beach on the affluent Palm Beach Island. Just 1.5 miles across the Intracoastal Waterway in West Palm Beach, thousands of affordable apartments and condos are being built to house the budding workforce in South Florida. Many of these young people, immigrants, retirees and others of all races and religions, love to descend on Midtown Beach.

This is how it should work. Public beaches should be our model for building more houses and more vibrant and safe communities — not fiefdoms but an open, inclusive society. That would go a long way toward solving our housing woes.

Reform institutional house buying 

I recently met a fellow who was part of a gigantic investment fund buying up tens of thousands homes in  North America. 

He admitted that he felt somewhat guilty about the business that he was in, raising the cost of housing and preventing many people from entering the housing market at a reasonable price.

His financial model works when rents and home prices are rising.

This group of investors has gotten away with this strategy for too long. However, their learnings have value, so we must tame their greed with incentives to do the right thing, as was done with landlords in NYC in the 1990s.

Only bold policies will work

Incremental steps to fix the housing problem are not working. The political consequences are dire, with entire generations of young people prevented from finding affordable living places — creating more alienation and spawning legitimate political unrest.

Decent and affordable rental housing should be a civic right but with a step ladder to achievable homeownership.

The only thing that deters us is a lack of private and public courage and leadership. 

And pessimism gets us nowhere. 

As a species, we are gifted with brains and the will to make the planet a better place. That is because, like other species, we have an incentive: survival.