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Expensive Housing is Killing Real Economic Growth

Posted by Sami Thalji | Sep 23, 2021 | 0 Comments

A lack of affordable housing, ushered in through questionable housing policies in many American cities appears to have a negative effect on the economy beyond just an increase in rent and housing prices.

According to Zillow, in June 2021 mortgage payments as a share of income were 19.4%. However, they anticipate that number will climb to 23.1% by the end of 2021 which would be a record high. The numbers are even worse for renters where the current average rent as share of income was 30.2% in June 2021, with many economists predicting that number to grow well beyond 30% by the end of the year.

Expensive housing kills economic growth because it prevents people on the lower ends of the income scale from being able to move to areas where there are jobs. Ever increasing housing prices are driven in large part due to local regulations and land-use policies which obviously favor high end developers. Research shows that since the 1970s, such restrictive policies have reduced wage and GDP growth by over 50%. Economists say that these policies have led to an average $7,000 reduction in wages for working class Americans. Things weren't always this way. When America was serious about providing economic advancement for many (not all) of its citizens, housing policies made it affordable for people to move to big cities like New York City where they found economic opportunity. Americans advanced economically in those times and the ability to find affordable housing that allowed them to work was likely the major factor. Now, major cities are providing very little in the way of affordable housing and there is no more opportunity for people to move to where the jobs are.

In many ways the policies preventing affordable housing seem intentional. Something has to change and change quickly, or tent cities and massive lines of RVs parked on the street will soon be commonplace throughout Florida.  

About the Author

Sami Thalji

Sami Thalji is a native Floridian, born in Clearwater and raised in St. Petersburg, Florida. Sami graduated from Osceola High School in Seminole, Florida before attending and receiving both his Bachelor of Science and Juris Doctor from the University of Florida in Ga...

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